Should Zakah be Distributed as Unconditional Cash Transfers (UCTs)?

Zakah is a distinct form of Islamic philanthropy guided by Shariah-stipulated rules of distribution. The rules clearly identify the poor and the needy as the most deserving in the society to whom zakah funds should flow. Further, the magnitude and intensity of poverty, accordingly to scholars, should have a direct relationship with the assistance to be provided through zakah. Note that traditionally Islamic scholars have permitted zakah flow into the hands of individuals with relatively higher standard of living as compared to the ultra-poor of today. Therefore, the issue is largely not a matter of permissibility but of efficiency in distribution of zakah to the poor.

The fact remains however, that there is a need to objectively and accurately measure poverty. There has been considerable research into the question of how best to measure poverty. The most recent research in this regard has been undertaken under the Oxford Poverty and Human Development Initiative (OPHI) by Sabina Alkire and James Foster. The duo have created a new method for measuring multidimensional poverty. The Alkire-Foster method identifies who is poor by considering the intensity of deprivations they suffer, and includes an aggregation method. The method is flexible and can be applied to measure poverty or wellbeing, target services or conditional cash transfers and for monitoring and evaluation.

Another interesting area of research into the type of intervention that performs best in terms of impact on poverty involves a comparison between targeted services or conditional cash transfers and unconditional cash transfers. While many of the largest and best known cash transfer schemes attach conditions to the money beneficiaries receive (e.g. cash is paid on the condition that children go to school and get vaccinated), some recent experiments have experimented with unconditional cash transfers. The one that has caught the attention of the policy makers is “GiveDirectly”, a California-based NPO that uses mobile money technology to transfer cash directly from donors to some of East Africa’s poorest people. In an MIT study to evaluate the impact of UCTs, Haushofery and Shapiro (2013) found that recipients spent the cash on things such as food and healthcare, to replace thatched roofs with metal ones, buy livestock and invest in small businesses. It also found evidence to suggest the money reduced hunger and increased psychological wellbeing. It debunked the fundamental assumptions underlying conditional giving that the poor would waste the money given to them.

If this recent evidence is juxtaposed against the views of early and contemporary scholars, one finds an interesting match between the early Islamic scholarship and the most recent evidence available in conventional domain. Early scholars were inclined to insist on the unconditional nature of zakah payment (whether cash or kind) emphasizing the condition of “tamleek” or imparting ownership of the zakah contribution to the beneficiary. As the new owner of the contribution, the beneficiary would have every right to determine how the money or asset would be used. Recent Islamic scholars however, seemed to favor the channeling of zakah into developmental projects in education, healthcare at a societal level relaxing the strict interpretation of “tamleek”. For example, a contemporary Islamic economist Shawki Ismail Shehata in a popular article published in Islamic Economic Studies (vol.1, No.2), journal of the Islamic Research and Training Institute (IRTI) writes “zakah may be given to institutional bodies, taking care of the poor and the needy, in providing the public utilities and services…any money spent on the education and medical treatment of the poor is deemed to have been spent on them and paid to them. Further, zakah may be paid in cash or in kind. Payment in kind includes the money spent for procuring tools and equipment and the like.” In another work published by IRTI, noted Islamic economist Seif el-Din Tag el-Din dwells extensively on the concept of “tamleek”. Highlighting the limitations of physical capital goods transfer, he recommends the equities transfer alternative as a way to make the poor participate in and benefit from mega developmental projects.

Given the clear evidence in favor of unconditional cash transfer over other forms of giving, will it lead to a change in the thinking of our Islamic economists? Or shall we say, the wheel has come full circle?

Policy Brief: Impacts of Unconditional Cash Transfers


Mohammed Obaidullah | February 08, 2014


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