What is Zakat?

What is Zakat?

According to Islamic financial analysts, between $200 billion and $1 trillion is spent yearly on mandatory alms and voluntary charity across the Muslim world. The majority of these funds come from Zakat. Zakat is an Islamic finance term referring to the obligation of an individual to donate a specific portion of their income every year to charitable causes.

It is mandatory for all Muslims in most regions of the world and it is considered to be a form of worship. Gifting money to charitable causes is thought to cleanse any earnings above what is required to provide an individual and their family with the basic necessities of life.

How does Zakat work?

As one of the five pillars of Islam, Zakat is the act of gifting charitable donations for Muslims who make above a specific earnings threshold. Not to be confused with Sadaqah, the act of voluntarily giving charitable gifts, Zakat is considered mandatory within the Muslim faith and is based on income and net worth. Followers of Islam who meet the minimum requirement of wealth are expected to donate a percentage of their liquid assets away to charity every year.

In addition to Zakat philanthropy, there is also a category of voluntary giving within Islam known as Sadaqah. Sadaqah aid is provided out of kindness and generosity to help those in need. Unlike Zakat, Sadaqah can be given on behalf of another person. Zakat can be paid at any time, with the only condition being that the earnings reflect one year’s worth of net savings (one lunar year). However, Sadaqah goes hand-in-hand with Ramadan, and is typically donated before the end of the month.

Who is required to pay Zakat?

Any adult who processes Nisab within the past year is required to pay Zakat. Nisab is the minimum amount of wealth required to satisfy the needs of the individual and their family. This amount is often referred to as the Nisab threshold. Typically, gold and silver are used to calculate the Nisab threshold. 

According to Islamic Relief, if just the ten richest people in the world paid Zakat, it would amount to a staggering AED 32.6 billion! The impact of such a donation toward tackling poverty would be astronomical. 

Today, silver and gold are not used as monetary exchange. When determining Zakat, the donor needs to determine the equivalent of the rates in the currency they wish to use for their donation. Most people have a mixture of assets. In this case, the Nisab level of silver is used to determine Zakat contributions.

The Nisab value for 2022 is as follows:

• Using value of silver (612.36 grams) – approximately AED 1,455
• Using value of gold (87.48 grams) – approximately AED 17,319

What time of year should you make Zakat donations?

While anyone can make their Zakat contribution at any point in the year, most are typically given during the time of the Hajj pilgrimage and during the month of Ramadan. In particular, many Zakat donations are made on Laylat Al Qadr, which falls on an evening during the last ten days of Ramadan. Zakat funds must be used within one lunar year of when it was gifted. Additionally,  the Zakat year begins on the date wealth equals or surpasses the Nisab.

How much is Zakat?

A Zakat donation should amount to 2.5% of your total Zakatable wealth (i.e. your net worth less after any debts owed). For example, if your total assets (less your debts) amounted to AED 42,000, you would pay AED 1,050. If you need help determining your Zakatable wealth, we suggest using a Zakat calculator.

Who benefits from Zakat?

The typical recipients of Zakat aid include:

• The poor and needy (Al Fuqara)
• Individuals in need following natural disaster (Al Masakeen)
• Stranded and needy travelers, such as refugees and displaced peoples (Ibnas Sabil)
• Those who are enslaved, trafficked, or otherwise oppressed (Fir Riqab)
• Individuals burdened by heavy debt (Al Gharimin)
• Struggling Muslim converts
• Zakat administrators

HasanaH for maximum Zakat impact

HasanaH is a crowdfunding platform that connects donors with charitable causes that address the world’s most urgent needs while being respectful of islamic traditions and principles. 

For Muslims, HasanaH is a powerful tool to inform and guide your almsgiving (Zakat & Sadaqah) for maximum impact. HasanaH does not make individual judgements over which projects qualify for Zakat. Instead, HasanaH enables donors to make informed decisions based on reliable data, and to direct contributions to credible projects that are aligned with your priorities and values.

Are you interested in making a meaningful impact? Discover projects here.