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 ushr was ordered by 141st verse of Surah al-An’am, and giving one-
tenth of produce was ordered by hadith-i sharifs.

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.