Zakat and Economic Empowerment of Indian Muslims
Economic strength and empowerment of any community depends both on the endogenous and exogenous factors. Appointment of a High Level committee by PRIME MINISTER OF INDIA to look into the matters of Indian Muslims and suggest ways for their upliftment may be treated as an exogenous factor. But often-endogenous factors acquire greater importance as non-utilization of available opportunities and resources mars any scheme of progress. This may be equally true for Indian Muslims who lag behind in work participation and utilization of potential fund in form of ZAKAT.It may be noted that ZAKAT (a compulsory charity) is inherent and inbuilt in faith and practice of every member of the community with an amount of surplus money/asset. In the following lines therefore an effort is made to evaluate the disbursement and use of ZAKAT in India. Moreover certain inferences are made that may empower the community at a faster rate. Collaborated with government efforts, Indian Muslims can be uplifted to a desired scale faster than not.
1. MEANING & SIGNIFICANCE OF Zakat
The literal meaning of Zakat is an increase.(1) As Zakat is in relation to wealth, it may mean increase in the bank balance of the payer in the life hereafter. It may also mean increase in wealth of the payer, receiver and society in general by way of increase in generation of income through propensity to consume and invest.
Zakat is an Islamic institution. It is one of the five pillars of Islam. No society or social structure of Muslims can be visualized without the practice of SALAT (prayer) and Zakat (sadqat) Allah Almighty has ordained the believers and the followers of the Prophet Mohammad (P) to pay Zakat as a specified portion from their accumulated earnings/wealth over a period of one year. The regular readers of the Holy Book know that there are more than three hundred verses, which directly or indirectly deal with Zakat.(2) Here one important fact to be noted is that Zakat is not a donation but due of Allah Almighty vis a vis poor. Remember the QURANIC verdict that in their wealth and possessions there is a right for the asking needy and the deprived.(3) In compliance to this ordinance, Prophet Mohammad (P) appointed collectors (Ammal) for collection of Zakat from Muslim societies. The importance of Zakat in the Islamic system can further be assessed from the fact that the first caliph of Islam Hazrat Abu Bakr Siddiq, on an important occasion refused to distinguish between SALAT and Zakat. Moreover declared his verdict of war against those Muslims who refused to pay Zakat to BAITULMAL.(4)
The purpose of imposing Zakat on the assets of Muslims may be many. Historically it seems to be a common phenomenon between the followers of the Prophet Mohammad (P) and the followers of all other earlier Prophets (P). However the study of the HOLY QURAN and traditions of the Prophet Mohammad (P) reveals the following three major objectives of the Zakat ---
a) RIGHT OF ALLAH
One reason for imposing Zakat seems to be the question of authority and ownership. According to the Islamic teachings every thing, which is found below, on and above earth, belongs to ALLAH ALMIGHTY. Remember what the Holy Book says To Him belongs whatever is in the Heaven and whatever is on the earth. (5) It implies that whatever man possesses, possesses it as trustee and not as owner. Therefore whatever is paid to ALLAH though collected by Muslim Government or other representatives of Muslims society is share of the owner and not a charity or donation by the payer. The HOLY QURAN says, ALLAH does accept repentance from his votaries and receives Sadqat. (6)
b) PURIFICATION OF SELF AND WEALTH
These are the twin purposes of Zakat from the point of view of its payer. Allah Almighty Ordains the Prophet (P) Take alms from their wealth in order to purify them and sanctify.(7) It may be noted that Zakat is a ritual and therefore its payment gives the feeling of pleasure of obeying / worshipping ALLAH. By this way the man achieves purification of the self (Tazkiy-e-Nafs). It may further be noted that payment of Zakat checks the tendency of niggardliness and avarice and exalts the soul of the individual. Similarly it purifies wealth by segregating the total wealth into trustees and owners share. Once owners share is paid, the remaining amount becomes pure for the use of the trustees-- men possessing it.
c) SOCIAL SECURITY
Islam enjoins on believers a duty of individualistic and collective nature. Moreover duties of the individualistic nature also carry social dimensions. This is due to the fact that Islam considers individual as an integral part of the total society. Therefore he has much rights and duties towards it as it has towards him. The eight heads of use of Zakat (8) as prescribed by HOLY QURAN indicates nothing but social security/insurance to the indigents of the society where Zakat is practiced.
