An Act of Faith: Humanitarian financing and Zakat

Zakat, the mandatory Muslim practice of giving 2.5% of one’s accumulated wealth for charitable purposes every year, is one of the main tools of Islamic social financing. It is explicitly intended to reduce inequality and is widely used in Muslim countries to fund domestic development and poverty-reduction efforts. 

Zakat can be paid in a variety of different ways to a variety of different institutions, either governmental or non-governmental, often depending on the country a Muslim lives in or on their sect of Islam. There is no reliable data currently available to show precisely how much Zakat is paid by Muslims around the world, or how it is spent globally. Yet data collected in this report for Indonesia, Malaysia, Qatar, Saudi Arabia and Yemen, which make up 17% of the world’s estimated Muslim population,
indicates that in these countries alone at least US$5.7 billion is currently collected in Zakat each year.

The study estimates that the global volume of Zakat collected each year through formal mechanisms is, at the very least, in the tens of billions of dollars. If Zakat currently thought to be paid through informal mechanisms is also considered, then the actual amount available is likely to be much higher, and could potentially be in the hundreds of billions of dollars. By way of comparison, international humanitarian assistance from government and private donors in 2013 totalled US$22 billion, while official development assistance (ODA) from member countries of the Organisation for Economic Cooperation and Development (OECD)’s Development Assistance Committee (DAC) was US$134.8 billion in the same year.

However, there are a number of possible ideological and ogistical barriers that will need to be overcome if Zakat is to fully realise its humanitarian potential.