Journal of the New Economy Vol:11/N:01 (Part2) (2020), p319-341

ZAKAT CAN BE CONSIDERED A VITAL RESOURCE FOR SUSTAINABLE

DEVELOPMENT IN ISLAMIC COUNTRIES.

Pr. Mokhtar Abdellah MAAZOUZ

Jouf University. Saudi Arabia

Received: 17/11/2019. Accepted: 05/12/2019 Published:01/01/2020

Abstract:
Zakat plays a vital role in reviving the economy and achieving development as a
result of three fundamental and interrelated factors, namely, fighting the
compactness, encouraging investment and encouraging spending. Hence, this
principle is compatible with the principles of the world economy and therefore it
is considered one of the most important factors hindering the economic
development of the state because these stagnant resources do not enter in the
wheel of the economy and thus reduce the volume of domestic resources. Hence,
this leads to a much lower level of development than would be possible if all the
resources are employed and used to revive the economy and through the above
analysis and study of this vital resource and its impact on the decline of poverty
by establishing decent jobs and improving the level The livelihood of the
individual and society as a whole.
Keywords: Zakat, Sustainable development, factors of development.

Jel Classification Codes: A1, B3

:‫ﻣﻠﺨﺺ‬
ٔ ‫ﻟﺘ‬
‫ﺗﻠﻌﺐ اﻟﺰﰷة دورا ﺣﻴﻮاي ﰲ إﻧﻌﺎش الاﻗﺘﺼﺎد وﲢﻘﻴﻖ ا ﳮﻴﺔ وذكل ﻧﺘﻴﺠﺔ ﻟﺜﻼﺛﺔ ﻋﻮاﻣﻞ اﺳﺎﺳـﻴﺔ وﻣﱰاﺑﻄﺔ وﱔ ﳏﺎرﺑـﺔ الاﻛﺘﻨـﺎز وﺗﺸـﺠﻴﻊ‬
‫ اﻟﺘﺎﱄ ﻫﺪﻩ اﳌﺒﺎدئ ﳒﺪﻫﺎ ﺗﺘﻮاﻓﻖ ﻣﻊ ﻣﺒﺎدﰄ الاﻗﺘﺼﺎد اﻟﻌﺎﳌﻲ و ﻣﻦ ﰒ ﻓﻬـﻲ ﺗﻌﺘﱪ ﻣﻦ ٔاﱒ اﻟﻌﻮاﻣﻞ اﻟﱵ ﺗﻌـﻮق‬.‫الاﺳﺘامثر وﺗﺸﺠﻴﻊ اﻻٕﻧﻔﺎق‬
‫ ﻓـﺎٕن ذكل‬،‫ و ﻣـﻦ ﰒ‬.‫اﻟﺘﳮﻴﺔ الاﻗﺘﺼﺎدﻳﺔ ﻟدلوةل ٔﻻن ﻫﺬﻩ اﳌﻮارد اﻟﺮاﻛﺪة ﻻ ﺗﺪﺧﻞ ﰲ ﲺةل الاﻗﺘﺼﺎد و ابﻟﺘﺎﱄ ﺗﻘﻠﻞ ﻣﻦ ﲩﻢ اﳌﻮارد اﶈﻠﻴﺔ‬
‫ﻳﺆدي إﱃ ﻣﺴـﺘﻮى ﺗﳮﻮي ٔاﻗﻞ ﺑﻜﺜﲑ ﳑﺎ ﳝﻜﻦ ٔان ﻳﺘﺤﻘﻖ ﻟﻮ ٔان ﰻ اﳌـﻮارد ﻣﻮﻇﻔـﺔ و ﻣﺴــﺘﺨﺪﻣﺔ ﰲ إﻧﻌـﺎش الاﻗﺘﺼـﺎد و ﻣـﻦ ﺧـﻼل ﻣـﺎ‬
‫ﺳـﺒﻖ ﺣﺎوﻟﻨﺎ ﲢﻠﻴﻞ و دراﺳﺔ ﻫﺪا اﳌﻮرد اﳊﻴﻮي و اتﺛﲑﻩ ﻋﲆ اﳔﻔﺎض اﻟﻔﻘﺮ ابٕﻧﺸﺎء ﻣﻨﺎﺻﺐ ﺷﻐﻞ ﺣﻘﻴﻘﻴﺔ و ﲢﺴﲔ اﳌﺴــﺘﻮى اﳌﻌﻴﴚـ‬
.‫ﻟﻠﻔﺮد و ﻟﻠﻤﺠﳣﻊ ﻣﻌﺎ‬
‫ ﻋﻮاﻣﻞ اﻟﳮﻮ‬، ‫ اﻟﳮﻮ اﳌﺴـﺘﺪام‬،‫ اﻟﺰﰷة‬:‫ﳇﲈت ﻣﻔﺘﺎﺣﻴﺔ‬
A1, B3 : JEL ‫ﺗﺼﻨﻴﻒ‬
Corresponding author: Full name, e-mail: [email protected]
1. INTRODUCTION
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 Journal of the New Economy Vol:11/N:01 (Part2) (2020), p319-

The global economic crisis of 2007-2009 is helping to limit the ability of states to
address the challenges of poverty, income inequality and high unemployment.
Moreover, the revolutions of the Arab Spring, which have been shaking up some
Middle East countries since 2011, reflect the failure of national economic plans
aimed at improving the standard of living of citizens and achieving sustainable
development. This situation makes it urgent to find local financial resources other
than public resources alone.
This would fund development projects by ensuring equity and social cohesion.
For these reasons, it seems important, even necessary, to resort to the solidarity
economy in modern economies, as well as to a "charitable" economy. The social
and solidarity economy (SSE) favors the satisfaction of the social interest by
relying on the principles of democratic and participative management, free
membership and limited remuneration. Its main role is to combine paid and
unpaid work, economic and social activities and to interconnect the various local
actors to collectively solve the economic problems of society and attract external
resources1. With respect to the charitable economy, it mobilizes philanthropic
resources to provide better financing and learning opportunities for people in
difficulty.
This practice is aimed at improving the living conditions of the underprivileged
classes. In this respect, these two new sectors jointly contribute to wealth and
employment creation and the fight against poverty. Our study will focus on forms
of solidarity based on the principles of Islam such as zakat ("obligatory alms")1,
waqf (godly foundation) or sadaqa (voluntary alms). These forms of religious
solidarity can be adapted to finance development projects that contribute to
greater equality. Zakat, a moral obligation based on a levy on the surplus of the
rich, contributes to a redistribution of income between the different social
categories and plays a sometimes-decisive role of reintegration of the poorest in
the economic circuit.

