Chapter 1& 2

ZAKAT FOR SOCIAL FINANCING

 (3) ON WHOM ZAKAT IS OBLIGATORY
Zakah is obligatory on the Muslim who
has reached puberty, who is sane, who
is free, and who owns the minimum
assigned, nisab, according to the
conditions in Shari’ah.
(1) Non-
Muslims?
Is zakah required religiously from non
- Muslims, and why?
Why did Islam exempt Non-
Muslims from paying zakah?
Can an equivalent of Zakah be tak
en from Non-Muslims as a tax?
(2) Zakah on funds of children and the
in
sane?
 (3) ON WHOM ZAKAT IS OBLIGATORY

As narrated by Ibn 'Abbas in the two

correct This saying indicates, according to al
books of hadith: Bukhari and Muslim: Nawawi and others, that all obligations in
Islam come only after the declaration of
faith. That much is universally agreed
The messenger of Allah (p) when he sent upon.
Mu'adh to Yemen told him: 'You are going
"And because zakah is one of the pillars
to folks who are of the people of the of Islam," said the jurists, "it is not
Book. The first thing you call them to required
Is zakah from a disbeliever,
required “ from non
religiously
should be to testify that there is no god Muslims,
- and
but God and that Muhammad is the why?
Messenger of God. If they accept that, Why Did Islam Exempt Non-Muslims
tell them that God has made it obligatory from
on them to pray five times every day and paying Zakah?
night. If they accept that then tell them
that God has imposed zakah on them, to Can An Equivalent of Zakah Be Taken
be taken from the rich among them and from Non-Muslims as a Tax?
 (3) ON WHOM ZAKAT IS OBLIGATORY
• Can An Equivalent of Zakah Be Taken from
Non-Muslims as a
• Tax?
Abu 'Ubaid reports that al Nu'man bin Zar'ah
asked 'Umar bin al Khattab about the question
of bani Taghlib (Christian). 'Umar was about to
collect jiziah from them, which would drive
them to disperse in the land. Al Nu'man bin
Zar'ah told 'Umar, "Oh Leader of Believers, bani
Taghlib are Arabs. They are dismayed at the
word jiziah. They don't own cash funds. They
are people of agriculture and cattle and they
can be instigated by our enemy. Please do not
help your enemy by drifting them away.“
• Then 'Umar reconciled with them on the
condition that they pay double the amount of
zakah.
Al Baihaqi reported from 'Ubadah
bin al Nu'man, in a long saying, that
the tribe argued, "We are Arabs. We
don't pay what the non-Arabs pay.
Take from us as your people take
from each other", meaning zakah.
'Umar said, "No. This is an
obligation on Muslims," They
replied, "Impose whatever you
want, but under that name, not
under the name or jiziah." He
agreed, and then they settled on
doubling the amount due from
them. In some versions of this
saying 'Umar said, "Call it whatever
 (3) ON WHOM ZAKAT IS OBLIGATORY

• Can An Equivalent of Zakah Be Taken from

Non-Muslims as a This duty may be called "tax of
• Tax?
Abu 'Ubaid added, "What he did with bani Taghlib social insurance" or "tax of caring"
was one of those exact solutions and one of or any similar name that
those uncountable good deeds of 'Umar.“ distinguishes it from the Islamic
• So 'Umar did not see any wrong in collecting a zakah
due from Christians under the name of zakah,
because of their dislike of the title jiziah, and
doubled the amount of zakah owed by them
through mutual agreement.
• For that reason al Zuhri said: there are no
financial dues on the livestock of the people of
the Book except the Christians of bani Taghlib
or Christian 'Arabs, for whom livestock is the
major part of their wealth.
 (3) ON WHOM ZAKAT IS OBLIGATORY
• Is Zakah obligatory on the property
of children and the
insane?
(1) ZAKAH IS NOT
OBLIGATORY
(1) There is no zakah on the wealth of the orphan except on
agricultural products and livestock. Ibn Hazm reports in al
Muhalla that Ibn Shabrumah had a similar view.
-Abu Hanifah and his disciples argued that zakah is obligatory
on agricultural products only, all other assets are exempt.
(2)In al Amwal, Mujahid is reported as saying that any form of
wealth of the orphan that has growth potential such as
livestock, agricultural products, and business funds, should be
zakated, and any kind of wealth that is stagnant is not
zakatable until the orphan reaches puberty, and should then
be given to him.
IS INABILITY TO INVEST HIS WEALTH IS SUFFICIENT
REASON TO WAIVE ZAKAH?
EVIDENCE SUPPORTING THIS
ARGUMENTS
(1) Zakah is a pure worship, which
requires
intention. Children and the insane cannot
fulfill this requirement. E.g prayer is not
required from them, so does zakah.
[Tawbah:
103]
[Take alms out of their property, and clean
and cleanse (purify) them thereby].
Purification is needed from sins and evil.
The child and the insane have none of
these .
 (3) ON WHOM ZAKAT IS OBLIGATORY

