Socio-Economic Importance Of Zakat

In Islam, there are five pillars of faith which must be upheld by every Muslims and one of them is Zakat, which compels the well-off Muslims to give a certain portion of their wealth to the poor Muslims. The key objectives in establishing the Zakat institutions are to relieve the needy and poor from their state of indigence and discourage the rich society from keeping or hoarding the wealth for themselves, aside from following the commandments of Allah in the Qur’an to perform Zakat. This religious act is believed to be an automatic stabilizer, counteracting the adverse effects of poverty, even when the nation is facing economic crisis. This paper will discuss on the essence of Zakat, how it helps to eliminate poverty amongst the poor without government intervention using Brunei and Bangladesh as examples, thus acting as an automatic stabilizer in the Islamic economy.

S.A. Saddiqi (1982) defines Zakat as “growth and increase as well as purity.” Performing Zakat was instructed by Allah due to its benefits, as mentioned in the Qur’an: “Take, [O, Muhammad], from

It provides growth of wealth and purification of sins for the wealthy individuals and drives the poor out of indigence. Poverty is a hindrance to the economy, which could be eliminated through the establishment of an efficient Zakat system according to the Shariah law. The institution of Zakat does not contain any sort of exploitation which is normally present in conventional economics. Regardless of the fluctuations in the economic activities, Zakat funds will still continue to flow from the rich to the poor without the need of government intervention, making it an automatic stabilizer in the Islamic