1
C., Rambaud, T. (2012), "La finance islamique et la crise de l'économie contemporaine, colloque
international du 17 janvier 2012, Emirates center for strategic studies and research, Abou Dhabi.

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2 -THE WAQF AND SOLIDARITY ECONOMY

The operating mechanism, which consists of making a lifetime gift of the usufruct
of a property to the benefit of a charitable foundation, makes it a valuable tool. to
support sustainable actions for economic development. Despite their economic
and social importance, zakat and waqf remain largely isolated from operations -
both humanitarian and development - coordinated by international aid and have
their own channels. Our objective is twofold: first, to present the role of zakat and
waqf in the economic system, and secondly, to evaluate the possibilities of
mobilizing these flows, using the tools of Islamic finance and solidarity finance
for make them innovative levers for financing development. This is where we find
the originality of this topic that we wanted to address since few studies have been
devoted to analyze these forms of religious charity in an economic perspective.
Islamic finance is a financing method based on six fundamental principles:
participation in losses and profits; the prohibition of excessive risk; prohibition of
the practice of interest or usury; the backing of real assets; the prohibition of
speculative practices and the prohibition of investing in companies whose
activities are harmful to people and society (tobacco, weapons, gambling, etc.).
While solidarity finance is a type of financing that collects private and public
savings and receives donations to finance specific economic activities
(environment, education, social action) or targeted audiences (women,
unemployed, activity creators)2. These two alternative financing can thus
intervene effectively in the field of charity in order to better develop the capacities
of these funds to put them at the service of the economic and social development.
Our study and our thinking are articulated in three points. First, we will literally
and economically define the financial resources from Islamic charity (zakat and
waqf), specifying their current criteria, beneficiaries and economic roles. Next, we
will examine investment and productive management mechanisms to adapt these
resources to financing and development needs. These means must respect both the
principles of Islamic finance and the conditions of these resources themselves.
Finally, in the last part, we will discuss the benefits of the "Venture
Philanthropy3" strategy to put in place effective charitable investment plans for
development projects with high growth potential.

2
Ben Néfissa, S., (1991), "Zakât officielle et zakât non officielle aujourd'hui en Égypte", la revue
Égypte/Monde arabe, pp.105-120,

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Zakat As a first step, we propose to define literally and economically the concept
of zakat, its conditions and its specific beneficiaries. We will try to see the
difference between zakat and other forms of Islamic charity. We will then
examine the economic functioning of zakat, the purpose of which is the
redistribution of income among different social categories and the inclusion of the
poor in the investment cycle. Based on concrete examples from projects in some
countries, we will discuss the possibilities of managing and investing in zakat for
the sustainable use of these resources. Finally, we will demonstrate that zakat can
go hand in hand with international development assistance to meet the huge
financing needs. The concept of Zakat Zakat is a religious duty for every Muslim
under certain conditions. The term zakat in Arabic means purity, increase, and
righteousness. Its purpose is therefore to help the rich to purify themselves of their
attachment to material goods and to fight against the behavior of greed.
This duty is thus described by the Qur'an: Surat 9 AtTawbah "Repentance", Verse
103). In economic terms, zakat is a type of 3 Venture capital or venture capital is a
form of financing that takes the form of temporary participation in the capital of
companies with high growth potential in order to subsequently generate a very
strong position. capital gain. "Venture Philanthropy" is the adoption of venture
capital investment strategies to the needs of the charitable sector. In this case, the
resources of the charity are used to finance sustainable development projects by
employing business and business practices characterized by innovation,
efficiency, the measurement of results and the search for a leverage effect.
The purpose of Zakat is therefore to fight against the accumulation of
unproductive capital by promoting cohesion between the different categories of
society. In summary, zakat is a moral obligation for the faithful, taken from the
flow or surplus of the rich, created for a year, for the specific beneficiaries
mentioned by the Koran (Surah 9, Verse 60). This alms, paid according to the
rules of solidarity, is a right of the poor and needy and must not pass through the
coffers of the state. There are two types of zakat: zakat al-mal (legal alms), which
is paid annually3. Indebted people who have incurred debts for a pious purpose

3
Kettani, Omar, (1997), "L'impact de la zakat sur le développement", in la Zakat et le Waqf: Aspects historiques,
juridiques, institutionnels et économiques, éd. La Banque islamique de développement et l'institut islamique de recherches
et de formation, 187-195.

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 Author/Title

and unable to pay them. People who find themselves suddenly homeless and
away from their family or country and children from the road).
Travelers far from his country: they can benefit from zakat to support themselves.
In the way of God: concerns all that is of public utility, such as the construction of
hospitals, schools and asylums for orphans. The conditions of zakat11 In order to
pay zakat, precise conditions must be respected12: - Zakat must come from assets
derived from a lawful activity. - The levy must relate to a property that is part of a
private property. This property must be absolute, that is to say that it is devoid of
indebtedness and gives the owner the possibility of free use. - Before paying
Zakat, we must secure the basic needs (food, housing, education, health, expenses
for children, ... etc.). Then, the zakaah must be paid at the moment the income
reaches the amount of the nissab, and if it has never fallen below this amount
during a lunar year.
These are certain activities that are prohibited by Islam because they harm people
and society such as: the tobacco and drug industry, alcohol industry, gambling
industry, the arms industry. The nissab is the minimum amount for the property or
income to be subject to Zakat and therefore anyone whose income does not reach
this amount, does not pay Zakat. The nissab on metals is equivalent to 595 grams
of silver and 85 grams of gold. As for zakat on money, its nissab is equivalent to
that of gold and silver
The payment of Zakat after identification of the threshold of ease Source: (Alaoui,
2014), "The Zakat an ethical readjustment for the business world. Currencies:
represented by gold, silver and all that can be valued by currency such as goods,
mined mines, bank notes ... etc. The required portion of the zakat of these goods
must represent 2.5%, ie one fortieth of the income. For example: a person has 600
grams of money (which exceeds the nissab that is 595 grams) and the price of one
gram of money is 5 €. In this case, the amount of zakat would be 600 * 5 * 2.5% =
75 €. Or, a person has a credit balance in a bank account of 4 000 €, the nissab is
2618 € and if during a lunar year, considering this balance does not fall below the
value of the nissab, the zakat amount should be equal to 4000 * 2.5% = 100 €. (2)
Agricultural products: these are grains intended for consumption and capable of
being preserved, such as wheat, barley, dates, raisins ... etc. Zakat is equivalent to
10% of the annual harvest for crops that have the distinction of watering without
difficulty thanks to rains, rivers. But if watering requires more human effort and
equipment like the machines to extract the water, it must in this case out 5% of the
annual harvest. 3) Livestock (camels, cattle, etc.)