Visualize the prosperity and solidarity of a society where nobody is willing to withhold liquid money lest it would be eaten away by Zakat. Further, if all surpluses were spend on consumption and investment, the generation of income and employment will lead to nothing but economic strength where per capita income will rise reducing proportion of population below poverty line on the one hand and maximizing standard of living on the other.
1. ZAKAT COLLECTIONS AND DISTRIBUTION SYSTEM IN INDIA
The decline in the practice of Rule of the Islamic Law began with end of Caliphate System. It degenerated both the concept and practice of Islami BAITULMAL. People started paying and distributing Zakat individually in the absence of mandatory authority appointed or elected as per Islamic Law. India, in spite of being under rule of Muslims for around eight hundred years, witnessed the same system. Under the influence of teachings of various schools of thought, Muslims of India pay and distribute Zakat and Sadqat at individual levels. It may be noted that allocation of Zakat fund by individual payers does not have any standard norm or practice. In addition to many factors, The depth of Islamic knowledge, social consciousness, relation with needy and also whims and fancies of the payers play important role in allocating funds under different heads. However a critical look at the practice of collection and use of Zakat in India, the following is evident: -
a) INDIVIDUALISTIC PATTERN
Individual indigents in the garb of Fakeer(poor), and Miskeen(needy) approach the Zakat payers for monetary help and Zakat payers assessing their needs, give them an amount. Thus according to this system Zakat payers mostly distribute their amount among those individuals who approach them or those known to deserve monetary help. These are in addition to their kiths and kins eligible to get Zakat money. Under this system Zakat is distributed by Zakat payer keeping in view individuals as target being unmindful of collective need of the society. It is difficult to arrive at a specific amount of Zakat being distributed and used under this category in the absence of any authentic survey. However, based on general observation it is estimated that approximately 25 to 30 percent of total Zakat is collected by and for individuals. If zakat collected by Madaris is taken as basis, then an amount of Rs. 42,28,29,00,000/= of total zakat in India is disbursed at individualistic pattern.
2. SOCIO RELIGIOUS GROUPS
Various religious groups particularly Religious Educational Institutions popularly known as Madaris Jamia and Darul Uloom collect Zakat for financing their annual educational and administrative budget. Educational heads and their representatives (Sufra) approach Zakat payers, make announcements at congregations and collect huge funds from the people. But again much is talked about their lions share in Zakat, no serious effort is found to determine their share in TOTAL Zakat being paid and collected in the country. However the author of this paper conducted a pilot study of the following 18 Madaris. On the basis of their annual reports, (9) total budget and % of Zakat as portion of their total income is calculated as below: -
Zakat % of Total
NEMATUL ULOOM (BIHAR)
TALIMUNISAR PACHORA (MAH)
JAMAIA AHYAUL SUNNAH (JHARKHAND)
ISHAATUL ULOOM (BIHAR)
MADARSA QADERIYA (HP)
MADARSA ISLAMIYA (SURAT)
QASIMUL ULOOM (J & k)
MADARSA ARABIA ISLAMIA (U.P)
DARUL ULOOM QASMIYA (MAH)
JAMIA RASHEEDIYA (U.P)
MADARSA MARKAZI (SURA)
RIYAZUL ULOOM CHOKIA (U.P)
JAMIA RAHMANIA (U.P)
JAMIA SHARQIYA (U.P)
MADARSA ARABISA (U.P)
JAMIA ARABIA MAHARGANJ (U.P)
AL HUDA ARABIA (U.P)
