Zakat and Economic Justice: Emerging International Models and their Relevance for

Zakat, one of the five pillars of Islam, is a charitable donation incumbent upon all Muslims with assets above a specified level. Eight purposes are defined in the Qur’an for the use of zakat donations, of which the most important is the support of the poor and unfortunate. Although reliable estimates of zakat generation are not available, anecdotal evidence indicates that very large sums are generated annually, in the range of several billion or tens of billions of dollars. A debate has arisen in recent years over how to manage and use zakat, encompassing three main areas. First, scholars and practitioners disagree as to whether zakat must be used for direct donation to individuals or can be used to support institutions that serve individuals or to combat poverty through development projects such as microfinance. Second, conservative scholars argue that only Islamic governments can collect zakat, which constitutes one of the few permitted sources of taxes to an Islamic government while reformists promote private nonprofit organizations as equally appropriate. Zakat funds relying on the latter model are spreading in the West, even as professional managers of zakat funds in Islamic countries are moving to explore greater use of financial management and marketing tools drawn from business models. A third issue surrounds the use of a share of zakat collections for program administration by private parties. Other issues include how to respond to demands by reformers for increased transparency and accountability from state or private institutions that manage zakat collection and distribution; how to expand the definition of th