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their Nissab is fixed at 5 for camels, 30 for cows and 40 for sheep. For example:
the ownership of 5 camels leads to the donation of a one year old sheep; 10
camels, two ewes aged one year each15, etc. On the other hand, horses, mules and
donkeys are exempt from zakat as it is reported by the Prophet: "The Working
Paper:" Islamic Charity: An Innovative Lever for Financing Development? "-
February 2015 13 law, neither for his horse nor for his slave" (hadith in the
(authentic) sahih of Imam Muslim16). Zakat, sadaqa and waqf: To better
understand the special nature of zakat, one must illustrate the difference between
zakat and other financial resources from other forms of charity.

III-THE DIFFERENCE BETWEEN ZAKAT AND SADAQA

these two financial resources have the same goal of promoting social cohesion
and helping the poorest in the community. They also aim to reduce, if only
slightly, the economic disparities in the population in order to diminish possible
claims from the poor in the community towards the most favored, which
contributes to establishing peace. social. However, zakat is a divine obligation
enjoining Muslims with a wealth that reaches a certain level (the nissab) to pay a
precise amount (one fortieth of the income, 2.5%) in favor of beneficiaries quoted
by the Koran. , mentioned above. Sadaqa, on the other hand, represents a non-
obligatory alms for the poor and is not tied to a limited time or quantity. B) The
difference between zakat and waqf "godly foundation": the income from these two
sources is paid on a recurrent basis, usually every year at the same time in the
year. However, Islamic jurists have excluded the property of the waqf from zakat
because the waqf is intended for persons determined by the donor and not by the
Koran. The waqf beneficiaries may be, in fact, members of the founder's family
who are not necessarily poor or needy. Likewise in sadaqa, the waqf is a non-
obligatory charitable act. The Economic Role of Zakat: Theoretical and Empirical
Framework Since investment is the engine of development, zakat leads to a
reinjection of social surplus into the economic circuit, stimulating demand and
production, especially those of basic necessities. It also helps to reduce inequality
by providing poor people with purchasing power to achieve a decent standard of
living. El Kettani (1997, p.190-194), Boudjelal (2013, p.7) and Alaoui (2014),
define zakat as a social investment instrument according to the following
mechanism: in the first place zakat exerts a redistribution 16 All that is related to
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 Author/Title

the Prophet as words, actions or characteristics "the hadiths" are collected by

Muslim scholars such as Imam Muslim and Imam Mohamed Al-Bukhari. The
three reliable sources of hadith come from Imam Muslim, Imam Al-Bukhari and
Imam Malik.
Working document: "Islamic charity: an innovative lever for financing
development? "- February 2015 14 most disadvantaged social groups. Since the
propensity to consume (PMC) among low-income people is higher than among
rich people17, this income distribution will increase the level of consumption
among them. As a result, this redistribution will create a demand for the goods
and services needed to drive mass production, which in turn will increase the
demand for jobs. Moreover, the rate of zakat is low (2.5%) so that it does not
affect the marginal propensity to invest. On the other hand, it decreases the
propensity to uxury by encouraging investment in the staple goods sector. Indeed,
when the incomes of wealthy families decrease with the payment of zakat, the
consumption of luxury goods decreases more than proportionally in relation to
income (the Engel laws of income elasticities). Thus, because zakat is taxed on
the return on capital (r) that is not spent on consumption, it can therefore
contribute to reducing the concentration of wealth that is equal to "rg" (r = rate of
return). (net of tax) of capital, g = growth rate).4
Secondly, the poor can, subject to physical fitness, use the financial resources
provided by zakat to create their own commercial or other projects. As these
projects are likely to improve their standard of living, they may subsequently
become contributors to zakat. In addition, zakat can work in complementarity
with Islamic finance in areas that it can not cover. Indeed, Islamic banks grant
types of financing to customers who can afford to repay. On the other hand, zakat
makes it possible to finance the small projects of the poor households, unable to
resort to the banks, through loans exempted from interests "qard hassan". Finally,
zakat-based income redistribution policy reduces conflicts between social
categories by promoting the economic stability necessary for sustainable
development. 17According to the Keynesian consumption function (Consumption
= PMC * Income + Self-Consumption), there is a decreasing relationship between
the propensity to consume (the share of each additional unit of income consumed)

4
Noor, A., Abdul Rasool, M., Ali, R., Abdul Rahman, R., (2014), "Efficiency of Islamic
Institutions: Empirical Evidence of Zakat Organizations‟ Performance in Malaysia", Journal of
Economics, Business and Management, Vol. 3, No. 2, pp.282-286.

