RIPHAH INTERNATIONAL UNIVERSITY ISLAMABAD

Role of Zakat & Usher in Economic Development

Umair Javaid

Muhammad Rafay Munir

Anees ur Rehman
 1. Introduction

Back ground of study

Islam has basic five principles in which Zakat is one. Meaning of zakat is “to grow, to increase, and to be
clear”. Zakat is the combination of different words such as za, kaf, ya, having different meaninings such
as to be clean to be pure, innocent to be better in purity and to praise oneself or to justify. It can also be
considered a form of sadaqah (charity), given to the poor. So zakat can be classified and implemented as,
levied on specific assets only, identified by Shariah (Islamic Law) as assets having the potential for
growth. Levied at the rate of 2.5% each year (calculated according to the lunar calendar) on the market
value of the Zakat-able assets after deducting there from specified liabilities. The compulsory transfer of
ownership of a portion of the property of the giver, calculated at the rate of 2.5% as aforesaid, to a poor
and needy Muslim who qualifies to receive Zakat according to the Shariah. It is assumed as worship not a
tax, Obligatory on every Muslim who owns Nisab viz. 613.35 grams of silver, or 87.49 grams of gold or
who owns one or more assets liable to Zakat as set out below, equal in value to 613.35 grams of silver or
87.49 grams of gold. Zakat is calculated according to the lunar year. Those who pay Zakat according to
the solar year should accordingly, in order to take into account the difference in days, add 3% to the
amount of Zakat payable. With regard to above mentioned calculations have followed the opinion of the
Hanafi school of thought.

Usher may be defined as zakat on agricultural produce. Usher is for a poor person or an indebted person.
Whereas the case is not so with zakat on trade goods and livestock, which obligate one to give zakat if
one, reaches nisab after deducting one’s debts. One of the saying about usher is “When crops are obtained
from the earth, whether in a large or small amount, it is fard to give its one-tenth or its equivalent in gold
or silver to poor Muslims”. According to Imam Abu Yusuf and Imam-i Muhammad, to give usher, the
produce obtained from the land has to be of the kind and quality that will last one year and its amount has
to be more than 1250 liters [approximately more than 1000 kg]. A poor person who has to give usher can
receive usher given by others. However, it is haram for a rich person to receive zakat. If one donates one-
tenth of one’s farm or garden to a poor person, one still has to give usher on the remaining part of it every
year. The important one about usher is There is no nisab. Usher must be given even if one’s produce is a
little. Expenditures are not deducted. But there is a condition at which the applied rate is change, if
irrigation is made by a method that costs money or water pumps, then one-twentieth is given.
Giving usher was ordered by 141st verse of Surah al-An’am, and giving one-tenth of produce was ordered
by hadith-i sharifs.

Gap Identification

Study related to the application of zakat and usher is important. We can view its application in multi
aspect foams such as uses of zakat and usher in the development of society how by collecting and
distributing the amount received from zakat and usher among needy masses of the society. It has also
impact on the economy of a country as if there is proper system implemented in a country and every
person upon which zakat and usher is compulsory to pay has to pay in govt. treasury

Specification
Poverty has been an economic as well as a social concern since time immemorial. Humans tried to lighten
or at least cure the cancer of poverty according to their respective systems and settings. Hence, various
religious, sociological and economic ideologies have provided their responses varying in thoughts and
actions and degrees of success.

For instance, the socialist philosophy sought common ownership of all means of production and,
therefore, proposed an agenda whereby everyone was asked to contribute according to his or her ability
and get what was duly needed. In capitalism, there is an over whelming emphasis on individualism, yet it
also proposes a welfare state to satiate the equity demands. Because of certain extremities, with respect to
the individual and the society, imbalances have been experienced in the capitalistic and socialistic
approaches. This leads us to yet another ideology that is Islam, which emphasizes the moral aspects of
economic policy and keeps balance between the demands of individual and the society. Of the three
Semitic religions, Islam has put the greatest emphasis upon the plight of the poor and the destitute and, in
the Holy Quran, neglect of the poor is directly associated with the “most grievous penalty”. Moreover,
although both Judaism and Christianity urge the believers to provide support to the poor, but this support
is of voluntary nature, whereas in Islam supporting the poor assumes an obligatory character and
disregard for the poor is considered a heinous act of noncompliance. Zakat is the main source of Islamic
Economic System to alleviate poverty. The percentage of the poor who benefited from Zakat in one way
or the other was estimated by Faiz (n.d.) to be 50% to 60%.

As the modern secular economic models and approaches of poverty reduction did not find any significant
success in achieving the goal of poverty alleviation, this research was conducted to investigate the role of
Zakat in poverty alleviation in order to discover whether the Islamic Economic System has potential to
alleviate poverty or not? The concept of Zakat is defined as growth and increase, and cleansing or
purification (Haider, 1978). “When distributing Zakat to the poor, give them in abundance so that they are
satisfied. Repeat giving them even if one has to get a hundred camels” is the opinion of some jurists.
Imam Al Nawawi [the renowned interpreter of Muslim Sharif a famous book of Hadith] said, the faqir
[poor] and the miskeen [destitute] should be given what could bring them out from poverty to sufficiency
on permanent basis, and that is what Imam Shafi has argued. According to Al-Nawawi, “sufficiency”
includes food, clothing, shelter and all what is necessary for him and his dependents as suit his conditions
without extravagance or miserliness. The Malikites and the majority of the Hanbalities said that faqir and
miskeen should be given what is sufficient for them and their dependents for a whole year.