• Is Zakah obligatory on the property SUMMARY

of children and the Zakah is a financial worship that
insane? can be done by proxy, and the
(2) ZAKAH IS OBLIGATORY guardian. It is unlike bodily
worship such as prayer and
(1) [Tawbah: 103] This is general text and they are all fasting that need to be
believers.
done by the
Exempting the person
child andhimsel
the
Similarly, the Prophet told Mu'adh before he left for
Yemen: "And inform them that God imposes on their f.
insane from prayer does not
funds a zakah to be taken from the wealthy and mean wavering zakah.
rendered to the poor among them." Children and the
insane receive zakah if they are poor, so they must The saying of Yusef bin Mahak
pay it if they are rich. that "the Messenger of Allah (p)
(2) The intent of zakah is to satisfy the needs of the said "seek investment of the
poor and as a sign of thankfulness to God and funds of the orphans so they
purification of these assets. may not be used up by zakah.“
 (3) ON WHOM ZAKAT IS OBLIGATORY

• Is Zakah obligatory on the property of

children and the
• insane?
Zakah is obligatory on the property of children
and the insane whether those assets are in
the form of livestock, agricultural produce,
assets, or money, except for liquid cash
fruits, business
earmarked for future necessary expenditure, CONCL
whereby it is not considered in excess of
essential needs. USION
• to
Thepayguardian of their
zakah on the child or Itthe
behalf. is insane is
preferred,
required to some Malikites, that a court order
according
be sought so the guardian can protect himself
against future claims based on Hanafite’s
viewpoint.
(4) ZAKATABLE WEALTH I N
GENERAL
ASSE AGRICULTUR
TS AL

(5) CONDITION ON
ZAKATABLE WEALTH
 (6) COLLECTION AND
DISTRIBUTION OF ZAKAH
SOURCES OF ZAKAH FUND METHODS OF
COLLECTION
• Zakat on business (e.g. building and • Collection by
appliances rental) (1)appointed staff
• Zakat on agriculture (e.g. paddy, paddy (2)through offices of the state
field and land rental) religious department / zakat
• Zakat on savings (e.g. saving, salary, share, localization
etc)
(3)through salary deduction
• Zakat on livestock
• CALCULATION OF ZAKAH:
• Zakat on mining
• (1) Zakat for Income
• Zakat on earnings
• (2) Zakat of Agriculture
• Zakat fitr.
 (6) COLLECTION AND
DISTRIBUTION OF ZAKAH
ZAKAH CALCULATION ON
INCOME
METHOD A
• 2.5 % on the amount of
income per year.
• Example : $10k x 12m = $
120k.
• Rate of Zakat that should be
paid is: $ 120k x 2.5 % = $3k
per year
• $ 3k per year divided with 12
month = $ 250.
METHOD B
• The income per year will be deducted with the
life requirement (basic) per year.
• A was married and his salary is $ 1,500.00 per
month x 12 month = $ 18,000.00 per year.
• Then, the salary is deducted to the household
expenses including himself (per year) $
8,000.00, his wife (per year) $ 3,000.00 and his
child (each one) $ 8,00.00. The amount is $
11,800.00 minus to the per year income = $
6,200.00 per year.
• Therefore the rate of Zakat is: $ 6,200.00 x 2.5 %
= $ 155.00 per year. $ 155.00 per year will
divided with 12 month = $ 12.91 per month
 (6) COLLECTION AND
DISTRIBUTION OF ZAKAH
FA
BENEFICIARIES OF QIR