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 Journal of the New Economy Vol:11/N:01 (Part2) (2020), p319-

and the household income. In other words, "people tend to increase their
consumption as their income grows, but less than proportionally to their growth".
As a result, when income rises, households that already reach a high income level
consume less of their income than lower income households. Moreover, according
to the demonstration effect formulated by J. Duesenberry, the household PMC is
determined not only by its absolute income, but also by its relative income relative
to the average income of other households. In other words, the CGP is affected by
a demonstration effect by high-income households. As such, low-income
households try to emulate the mode of consumption of the rich and therefore have
a stronger PMC (Villieu, 2008, p.60 to 76). Working document: "Islamic charity:
an innovative lever for financing development? Figure 2: The effect of zakat on
bringing the poor into the investment cycle In order to concretely measure the
effect of zakat on economic development, many studies have empirically
evaluated it from Household surveys. Yusoff (2011) studied the impact of tenure
and education expenditures on economic growth from a survey in four cities in
Malaysia. The results of this work indicate that zakat spending and education
significantly and positively affect the rate of real GDP growth. Other things being
equal, an increase in zakat spending of 10% increases the real GDP growth rate by
0.138%. In the same way, a 10% increase in the enrollment rate increases
economic growth by 0.023%. Using microeconomic data from a survey conducted
in Pakistan by the Household Integrated Economic Survey (which provides
information on the donors and beneficiaries of zakat), Jehle (1994, p.205-211)
demonstrated that zakat improves the redistribution of income between social
categories by blurring inequalities.
The official development assistance (ODA) 18, the OECD's Development
Assistance Committee notes that zakat can go with international aid to solve
development issues such as unemployment and the lack of funding for social and
economic projects19. These studies indicate that zakat reduces poverty through an
integrated system of redistribution within society. Its purpose is not only to lift
beneficiaries out of poverty but also to ensure the long-term redistribution and
circulation of money within the community. That is why Islamic countries must
collect it effectively and implement productive methods for its benefit to
development projects. Modern Forms of Investment in Zakat: Traditionally, zakat
is collected formally or informally.

326
 Author/Title

Currently, zakat is collected by social public banks or Islamic banks. The latter
have a social solidarity service whose role is to collect zakat and redistribute it to
enable the realization of development projects such as the construction of
hospitals, the contribution to the equipment of universities and schools, or to offer
the poor the means to make their pilgrimage journey.
Among these banks are the Nasser Social Bank in Egypt and the Faisal Islamic
Bank. On the other hand, the informal way is to pay zakaah to trusted people who
are responsible for redistributing it. Many doubts about the efficiency and fairness
of the public sector's use of zakat money, whereas trustworthy people are closer to
the needy and can better understand their needs. . In this regard, there are modern
forms of zakat management that are not part of the public sector but have the
technical and administrative skills to invest well and grow zakaah. Several
Muslim-majority countries (the United Arab Emirates, Qatar, Saudi Arabia,
Algeria, Jordan, etc.) have established zakat funds. They are religious and social
institutions that work under the supervision of the government to guarantee their
legal coverage. Their objective is to count the money of zakat to spend it for the
benefit of poor families through a quarterly, semi-annual or annual allowance.
They also use these resources to finance pro-poor investment projects and to
acquire equipment for small businesses5.
In Algeria, the zakat fund is under the supervision of the Ministry of Religious
Affairs and Waqfs. It is organized into three levels corresponding to the local
basic commission (daïra), the regional commission (wilaya) and to the national
commission which represents the high council of the fund. The latter consists of
the chairman of the board, government representatives and major donors. The
collection of zakat is made by awareness campaigns at the local level, while the
distribution is carried out by the wilaya commission of the zakat fund.
This commission allocates 50% of the sum for the benefit of the poor, 35.5% for
investment through "qard hassan" (loans exempted from interest) and 12.5% to
the authorities 20The Social Bank Nasser is a bank Egyptian public whose
resources come mainly from the earnings of public enterprises and the budget of
the Ministry of the Waqfs. Its goal is to fund charitable activities while respecting
the ban on usury (Ben Nefissa 1991, Warde 2010, p.71). 21The Islamic Fiqh
Council has made zakat funds available for investment projects that will

5
Mohammad, M. (2009)," Alternative development financing instruments for waqf properties ",
Malaysian Journal of Real Estate, Vol. (4), No 2. Pp:78-80.

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 Journal of the New Economy Vol:11/N:01 (Part2) (2020), p319-

eventually be appropriated by the zakat beneficiaries or affiliated with the legal

body responsible for the collection and distribution of zakat, but provided that the
basic needs of the needy are met in the first place and that sufficient guarantees
are provided to guard against possible losses (Islamic Fiqh Council, Third
Session, 1986, Amman, Jordan, Feddad, 1997.

4-IMPORTANCE OF ZAKAT IN SOCIETY

Thee importance of zakat in society through the media, awareness campaigns,

publicity, etc. They are also used to use the money collected to improve the
economic situation of the most disadvantaged socioeconomic groups. There are
several types of NGOs, including: Islamic preaching associations, social and
cultural associations and charitable associations24. Examples of NGOs include
charities in Egypt: "Misr El Kheir" (beneficence in Egypt), "Resalah" the
message) and "Sonaa el Hayah" (life makers) who collect zakat and donations
from individuals or companies to finance non-profit projects (scholarships, micro-
loans to small businesses, building schools in small isolated hamlets, providing
clean water in poor neighborhoods , etc.)
On a global scale, the American Zakat Foundation of America (ZF)6 is dedicated
to collecting zakat and sadaqats from Muslims in the United States for emergency
relief in poor countries. First, it sends a team of specialists to take stock of the
needs of the population. She then sends emergency relief to the victims; for
example, during the earthquake in Haiti, the ZF sent aid packages containing
hygiene kits and temporary shelters to the victims. In Mozambique, the ZF raised
donations to finance a feeding program by providing technical aids to improve
agricultural production. The amount of Zakat collected by ZF has gradually
increased from $ 3 million in 2011 to $ 7 million in 2012 and $ 9 million in 2013.
The Foundation allocates 91% of this amount to support programs. urgency and
the rest is allocated to administrative expenditure26. As a result, the number of
national and official structures responsible for the collection and management of

6
Minor, A., (2014), "Zakat and development finance: Filling in the gaps, Open data for
international development. Disponible sur: http://aiddata.org/blog/zakat-anddevelopment-finance-
filling-in-the-gaps

