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©The Pakistan Development Review
48 : 4 Part II (Winter 2009) pp. 739–754
Poverty Elimination Through Potential Zakat Collection
in the OIC-member Countries: Revisited
N
ASIM SHAH SHIRAZI and MD. FOUAD BIN AMIN
*
1. INTRODUCTION
The World Bank has been reporting poverty estimates for a number of years which
are helpful in assessing the progress towards poverty alleviation across the countries. The
World Bank (2009) estimates show that poverty level has been decreasing over last two
and half decades. The number of absolute poor (in terms of $1.25 a day) has decreased
from about 1.9 billion in 1981 to about 1.8 billion in 1990, and it further dropped to
about 1.4 billion in 2005. The share of people living on less than $ 1.25 a day decreased
by 10 percentage points from 52.2 to 42.0 percent during 1981 to 1990 and it further went
down by about 17 percentage point ( from 42.0 percent to 25.3 percent) during 1990 and
2005. Similarly, we can find variations on the poverty alleviation front across the
regions. East Asia and pacific, Middle East and North Africa witnessed a decline in
poverty both in terms of number of absolute poor and the share of people in poverty
during 1981 to 2005. Although the share of South Asia’s poor people in Global poverty
declined from 59.4 percent to 40.3 percent during 1981 to 2005, yet absolute number of
poor people increased from 548 million to 596 million during the same period. Sub-
Sahara Africa witnessed a slight decreased (53.4 percent to 50.9 percent) in its share of
poor people, while the number of poor people increased from 211 million to 388 million
during 1981 to 2005. This shows that poverty has been the serious problem and a great
challenge for Developing Countries. In Europe and central Asia, both the number of poor
people and the share of people in poverty increased during the same period. [See World
Bank (2009), Table 2.8]. The World Bank believe that about 46 million more people will
come under the income level of $1.25 a day due to the recent global economic meltdown
and the slow economic growth rates.
Different policies and strategies, both at the micro and macro level including
safety-nets programmes, have been adopted in different countries in the past to reduce the
poverty, but the fact remains that poverty still persists especially in developing countries.
The Muslim countries have a very strong institution—Zakat and Sadaqat—which has
never been practiced in its true spirit. We firmly believe that if this institution is revived
and fully implemented then absolute poverty can be eliminated from these countries.
Nasim Shah Shirazi <nasimss@yahoo.com> is Professor, and Md. Fouad Bin Amin is PhD Student,
Department of Economics, Faculty of Economics and Management Sciences, International Islamic University
Malaysia (IIUM).
Shirazi and Amin
740
This paper is written in the said spirit. The paper attempts to estimate resource shortfall
and potential Zakat collection for poverty elimination in 38 OIC-member countries.
1
The
rest of the paper is organised as follows. Section 2 gives a brief summary of the literature
review and Section 3 discusses the data and methodology employed for the estimation of
results. Section 4 highlights the poverty incidence in the OIC member countries from
which data are available, Section 5 provides the estimates of resource required for
poverty elimination, the estimates of potential Zakat collection and compares both the
resource required and resource needed that can be made available through potential Zakat
collection. Section 6 sets forth the summary and conclusion.
2. LITERATURE REVIEW
An extensive review of literature has been covered by [Shirazi (2004, 2006)].
However, this section focuses on a few studies only, which discuss the subject matter
of the paper. Ahmed (2004) estimates the potential of Zakat collection and resource
required for poverty alleviation for a sample of 24 IDB member countries by using a
$1/day (group1) and $2/day (group 2) international poverty lines. To determine the
amount needed per annum for poverty alleviation, the author multiplied the number
of poor of each country under his study by 365 and converted the amount into
percentage of GDP of the respective country. Similarly he estimated the resource
required under $2.00 a day. He found that , at one extreme, Tunisia required only 0.3
percent (for group 1) and 1.4 percent (for group 2) of its GDP for the alleviation of
extreme poverty while at other extreme, Nigeria required huge amount that is 107.7
percent (for group1) and 149.6 percent (for group 2) of GDP respectively for poverty
alleviation. The author employed Kahf (1989) estimates to measure the potential of
Zakat in the respective countries. Author compares the percentages of GDP required
under $1 and $2 for poverty alleviation with potential Zakat collection under three
different opinions for Zakatable items. With the Zakat rate of 1.8 percent, only eight
countries namely Tunisia, Turkey, Kazakhstan, Jordan, Algeria, Morocco, Egypt and
Azerbaijan are capable of lifting the poor from poverty line in a year (group 1), but
other 16 countries are failing to do so. At 4.3 percent Zakat rate half of the sample
countries are able to move their hard core poor people (Group 1) out of poverty [for
further detail see Ahmad (2004)].
In our view, study has two shortcomings. Firstly, study multiplies the total number
of poor of the respective country by 365 to estimates total funds needed per annum for
poverty alleviation. Thus the study assumes that every poor has zero income. This may
not be true. Some may be having zero income while other more than zero but less than $1
a day. Therefore, precise estimates for obtaining absolute resource required can be
obtained by using the poverty gap index. Secondly, the author has not adjusted the
Muslim and non-Muslim population for the estimation of potential Zakat.
Yaumidin (2009) estimates the resource needed for poverty alleviation and
potential Zakat collection for Malaysia and Indonesia. She concludes that Malaysia
performs better than Indonesia. She replicates the methodology employed by Ahmad
(2004) which suffers the same shortcoming as discussed above.
1
Data are available for 38 OIC-member countries only.
Poverty Elimination Through Potential Zakat Collection
741
Although macroeconomic policies play pivotal role in alleviating poverty, yet it
cannot be eliminated without the use of Zakat in an effective way [Ahmad (2008)].
Ahmad is of the view that Zakat can make an impact on poverty if (i) it is complemented
by robust macroeconomic policies that increase growth and redistribute income, and (ii)
when larger portion of Zakat is used for productive purposes.