ZAKAH IBN M
DISTRIBUTION SABIL ISKIN

(ASNAF)
"Zakat is for the poor and the needy,
and amil (those employed to FI SA
BILILLAH ASN AM
administer the funds), for the AF
IL

muallaf (those who have embraced

Islam), for those in bondage and in
debt, those who strive in the cause GHARIM MUALA
IN F
of Allah and for the wayfarer; (thus
RIQA
it is) ordained by Allah and Allah is B
full of knowledge and wisdom.“
 (6) COLLECTION AND
DISTRIBUTION OF ZAKAH
• Fakir •
• One who has neither material • Miski
These include all Muslims whose
possession nor means of n
means are, lackingor are so d
livelihood; one who suffers and deny them the
eficient as tobasic lawful
has no means to sustain his/her necessities
material of life.
daily needs. • Income more than 50 percent from
their needs for life. individuals below
• In spite of their best efforts or due nisab
to some physical disability,
insufficient to adequately provide • The real poor people can be defining
as people who earn $529 per month
for the basic lawful material and above.
necessities of life such as food,
• The group of people who are closely
clothing and shelter. to be poor can be defining as people
Wassalaam
Chapter 3
(2) The Role of Zakat in Establishing
Social Welfare and Economic
Sustainability and Growth
Zakat in Provet’s Covenant:
Our Beloved Prophet Muhammad (pbuh) brought about the greatest revolution

economic and political miracle in the human history. In Medina, where our prophet

first implemented the system of Salah and Zakat, immediately the economic

conditions of the people changed. He is reported to have said “ if a single person

where to sleep hungry in a town, then GOD’s protection is lifted from such a town.”
(2) The Role of Zakat in Establishing
Social Welfare and Economic
Sustainability and Growth
This Hadith emphasizes that no one under this system should go hungry. This Zakat

system created the first universal welfare system in human history. History tells us
that there was a time when hardly to find anyone in need of charity, during the
khilafat of Umar Bin Abdul Aziz (R.A).

• He has set the philanthropic properties,

used to finance the wheels of ISLAMIC PHILANTHROPY
government and provide for the poor.
• Balance between personal wealth
accumulation and public welfare leads
to social balancing and social security,
not only material satisfaction but
involves faith element.
Wassalaam
PERFOMANCE INDICATORS MODEL FOR ZAKAT
INSTITUTION
Thank you
 ZAKAT VS. TAXATION: THE ISSUE OF
SOCIAL JUSTICE AND REDISTRIBUTION OF
WEALTH
 Tax and Zakat at the Beginning of the Islamic Period

In the seventh year of Hijrah, kharaj was imposed. Kharaj means the tax levied on all
agricultural lands and orchards conquered by Muslims through war or surrendered to
Muslims as the direct result of war-related threats. These lands are known as Kharaji
land, and are under the ownership of the Islamic state (Jalili, 2006). This ownership
means that kharaj tax was not applicable to the lands used for agriculture.

Another tax imposed in the early era of Islam was jizya, which is a poll tax or
capitation. It was imposed on non-Muslims living in an Islamic state who had legal
protection.
 Similarities of Zakat with Tax
Zakat satisfies the four famous principles of a fair taxation system as set up by Adam
Smith ; the four principles are fairness, certainty, simplicity and convenience.

Smith considered these four pillars as the back-bone to a just system of redistribution
of wealth . In his attempt to sustain his argument that Zakat is an Islamic system of
redistribution which parallels with the Western idea of taxation.