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 Author/Title

zakat funds has increased sharply in recent decades, especially in South Asia and
the Middle East7 All of this helps to demonstrate the important role of zakat as a
tool for financing local development.
However, investing in zakat faces challenges of many kinds: the main constraint
comes from the following: the lack of quantified data on the added value of zakat
organizations and funds, which reduces the possibility of strengthening the zakat
consciousness of the general public.The absence of these data also makes it
difficult to quantitatively measure the importance of The second constraint lies in
the fact that in developing countries most NGOs, whether charitable or non-
charitable, face obstacles that limit their productive and philanthropic activities,
including red tape, bureaucracy and legal constraints, and some Muslims believe
that payment of their tax exempts them from paying zakaah do not wish to be
subject to double taxation. Thus, the low awareness of the economic and social
importance of zakat has made Muslims feel that Zakat is only a charity that has
nothing to do with the modern economic system. As a result, zakat in many
Muslim countries contributes only marginally to economic development plans.
Faced with these problems, Sudan and Malaysia have adopted collection and
redistribution methods to maximize the role of the Working Paper: "Islamic
Charity: An Innovative Lever for Financing Development? "- February 2015 21
economy of zakat. Sudan has made zakaah levy compulsory since 1990 (for
development, see below).
By contrast, Malaysia has introduced a voluntary zakat levy method on monthly
income of individuals, made attractive by tax incentives (for development, see
below) 27. The compulsory levies of zakat: the case of Sudan The payment of
Zakat in Sudan is made compulsory by law (Article 16 of the 2001 Law). This
article stipulates that zakat is a financial obligation collected by the state and its
collection, distribution and administration will be in accordance with Islamic law
(sharia law28). Zakat is levied on all Sudanese Muslims who possess, in Sudan or
abroad, property subject to Zakat and are extended to any non-Sudanese Muslim
who works or resides in Sudan. As for non-Muslims, they are subject to taxes of
"social solidarity" of a rate that is equivalent to that of zakat29. The responsibility
for the management of zakat funds in Sudan is organized into three levels:

7
Aziz, M., Johari, F. and Yusof, M. (2013), "Cash Waqf models for financing in education",
Islamic Economic System Conference (Iecons 2013), International Islamic University Malaysia
Kuala Lumpur, Malaysia.

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national level (zakat chamber), regional level (regional office), local level (local
councils and neighborhood committees) 30.
As a result, individuals do not officially pay their zakaah, while big business and
personal enterprises are forced to pay it to the state. These sums are then
registered in an account It is then stored in different banking structures (the
Central Bank and the Bank of Solidarity) which manage the accounts on behalf of
the Zakat Chamber. According to the Zakat Chamber's annual report, agriculture
and commercial goods are the main sources of funding for zakat in Sudan. These
data also reveal that between 2011 and 2012, zakat in agriculture and zakat in
livestock increased sharply by a rate of 73.7% and 63% respectively32. This
increase in the resources of zakat is explained 31 Anyone carrying on a gainful
activity which requires a registration in the commercial register is obliged to pay
Zakat. The regional offices are in charge of redistributing zakat between local
councils. The latter are responsible for rebalancing this redistribution between
richer and poorer neighborhoods.8

4.1-Vertical Redistribution
Concerns all categories of beneficiaries to meet their necessary needs, the aid is
distributed either directly in the form of donations in kind or in cash, or through
intermediaries (associations, organizations, etc.). They then provide people in
difficulty with a certain level of insurance against food shortages caused by rising
world food prices. This distribution amount reached 399.3 million Sudanese
pounds in 2012, or 48% of the total amount of zakat collected. 2. Horizontal
redistribution: refers to the redistribution to income-generating projects that form
part of a development policy and the ability of the poor to participate in economic
activity. Between 2011 and 2012, projects were launched for an amount of about
104.8 million Sudanese pounds (20% of the total amount of zakat collected),
targeting 306483 poor families. To avoid the loss of such aid, the Zakat Chamber
has set up departments to analyze the relevance of individual projects and to
evaluate their costs in order to provide them with the necessary funds and the
missing human capacities. 45% 39% 8% 4% Agricultural products Commercial

8
Mahed, G. (2009), "The corporate governance of an 90 organization managing Islamic charitable
endowments (waqfs)", Corporate Governance in Africa Case Study, No.2.pp122-123.

330
 Author/Title

goods Personal businesses Livestock Capital Other Working document: "Islamic

charity: an innovative lever for financing development? 3. Administrative Costs
and Workers' Wages: Like all NGOs, the Zakat Chamber does not receive state
funding, but has its own sources of funding (10% of the redistribution). is devoted
to administrative costs and 12.5% is allocated to workers9. This strategy of
collection and redistribution in Sudan is well organized compared to other
countries in the same region. It increases the effectiveness of zakat in the fight
against poverty and regional inequalities. However, several criticisms have been
addressed to this system: - The beneficiary targeting system should not depend
solely on informal knowledge, since other criteria than the level of income could
bias the method of selecting beneficiaries such as the region, origin, membership
of an ethnic group. - Within the Zakat National Chamber, there is the "Zakat
Research Institute" which is responsible for putting in place future policies for the
management and distribution of zakat. However, much of his research is oriented
towards a theoretical rather than a practical approach.
The Zakat House must therefore pay attention to research that develops new
practical ideas about the productive investment of zakat (field work that collects
data on the economic and social situations of recipients of zakat, on the link
between zakat and current economic needs, etc.). Monthly Zakat levies on wages:
the case of Malaysia In Malaysia, the Zakat Management Authority (ZMA) is
responsible for the collection and redistribution of zakat. It is under the tutelage of
each federal state to decentralize the collection and redistribution of funds. In
some states, the management of the ZMA is entrusted to the private sector to
ensure a better outcome34. In order to improve the zakat collection system,
Malaysia enacted a tax law in 1997 encouraging Muslims to voluntarily pay their
zakaah from their monthly salary (Mohsin, Lahsasna and Ismail 2011, p.284).
This law grants employees tax deductions when they pay zakat. In general terms,
the government deducts the annual amount of planned spending based on the
number of wives and children in the family.
Zakaah is then deducted from the amount of tax paid. For example, if the annual
income of an employee is RM60,000 and he has only one wife and four children,
then the estimated expenses will be RM16,000 (personal expenses plus family

9
Noor, A., Abdul Rasool, M., Ali, R., Abdul Rahman, R., (2014), "Efficiency of Islamic
Institutions: Empirical Evidence of Zakat Organizations‟ Performance in Malaysia", Journal of
Economics, Business and Management, Vol. 3, No. 2, pp.282-286.