Hassan and Khan (2007) find that Zakat fund can largely facilitate the government
budgetary expenditure and support the poor through transfer of payment in Bangladesh. By
allocating funds into eight groups of Zakat recipient, it is possible to increase the income and
employment with the improvement of safety net programmes. Zakat funds can increase the
tax potential of the government through the improvement of productivity, employment and
output. They conclude that Zakat funds can replace the government budgetary expenditures
ranging from 21 percent of ADP (annual development me) in 1983-84 to 43 percent of ADP
in 2004-2005. These funds can be used for other developmental and social expenditures. They
suggested that Zakat should be included, for Bangladesh and rest of the Muslim countries, as a
poverty alleviation instrument in their PRSP.
Sadeq (1996) finds that RM 293 million (which is about 73 percent of estimated
potential Zakat collection) will be needed annually to change the status of hard-core
households to a status of non-poor households in Malaysia. The rest of the amount (23
percent), as the study suggests, could be used for uplifting their economic condition.
While discussing the distributive effect of Zakat, Awad (1989) estimates that in Sudan
about 3 to 4 percent of GNP is collected as Zakat revenue which implies that one third of
GNP can be redistributed form the rich to the poor in a decade. However, some studies find
that the proceeds of Zakat will not exceed 1 to 2 percent of GNP, when all the existing Fiche
rules are followed, especially in Sudan and Saudi Arabia [Khan (1989) and Salama (1990)].
The studies made, so far, are either limited in scope or lack the proper
methodology for estimation of the resource needed and potential Zakat collection.
Therefore the present study is devoted for the purpose.
3. METHODOLOGY AND DATA SET
As we have noted earlier that this paper is the updated and extended version of
Shirazi (2004, 2006), so we have followed the same estimation method for the current
paper. However, we have corrected the error which we made in our earlier paper, which
resulted under estimation of the resource required for poverty elimination.
3.1. Estimation of Resource Shortfall
The resource gap has been estimated by using the poverty gap index, which is
defined as the mean shortfall below the poverty line, expressed as a percentage of the
poverty line. The World Bank has used the recent updated poverty lines of US $1.25 a
day in 2005 PPP terms for hard core poor and US $2.0 a day for the poor respectively
which represents the mean of poverty lines found in the poorest countries ranked by per
capita consumption.
2
This reflects the depth of poverty as well as its incidence. The
2
For precise estimates, national poverty lines and micro data of each country are required, which are not
available to us. Therefore we have to rely on the International poverty line and the poverty gap index measured
in terms of international poverty line. The World Bank has updated the previous international poverty line
which was in terms of $ 1 a day for the extreme poor and $ 2 a day for the relative poor. However, this poverty
line remained controversial among the researchers [see Pogge and Reddy (2003)]. The recent updated poverty
lines in terms of $1.25 a day and $2.0 a day is also questioned by the same author [see Reddy (2009)].
Shirazi and Amin
742
poverty gap index does not provide the total income (consumption) shortfall explicitly.
For this purpose we will use the estimated poverty gap based on international poverty
line, and convert it into absolute figures for each country under study.
1
1
1/ ( ),
q
i
Yi
PN Z
z
Where, N is total population, Z is poverty line and Yi is
the income (consumption) of the ith household. The poverty gap index has been
rearranged to get the absolute resource shortfall of the country concerned.
NZPYiZ
q
i
1
1
)(
Similarly average resource shortfall under $2 a day is calculated. This will give us, on
average, the total amount required for poverty elimination for each country under study.
3.2. Estimation of Potential Zakat Collection
Different studies have been made for the estimation of potential Zakat collection
in the past. All such studies have used different methodology and employed diverse
opinions of scholars regarding the coverage of Zakat and consequently their results are
not comparable [see Salama (1982); Chowdhry (1991); Kahf (1989, 1999); Hussain and
Shirazi (1994); al-Tahir (1997)].
3
Since there is no agreement among the scholars on the
new wealth that may be brought under Zakat net, hence there is urgent need for the
general agreement on the definition of the items, which may be taken as Zakatable items.
This requires Ijmah of the ullama and other contemporary scholars on the issue.
Kahf (1989) estimated Zakat potential for eight Muslim countries by using National
Income Accounts. His estimates of potential Zakat were based on three different opinions
of jurists regarding Zakatable items. Those three definitions were named as Z1, Z2 and Z3.
Z1 was estimated in accordance with the majority traditional view according to which
Zakat was levied on agriculture, livestock, stock in trade, gold, silver and money. Z2 was
based in accordance with the views of contemporary Muslim scholars where Zakat can be
deducted from net returns of manufacturing concerns and building rents and from net
savings out of salaries. Z3 was based on Malikite views, where Zakat base includes
buildings and other fixed assets except those assigned for personal and family use.
According to these definitions, under Z1, Zakat can be collected in the range of 1.0 percent
to 2.0 percent, under Z2 from 3.1 percent to 4.9 percent and under Z3 from 3.2 percent to
7.5 percent of the GDP for the eight Muslim countries (for detail see Table 1).
Table 1
Percentage of Estimated Zakat Proceeds to GDP in Selected Muslim Countries
Countries Z1 Z2 Z3
Egypt 2.0 3.9 4.9
Indonesia 1.0 1.7 2.0
Pakistan 1.6 3.5 4.4
Qatar 0.9 3.7 3.2
Saudi Arabia 1.2 3.7 3.4
Sudan 4.3 6.3 6.2
Syria 1.5 3.1 3.1
Turkey 1.9 4.9 7.5
Average 1.80 3.85 4.34
Source: Kahf (1989).
3
For detail see Shirazi (2006).
Poverty Elimination Through Potential Zakat Collection
743
The different potential Zakat collection is due to different economic structure of
the countries. Kahf’s (1989) estimates covered eight Muslim countries having different
economic structure, therefore, we have opted his definitions for potential Zakat
estimation with some changes.