In regard to fairness, Zakat is levied on the individual’s savings for the period of
twelve months, therefore, people with bigger savings will contribute more. As an
effect the poorer people of the community will not be prejudiced, as people with no
savings are not obliged to pay Zakat.
 Similarities of Zakat with Tax

Taxes on the other hand are levied on the income of individuals and increase
proportionally as there is an increase in income. Though no account is taken of the
amount of wealth accumulated by the individual. Furthermore, the poor benefit more
from the revenues of Zakat, which helps to serve one of its main objectives, which
is to provide social justice.
 Different views of Scholar on imposing Tax

There are two main views In this regard. The first is that Islamic states are not allowed
to impose tax besides zakat on Muslims due to the following evidence:

Talhah bin `Ubaidullah (May Allah be pleased with him) reported: A person with
dishevelled hair, one of the people of Najd, came to the Messenger of Allah
(sallallaahu ’alayhi wa sallam). And the Messenger of Allah (sallallaahu ’alayhi wa
sallam) told him about the zakat (obligatory charity). The inquirer asked, ‘Am I obliged
to pay anything besides this?’ The Messenger of Allah (sallallaahu ’alayhi wa sallam)
said, ‘No, but whatever you pay voluntarily out of your own free will’ (Al-Nawawi).
 Different views of Scholar on imposing Tax

From this Hadith, it is believed that the governors of Islamic states are not allowed to
levy anything besides zakat. Therefore, the shari’ah point of view is that no tax other
than zakat is allowed to be imposed on Muslims (Qaradaghi).

Islam recognizes individuals’ private ownership in Muslim society, which does not
allow anyone to have rights over the assets of others unless there is a sufficient
objective, which is not taxed. Thus, the states are not allowed to charge Muslims tax
due to Islam’s recognition of individuals’ private ownership (Qaradaghi).
 Different views of Scholar on imposing Tax

On the other hand, there are others who believe that a tax besides zakat can be
imposed. Their opinions rely on evidence and justification, such as the following:

Zakat channels are limited to certain instruments, which means zakat revenue cannot
be utilized on all instruments of states’ spending. Tax would solve this issue for the
Muslim government, which could impose tax for other channels of spending that
government needs to cover, such as defense and health care (Al Qardawi, 1997;
Qaradaghi).

Generally, Islam always encourages the citizens of Muslim society to cooperate with
each other. Imposing tax besides zakat encourages this cooperation.
 Different views of Scholar on imposing Tax

However, according to Qaradaghi’s research, neither opinion is totally correct, since

we are able to waver between both opinions by saying that imposing tax besides
zakat on Muslims is generally not allowed; however, it might be allowed for the
states’ governors to tax people beside zakat in cases of need that fulfil the following
conditions:

 They are not allowed to take more than necessary.

 When distributing the revenue, they should start with the neediest.
 Distribution of the income should be equal among people based on their position
and needs.
 Government sources of income are not enough to cover the needs of the state’s
expenditure.
 Different views of Scholar on imposing Tax

 Tax is paid by those who have the ability.

 When the need for the tax no longer exists, the collection of the tax should be
stopped.
 Tax cannot be replaced with zakat since the beneficiaries of zakat are specified
and determined by the shari’ah.
Thank you
 Chapter 6
Integrating Waqf and
Islamic Finance

Waqf Management
Introduction (1)
Historically, awqaf played a significant role to
bring about economic growth and socio-
economic justice in Muslim societies
Awqaf is stagnant during contemporary times,
both as a concept and in practice
The role of third sector in promoting growth and
welfare is increasingly becoming important
Waqf is not contributing in the growth of
economies in general and third sector in
particular
2
Introduction (2)
Islamic finance was conceived to provide stable
and equitable alternative
Islamic finance appears to have failed to realize
the social objectives
One way to introduce social goals in Islamic
finance is to introduce waqf based organizations
and its concepts
This presentation discusses how waqf can be
integrated in the financial sector to enhance
growth and welfare
3
Waqf-Introduction
Waqf—”Stand still, hold still, not to let go”
(Maliki- habs)
Waqf established by founder (waqif) by
dedicating an asset for benefit of a defined
group
Waqf deed determines:
 Objectives for which waqf is created
 Way(s) its revenues/fruits/services can be used
 Management process and procedures of
succession of managers (mutawalli)
4
Potential of Waqf in Enhancing
Welfare
Religious Philanthropic/
Type
Social
Beneficiaries
Family A B
General Public C D
 Type A—Not too common (tombs)
 Type B—Waqf for family members
 Type C –Mosques, graveyards, etc.
 Type D—Waqf for enhancing welfare
5
Waqf—Historical Experience
(1)
 The first waqf created by the Prophet (PBUH) was
Masjid in Medinah
 Other than these, the first known awqaf were
established for social purposes
 Umar bin Khattab—land of Khaybar
 Uthman bin Affan—well in Madinah
 Thereafter many different kinds of waqf were
created
 Public utilities, education and research, health care, etc.
 Property, cash, grains for seeds, etc.