These MADARIS are spread over states of Utter Padres, Bihar, Jharkhand, Himachal Padres, Gujarat and Maharashtra. It may be noted that approx. 52% of their budget of MADARIS budget is funded through Zakat money. It is noteworthy that the annual budget of Madaris under survey ranges from minimum Rs 2,34 905/- to maximum of Rs 77,15451/- making an average of Rs 18,22,132/- per Madarsa. Keeping in view the large chain of Islamic Educational Institutions spread up at every nook and corner of the country.It may be noted that Madaris are the basic source of Islamic education. Hence there is madarsa in every mosque. It may not be too much to say that no locality or village with 20 to 50 Muslim houses exist without a madarsa.. There are 300 districts of India (10) where 84 percent of India Muslims live. Assuming small and big madaris to be 1000, the total number of MADARIS in India may be estimated to 300,000. It means that even if the minimum amount of Rs 2,34,905 is taken as average amount is collected by all the MADARIS of India, then total Zakat collected by them works out to be Rs. 7047,15,00,000
3. RELIGIOUS ASSOCIATIONS
There are various religions organizations which attend to the social needs of the people in accordance with the teachings of Islam. Jamiatul Ulema e- hind, Sunni Jamiatul Ulema, Jamat-e-Islami Hind Jamiat- e - Ahle-Hadith and Amarat e Shariah Bihar are prominent among them. They collect Zakat fund from their members and sympathizers and use it for realization of their annual work plan. As considerably good number of Muslims in India is associated with these organizations, it is assumed that considerable Zakat amount is collected and allocated for organizational work. In view of difficulty to access their annual financial audited statements, their authentic share in total Zakat paid in India cannot be ascertained. However it may safely be said that approximately 10 percent of total Zakat in India is being collected and used by them.It implies that approx. Rs 1409,43,00,000 of total zakat is collected and used by religious associations.
4. SOCIAL ORGANIZATION
There are very large number of registered and unregistered social charity organizations and institutions, which collect Zakat fund from the philanthropists. Every organization has certain basic objectives and priority of work. They make annual plan of work and finance the same through Zakat fund. By and large registered social organizations publish their annual audited statements. Yet majority among them do not bifurcate their annual income earned through Zakat and non-Zakat sources. Hence here too, the determination of the share of Zakat money as proportion of total income during the year remains unknown. However these organizations have many other sources of income, hence it is estimated that their total share in Zakat fund may be around 10 percent This means that again Rs 1409,43,00,000 is collected and used for fulfillment of the social needs.
According to this estimation the total zakat disbursed and used in India accounts to Rs 14094,43,00,000.
OTHER Estimates of Zakat in India
According to Census of India 2001 the total Muslim population is enumerated as 138188240 i.e. 13.42% of Indian population. Assuming the size of family as 5 members, it amounts to say that there are 27637648 Muslim families in India
The scan of literature on Zakat in India reports no specific information about how much money is paid /disbursed as Zakat by Muslims in India. Further in the absence of any survey on the all India basis it would be difficult to arrive at any consensus figure. However inferences can be made on the basis of vital statistical information available for general population including Muslims in the country. Based on the general profile of Indian population, therefore an attempt is made to find out Zakat being paid and used in India on the following lines-
A-- BASED ON HOUSEHOLD SAVINGS
According to Statistical Outline of India 2004-05,(11) of the total Domestic savings in India in 2002-03 (Rs. 597697 crores ),approx 94 percent (Rs. 559258 crores ) is saved by households. Assuming share in savings is proportionate to their population will mean that savings of Muslims accounts to Rs. 75108 crores. It implies that @ 2.5% payable Zakat amount becomes approx. Rs. 1878 crores. This small figure is obviously on consideration of only cash amount saved. ASSETS liabale for Zakat, which are larger in number and vast in value for example gold ornaments, working business capital etc. are unavailable, hence unconsidered.
