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Zakat is a mandatory charitable giving in Islam, considered a form of worship and a pillar of the faith. It requires Muslims with sufficient financial means to give a specific portion (typically 2.5%) of their wealth annually to those in need, such as the poor and underprivileged. The purpose of Zakat is to purify one’s wealth, promote social welfare, and foster a sense of community and generosity among Muslims.


The phonetics of the keyword “Zakat” is: /zəˈkɑːt/

Key Takeaways

  1. Zakat is one of the Five Pillars of Islam, representing the obligation of Muslims to donate a portion of their wealth to support the needy, the poor, and the community as a whole.
  2. The amount of Zakat a Muslim must contribute is typically 2.5% of their total wealth, including savings, income, and physical possessions, calculated annually based on the lunar Islamic calendar.
  3. Zakat not only functions as a form of social welfare, but is also seen as an act of spiritual purification, encouraging Muslims to detach themselves from material wealth and prioritize community well-being and equality.


Zakat is a crucial concept in Islamic finance and business, signifying the mandatory act of giving a specific proportion of one’s accumulated wealth to those in need. As one of the Five Pillars of Islam, it plays an essential role in not only promoting economic equality and social welfare but also in fostering a sense of moral responsibility and empathy among Muslims. By redistributing wealth among the less fortunate, Zakat helps to alleviate poverty, encourage philanthropy, and invigorate the ethical foundation of the community. Moreover, it enhances the spiritual purity of the giver, as they fulfill an essential duty in their faith, ultimately strengthening the interconnectedness and stability of the entire Muslim community.


Zakat is an essential pillar in the Islamic faith that upholds the core socio-economic values of compassion and wealth redistribution amongst society members. This tenet serves as a religious obligation for Muslims who meet certain financial criteria to donate a fixed portion of their wealth to the underprivileged and for other specified causes, as stipulated in Islamic teachings. The primary purpose of Zakat is to foster a spirit of social responsibility, altruism, and prioritizing the needs of others, which in turn helps in reducing income inequality and ensuring enhanced welfare for those in need.Beyond the short-term benefit of providing immediate relief to less fortunate individuals, Zakat serves as a long-term financial instrument for establishing societal balance and economic stability. By targeting eight specified categories of recipients, namely the poor, needy, Zakat administrators, those whose hearts are being won, slaves, debtors, in the cause of Allah, and the wayfarer, Zakat addresses a broad spectrum of societal needs. The significance of Zakat in the realm of business and finance spans from strengthening communal bonds to developing sustainable business practices, which ultimately paves the way for a more equitable and economically resilient society.


Zakat is an obligatory form of almsgiving in Islam, usually constituting 2.5% of a Muslim’s wealth and assets, paid annually. It is one of the Five Pillars of Islam and is meant to support the needy, the poor, and the community as a whole. Here are three real-world examples of Zakat in the business and finance context:1. Islamic Banks: Many Islamic banks, such as Dubai Islamic Bank, Meezan Bank, and Al Rajhi Bank, provide services to their customers for the collection and distribution of Zakat. These banks calculate the total amount of Zakat payable for an individual based on their income and assets and distribute the funds to appropriate beneficiaries.2. Muslim Entrepreneurs and Business Owners: Successful Muslim entrepreneurs and business owners, such as Shahid Khan (owner of the Jacksonville Jaguars NFL team and Fulham Football Club) and Tariq Farid (founder of Edible Arrangements), may choose to pay their Zakat annually based on their wealth and business profits. This Zakat amount may be paid directly to the needy or through charitable organizations like Islamic Relief.3. Zakat Foundation: The Zakat Foundation is one example of a global non-profit organization that collects and distributes Zakat funds to help alleviate poverty, provide disaster relief, and support community development projects. They use the Zakat funds to provide food, water, shelter, and education to millions of beneficiaries across the world, in accordance with Islamic principles.

Frequently Asked Questions(FAQ)

What is Zakat?

Zakat is one of the five pillars of Islam and is a mandatory almsgiving. It is an obligation for eligible Muslims to give a certain percentage of their wealth annually, usually 2.5%, to help the less fortunate members of the community.

Who is required to pay Zakat?

Every adult Muslim, who meets the minimum requirements of wealth, known as Nisab, is required to pay Zakat annually. It is the responsibility of individuals to calculate and distribute their Zakat accordingly.

What is Nisab?

Nisab is the minimum amount of wealth a Muslim must possess before they become eligible to pay Zakat. For gold, the Nisab is 85 grams (approx. 3 ounces), and for silver, it is 595 grams (approx. 21 ounces). For cash or other possessions, it is the equivalent monetary value.

On what types of assets and income is Zakat paid?

Zakat is paid on assets such as cash, gold, silver, investment properties, business inventory, and shares. It is not paid on personal items such as one’s own house, personal clothing, and vehicles. Zakat is also not applicable on income, but rather on the wealth that has been accumulated or saved over a year.

How is Zakat calculated?

To calculate Zakat, one must add up all their zakatable assets, subtract any liabilities or debts, and then determine if the remaining sum meets or exceeds the Nisab. If it does, 2.5% of the value above the Nisab should be paid as Zakat.

When should Zakat be paid?

Zakat should be paid once a lunar year (Islamic calendar year) has passed from the time a person’s wealth first met or exceeded the Nisab. It should be calculated and paid annually, preferably during the month of Ramadan.

To whom is Zakat distributed?

Zakat is primarily distributed to eight categories of recipients mentioned in the Quran, including the poor, the needy, those in debt, travelers in need, and for the emancipation of slaves. It is meant to aid those who are struggling financially and to create a more equitable society.

Is Zakat only applicable to Muslims?

While Zakat is an obligation for Muslims, it can be given to non-Muslims who are in need, as long as they fall within the eight eligible categories of Zakat recipients.

What is the difference between Zakat and Sadaqah?

Zakat is a mandatory form of almsgiving, whereas Sadaqah is an optional form of charity and can be given by any individual, not just Muslims, at any time and for any amount. Both forms seek to help the needy and create a more equitable society, but Zakat has specific requirements and guidelines.

Related Finance Terms

  • Alms-giving
  • Islamic finance
  • Pillar of Islam
  • Zakat rate
  • Nisab threshold

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