Zakat – Purifying Your Wealth

Muath Mubarak



“And establish prayer and give Zakat, and whatever good you put forward for yourselves – you will find it with Allah; surely Allah sees what you do.” -The Holy Qur’an, 2:110

The third pillar of Islam after the declaration of faith and prayer is Zakat which means purification and growth. Every sane and adult Muslim, male or female has to pay 2.5% of their accumulated wealth for a complete lunar calendar which will go into the hands of the most deserving sections of society.

In fact, Zakat is believed to be the most important form of wealth transfer anywhere in the world due to a large number of adherents of the Islamic faith, numbering over a billion persons scattered over all five continents. This global philanthropy is too big to ignore as much as it serves the purposes of the United Nations Social Development Goals (SDGs) with track records of improvements over time. Giving away Zakat is an act of appreciation of the blessings one has been bestowed by the Creator, while at the same time, supporting and empowering those who are eligible to receive Zakat.

In 2016, Islamic financial institutions disbursed a total of US$683 million globally in Zakat, Qard Hasan and charity funds. Saudi Arabia leads in Islamic corporate social responsibility (CSR) funding with a total of US$363 million disbursed in 2016, primarily in mandatory zakah payments collected by the General Authority of Zakat and Tax (GAZT) according to ISRA-THOMSON REUTERS IRTI ISLAMIC COMMERCIAL LAW REPORT 2018.


Wealth Circulation

Zakat is as an obligatory wealth transfer, that helps circulating it among all sections of the society rather than it builds up in the hands of a few. It’s mandatory every year if the categorized wealth reaches a prescribed minimum level known as nisab. Zakat must be calculated on specified assets such as gold, silver, cash and bank balances, savings & term investment accounts, rental income, business stocks, work in progress, trade profits, shares, securities, bonds, etc. Zakat is not calculated for debt repayments, living expenses such as food, house rental, clothing, educational expenses, transportation, etc.

As per the Shariah Standard 35 of AAOIFI, the Zakat amount is calculated for a complete (Lunar) year based on the prescribed nisab level for eligible categories. Zakat Rates vary for different forms of wealth. Financial instruments such as Term Investment, Savings, Current Account balances, shares, bonds, and other instruments are also subject to Zakat (applications are different based on the contexts). The Zakat payable amount is treated as a ‘Non-operating expense’ in the Income Statement. Similarly, this amount is also shown as ‘Current Liability’ in the Statement of Financial Position. Scholars recommend the immediate distribution of Zakat to its recipients when all conditions are met.

It is not necessary that the calculation of Zakat takes place in Ramadan. Instead, it can be any month of the year. Also, scholars permit the provisional distribution of Zakat in advance regularly too.


Challenges Ahead

There are numerous challenges concerning Zakat. Even though sufficient awareness programs and information are going around to educate Zakat payers, lack of awareness still prevails. Generally, there is a lack of dedicated legal and regulatory requirements in most countries to get full benefit from it. This may, of course, mean challenges in being more transparent and expecting greater accountability and good governance from Islamic organizations that serve as foundations or distributional channels of Zakat. There is a shortage of capacity and capabilities to run and manage Zakat / charitable organizations globally. Absence of unified Zakat calculations, collections, and effective distribution are few of the other main challenges we face.

However, it is good to note that people all over the world recognize Zakat and its contribution to the global economic landscape. It is noteworthy that Indonesia is a worldwide leader on Zakat for SDGs. The UNDP Indonesia team worked with BAZNAS, the national Zakat collection agency, to apply Zakat funds, for the first time ever, towards local SDG plans, beginning with renewable energy projects in underserved communities. Zakat, therefore, shows massive potential for achieving the UN’s SDGs among other useful things.

Most importantly, Zakat purifies one’s wealth and yields immense blessings to the community.



  • Mo

    How do I calculate Zakat on my stocks and shares ISA I have with Wahed

  • Wahed Editors

    Salaam, thank you for reaching out!

    Can you please email us at [email protected] so we can better assist you?

  • aiman

    May I know how to calculate zakat with Wahed Investment, I’m from Malaysia

  • Wahed Editors

    Hi Aiman, thank you for reaching out! For us to better assist you, can you please email us at [email protected]?

  • Ahmed

    I’m from canada and I wanted to ask if you guys pay the zakat on our behalf or we have to do it on our own. In this case how to calculate it?

  • Wahed Editors

    Hello Ahmed, thank you for reaching out! Can you please email us [email protected] so we can help?

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