It may be noted that Zakat is collected from the rich Muslims only and non-
Muslims
4
citizens are exempt from the payment of Zakat. Kahf’s study for the above-
mentioned eight countries, perhaps, did not take into account this factor while estimating
Zakat potential under different definitions of Zakatable items. Consequently, we have
adjusted GDP of each Muslim country by taking into account the proportion of Muslim
Population in each of the Muslim country. We have used the per capita concept of GDP
for the adjustment of GDP. For example, GDP of Bangladesh was US$ 163,728 million
(at PPP) in 2005, and the Muslim population was 88 percent, therefore, adjusted GDP for
the purpose of Zakat estimation will be [(163,728)*( 0.88)] US$ 144081million.
Similarly, we have adjusted the GDP of all other countries with respect to their
proportion of Muslim population. After adjusting GDP, we have used the Kahf’s
definition of potential Zakat collection for Egypt, Pakistan and Turkey as reported in the
above Table 1. On the other hand, for the rest of the Islamic countries, where such
estimates are not available, we have taken the average of Zs of the above eight countries
(see Table 1) and used this average to estimate the potential Zakat collection.
3.3. Data Sets
We have used Poverty gap index under US $ 1.25 a day and US $ 2.0 a day as
reported in World Bank (2009). Total Number of Population is taken from World
Development Indicators (2007), while GDP (at PPP) from 2005-2007 are taken from the
CIA World Fact books
5
and Development Data Group, the World Bank. 2008. 2008
World Development Indicators Online.
6
4. POVERTY INCIDENCE IN MUSLIM COUNTRIES
This section gives an overview of poverty condition in OIC-member states. The
poverty in the majority of the OIC-member countries are sever and housing more than 50
percent of their population as extremely poor. Among these countries are Burkina Faso
(56.5 percent), Chad (61.9 percent), Guinea (70.1 percent), Mali (51.4 percent),
Mozambique (74.7 percent), Niger (65.9 percent), Nigeria (64.4 percent), Sierra Leone
(53.4 percent), and Uganda (51.5 percent). The incidence of poverty in Bangladesh (49.6
4
Although non-Muslims are exempt from the payment of zakat but controversy still exists regarding the
payment of zakat to the poor non-Muslims. Maududi (1988, pp. 63-64), wrote that non-Muslims should be
helped from other social welfare funds as they are not eligible for taking zakat. His views were based on Hadith
“…To be taken from your rich people (Muslims) and to be distributed to your poor people”. Shaikh (1980) was
of the view that zakat money may be paid to non-Muslims after meeting the need of the Muslims. He said that
there is nothing-pertinent indication in the Qur’an or Hadith that zakat is to be used for Muslims only. Abu Saud
(1988) expressed the same view. He further reported that zakat could be paid to non-Muslims as long they do
not fight against Islam and Muslims. However, non-Muslims are not excluded from the poor people of the
countries under study.
5
Available at (http://www.nationmaster.com/graph/eco_gdp_pur_pow_par-economy-gdp-purchasing-
power-parity) Economy Statistics > GDP (purchasing power parity) (most recent) by country.
6
GDP, PPP, current international dollars, : http://earthtrends.wri.org/text/economics-business/variable-
222.html
Shirazi and Amin
744
percent), Benin (47.3 percent), Comoros (46.1 percent), guinea-Bissau (48.8 percent) and
Uzbekistan (46.3 percent) is also very high.
The World Bank (2009) report overestimates the percentage of poor population
(under $1.25 a day) in case of Benin, Burkina Faso, Guinea-Bissau and Uganda
compared to their national poverty lines. In contrast, countries like Albania, Azerbaijan,
Egypt, Iran, Jordan, and Malaysia have the lowest rate of poverty (less than 2 percent of
their total population ) while Kazakhstan, Morocco, Tunisia, Turkey and Gabon also
having less than 5 percent of their total population as poor. Interestingly, the report
underestimates the percentage of poverty in case of all these countries compared with
their national poverty line, which indicates the real picture of poverty in the respective
countries. However incidence of poverty reported in the countries like Bangladesh,
Mozambique, Niger, Nigeria and Togo is approximately comparable under both the
national and international poverty lines. Under international poverty line of US $ 2 a day
the incidence of poverty, in most of the countries, is found to be more than 70 percent of
their total population (for detail see Appendix Table 1).
Since the international poverty measurements provide a uniform standard for
comparing poverty rates and the number of people in poverty across countries, therefore
results based on national and international poverty lines cannot be compared. However,
as we have noted elsewhere, for precise measure micro data of each country is required.
5. RESULTS
In this section we have reported the estimates of resource required and potential
Zakat collection for poverty elimination in the OIC member countries.
5.1. Resource Shortfall for Poverty Elimination
The column 7 and column 8 of the Table 2 depicts the resource required for poverty
elimination under US $1.25 a day and US $ 2.0 a day respectively. Fifteen countries of the
sample including Albania (0.03 percent), Algeria (0.16 percent), Azerbaijan (0.04 percent),
Gabon (0.03 percent), Egypt (0.04 percent), Guyana (0.66 percent), Iran (0.02 percent), Jordan
(0.04 percent), Kazakhstan (0.03 percent) Malaysia (0.02 percent), Morocco (0.06 percent),
Suriname (0.54 percent), Tunisia (0.04 percent), Turkey (0.05 percent) and Yemen (0.88
percent) require small amount of resources for poverty elimination. These countries constitute
about 37 percent of a total of 38 OIC-member countries that need less than l percent of their
GDP per annum for reducing poverty. For some countries the resource requirement for
poverty elimination ranges from 1 percent to about 3 percent of their GDP. This group of
countries consists of Cameroon (2.69 percent), Cote d’Ivoire (2.01 percent), Djibouti (1.48
percent), Mauritania (1.84 percent), Pakistan (1 percent), Senegal (3.20 percent), and
Tajikistan (1.55 percent). Resources shortfall for some countries is quite high. These countries
are Mozambique (29.81 percent), Niger (21.29 percent), Sierra Leone (19.03 percent), and
Guinea-Bissau (17.26 percent).
