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    Wednesday, October 15, 2008

    A New Paradigm on the Management of Zakah

    It's the day of the year again, October 15, the Blog Action Day. The topic for this year's event is Poverty. So, I'm writing briefly on Islam's religious duty to combat poverty and how a new paradigm of managing religious alms may do it more effectively.

    In Islam, we have the five pillars of the religion. The five pillars of Islam constitute the obligatory foundation of which Muslims must satisfy during their life in order to prove their devotion to their faith. One of the pillars is Zakah. Zakah is the fourth pillar and can be considered as a form of religious alms, mandatory for able Muslims. It is probably the only pillar that put the focus on a believer's relationship with his/her society since the funds pooled from Zakah are then distributed as a part of the state's social welfare program.

    From Islam's perspective, the poor and the needy (along with the other six eligible recipients) have the rights to a small part of the income and wealth of able Muslims. It is through Zakah, that the transfer of rights are conducted. Under mainstream interpretation, Zakah funds are distributed for consumption use by the eligible recipients. I've been looking for a ruling on alternative use of the funds but haven't found it yet. Most of the rulings deal with the method of Zakah collection, types of wealth and income subject to Zakah, and the people who are either the donors or the recipients of Zakah. Very little are discussed regarding the method of its management.

    Kiva - loans that change livesWith the advent of microfinance (especially on microcredit), it brings up a new possibilty for managing Zakah funds. Instead for consumptive use, Zakah can be managed and distributed for productive use. It is more sustainable that way, I think, and more people can get out from poverty at a faster rate. After each repayment, the Zakah can then be distributed again as a new loan ad infinitum, barring default. Profit sharing schemes (instead of interest-based return) can be devised up since the purpose of the loan is to fund productive business. The profit then can be used for operational expense incurred by the management. Examples for this type of microlending endeavor include Kiva and Microplace (although one may object due to their interest charging practice, it's a working model that is certainly can be replicated with some modification, like instituting profit sharing schemes as an alternative to interest-based return).

    Perhaps a new paradigm on the management of Zakah is needed for the Muslims to join the world in responding to the call to arms against poverty. God willing.

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