An Investigation into Goodness of Zakat Laws in Selected Countries

Abstract

Zakat as an annual flow of charity funds has received increasing attention of financial regulators and policy makers. Unlike other forms of Islamic philanthropy, zakat is mandated and compulsorily levied on every high-net-worth Muslim. Its primary goal is to serve as a tool to provide for the basic needs of the poor and the needy. Traditionally, most Muslim societies have viewed zakat as a purely religious matter. In such countries, zakat is managed entirely by the state apparatus dealing with religious affairs of its people. In some other countries with secularism as the avowed policy, the state sees no role for itself in religious matters and leaves the same to individuals and non-state actors. In yet another set of countries, the state sees the importance of a proactive role for itself in zakat management even while the task of zakat collection and distribution remains in the private domain. These countries have witnessed an increasing integration of zakat with the financial system. This paper hypothesizes that the regulatory framework for zakat management has an important bearing upon the mobilization of such funds and their utilization for alleviation of poverty. Using the concept of “goodness of laws” it undertakes a comparative analysis of the 29 sets of zakat laws as they exist in eight countries across the globe and seeks to delineate the “core principles” that should form the basis of legal and regulatory reforms that are necessary to strengthen the sector