Column 8 of the Table 2 presents the resource shortfall under US $2. The resource
short fall as a percentage of GDP is very high in the case of Guinea-Bissau (58.24
percent), Mozambique (72.09 percent), Niger (56.49 percent), Sierra Leone (56.26
percent), Chad (35.06 percent), Guinea (36.46 percent) and Uganda (31.35 percent). The
total resource shortfall for all the sample countries under US $ 1.25 a day and US $ 2.0 a
day is estimated to be 1.53 percent and 5.20 percent respectively of their total GDP.
Poverty Elimination Through Potential Zakat Collection
745
Table 2
Resource Shortfall for Poverty Elimination under US $1.25& US $ 2 Poverty Lines
1 2 3 4 5 6 7 8
OIC- Member
Countries
Survey
Year
Total
Population
GDP (PPP)
Millions
Resource
Shortfall
under $
1.25 per
Annum
(Million)
Resource
Shortfall
under $ 2
per Annum
(Million)
Resource
Shortfall
under $
1.25 per
Annum as
% of GDP
Resource
Shortfall
under $ 2
per Annum
as % of
GDP
Albania 2005 3153731 17,234 5.76 32.23 0.03 0.19
Algeria 1995 28265291 109,616 180.54 1320.55 0.16 1.20
Azerbaijan 2005 8391850 38,389 15.32 30.63 0.04 0.08
Bangladesh 2005 153281120 163,728 9161.42 37820.58 5.60 23.10
Benin 2003 7961594 9,163 570.30 1947.01 6.22 21.25
Burkina Faso 2003 13081911 12,450 1211.63 3743.52 9.73 30.07
Cameroon 2001 16240110 28,129 755.77 2797.85 2.69 9.95
Chad 2002 9118887 8,335 1065.09 2922.33 12.78 35.06
Comoros 2004 587944 630 55.80 146.79 8.86 23.30
Cote d’Ivoire 2002 17691452 27,333 548.88 2273.00 2.01 8.32
Djibouti 2002 762775 1,244 18.44 81.30 1.48 6.54
Egypt 2004 71550018 309,733 130.58 1828.10 0.04 0.59
Gabon 2005 1290693 17,839 5.30 47.11 0.03 0.26
Gambia 2003 1524061 1,491 84.14 277.03 5.64 18.58
Guinea 2002 8513599 8,556 1250.75 3119.89 14.62 36.46
Guinea-Bissau 2002 1455881 635 109.60 369.85 17.26 58.24
Guyana 1998 736291 1,977 13.10 37.09 0.66 1.88
Iran 2005 69087070 643,503 126.08 907.80 0.02 0.14
Jordan 2006 5537600 25,628 10.11 24.25 0.04 0.09
Kazakhstan 2003 14909000 103,441 27.21 424.46 0.03 0.41
Malaysia 2004 25191441 276,939 45.97 257.46 0.02 0.09
Mali 2006 11968376 12,664 1026.59 3188.97 8.11 25.18
Mauritania 2000 2566152 3,634 66.74 297.85 1.84 8.20
Morocco 2007 30860595 125,392 70.40 698.38 0.06 0.56
Mozambique 2002 19134153 10,366 3090.40 7472.84 29.81 72.09
Niger 2005 13264190 7,988 1700.55 4512.21 21.29 56.49
Nigeria 2003 134659379 178,435 18185.75 46103.33 10.19 25.84
Pakistan 2004 152061263 306,752 3052.63 20757.88 1.00 6.77
Senegal 2005 11770340 18,133 579.98 2113.72 3.20 11.66
Sierra Leone 2002 4924199 2,396 456.07 1348.00 19.03 56.26
Suriname 1999 432413 2,159 11.64 36.93 0.54 1.71
Tajikistan 2004 6467377 9,682 150.49 793.16 1.55 8.19
Togo 2006 6410428 4,971 333.42 1305.61 6.71 26.26
Tunisia 2000 9563500 45,617 17.45 209.44 0.04 0.46
Turkey 2005 72065000 561,075 295.92 1367.79 0.05 0.24
Uganda 2005 28947181 24,534 2522.57 7691.84 10.28 31.35
Uzbekistan 2003 25567700 43,028 1749.79 6196.59 4.07 14.40
Yemen 2005 21095679 46,150 404.25 2279.18 0.88 4.94
For all Countries 101009024 3208969 49106.43 166782.55 1.53 5.20
Source:
1. Total Number of Population is taken from WDI, 2007, Online Database, 2007 The World Bank Group,
2. GDP (at PPP) from 2005-2007 are taken from the web.
(http://www.nationmaster.com/graph/eco_gdp_pur_pow_par-economy-gdp-purchasing-power-parity)
Economy Statistics > GDP (purchasing power parity) (most recent) by country.
3. GDP, PPP, current international dollars, Web: http://earthtrends.wri.org/text/economics-business/
variable-222.html.
4. All the web pages accessed on 20-08-09 to 29-09-2009.
Shirazi and Amin
746
5.2. Potential Zakat Collection
The Table 3 presents the potential amount of Zakat that can be collected under
three different opinions of scholars regarding the items and assets that can be brought
under Zakat net. Column 4 of the Table shows Muslim population in the respective
country, which is used for the calculation of column 5 of the Table. Potential Zakat
collection in absolute terms is reported in columns 6 through 8, while columns 9 through
11 depict potential Zakat collection as percentage of GDP for the respective country.
