purayiap
Dynamics Of Zakat: A Sample Study
By P.P. Abdul Razak
From the fixation of Nisab (the size of the income/wealth whereby Zakat becomes compulsory) and share of Zakat, Islam wants us to understand many things. An observer may feel that fixation of 2.5% as the right of the deprived in the surplus income of the rich so silly and trifle. This observation is superficial even when we consider it at micro level and at macro levels it is baseless as well. Please see below just a sample study made on the usage of gold to understand the magnitude of socio-economic changes and impact that zakat makes at macro level.
Islam fixed 2.5% of Zakat on gold. The gold is basis of currency. So, the same percentage is applied on currency also. Gold is a metal which is not productive or which does not grow itself. Whatever work we do on it, it won’t help us to increase its quantity. Rather, it decreases in qty though it might appreciate in value depending upon market mechanism. Gold, as it is, is not used in the day to day life requirements of human beings. In Islam, wearing of gold is prohibited for men. In an Islamic society, gold is used only as ornaments for the women. Islam allows 84 grams of gold for each woman without Zakat. But, once the limit (Nisab) of 84 grams is crossed, 2.5% of zakat is levied on the total quantity of gold. Let us analyze the impact of Zakat levied on the gold in a society. For sample study, I have taken the state of Kerala (the most southern state in India) where from this writer is hailing. Kerala is the most densely populated state in one of the most densely populated countries in the world. Kerala is the most consumer oriented state in India. It is mostly agricultural though its spices have lost its glitter due to globalization phenomenon. Kerala relies mostly for its hard currencies on the export of man power. From all these angles, this writer feels Kerala is the ideal state to test new ideas since the ideas effective and feasible to Kerala could be feasible to the whole world.
The population of Kerala is 30 million. The increase in the population during the last 20 years has been 5 million. This means, 25 million people of Kerala are over the age of 20. Even though proportion of women is more than of men in Kerala, at least 12.5 million of women in Kerala are 20 years or more old. Age of marriage set by the Government for women is 18 years. Let us consider that 10 million of Keralite women are married at their age of 20 or earlier since we spare 2.5 million because of late marriage rampant among some sects other than of Muslims. Of course among these married, there are women who have got one or two kilos of gold. There are women who do not have even a single gram of gold. Let us consider 100 grams as minimum per capita consumption of the gold among the married women in Kerala. When we multiply this 100 grams with ten million women we do get 1000 million grams of the gold. The current price of the gold is US$. 52 per gram. The total value of the of the gold stagnating in the wrists, necks and ears of the Keralite women is tantamount to US$. 52,000,000,000. Imagine the economic impact if Zakat is levied on this gold. The annual share of Zakat on the above mentioned gold, irrespective of whether it be saving or converted into an investment, is US$. 1,300,000,000. If we consider US$. 6,000 ( equivalent to IRS 250,000) is sufficient for economic rehabilitation of the deprived class, we will be able to rehabilitate economically at least 216,666 families (1,083,330 members since each family constitutes an average of 5 members) every year from the Zakat of the gold only. Economic rehabilitation of each family should be in a way that they won’t and shouldn’t deserve Zakat in the following year. Now let us consider the impact of Zakat in other areas of economy if it is levied and taken correctly and punctually.
US$. 52,000,000,000 is the minimum value of the ornaments used by Keralite women. It is a kind of stagnated saving. The giver of Zakat will be forced to convert this stagnated saving into a kind of productive investment. Otherwise, there will arise a situation whereby he will forfeit his saving in terms of gold by giving Zakat every year especially in the context of prohibition of interest as mentioned earlier. So, Zakat works as a catalyst in converting this stagnated saving into a productive capital. When we consider the capital of medium scale industries in Kerala between US$. 3 million and US$ 4 million and US. 30 million as the required capital for the large scale industries, we will understand that the capital for establishing 2 large scale industries in each of the 15 districts of Kerala (total cost is US$. 900 million) and the capital for establishing 14,600 medium scale industries (US$ 3.5 Million per industry) throughout Kerala is stagnating in the writs, necks and ears of Keralite women. This will give job opportunity for more than 1.5 million people (direct employment of 500 people in each large scale industry and 100 people in each medium scale industry). This helps to increase the productivity of the country and the exports thereof. This supplements the per capita purchasing capacity. The extent of cycles of economic transactions this will generate is unfathomable. When Allah levied zakat on gold, He might have intended all these healthy movements and transactions in both micro and macro economic fields also.
