Understanding Zakat, Financial Inclusion and Economic Empowerment in Nigeria


Friday, May 07, 2021 / 1:00PM / Bukola Akinyele-Yisau  for WebTV / Header Image Credit: EcoGraphics


The Islamic Pillar of Zakat has been described as a tool for deepening financial inclusion and achieving economic empowerment in Nigeria. 


Dr Aliyu Dahiru, Deputy Director, Training and Linkages of the International Institute of Islamic Banking and Finance, Bayero University Kano made this point while speaking on "The Role Of Zakat In Poverty Alleviation".


According to him, Zakat is an obligatory payment for Muslims based on income and the value of possessions. The common minimum amount for those who qualify is 2.5% of a Muslim's total savings and wealth.


It is a religious obligation, ordering all Muslims who meet the necessary criteria to donate a certain portion of wealth each year to charitable causes.


Speaking further he said Zakat facilitates the transfer of wealth from the rich to the poor people.  Zakat is the third pillar of Islam and to have a sound economy it must be collected and distributed accordingly.


In terms of benefits, it establishes good relations among people and ensures wealth circulation in society.  He believed that any society that gives Zakat to the poor would experience poverty reduction.


The scholar stated that according to Surah Bakarah, Islam places a high premium on Zakat and Sadaqah. Quoting from the Holy Book "O believers, righteousness is to believe in Allah, the last day, the Angels, the Books, and the prophet and to spend wealth out of love for Allah, for relatives, orphans, the helpless, needy, travellers, those who ask for help and to establish prayer, to fulfil promises when made, to be steadfast in distress and adversity and at times of poverty".  Giving out from one’s wealth to the needy should be an act of love.


According to the 2015 Islamic social finance report, Dr Dahiru pointed out that of the seven poor countries studied (including Nigeria), it was clear that Zakat if fully deployed could boost the GDP of economies by 2.08%.


Speaking on how Zakat should be paid and where it could be paid, he said many financial institutions were involved in Zakat and this could be paid into their bank accounts to distribute to the poor. Currently, Nigeria has the largest number of poor people concentrated in the North.


On how the IDP's, refugees and other poor people in the society in Nigeria can benefit from Zakat, he explained further that some Mosques collect it and distribute it to the poor. He said Mosques can serve as intermediaries to link with Zakat organizations, while state-based Zakat and Waqf foundations alongside Endowment commissions could be established across the country.


He urged the government to support all Zakat institutions.  He stressed that it is important for Muslim to pay Zakat as it is enshrined in the Holy Quran.


For the types of Zakat Organizations in Nigeria, he mentioned the following;

  1. State-based Zakat- After the introduction of Shariah, Zamfara started Zakat, Sokoto, Kano, Jigawa, Bauchi and Lagos all have state-based Zakat agencies
  2. Foundation-based Zakat- An instance is Jaiz Bank a non-interest bank that collects Zakat and distributes it.
  3. Emirate-based  Zakat- This means the Emir of the emirate is the head of the Zakat fund and shares it, and are also individual-based payment of Zakat where the person distributes the Zakat himself without having any intermediary.  He noted that Zakat is taken from the rich and transferred to the poor.  


The goal of Zakat in contributing to socio-economic development is seen in the promotion of citizens economic empowerment. Zakat and Sadaqah contribute significantly to financial inclusion. 


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Zakat and Sadaqah

Zakat is one of the five fundamental concepts in Islam also referred to as the five pillars of Islam. As such, it is a compulsory act that all Muslims must perform this duty, provided they meet certain conditions. The concept of Zakat is to purify one's wealth and soul. All those Muslims whose savings meet or exceed Nisaab values are obligated to pay 2.5% of their total yearly savings to the poor and needy and for the welfare of the Muslim community.


Sadaqah, on the other hand, is purely voluntary.  It can be given at any time, to anyone and it can be of any amount or anything including a material object. Such as Food rations, clothing garments, and any type of household accessories. Sadaqah is not a religious obligation. It is, however, greatly endorsed and favoured in Islam.


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