On
Table 3
Potential Zakat Collection
1 2 3 4 5 6 7 8 9 10 11
OIC- Member
Countries
Survey
Year
GDP
(PPP)
Millions
Muslim
Popu
n
(%)
Adjusted
GDP (PPP)
in Million
USD
Z1
(Million
USD)
Z2
(Million
USD)
Z3
(Million
USD)
Z1
(% of
GDP)
Z2
(% of
GDP)
Z3
(% of
GDP)
Albania 2005 17,234 58 9995.72 179.92 384.84 433.81 1.04 2.23 2.52
Algeria 1995 109,616 99 108519.84 1953.36 4178.01 4709.76 1.78 3.81 4.30
Azerbaijan 2005 38,389 93.4 35855.33 645.40 1380.43 1556.12 1.68 3.60 4.05
Bangladesh 2005 163,728 88 144080.64 2593.45 5547.10 6253.10 1.58 3.39 3.82
Benin 2003 9,163 20 1832.60 32.99 70.56 79.53 0.36 0.77 0.87
Burkina Faso 2003 12,450 52 6474.00 116.53 249.25 280.97 0.94 2.00 2.26
Cameroon 2001 28,129 20 5625.80 101.26 216.59 244.16 0.36 0.77 0.87
Chad 2002 8,335 54 4500.90 81.02 173.28 195.34 0.97 2.08 2.34
Comoros 2004 630 99 623.70 11.23 24.01 27.07 1.78 3.81 4.30
Cote d’Ivoire 2002 27,333 38.6 10550.54 189.91 406.20 457.89 0.69 1.49 1.68
Djibouti 2002 1,244 99 1231.56 22.17 47.42 53.45 1.78 3.81 4.30
Egypt 2004 309,733 90 278759.70 5575.19 10871.63 13659.23 1.80 3.51 4.41
Gabon 2005 17,839 1 178.39 3.21 6.87 7.74 0.02 0.04 0.04
Gambia 2003 1,491 95 1416.45 25.50 54.53 61.47 1.71 3.66 4.12
Guinea 2002 8,556 85 7272.60 130.91 280.00 315.63 1.53 3.27 3.69
Guinea-Bissau 2002 635 38 241.30 4.34 9.29 10.47 0.68 1.46 1.65
Guyana 1998 1,977 10 197.70 3.56 7.61 8.58 0.18 0.39 0.43
Iran 2005 643,503 98 630632.94 11351.39 24279.37 27369.47 1.76 3.77 4.25
Jordan 2006 25,628 95 24346.60 438.24 937.34 1056.64 1.71 3.66 4.12
Kazakhstan 2003 103,441 47 48617.27 875.11 1871.76 2109.99 0.85 1.81 2.04
Malaysia 2004 276,939 60.4 167271.16 3010.88 6439.94 7259.57 1.09 2.33 2.62
Mali 2006 12,664 90 11397.60 205.16 438.81 494.66 1.62 3.47 3.91
Mauritania 2000 3,634 99 3597.66 64.76 138.51 156.14 1.78 3.81 4.30
Morocco 2007 125,392 99 124138.08 2234.49 4779.32 5387.59 1.78 3.81 4.30
Mozambique 2002 10,366 20 2073.20 37.32 79.82 89.98 0.36 0.77 0.87
Niger 2005 7,988 90 7189.20 129.41 276.78 312.01 1.62 3.47 3.91
Nigeria 2003 178,435 50 89217.50 1605.92 3434.87 3872.04 0.90 1.93 2.17
Pakistan 2004 306,752 98 300616.96 4809.87 10521.59 13227.15 1.57 3.43 4.31
Senegal 2005 18,133 94 17045.02 306.81 656.23 739.75 1.69 3.62 4.08
Sierra Leone 2002 2,396 60 1437.60 25.88 55.35 62.39 1.08 2.31 2.60
Suriname 1999 2,159 22 474.98 8.55 18.29 20.61 0.40 0.85 0.95
Tajikistan 2004 9,682 95 9197.90 165.56 354.12 399.19 1.71 3.66 4.12
Togo 2006 4,971 13.7 681.03 12.26 26.22 29.56 0.25 0.53 0.59
Tunisia 2000 45,617 99 45160.83 812.89 1738.69 1959.98 1.78 3.81 4.30
Turkey 2005 561,075 99 555464.25 10553.82 27217.75 41659.82 1.88 4.85 7.43
Uganda 2005 24,534 15 3680.10 66.24 141.68 159.72 0.27 0.58 0.65
Uzbekistan 2003 43,028 89 38294.92 689.31 1474.35 1662.00 1.60 3.43 3.86
Yemen 2005 46,150 99 45688.50 822.39 1759.01 1982.88 1.78 3.81 4.30
For all Countries 3208969 49896.21 110547.42 138365.46 1.55 3.44 4.31
Source: Percentage of Muslim Population is taken from: http://en.wikipedia.org/wiki/Islam_by_country.
Poverty Elimination Through Potential Zakat Collection
747
average Z1
7
for 8 OIC members’ countries ranges from 0.02 percent to 0.40 percent of
their GDP. This is due to very low share of Muslim population in these countries.
Similarly, for these countries, Z2 and Z3 vary from 0.04 percent to 0.85 percent and 0.04
percent to 0.85 percent of their GDP respectively. For rest of the 30 OIC member
countries, Z1 ranges from 0.68 percent to 1.88 percent, Z2 varies from 1.46 to 4.85
percent, while Z3 varies from 1.65 percent to 7.43 percent of the GDP of the respective
country. The potential Zakat collection from Z1, Z2 and Z3, for all the countries under
study, comes out to be 1.55 percent, 3.44 percent and 4.31 percent of their total GDP
respectively. Although we have used 1.8 percent as Z1 for all other countries except
Egypt, Pakistan and Turkey (for which we have used 2.0 percent, 1.6 percent and 1.9
percent respectively) still we get different potential Zakat collection as a share of GDP
due to adjustment of GDP with Muslim population share.