B-- BASED ON HOUSEHOLD INCOME
Distribution of households according to the level of income can be taken as another basis of estimating payable amount of Zakat. It may be noted that Zakat is paid out of surplus income over a period of one year and not on the income itself. In the absence of the required information about individual/households savings, while it may be presumed that total income has been consumed leaving no surplus hence no Zakat, it may also be presumed that people with comfortable level of income create assets like gold etc over a period of time and hence pay Zakat. More specifically it may be presumed that households with current level of income are also holding similar level of assets qualifying for Zakat payments. Here the later assumption is taken as the basis of estimation of Zakat in India
The Statistical Outline of India 2004-05 provides the estimated number of Households by income groups 2001-02 at the prices of the same year in India. According to this estimate, households falling under different categories are as below -
1- Upto Rs. 90,000/- 1353 (lakh) 71.94 %
2- Upto Rs. 90,000 to 200,000 412.7 21.93
3- Upto Rs. 200,000 to 500,000 90.3 4.8
4- Upto Rs. 500,000 to 10,00,000 17.3 0.92
5- Upto Rs. 10,00,000 to 20,00,000 5.46 0.29
6- Upto Rs. 20,00,000 to 50,oo,000 2.02 0.11
7- Upto Rs. 50,00,000 to 100,00,000 0.3 0.02
8- Above Rs. 100,00,000 0.2 0.01
This pattern obviously includes Muslim households too. Now let us see what happens to the payable Zakat amount when all categories pay Zakat at the following rate only ---
1- 72% of 13818830 i.e 9949557 pay @ Rs. 2250/- =Rs.22386504600
2- 22% of 13818830 3040143 @ Rs. 3600/- =Rs.10944514800
3- 4.8% of 663304 @ Rs. 9000/- =Rs.5969736,000
4-. 92% 127133 @ Rs. 19000/- =Rs2415531 000
5-. 29% 40075 @ Rs. 38000/- =Rs.1522850 000
6-. 11% 15200 @ Rs.88000/- =Rs. 1337600,000
7-. 02 % 2764 @ Rs.189000/- = Rs. 522396000
8-. 01% 1382 @ Rs. 300,000/- =Rs. 414600,000
This sum totals to RS. 45,51,37,31,000
It may be noted that these calculations are made on the basis of the assumption that only 50 % of the Muslim families /households in India are sahib e nisab and therefore pay Zakat.
C-- Based on poverty level
According to Economic Survey of India 2004-05, (12) only 26 percent of the Indian population lives below poverty line. Unfortunately 55.48 per cent of Muslims of India live in the states of U P, BIHAR, JHHARKHAND WEST BENGAL and ASSAM where poverty is reported to be higher than the national average say around 40%. There is a general understanding that Muslims are economically far behind others. Hence it may be assumed that 60 percent Muslim family in these five states and 40 percent in all other states is poor and not sahib-e-nisab. It amounts to say that 50% Muslim households are on or below poverty line and therefore do not pay ZAKAT. Every person above poverty line may not necessarily be sahib e nisab. It is however for the simplification it is assumed that persons above poverty line are Sahib E Nisab. This may not be exaggeration keeping in view the assumed higher percentage of population below poverty line. It means that average 50 percent of Muslims of India are sahib e nisab. It implies that 13818824 say 13818830 families pay little or more amount of Zakat . Let us assume that the payers pay Zakat at varying rates per family as below----------
First 10 % pay @ Rs. 1000 per family i.e RS 1381883
Second 10 % pay @ Rs. 2000 per family i.e Rs. 2763766
Third 10% PAY @ Rs. 3000 per family i.e Rs. 4145649
Fourth 10% pay @ Rs. 4000 per family i.e Rs 5527532
Fifth 10 % pay @ Rs. 5000 per family i.e Rs 6909415
Sixth 10 % pay @ Rs. 6000 per family i.e RS 8291298
Seventh 10 % pay @ Rs. 7000 per family i.e Rs 9673181
Eighth 10 % pay @ Rs. 8,000 per family i.e Rs 11055064
NINTH 10 % pay @ Rs. 10,000 per family i.e Rs 13818830
Tenth 10 % pay @ Rs. 25,000 per family i.e RS 34547075
Then the Zakat amount payable works out to be Rs 9,81,13,693 thousand. In other words Zakat distributed and collected in India amounts to approximately Ten thousand crores per annum.