The sample study clearly makes it out the magnitude of the economic movements that levying Zakat only on the gold itself will make. Zakat is applicable for other kinds of savings also. We have not yet calculated the 5% or 10% of Zakat of agricultural products in Kerala, nor we have calculated the Zakat of industrial and business concerns in Kerala. Again we need to calculate Zakat on bank deposits in Kerala. Now ponder over this. Kerala is the most densely populated state in the world after Bangladesh. Almost 700 people reside in a kilo meter square in Kerala. It can be said undoubtedly and unequivocally that an economic system that is effective for Kerala will be more effective for other countries which has got more resources and less density of population. The 2.5% and 5% of existing wealth itself which has been fixed by God, the Law Giver, is enough for eradication poverty from the face of this planet. The question is who will bell the cat?
Let me consider another example to gauge the magnitude of impact Zakat makes in an economy. I am taking the example now from India which is a developing economy. The registered value of assets of the big ten capitalists like TATA, Birla, Ambani, Vipro is USS. 100,000 million (This is based on the latest figures). If we collect only 2.5% of their assets, this will be equivalent to US$. 2,500 million which can be used for economic rehabilitation of the deprived classes. This is 2.5% of only ten capitalists in India. Consider the volume of Zakat that can be collected every annum in India for economic rehabilitation of the poor and the deprived taking into consideration of 2.5% of total bank deposits in India, 2.5% of all assets belonging to tens of millions of capital owners in India, 5% and 10% of agricultural products in India, 2.5% of value of gold ornaments worn by at least 350 million of women in India.. This will help you to understand that the poverty is the progeny of human made system and is the byproduct of the mismanagement of natural resources by the human beings. The divine system promises and provides the abundance that of the air and the transparency that of the sunlight and the integrity that of the nature. So, in nutshell, Islamic economics is not about dealing with the scarce resources and unlimited human needs. Rather it is more about judicious distribution of the abundant resources available in our nature and tapping of it for meeting the legitimate needs of the people.
By P.P. Abdul Razak
From the fixation of Nisab (the size of the income/wealth whereby Zakat becomes compulsory) and share of Zakat, Islam wants us to understand many things. An observer may feel that fixation of 2.5% as the right of the deprived in the surplus income of the rich so silly and trifle. This observation is superficial even when we consider it at micro level and at macro levels it is baseless as well. Please see below just a sample study made on the usage of gold to understand the magnitude of socio-economic changes and impact that zakat makes at macro level.
Islam fixed 2.5% of Zakat on gold. The gold is basis of currency. So, the same percentage is applied on currency also. Gold is a metal which is not productive or which does not grow itself. Whatever work we do on it, it won’t help us to increase its quantity. Rather, it decreases in qty though it might appreciate in value depending upon market mechanism. Gold, as it is, is not used in the day to day life requirements of human beings. In Islam, wearing of gold is prohibited for men. In an Islamic society, gold is used only as ornaments for the women. Islam allows 84 grams of gold for each woman without Zakat. But, once the limit (Nisab) of 84 grams is crossed, 2.5% of zakat is levied on the total quantity of gold. Let us analyze the impact of Zakat levied on the gold in a society. For sample study, I have taken the state of Kerala (the most southern state in India) where from this writer is hailing. Kerala is the most densely populated state in one of the most densely populated countries in the world. Kerala is the most consumer oriented state in India. It is mostly agricultural though its spices have lost its glitter due to globalization phenomenon. Kerala relies mostly for its hard currencies on the export of man power. From all these angles, this writer feels Kerala is the ideal state to test new ideas since the ideas effective and feasible to Kerala could be feasible to the whole world.
