Social And Economic Effects Of Zakat CSS

The article discusses “Social and economic effects of Zakat. Zakat and its impacts CSS. Social benefits of Zakat. Economic objective of Zakat. Social and economic effects of Zakat. Zakat reduces the economic imbalance in the society. Social And Economic Effects Of Zakat. Social And Economic Effects Of Zakat. The importance of Zakat to the development of economy. Role of Zakat in economic development. Social and economic effects of Zakat. Social impact of Zakat on Islamic society.”

Social And Economic Effects Of Zakat

Fiscal policy in general is a system of revenue and expenditure, that is, tax collection and government expenditure. In Islamic fiscal system, revenue is also collected through Zakat, which is obligatory on every Muslim possessing some money. Due to Zakat, Islamic economy flourished rapidly as compare to other political economies.

Social And Economic Impacts Of Zakat On Islamic Society

social and economic effects of zakat

Through Zakat, the social and economic welfare of the society is achieved more efficiently. Zakat flourishes Islamic economy and society through the following ways.

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Income Redistribution

The economic development of a society depends upon the rate of circulation of money in the hands of the public. This circulation of money is also called Velocity of money. Zakah ensure this circulation and prevent the control of few over the whole economy of the society. The Holy Quran has also stated this rule in these words

‘‘So that the wealth should not be remained among their rich’’

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Stabilization means bringing economy back to equilibrium level. Zakah payment increases income (Y) level in general public which also increases consumption. Thus demand and supply remains somewhat in equilibrium level which is hard to achieve generally.

Development And Growth

Due to the payment of Zakah, the income of poor class increases which causes development in long run. Zakah discourages idle saving and hoarding and for this reason Zakah is applicable on savings. Zakah forces people to invest. When there is investment, there will be employment and in result National Income (NI) will increase which causes development in general. Generally when Savings (S) goes down/decreases then Income (I) also decreases/goes down but Zakah has no such effect due to the following reasons.

  1. With Zakah, the consumption of poor’s increases and which causes the need for more investment.

Consumption increases = Average Demand rises = Investment’s need increases

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  • Zakah payment encourages micro-financing in society which result in the development of many small businesses in society especially by the poor class. Thus Zakah causes a rise in investment which causes growth and development.

Economic Efficiency

Economic efficiency means there is an overall increase in the utility of all members of a particular society. Due Zakah, there is an economic efficiency in the system as after Zakah payment economy comes to equilibrium and overall utility is maximized.

As poor gets Zakah, their Income (Y) rises which causes an increase in Average Demand (AD) which in turn result in increase in Consumption (C) thus ultimately lead to rise in Utility (U).

Similarly when rich reduces Saving (S) and increases Investment (I) due to the fear of Zakah, utility also increases.

Welfare Effects

Zakah also has a welfare effect as the money collected through Zakah by the state, can be used for providing basic necessities of life such food, shelter and clothes to the poor class in society. The money of Zakah can also be used for providing basic health facilities as well as for providing scholarships to the needy students of the society.


Zakat is one of the five basic pillars of Islam. It is mandatory on every well off Muslim in society. The above mentioned social and economic effects of Zakat show the social and economic importance of it for the society and economy.

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