It may be noted that assumptions may not look exaggerated as pattern of income distribution is highly uneven and in favor of 20 percent upper middle class and 10 percent top group of population. According to World Development Report 2003, the top 10 percent population in India has a share of 33.5 percent in the total income of the country.
Now imagine the benefits the community and the nation can get once even 10 percent of Zakat is pooled and spent in a planned manner, keeping in view the long term goals.
Let us hypothesize as below------
1-If ten percent of total Zakat of Rs. 10,000 crores i.e. Rs 1000 crores is invested for poor which fetches an annual return of 12 % (i.e. Rs 120 crores), then it means that 50,000 Zakat receivers will leave the queue and enjoy an income of RS 2000 per month in addition to capital saving. Certainly a great social empowerment!
2-Alternatively assuming labor capital ratio of 1:25,000, in home and cottage industry, 400,000 people can be helped to become self-employed with reasonably sufficient earnings to support their families every year. Assuming the generation of an employment of two more persons in each unit, the total employment generation (inclusive of owner) will be to the tune of 12,00,000 persons every year.
3-Assuming it to be community investment the generation of income will multiply depending upon the value of the multiplier. As propensity to consume among Muslims is very high, the value of multiplier is also expected to be higher. Say if value of multiplier is ten, the total income generation will be equivalent to Rs. 10,000 crores.
4-For various reasons the image of the Muslim community is not good. People in general treat them as liability of the country rather than an asset (except of course at the time of elections) Now suppose a public welfare project like safe drinking water in cities towns or Railway stations, any project of sanitation or health or Hydro or Wind Mill Electricity Project is undertaken and dedicated to the Nation (which houses Muslims too) the image of the community will improve leading to positive change in behaviors and decision of millions in India. Needless to say that it will bring huge benefits to the community of material and psychological nature.
5-A small fraction of the Zakat fund can be used for Muallfatul Quloob (advocacy / lobbying) that will change the total socio political climate in favor of the community in the country.
6-Appointment of 300 counselors /public relation officers costing Rs.1,80,00,000 p.a. (5000 *12 * 300) will engage in dessiminating and getting sanction of many government welfare schemes for the community. Assuming PRO manages to get sanction 100 old age pensions, 10 marriage grants and 25 self-employment soft loans, each PRO causes a transfer of govt. grants of 2,20,000 and interest free loans of Rs. 6,25,000/-. It means that 300 PROs will manage a grant of Rs. 6,60,00,000 and a soft loan of Rs. 18,75,00,000 in a year, government grants which remains unutilized. Remember all this at a cost of Rs. 1,80,00,000/= only. What it suggests is that there can be more productive use of Zakat funds causing multiple increase in community welfare.
These suggestions are indicative and by no means exhaustive.
However the critical look at the collection, distribution and use of Zakat leads to many apprehensions. Few of them may be noted as below--
1) Distribution of Zakat suffers from the weakness of determining genuineness of the receivers. Individuals do not and perhaps cannot have a network all over the country to find out the authenticity of Zakat collectors. Zakat collectors better equipped with art of speaking and methods of impressing succeed in collecting more funds than others irrespective of degree of genuineness. MASAKEEN who are in need but do not ask for, remain almost devoid of their share.
2) The method of distributing Zakat individually has marginalized the basic objectives of Zakat. It looks as If Zakat payers pay it as Masters and not as trustees and recipients receive it as mercy rather than their due right in the wealth of donors.
3) Distribution of Zakat at individual level is according to the whims and fancies of Zakat payer being unmindful of the real social needs of the community / society at large. As a result of this, the social benefit of Zakat at the national level is not achieved.
4) The current practice of Zakat payment in the month of RAMZAN makes indigents richer for couple of months and leaves them as beggars for the rest of the year. The needs of the community, which arises during the year mostly remains uncovered with Zakat fund, which may rightly be termed as social benefit fund.