331
 Journal of the New Economy Vol:11/N:01 (Part2) (2020), p319-

expenses). ). In this case, the net taxable income at the end of the year must be
equal to 44,000. Suppose he has to pay RM2,605 in taxes and decide to pay his
zakaah (44,000 * 2,5% = 1,100 RM). Under these conditions, he will only pay
1,505 RM of taxes. On the other hand, enterprises and cooperatives have to pay
both taxes and zakaah, but the taxable base is calculated by deducting the total
zakaah from total net income37. In addition, zakat can be paid from the funds of
the Social Security (Employees Provident Fund38). In this case, the payment of
zakat is explained by this example: an official whose income amounts to 12,000
RM will be subject to the payment of a wage contribution of 1,320 RM and tax
levies of 1,486,50 RM and therefore his net income will be RM 9.193.50. If the
official decides to contribute to zakat, his salary and net income will remain
unchanged. But the tax payments will be reduced to 1.237,6 RM and he will pay
248,92 RM of zakat. As for investment in Social Security funds, the authors
(Mohsin, Lahsasna and Ismail, 2011, p.283) propose to share the fund in two
accounts (one conventional and the other Islamic) to guarantee to contributors the
choice between the two types of investments and to assure donors that their zakat
will be invested in a Sharia-compliant way.

4-2The salary calculation method in Malaysia

The method of estimating the amount of Zakat on annual income repose on social
security scheme is mandatory for all public servants who have reached the age of
16 and are employed under a service contract. It offers contributors reduced
retirement pensions from the age of 50 (30% of their savings) and increased
pensions after the age of 55 (70% of their savings)10.
Investment = International Islamic Investment, I Property = Islamic Property,
IMMI = Islamic Money Market Instrument, Sukuk = Islamic Bonds, MGIS =
Malaysian Government Islamic Securities This tax exemption system therefore
explains the fact that wages represent the main source Zakat funding in Malaysia.
In addition, the Board of Directors of Zakat has succeeded in developing a set of
innovative strategies to increase the amount of zakat collected (by recruiting

10
Geoffroy, V., Robyns, A. (2009), "Les bailleurs émergents de l'aide humanitaire : Le cas des
pays du Golfe", Groupe URD (Urgence, réhabilitation, développement). Paris‐Dauphine, DIAL,
pp.1-2.

332
 Author/Title

experts, encouraging scientific research, organizing conferences and workshops,

using different social networks, etc.).
As a result, Malaysia is the second largest donor of zakat in the world after Saudi
Arabia (OECD Query Wizard for International Development Statistics, 2014).
Nevertheless, the zakat redistribution method suffers from a loophole since it does
not reduce income inequality in cities and rural areas because of incomplete and
unclear data on poverty in rural areas39. Thus, much of the zakaah is paid to large
cities where the cost of living is high without taking into account the low
purchasing power and the credit rationing in rural areas.
The compulsory levies on zakat in these countries apply to agricultural products,
commercial goods, livestock and the annual income received by certain liberal
professions (doctors, lawyers, engineers, etc.). On the other hand, they do not
apply to the monthly income of public officials as in the case of Malaysia. The
various systems of collecting zakat Compulsory 41 Voluntary Volunteer with the
establishment of an official structure to manage the zakat Obligatory Fund with
tax incentives Pays1 (ratio of the poor population having less than 1.25 $ per day
in 20102) Saudi Arabia (PA) Libya (PA) Pakistan (12.74%) Sudan (19.8%)
Yemen (9.78%) Burkina Faso (44.46%) Guinea (40.87%) The Gambia (61 , 3%)
Mali (50.6%) Niger (40.81%) Senegal (34.06%) Sierra Leone (56.63%) Algeria
(PA) Bangladesh (43.3%) Egypt (1.68%) ) United Arab Emirates (PA) Indonesia
(18%) Jordan (0.08%) Kuwait (PA) Malaysia (0%)11 Arguments in favor of each
system - Many Muslims take lightly how they pay zakat. -Being a minimum tax
threshold (the nissab), zakat does not amount to taxing low-level incomes.
Therefore, the compulsory imposition of zakat strengthens its social goals by
making the poor of today's taxpayers tomorrow. -Zakat is a moral obligation to a
spiritual dimension. Its purpose is to help the rich to purify themselves of their
attachment to material goods and to fight against the behavior of greed. That is
why the State does not have the right to intervene to oblige the Muslims to pay
their zakat -The objective is to create an independent social and religious
institution having the technical and administrative skills necessary to invest well
and to to grow zakat. -These zakat funds work under the tutelage of the state to
guarantee its legal coverage. -The tax system of zakat is an alternative to
traditional tax systems to solve the issue of income distribution among members

11
Aziz, M., Johari, F. and Yusof, M. (2013), "Cash Waqf models for financing in education",
Islamic Economic System Conference (Iecons 2013), International Islamic University Malaysia
Kuala Lumpur, Malaysia.pp12-13.