6
Waqf—Historical Experience (2)
At the dissolution of Ottoman empire—¾ of
the land and buildings in some Turkish towns
were awqaf
In some Muslim countries awqaf reached 1/3
rd or more of cultivable land

At the beginning of 20th century

 In Palestine, 233 waqf deeds recorded (owning
890 properties) compared to 92 private ownership
deeds (with 108 properties)
 al Quds had 64 operating schools supported by
awqaf (more than the no. of mosques) 7
Awqaf during Contemporary
Times—Status (1)
Due to different reasons, awqaf have
degenerated now—both as a concept and in
practice
The concept of waqf is corrupted:
 Waqf is only for religious purposes
 Waqf can be established in real estate only
 Lack of awareness that waqf can be productive
asset/organization used for social/philanthropic
purposes

8
 Waqf-based Takaful Model
Share of Surplus
(100%)
Participants

Wakalah Fee Shareholders’

Contribution
Funds
Initial Donation to Waqf

Waqf Profit Share Profit Share

Fund
Profit
Management
Investments Expenses

Policy Profit/Loss of
Benefits
Retakaful Reserves Shareholders

9
Surplus
 Chapter 7:-
Waqf and Socio-economic Development of
in Islamic Finance

Waqf Management Part

 Waqf Goals and Practices
Spir Pr
itual actice

Mor Pr
al actice
Eternal
Waqf Soci Pr Goal [Her
Goals al actice eafter]
Economi Pr
c actice

Environment Pr
al actice
 Waqf Goals and Practices

-Act of worship
Spiritu
al -Pleasure of
Allah
Waqf Eternal
Goals -Purification of the Goal [Her
soul eafter]
Mor from greed
al -Instilling values of
al-Ithar
 Waqf Goals and Practices

Social development
Soci with values for
al caring and shared
prosperity

Job Eternal
Waqf opportunities,
Goals
Economi
investments, Goal [Her
c
infrastructure, eafter]
healthcare, etc

Environment Clean agriculture

and planting
al
trees
 Conclusion
Waqf continuous to play significant role towards the
socio-economic development of the Ummah.

Serious efforts must be given to incorporate Waqf

into the mainstream development programs and
strategies at national, regional and international
levels.

Waqf institutions can use SDGs to measure their

results.
 Conclusion
• Waqf shares several goals with SDGs

• There are few SDGs especially those related to the environment

that Waqf institutions need to enhance their activities to achieve
them.

• Waqf goals are unique in terms of spiritual and morals goals,

which are not embodied in SDGs.

• Moreover, while SDGs are short term until 2030, Waqf goals are
eternal until the hereafter. Such a time span has far reaching
motivations for individuals and societies towards eternal
sustainability.
 ThankYou

WaAllah A’lam
 Chapter 8
The Waqf prospects and the
Way forward.
 Characteristics of Waqf
 Perpetuity

• The issue of perpetuity in Awqaf is something that all juristic

school of thought agreed upon as bequest and a condition for
the validity of Waqf.

• The principle of perpetuity is one of the strong points that make

waqf a suitable tool for fiscal policy as no one can obtain the waqf
entity for personal use (Ambrose et al. 2015).
 Characteristics of Waqf
 Inalienability

• The endowment must remain in place in which it operates

according to the conditions of the endower, and it is not
permissible to sell it or dispose of it in such a way that it differs
from its endowment.

• Because the ownership of a waqf property is transferred to Allah

(S.W.T), it is a form of frozen property. No one has the right over
it by selling it, give it as a gift or inherit (Magda et al. 2016).
 Characteristics of Waqf
 Irrevocability

• Endowment is a binding contract, so it is not permissible to

revoke to it after it has been removed from the property of its
owner to the ownership of Allah.

• This is the majority of scholars from the Maalikis, Shafi’is,

Hanbalis including Abu Yusuf (al- Kasani, 1983). However, it was
excepted in the case of waqf by will and on deathbed.