The existing system of Zakat is composed of one Central Zakat Administration at the federal level, one
Provincial Zakat Council in each province, a District Zakat Committee in each district, a Tehsil Zakat
Committee in each Tehsil (or sub-division) and a Local Zakat Committee(LZC) in each locality. All
Zakat collected officially through banks and other agencies are deposited with the Central Zakat
Administration which releases specified amounts from time to time to Provincial Zakat Councils. A major
share of these funds is then passed on to LZC’s through the District Zakat Committees. In this way, the
actual disbursement of Zakat to the needy is made mainly by LZC’s whereas disbursements to institutions
(hospitals, religious schools and welfare organizations etc.) and Mustahiq [Arabic term literally stands for
deserving person] students are made by the Provincial Zakat Council.

At present, the government collects Zakat at the rate of 2.5 percent only on eleven assets contained in the
first schedule of the Zakat and Usher Ordinance of 1980 [Zakat relates to wealth and usher relates to
crops]. Those assets are: (1) Saving Bank Accounts, (2) Notice Deposit Accounts and Receipts, (3) Fixed
Deposit Accounts and Receipts, (4) Saving/Deposit Certificates Accounts and Receipts, (5) National
Investment Trust (NIT) Units, (6) Investment Corporation of Pakistan Mutual Funds Certificates, (7)
Government Securities on which the return is receivable by the holder periodically, (8) Securities
including Shares and Debentures of Companies and Statutory Corporations on which return is paid, (9)
Annuities, (10) Life Insurance Policies, and (11) Provident Fund Credit Balances . All other assets are
part of the Second Schedule and are not subject to compulsory levy of Zakat. Sahib-eNisab[a man who is
liable to pay zakat] is, however, expected to pay on self-assessed basis. Valuation of assets for
compulsory Zakat is done on the first day of Ramadan (the 9th month of Islamic calendar).

Islamic economic entails the rules of transacting finance or other economic activity in a Shari'a compliant
manner, i.e.,a manner conforming to Islamic scripture (Quran and sunnah). Islamic jurisprudence (fiqh)
has traditionally dealt with determining what is required, prohibited, encouraged, discouraged, or just
permissible, according to the revealed word of God (Quran) and the religious practices established
by Muhammad (sunnah). This applied to issues like property, money, employment, taxes, along with
everything else. The social science of economics, on the other hand, works to describe, analyses and
understand production, distribution, and consumption of goods and services, and studied how to best
achieve policy goals, such as full employment, price stability, economic equity and productivity growth.

Objective of Study:

To study the impact of zakat and usher in the development of economy.

Literature Review

Zakat In the light of Quranic verses

The Quran discusses charity in many verses, some of which relate to zakat. The word zakat, with the
meaning used in Islam now, is found, for example, in suras: 7:156, 19:31, 19:55, 21:73, 23:4, 27:3, 30:39,
31:4 and 41:7. Zakat is found in the early Medina suras and described as obligatory for Muslims. It is
given for the sake of salvation. Muslims believe those who give zakat can expect reward from God in the
afterlife, while neglecting to give zakat can result in damnation. Zakat is considered part of the covenant
between God and a Muslim.
It is not righteousness that ye turn your faces to the East and the West; but righteous is he who believeth
in Allah and the Last Day and the angels and the Scripture and the Prophets; and give his wealth, for love
of Him, to kinsfolk and to orphans and the needy and the wayfarer and to those who ask, and to set slaves
free; and observed proper worship and pay the poor due. And those who keep their treaty when they make
one, and the patient in tribulation and adversity and time of stress. Such are they who are sincere. Such
are the God fearing. - 2:177
According to Yusuf al-Qaradawi, verse 9.5 of the Quran makes zakat one of three prerequisites for pagans
to become Muslims: "but if they repent, establish prayers, and practice zakat they are your brethren in
faith”. Although, this verse seems to generally list qualities that identify a "brethren in faith" to a Muslim.

Zakat In the light of Hadith

Each of the most trusted hadith collections in Islam have a book dedicated to zakat. Sahih Bukhari's Book
24, Sahih Muslim's Book 5, and Sunan Abu-Dawud's Book 9 discuss various aspects of zakat, including
who must pay, how much, when and what. The 2.5% rate is also mentioned in the hadith.
The hadith admonish those who do not give the zakat. According to the hadith, refusal to pay or mockery
of those who pay zakat is a sign of hypocrisy, and God will not accept the prayers of such people.
The Sunna also describes God's punishment for those who refuse or fail to pay zakat. On the day of
Judgment, those who did not give the zakat will be held accountable and punished.
The hadith contain advice on the state-authorized collection of the zakat. The collectors are required not
to take more than what is due, and those who are paying the zakat are asked not to evade payment. The
hadith also warn of punishment for those who take zakat when they are not eligible to receive it

Usher or usher, in early Islam, is a 5 percent for irrigated lands or 10 percent for non-irrigated lands levy
on agriculture produce. Caliph Umar expanded the scope of usher to include border trade tax. It literally
means a tenth part, and it remained in practice in Islamic ruled territories from Spain and North Africa
through India and Southeast Asia through the 18th century. Usher was applied only on non-Muslim
traders, at a rate of 10% of the value of the merchandise that was either imported or exported across the
border controlled by the Islamic state. It applied to non-Muslim traders who were residents of the Islamic
state (dhimmi), as well as to non-Muslim traders who were foreigners and wished to sell their
merchandise inside the Islamic state Historical medieval era trade documents between Oman and India,
refer to this tax on ships arriving at trade port as ashur or usher. The tax created an incentive for non-
Muslim traders to convert into Muslims thereby escape the Usher tax disadvantage.