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 Journal of the New Economy Vol:11/N:01 (Part2) (2020), p319-

of society by fighting the accumulation of unproductive capital. -A system of

absolute tax incentives thus avoids double taxation on monthly income.
Challenges / Problems -The difficulty of estimating in a relevant way the wealth
value of individuals (real estate, jewelry, ... etc.). - Zakat, having a spiritual
dimension, is paid for by voluntary solidarity. But when imposed by the state, this
solidarity can become coercive. -The absence of a national structure to collect
zakat makes some Muslims believe that the payment of their tax exempts them
from the payment of Zakat. - This may lead to a small contribution of zakat to
strategies to fight against poverty. In some countries, the zakat fund needs good
governance and transparency in its functions, collection operations and
distribution strategies to ensure donor confidence. -The taxes finance the state
budget to serve public expenditure, while the amount of Zakat is allocated to
charities -The application of zakat should not be seen as a break with the tax
system.
The Zakat levies on wages can not be generalized in all developing countries
where many of the employees work in the informal sector whose income is
unknown. Working document: "Islamic charity: an innovative lever for financing
development? - February 2015 29 Proposals According to several empirical
studies42, it appears that the trust of the donors, the transparency of the structure
in charge of collecting zakat and the efficiency of its modes of operation are the
main factors of influence on the payment. zakat. These results demonstrate the
need to establish an autonomous, autonomous structure to collect and redistribute
zakat using the media, mosque and new social networks to sensitize Muslims to
the economic and social importance of zakat. This structure must also be based on
a legal basis allowing donors to benefit from tax exemptions. This system of
exemptions can work like that of France (and most European countries) which
guarantees tax reductions on income equal to 66% of donations to works of
general interest. In other words, a donation of € 100 costs only € 3412 to the donor.
As for the redistribution strategies, they must be put in place by an administrative
committee made up of a team perfectly aware of the proponents.

12
Bendjilalal, B., (1997), "Les formes contemporaines du waqf: le cas du Koweït",in la Zakat et le
Waqf: Aspects historiques, juridiques, institutionnels et économiques, éd. La Banque islamique de
développement et l'institut islamique de recherches et de formation, p.282-296.

334
 Author/Title

This team will be tasked with identifying economic needs in order of priority in
order to obtain a concrete vision of the strategies to be adopted to allocate zakat to
the financing of these needs. To ensure equity and efficiency, such a team will
need to establish affiliated committees in villages or poor neighborhoods to
collect data on fragile individuals living in isolated small hamlets and to assess
their needs. It is important to note that countries suffering from rampant poverty
(Mali, Burkina-Faso, etc.) do not have a national body responsible for collecting
zakat. Such structures would enable them to effectively manage zakat so that it
can play its full role in the fight against poverty either through cash or in-kind
support, or through credits to finance micro-activities that generate income. Zakat
and official development aid: What complementarity? In order to better channel
aid and improve the performance of development projects, international
development organizations have recently begun to modify their aid strategies and
practices, taking into account the "partnership" needed with local development
organizations. more and more present and with specific skills. As a result, they
have increased their cooperation efforts with civil society organizations, which
therefore no longer have the simple task of providing services to the poor but also
supporting participatory democracy as interlocutors of public power43.
Previously, we have shown that the functions of the national structures of zakat
are not limited to giving simple monetary assistance to individuals in the poorest
quartile. They also contribute to fighting the other dimensions of poverty. The
classical measurement of poverty based on monetary criteria, the structures of
zakat help the most vulnerable categories to reach an adequate standard of living
by providing access to essential services (healthy foods, drinking water,
sanitation, electricity, etc.). However, poverty is also assessed according to non-
monetary criteria such as the enjoyment of human capital (education and health)
and social capital. In several countries, the zakat fund thus contributes to
improving the level of education and access to medical care for poor households
through the construction of schools, medical clinics, etc. Moreover, by granting
interest-free loans to the economically disadvantaged to help them achieve their
productive projects, the zakat institutions are increasing the participation of this
category in the economic life and in the system of mutual aid, which is a decisive
factor of social integration. It is clear that the zakat institutions can be the
appropriate partners of international development organizations and improve aid
effectiveness through coordination efforts. In the first place, the two bodies share
the same objectives, namely: "to reduce extreme poverty, to ensure economic and
human development, to promote social equality, to fight against unemployment
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 Journal of the New Economy Vol:11/N:01 (Part2) (2020), p319-

and social exclusion". On the other hand, the institutions of zakat can guarantee
transparency, one of the main difficulties of an international partnership, since
they are helped in several countries (Malaysia, Pakistan, Algeria, Lebanon,
Palestine, South Africa) by auditors who carry out regular audits. In addition,
zakat funds in some countries (eg Sudan and the United Arab Emirates) publish
annual reports that report the amount of zakat collected, its distribution channels
and the amount spent on administrative costs. These means therefore improve the
flow of information between international development aid organizations and
local zakat institutions. Comparing the aid provided by zakat with the ODA in
Malaysia and Sudan, we found that these two flows of aid target roughly the same
sectors. Data from zakat distribution by economic sector in Selangor State44 in
Malaysia show that in 2011, 57% of the amount of Zakat is allocated to the social
services sector and 33.7% to the education sector. Likewise, ODA flows in 2011-
2012 are allocated primarily to the education and social services sector in
Malaysia. As for Sudan, the distribution of zakat by the 8 beneficiary categories in
2012 shows that a large part of this aid is received by the poorest people (68%)13.

4-3 The Different Factors

The similarity of objectives and activities as well as the existence of a certain
transparency of information, it is interesting to establish coordination between
international development organizations and national zakat structures. This
cooperation has benefits for both partners in strengthening development efforts.
First, international organizations can provide zakat institutions with skills transfer
either through the provision of experience or through financial support. This helps
zakat funds develop their development programs and strengthen their ability to
meet the needs of the poor. In addition, international recognition of their role as
development actors increases the credibility and transparency of these national
structures. In addition, this cooperation increases the capacity of international
organizations to identify the priority problems and needs of the populations, since
zakat institutions are familiar with the local environment. Indeed, the partnership
between these two bodies makes it possible to avoid a double concentration in a

13
Alias, Tunku, (2012), « Venture Capital Strategies in Waqf Fund Investment and Spending »,
ISRA International Journal of Islamic Finance, v. 4, issue 1, pp: 99-124.