5.3. Resource Shortfall and Potential Zakat Collection
Resource shortfall and potential Zakat collection have been put together in
Table 4. Columns 3 and 4 shows the resources shortfall under US $ 1.25 and 2
respectively whereas columns 5 through 7 represents the potential Zakat collection
under three definitions of Zakatable items. The resource requirement, under US
$1.25 a day, of some of the countries for poverty elimination is too high, which
cannot be met by their potential Zakat collection. For example, the resource shortfall
of Burkina Faso (9.73 percent), Chad (12.78 percent), Guinea (14.62 percent),
Guinea-Bissau (17.26 percent), Mozambique (29.81 percent), Niger (21.29 percent),
Nigeria (10.19 percent), Sierra Leone (19.03 percent) and Uganda (10.28 percent) are
very high and corresponding Zakat collection even under Z3 is very low. However,
resource shortfall of the countries like Albania, Algeria, Azerbaijan, Djibouti, Egypt,
Iran, Jordan, Kazakhstan, Malaysia, Morocco, Pakistan, Tajikistan, Tunisia, Turkey,
Yemen can be covered from collection of Z1 (see Table). If we take into account the
administrative cost of Zakat collection (assuming 10 to 20 percent of the potential
Zakat collection), even then Z2 and Z3 collection is enough for fulfilling both the
amount of resource shortfall and administrative cost. The countries, like Gabon (0.03
percent) Mauritania (1.84), Senegal (3.20 percent) and Suriname (0.54 percent)
cannot meet their resource shortfall by Z1 but these can meet it by utilising Z2. The
nineteen OIC member countries can easily eliminate poverty form generating their
own Zakat resources, whereas the rest of the sample countries cannot meet their
resource shortfall from their own resources.
Resource shortfall, under US $1.25 a day and US $ 2.0 a day, on average, is 1.53
percent and 5.20 percent of the GDP for all the countries under study. The corresponding
amount, which can be collected under Z1, Z2 and Z3, estimated to be 1.55 percent, 3.44
percent and 4.31 percent of their total GDP, respectively. These resources are not only
sufficient to provide for the shortfall and eliminate the extreme poverty but also can
generate surplus.
7
Z1 = [{(0.018) (Adjusted GDP/ GDP)}* 100]. Similarly Z2 and Z3 are calculated by using average of
eight Muslim countries, which is 3.85 percent and 4.34 percent of the GDP respectively. For Egypt, Pakistan
and Turkey Z2 is 3.9 percent, 3.5 percent and 4.9 percent and Z3 is 4.9 percent, 4.4 percent and 7.5 percent
respectively.
Shirazi and Amin
748
Resource shortfall under US $ 2.0 a day is high. Countries, which could meet their
resource shortfall under US $ 1.25 a day from Zakat proceeds, are not able to meet their
resource shortfall under US $ 2.0 a day. The countries which added to such list are
Djibouti, Pakistan, Tajikistan and Yemen (see Table 4). As noted above that resource
shortfall under US $ 2.0 a day cannot be met by resources raised through potential Zakat
collection. The maximum that can be collected is estimated to be 4.31 percent of the
GDP of all countries under study , whereas corresponding resource required are estimated
to be 5.20 percent of the GDP of these countries. However, some resource rich countries
are not included in the sample due to non-availability of the data. If these countries
also
Table 4
Resource Shortfall and Potential Zakat Collection
1 2 3 4 5 6 7
OIC- Member
Countries
Survey
Year
Resource Shortfall
% of GDP (US $
1.25)
Resource Shortfall
% of GDP (US $ 2)
Z1
(% of GDP)
Z2
(% of GDP)
Z3
(% of GDP)
Albania 2005 0.03 0.19 1.04 2.23 2.52
Algeria 1995 0.16 1.20 1.78 3.81 4.30
Azerbaijan 2005 0.04 0.08 1.68 3.60 4.05
Bangladesh 2005 5.60 23.10 1.58 3.39 3.82
Benin 2003 6.22 21.25 0.36 0.77 0.87
Burkina Faso 2003 9.73 30.07 0.94 2.00 2.26
Cameroon 2001 2.69 9.95 0.36 0.77 0.87
Chad 2002 12.78 35.06 0.97 2.08 2.34
Comoros 2004 8.86 23.30 1.78 3.81 4.30
Cote d’Ivoire 2002 2.01 8.32 0.69 1.49 1.68
Djibouti 2002 1.48 6.54 1.78 3.81 4.30
Egypt 2004 0.04 0.59 1.80 3.51 4.41
Gabon 2005 0.03 0.26 0.02 0.04 0.04
Gambia 2003 5.64 18.58 1.71 3.66 4.12
Guinea 2002 14.62 36.46 1.53 3.27 3.69
Guinea-Bissau 2002 17.26 58.24 0.68 1.46 1.65
Guyana 1998 0.66 1.88 0.18 0.39 0.43
Iran 2005 0.02 0.14 1.76 3.77 4.25
Jordan 2006 0.04 0.09 1.71 3.66 4.12
Kazakhstan 2003 0.03 0.41 0.85 1.81 2.04
Malaysia 2004 0.02 0.09 1.09 2.33 2.62
Mali 2006 8.11 25.18 1.62 3.47 3.91
Mauritania 2000 1.84 8.20 1.78 3.81 4.30
Morocco 2007 0.06 0.56 1.78 3.81 4.30
Mozambique 2002 29.81 72.09 0.36 0.77 0.87
Niger 2005 21.29 56.49 1.62 3.47 3.91
Nigeria 2003 10.19 25.84 0.90 1.93 2.17
Pakistan 2004 1.00 6.77 1.57 3.43 4.31
Senegal 2005 3.20 11.66 1.69 3.62 4.08
Sierra Leone 2002 19.03 56.26 1.08 2.31 2.60
Suriname 1999 0.54 1.71 0.40 0.85 0.95
Tajikistan 2004 1.55 8.19 1.71 3.66 4.12
Togo 2006 6.71 26.26 0.25 0.53 0.59
Tunisia 2000 0.04 0.46 1.78 3.81 4.30
Turkey 2005 0.05 0.24 1.88 4.85 7.43
Uganda 2005 10.28 31.35 0.27 0.58 0.65
Uzbekistan 2003 4.07 14.40 1.60 3.43 3.86
Yemen 2005 0.88 4.94 1.78 3.81 4.30
On Average 1.53 5.20 1.55 3.44 4.31
Source: Based on Tables 2 and 3.