The population of Kerala is 30 million. The increase in the population during the last 20 years has been 5 million. This means, 25 million people of Kerala are over the age of 20. Even though proportion of women is more than of men in Kerala, at least 12.5 million of women in Kerala are 20 years or more old. Age of marriage set by the Government for women is 18 years. Let us consider that 10 million of Keralite women are married at their age of 20 or earlier since we spare 2.5 million because of late marriage rampant among some sects other than of Muslims. Of course among these married, there are women who have got one or two kilos of gold. There are women who do not have even a single gram of gold. Let us consider 100 grams as minimum per capita consumption of the gold among the married women in Kerala. When we multiply this 100 grams with ten million women we do get 1000 million grams of the gold. The current price of the gold is US$. 52 per gram. The total value of the of the gold stagnating in the wrists, necks and ears of the Keralite women is tantamount to US$. 52,000,000,000. Imagine the economic impact if Zakat is levied on this gold. The annual share of Zakat on the above mentioned gold, irrespective of whether it be saving or converted into an investment, is US$. 1,300,000,000. If we consider US$. 6,000 ( equivalent to IRS 250,000) is sufficient for economic rehabilitation of the deprived class, we will be able to rehabilitate economically at least 216,666 families (1,083,330 members since each family constitutes an average of 5 members) every year from the Zakat of the gold only. Economic rehabilitation of each family should be in a way that they won’t and shouldn’t deserve Zakat in the following year. Now let us consider the impact of Zakat in other areas of economy if it is levied and taken correctly and punctually.
US$. 52,000,000,000 is the minimum value of the ornaments used by Keralite women. It is a kind of stagnated saving. The giver of Zakat will be forced to convert this stagnated saving into a kind of productive investment. Otherwise, there will arise a situation whereby he will forfeit his saving in terms of gold by giving Zakat every year especially in the context of prohibition of interest as mentioned earlier. So, Zakat works as a catalyst in converting this stagnated saving into a productive capital. When we consider the capital of medium scale industries in Kerala between US$. 3 million and US$ 4 million and US. 30 million as the required capital for the large scale industries, we will understand that the capital for establishing 2 large scale industries in each of the 15 districts of Kerala (total cost is US$. 900 million) and the capital for establishing 14,600 medium scale industries (US$ 3.5 Million per industry) throughout Kerala is stagnating in the writs, necks and ears of Keralite women. This will give job opportunity for more than 1.5 million people (direct employment of 500 people in each large scale industry and 100 people in each medium scale industry). This helps to increase the productivity of the country and the exports thereof. This supplements the per capita purchasing capacity. The extent of cycles of economic transactions this will generate is unfathomable. When Allah levied zakat on gold, He might have intended all these healthy movements and transactions in both micro and macro economic fields also.
The sample study clearly makes it out the magnitude of the economic movements that levying Zakat only on the gold itself will make. Zakat is applicable for other kinds of savings also. We have not yet calculated the 5% or 10% of Zakat of agricultural products in Kerala, nor we have calculated the Zakat of industrial and business concerns in Kerala. Again we need to calculate Zakat on bank deposits in Kerala. Now ponder over this. Kerala is the most densely populated state in the world after Bangladesh. Almost 700 people reside in a kilo meter square in Kerala. It can be said undoubtedly and unequivocally that an economic system that is effective for Kerala will be more effective for other countries which has got more resources and less density of population. The 2.5% and 5% of existing wealth itself which has been fixed by God, the Law Giver, is enough for eradication poverty from the face of this planet. The question is who will bell the cat?
Let me consider another example to gauge the magnitude of impact Zakat makes in an economy. I am taking the example now from India which is a developing economy. The registered value of assets of the big ten capitalists like TATA, Birla, Ambani, Vipro is USS. 100,000 million (This is based on the latest figures). If we collect only 2.5% of their assets, this will be equivalent to US$. 2,500 million which can be used for economic rehabilitation of the deprived classes. This is 2.5% of only ten capitalists in India. Consider the volume of Zakat that can be collected every annum in India for economic rehabilitation of the poor and the deprived taking into consideration of 2.5% of total bank deposits in India, 2.5% of all assets belonging to tens of millions of capital owners in India, 5% and 10% of agricultural products in India, 2.5% of value of gold ornaments worn by at least 350 million of women in India.. This will help you to understand that the poverty is the progeny of human made system and is the byproduct of the mismanagement of natural resources by the human beings. The divine system promises and provides the abundance that of the air and the transparency that of the sunlight and the integrity that of the nature. So, in nutshell, Islamic economics is not about dealing with the scarce resources and unlimited human needs. Rather it is more about judicious distribution of the abundant resources available in our nature and tapping of it for meeting the legitimate needs of the people.