336
 Author/Title

specific sector to the detriment of another sector essential to economic and human
development. In short, better coordination between international organizations and
national structures of zakat can increase both the effectiveness of ODA and zakat
by maximizing their effects on economic development.
The waqf or habous represents a pillar of the Islamic economy since the first
centuries of Islam. It holds an important place in the Muslim and non-Muslim
communities. Our objective is to highlight the most important aspects of Waqfs,
especially in economic terms. To do this, we will first define the concept of waqf,
its forms, its conditions, the nature of its beneficiaries and its objectives. Next, we
will endeavor to analyze the management methods and investment mechanisms
that are used to develop and grow the assets of the waqf, including the waqf
public or charitable whose income is distributed for the benefit of public works,
charity or nuns. Linguistic and economic definition of the word waqf: The term
waqf in Arabic is defined by two concepts: habous (immobilisation), or
suspension of the right of ownership and tasbil (reserving the use and the profits
of a property immobilized for charitable purposes). The waqf therefore refers to
the immobilization of a property for charitable purposes.
The type of beneficiary defines the type of waqf. If the beneficiary is religious,
charitable or public, it is a Khayri foundation. In the case where the income from
a property dedicated to waqf is allocated to particular persons, it is a private or
family waqf: waqf ahli or waqf dhurrî. In other words, this waqf is dedicated to a
particular sector, to living people at the time of the constitution of waqf or to
people not yet born. Finally, the donor has the right to specify that the revenues
generated from waqf simultaneously target public beneficiaries and individuals
(waqf hybrid or shared: waqf moushtarak). Voluntary acceptance contract of the
donor (waqif / waqifa): the formula of this contract must be immediately
operational and not in the future. It must be definitive and not just a promise.
Finally, it must not include a condition that contradicts the principles of waqf. For
example, it is forbidden to say: I would put in waqf a parcel of land provided that
I reserve the right to sell it whenever I want. There are, however, permissible
conditions such as: devoting waqf property to a particular category or sector. The
administrator of waqf has no right either to the property of the immobilized
property or to his usufruct. He does not have the right to sell the property of waqf
as long as it is in good condition. But if it falls into ruin and if its profits decline
so that it does not meet the needs of the beneficiaries, it will be possible to
exchange it for the benefit of another property of a better report for the foundation
of the waqf (the steps to carry out this exchange are called istibdal, mu'awada
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 Journal of the New Economy Vol:11/N:01 (Part2) (2020), p319-

"substitution", ibdal "exchange"). The typology of waqfs: We can classify the

waqf according to several criteria: 1. According to the purposes of waqf Waqf can
be charitable-religious-public, family-private or hybrid. - Waqf public or
charitable "waqf khayrî": is the waqf whose income is intended for charitable
purposes. Recipients of Waqf revenues may be poor or projects of general interest
(hospitals, schools, mosques, public bridges, fountains). They can also be places
of prayer and worship (mosque) but also places of education (dar al-hadith,
madrasa, etc.). This type of waqf also includes the family waqf whose
beneficiaries have disappeared. The social impact of this type is important since
its income finances the projects of general or religious interest and subsidizes the
infrastructure works that give access to the basic services of companies Working
Waqf private or family "waqf dhurrî or ahlî": the income of this type of waqf is
intended for one or more persons designated by the founder. He can be the donor
himself (the waqif), his children, his grandchildren…etc14.
Similarly to the charitable waqf, the family waqf was a way of subsidizing the
infrastructure (shops, bakeries, baths, houses, farmland), but the benefits are to the
benefit of the family members of the waqf founder. However, the opinions of the
Islamic jurists differ on this type: the Malékite rite rejects it, because it is against
the original purposes of the waqf. Thus, its social impact is negative since it
increases social inequalities. But some scholars of the Hanbalites rite accept it
because they have seen that the cancellation of the family waqf can discourage
people from practicing waqf. It has therefore become more beneficial to revitalize
the family waqf in the hope that it will be transformed into public waqf. - Hybrid
waqf: is the waqf whose income is intended simultaneously to the particular
beneficiaries (including the founder himself) and to religious or public works46.
For example: individuals who share the usufruct of a waqf land between family
members and the poor. 2. According to the purpose of waqf (furniture or real
estate) - Waqf real estate: which has lasting value, it is a commercial building
(shops, cafes, workshops), residential building (houses), farmland, etc. . The real
estate waqf generates income usually from a long-term lease allowing to pay
regular income to the beneficiaries or to build projects of social or religious

14
Idem Aziz, M., Johari, F. and Yusof, M .pp 18-20.

338
 Author/Title

utility. Moreover, there are modern forms of real estate waqf where the assets
consist of a form of a company or bank designed as a waqf that generates income
intended to finance a social or religious work.
Abu Hanifa, the founding guide of the Hanafite school, does not allow furniture
waqf as it may be exposed to the risk of loss and deterioration. Yet this view was
not followed by other Muslim doctrines or by his own disciples. The latter
consider that the terms sustainability and perpetuity should not be taken literally.
It is sufficient that the object of the waqf is usually imperishable, a character is not
exclusive to immovable property.

5-CONCLUSION
The development of these goods can help to improve the tourism sector
considered as one of the main sources of foreign currency. In Jordan, the
government revived an old Waqf Mosque (Ja'far ibn Abi Talib Mosque),
considered one of the most important religious monuments, surrounding cafes,
restaurants and shopping malls to welcome tourists . - In the Health Sector: some
benefactors put hospitals or medical equipment in waqfs. In Cairo, the Egyptian
physician and writer Mustapha Mahmoud (1921-2009) created, in 1979, a pious
foundation "the association of Mustapha Mahmoud" which includes a mosque, a
general hospital, a library, a museum of geology and a museum. aquatic Center.
Mustapha Mahmoud Hospital is intended to provide low-cost medical services to
low-income individuals and families. Known for the quality of its services, this
renowned hospital has an average annual income of 60 million Egyptian pounds.
These revenues in turn help finance the other assets associated with the hospital
(the mosque, the library and the museum of geology) and acquire new land
needed for expansion. Subsequently, the profits from these investments are used
to renew medical equipment and recruit teams of caregivers essential to treat
many types of diseases (eye diseases, heart disease, dental care, aging-related
diseases, etc.). The foundation is managed by a board of directors with 400
members including a president elected periodically. It is responsible for investing
and making the waqfs assets profitable to redistribute usufruct to the needy in
various forms (financial aid).

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