Poverty Elimination Through Potential Zakat Collection
749
collect Zakat to its potential and transfer their surplus to the common pool and if these
funds could be provided for the resource deficit countries then we hope that the deficit in
resource can be met and poverty under US $ 2 a day can easily be eliminated.
6. SUMMARY AND CONCLUSION
The poverty has been the serious problem and challenge for the Developing
countries. Since majority of the OIC countries fall in the same category, therefore, these
countries also face the same problems and challenges. Different policies and strategies, in
addition to safety-nets programme have been adopted in the past to alleviate poverty, but
poverty still persists. Some of the Muslim countries have implemented the system of
Zakat officially and while in other it is unofficial matter and they have ignored the
collection and distribution. But the fact is that none of the Muslim country has enforced
Zakat in letter and spirit. It is believed that if the system is enforced in letter and spirit
then extreme poverty can be eliminated. The paper has been written in this spirit.
The paper has estimated the resource required by 38 OIC member countries and
potential Zakat collection for poverty elimination. We have employed the poverty gap
index based on US $ 1.25 and US $ 2.0 as reported in World Bank Indicators (2009) for
measuring resource shortfall. Our results show that fifteen countries of the sample
including Albania (0.03 percent), Algeria (0.16 percent), Azerbaijan (0.04 percent),
Gabon (0.03 percent), Egypt (0.04 percent), Guyana (0.66 percent), Iran (0.02 percent),
Jordan (0.04 percent), Kazakhstan (0.03 percent) Malaysia (0.02 percent), Morocco (0.06
percent), Suriname (0.54 percent), Tunisia (0.04 percent), Turkey (0.05 percent) and
Yemen (0.88 percent) require small amount of resources for poverty elimination. Some
countries, like Cameroon, Cote d’Ivoire, Djibouti, Mauritania, Pakistan, Senegal and
Tajikistan resource requirement for poverty elimination ranges from 1 percent to about 3
percent of their GDP. Resources shortfall for some countries is quite high. These
countries are Mozambique (29.81 percent), Niger (21.29 percent), Sierra Leone (19.03
percent), and Guinea-Bissau (17.26 percent). Similarly resource shortfall, under US $2 a
day, for countries like Guinea-Bissau (58.24 percent), Mozambique (72.09 percent),
Niger (56.49 percent), Sierra Leone (56.26 percent), Chad (35.06 percent), Guinea (36.46
percent) and Uganda (31.35 percent) is quite high. The total resource shortfall for all the
sample countries under US $ 1.25 a day and US $ 2.0 a day is estimated to be 1.53
percent and 5.20 percent of their total GDP respectively.
We have used Kahf (1989) for the estimation of potential Zakat collection with
some modifications. On average, Z1 for 8 OIC member countries ranges from 0.02
percent to 0.40 percent of their GDP. This is due to very low share of Muslim Population.
Similarly, for these countries, Z2 and Z3 vary from 0.04 percent to 0.85 percent and
0.04 percent to 0.85 percent of their GDP respectively. For rest of the 30 OIC member
countries, Z1 ranges from 0.68 percent to 1.88 percent, Z2 varies from 1.46 to 4.85
percent, while Z3 varies from 1.65 percent to 7.43 percent of the GDP of the respective
country. The potential Zakat collection from Z1, Z2 and Z3, for all the countries under
study, comes out to be 1.55 percent, 3.44 percent and 4.31 percent of their total GDP
respectively.
Keeping in view the resource required and resource available through potential
Zakat collection, the general picture that emerges is as follow. Most of the African OIC
Shirazi and Amin
750
member countries cannot meet their resource requirement by their own potential Zakat
collection. However, countries like Albania, Algeria, Azerbaijan, Djibouti, Egypt, Iran,
Jordan, Kazakhstan, Malaysia, Morocco, Pakistan, Tajikistan, Tunisia, Turkey, Yemen
resource shortfall can be covered from collection of Z1. If we take into account the
administrative cost of Zakat collection (assuming 10 to 20 percent of the potential Zakat
collection), even then Z2 and Z3 collection is enough for fulfilling both the amount of
resource shortfall and administrative cost. The countries, like Gabon (0.03 percent)
Mauritania (1.84), Senegal (3.20 percent) and Suriname (0.54 percent) cannot meet their
resource shortfall by Z1 but these can meet it by utilising Z2. The nineteen OIC member
countries can easily eliminate poverty form generating their own Zakat resources,
whereas the rest of the sample countries cannot meet their resource shortfall from their
own resources.
Resource shortfall, under US $1.25 a day and US $ 2.0 a day, on average, is 1.53
percent and 5.20 percent of the GDP for all the countries under study. The corresponding
amount, which can be collected under Z1, Z2 and Z3, estimated to be 1.55 percent, 3.44
percent and 4.31 percent of the total GDP, respectively. These resources are not only
sufficient to provide for the shortfall and eliminate the extreme poverty but also can
generate surplus.
Resource shortfall under US $ 2.0 a day is high. Countries, which could meet their
resource shortfall under US $ 1.25 a day from Zakat proceeds, are not able to meet their
resource shortfall under US $ 2.0 a day. The countries which added to such list are
Djibouti, Pakistan, Tajikistan and Yemen. The maximum Zakat that can be collected is
estimated to be 4.31 percent of the GDP of all countries under study, whereas
corresponding resource required are estimated to be 5.20 percent of the GDP of these
countries. However, some resource rich countries are not included in the sample due to
non-availability of the data. If these countries also collect Zakat to its potential and
transfer their surplus to the common pool which could be provided for the resource
deficit countries, then we hope that the deficit in resource can be met and poverty under
US $ 2 a day can easily be eliminated. However, this requires globalisation of Zakat and
serious efforts on the part of the OIC-member countries.