5. Organized collection and use of Zakat funds through religious groups, religious associations and social organizations too do not seem to conform to the letter and spirit of AYAT-E-SADQAT of the HOLY QURAN. These collections are spent in accordance with specific agendas of the groups, associations and organizations, which may not necessarily be the priority of the community.
BETTER late than never
Thanks to GENERAL AWRENESS world over along with other things, the need to have an agency for organized collection and planned use of Zakat became a point of debate. Convinced with fruitfulness of this exercise efforts were made at the micro and macro levels to convert this thought into practice. Establishment of Zakat organizations at local / regional levels in India and abroad are manifestations to these efforts. As of now ten Muslims countries (13) namely Saudi Arabia (1951, Libya (1971), Jordan (1978), Bahrain (1979), Pakistan (1979), Sudan (1980), Malaysia (1980), Kuwait (1982), Bangladesh (1982), and Lebanon (1984) have created state Zakat authorities for collection and disbursement of Zakat fund. In countries like Saudi Arabia, Pakistan and Sudan, payment of Zakat to these states agencies is partly compulsory whereas in all other countries it is voluntary. *
Objectives of Zakat teachings of ISLAM and need of the community, all warrant an organized collection and planned use of Zakat in India. Absence of an Islamic authority is no excuse for non-organization. After all for every religious and non-religious need of the community we have organizations/organized groups operational under the law of the land to do the needful. Then why not for Zakat, which has immense potential for socio economic empowerment of the community? Therefore let us agree that it is high time for planned vigorous efforts to be made to launch a movement to address to problems related to Zakat on the one hand and educate the community to opt for centralized collection and use of Zakat at the local/state /national level on the other. The justification for such work can be understood with the help of the following lines----
1-The Holy Quran at various places ordains Muslims to establish prayer and pay Zakat. This itself indicates the existence of an authority to which this amount should be paid. It is further reinforced with another verse where Muslims are characterized with practitioners of Zakat system.
2-The QURANIC verse specifically dealing with Zakat and its use describes expenditure on AMELEEN (persons involved in collection and disbursement of Zakat) as admissible head of expenditure of Zakat. This itself denotes an organization where there will be employees to administer the fund.
3-As per the current practice Zakat is mainly paid in the month of RAMZAN whereas community needs monetary help throughout the year. The fulfillment of this need is possible only when we have a BAITULMAL that works throughout the year.
4-Utmost importance is attached to collective, organized and planned way of life for Muslims. For instance, when more than two even in tours, believers are asked to select one among them as leader. Further regarding the general affairs, Muslims are asked to resolve and decide through mutual consultation.
5-Zakat is an amanat of ALLAH ALMIGHTY in the hands of the payers. It is required to be used in a genuine manner. As people for far of places beyond reach of payers collect Zakat, nothing can be said with certainty about its genuineness.
(1) Al Munjid (Arabic Dictionary)
(2) Dars E Quran Published by Idara Talimat I Islami Deoband, U.P., India
(3) The Holy Qyran (51: 19)
(4) Bukhari Sharif (Vol. 2, Book 24, No. 536)
(5) The Holy Quran (2:255)
(6) The Holy Quran (9:104)
(7) The Holy Quran (9:103)
(8) The Holy Quran (9:60)
(9) Printed reports including financial statements for the year 2003-04.
(10)Census of India Report 2001.
(11)Statistical outline of India 2004-05, published by Tata Services Limited, Mumbai.
(12)Economic Survey of India 2004-05, published by Ministry of Finance, Govt. of India.
(13)Management of Zakat in Modern Muslim Society, published by IRTI, IDB Jeddah 1989.
Dr. Rahmatullah (Reader and Head, Department of Business Economics, A.P. College of Commerce & Economics, Affiliate to Mumbai University) presented this paper in a National Seminar on Zakat, organized by Zakat Foundation of India, Delhi on September 3 & 4, 2005.