Zakat

Zakat is one of the few religious obligations anywhere that is calculated, and the calculation is the substance of the practice rather than an administrative detail attached to it.

The rate on savings, gold, silver and trade goods is one-fortieth, two and a half per cent, charged annually on wealth held for a full lunar year above a minimum threshold. The threshold is defined by a weight of gold or of silver, which means it has to be converted into current prices every year, and the two metals now give very different answers, a live disagreement, since the silver threshold is far lower and therefore brings many more people into liability. Different rates apply elsewhere: a tenth on crops watered by rain, a twentieth where irrigation required labour and expense, and separate schedules for livestock counted by head.

The critical feature is that it falls on accumulated wealth rather than on income. A person with a large salary and no savings owes nothing; a person with idle capital owes every year, so that over time the capital is either put to use or eroded. The traditional argument is that this is entirely deliberate and that hoarding is the target.

The recipients are fixed in the Quran as eight categories: the poor, the destitute, those employed to administer the fund, those whose hearts are to be reconciled, the freeing of captives, debtors, the path of God, and the stranded traveller. Most contemporary argument concerns how widely the seventh may be read, because a broad reading makes almost any communal project eligible and a narrow one restricts it to something close to armed defence.

Whether the state collects zakat is the question that most separates Muslim countries from one another, and it has consequences well beyond the religious.

The classical arrangement was collection by the ruler, and several modern states have restored some version of it: Saudi Arabia, Pakistan, Sudan, Libya, Yemen and Malaysia levy it in some form, though the scope differs greatly between them. Pakistan's compulsory deduction from bank accounts prompted a formal exemption for Shia Muslims, who dispute the state's authority to collect it at all, which is an instructive example of how an apparently simple obligation interacts with sect and with the machinery of a modern state.

Most Muslim-majority countries do not compel payment. It is voluntary and moves through mosques, national zakat foundations, and increasingly through applications that calculate a person's liability from their account balances and disburse it on their behalf. The annual total is very large and genuinely hard to measure, because much of it is given directly and privately, which is what the tradition recommends; figures in the tens of billions of dollars are commonly cited and should be treated as estimates rather than as accounting.

There is a live argument about effectiveness. Because zakat must reach individuals in named categories, it suits direct relief and sits awkwardly with long-term development work, which funds institutions rather than people. Islamic finance scholarship has spent considerable effort on whether building a school or a clinic can qualify, and the disagreement is real and unresolved. Meanwhile the international humanitarian sector has become interested in zakat as a funding stream, and several United Nations agencies now run zakat funds with formal rulings from Muslim scholars certifying that they comply.