Poverty Elimination Through Potential Zakat Collection
751
Appendix Table 1
Poverty in the Selected Muslim Countries
1 2 3 4 5 6 7
OIC-Member
Countries
Population Below
National Poverty
Line (%)
Survey
Year
Population
Below $ 1.25
a Day (%)
Poverty gap at
$ 1.25 a day
(%)
Population
Below $ 2 a
Day (%)
Poverty Gap
at $ 2 a Day
(%)
Albania 25 2005 <2 <0.5 7.8 1.4
Algeria NA 1995 6.8 1.4 23.6 6.4
Azerbaijan 49 2005 <2 <0.5 <2 <0.5
Bangladesh 45 2005 49.6 13.1 81.3 33.8
Benin 37 2003 47.3 15.7 75.3 33.5
Burkina Faso 45 2003 56.5 20.3 81.2 39.2
Cameroon 48 2001 32.8 10.2 57.7 23.6
Chad 80 2002 61.9 25.6 83.3 43.9
Comoros 60 2004 46.1 20.8 65 34.2
Cote d’Ivoire NA 2002 23.3 6.8 46.8 17.6
Djibouti 50 2002 18.8 5.3 41.2 14.6
Egypt 16.7 2004 <2 <0.5 18.4 3.5
Gabon NA 2005 4.8 0.9 19.6 5
Gambia NA 2003 34.3 12.1 56.7 24.9
Guinea 40 2002 70.1 32.2 87.2 50.2
Guinea-Bissau NA 2002 48.8 16.5 77.9 34.8
Guyana NA 1998 7.7 3.9 16.8 6.9
Iran 40 2005 <2 <0.5 8 1.8
Jordan 30 2006 <2 <0.5 3.5 0.6
Kazakhstan 26 2003 3.1 <0.5 17.2 3.9
Malaysia 8 2004 <2 <0.5 7.8 1.4
Mali 64 2006 51.4 18.8 77.1 36.5
Mauritania 57 2000 21.2 5.7 44.1 15.9
Morocco 17 2007 2.5 0.5 14 3.1
Mozambique 70 2002 74.7 35.4 90 53.5
Niger 63 2005 65.9 28.1 85.6 46.6
Nigeria 60 2003 64.4 29.6 83.9 46.9
Pakistan 35 2004 22.6 4.4 60.3 18.7
Senegal 54 2005 33.5 10.8 60.3 24.6
Sierra Leone 68 2002 53.4 20.3 76.1 37.5
Suriname NA 1999 15.5 5.9 27.2 11.7
Tajikistan 60 2004 21.5 5.1 50.8 16.8
Togo 32 2006 38.7 11.4 69.3 27.9
Tunisia 14.1 2000 2.6 <0.5 12.8 3
Turkey 20 2005 2.7 0.9 9 2.6
Uganda 35 2005 51.5 19.1 75.6 36.4
Uzbekistan NA 2003 46.3 15 76.7 33.2
Yemen 45.2 2005 17.5 4.2 46.6 14.8
Source: World Bank (2009).
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Comments
As the title suggest, this is an important area in poverty alleviation through
potential Zakat Collection in OIC-member Countries. First of all, apart from the technical
comments, I would like to say that it is difficult to comment on the text as a through
editing of the paper is needed for the benefit of the reader.
Secondly, authors claims at page 5 that earlier studies were either limited in scope
or lack the proper methodology for estimation of the resources needed and potential zakat
collection. But what constitutes a proper methodology is not explained in the paper
clearly. Thirdly, the authors have used poverty gap index based on $ 1 a day poverty or $
2 a day estimated by the World Bank to compute the resource shortfall for poverty
alleviation but have not mentioned with clarity that how they have converted into
absolute number.
Thirdly, authors reviewed that Kahf (1989) using National Income Accounts
estimated zakat potential for eight Muslim countries which is based on three different
opinions of jurists regarding zakatable items namely Z1, Z2 and Z3.
Z1 was estimated in accordance with the majority traditional view according to
which Zakat was levied on agriculture, livestock, stock in trade, gold, silver and
money.
Z2 was based in accordance with the views of contemporary Muslim scholars
where Zakat can be deducted from net returns of manufacturing concerns and
building rents and from net savings out of salaries.
Z3 was based on Malikite views, where Zakat base includes buildings and other
fixed assets except those assigned for personal and family use. According to
these definitions, under Z1, Zakat can be collected in the range of 1-2 percent of
GDP, under Z2 from 3.1- 4.95 and under Z3 from 3.25 to 7.5 percent of the
GDP for the eight Muslim countries.
The authors claim that Kahf (1989 ) estimates has a shortcoming of not taking into
account of non-Muslims population and claim that their estimates are better than Khaf
(1989). While authors have not applied the above method using national accounts as done
by Kahf, the authors should not claim that these are their estimates and are better than
Kahf. In my opinion, authors have simply adjusted Kahf estimates by multiplying it to
non-Muslim population ratios with Kahf’s estimates. The authors’ estimates can be
regarded as Kahf’s non-Muslim population adjusted estimates.
Finally, it is also important to discuss the existing extent of Zakat collection in
Pakistan and in other Muslims countries and how Zakat collection can be enhanced to fill
the gap in order to reduce poverty. Currently, few hundred billion of rupees have been
collected in Pakistan as people are not willing to pay Zakat through government system
due to lack of creditability of the government. Similar is the case with other Muslim
countries. Hence, its scope for poverty alleviation will remain limited.
Talat Anwar
Canadian International Development Agency,
Programme Support Unit, Islamabad.
