Should Zakat Management be Centralized in India?

There are clear indications that zakat collections have been growing in many parts of the globe. The growth has been particularly spectacular in some Muslim countries that have made the payment of zakat mandatory, such as, Saudi Arabia and Malaysia. Additionally, collection of zakat is entirely in the hands of the state. For instance, Saudi Arabia’s zakat revenues during 2014 is expected to be around USD4 billion (they currently stand at about USD 3.7 billion). Zakat and tax revenues in the kingdom have been increasing at a rate of 20 percent per year through the last five years. Malaysia reported zakat collections at about USD550 million in 2011 and these have increased by 27 times over the previous two decades. In contrast, Indonesia reported total zakah collections at USD232 million in 2012 and these have increased by 32 times over the previous decade. Indonesia, of course, permits private institutional collectors under the overall supervision of the state agency BAZNAS. Pakistan offers another interesting contrast by making zakat collection free-for-all (state, private institutional as well as individual collectors). Even after making zakat on financial assets mandatory and to be deducted at source, the state collected merely USD105 million in 2011 (increased by 40 per cent over 3 years). At the same time unofficial estimates put the total collection at about USD 2 billion clearing indicating either gross inefficiency or trust-deficit with the state collection agency.

Close observers and zakat officials attribute the surge in collections to different factors. In Saudi Arabia, it is the firm hand of the state that now requires mandatory electronic filing for all zakat declarations. In Malaysia, the state owned Islamic religious councils have the sole authority for zakat collections. However, officials admit that enforcement is very weak. Major reasons for this are: absence of database of those liable to pay zakat, unwillingness of zakat officer to list down those who fail to pay zakat, shortage of staff and inadequate authority to zakat officers to investigate any failure and the like. The steep growth in zakat collections however, seems to have come about due to large-scale corporatization with banks and FIs acting as agents of the state religious council for zakat collection. On the other hand, the high growth witnessed in Indonesia seems to have come about because of a very proactive and rational legal and regulatory framework.

Are there any lessons here to be learnt for the Muslims of India? Unlike awqaf, India does not see a role for the state (e.g. Ministry of Minorities Affairs) in management of zakat. Private individuals and institutions are free to collect and distribute zakat. Indeed it is believed that a major part of zakat is collected by Madaris or Islamic religious schools. A sample-based study undertaken in 2007 estimates total zakat collected in India to be USD1.5 billion. It is indeed a sad realization for any observer that the Indian Muslim community – second largest in the world – has no clue regarding the operationalization of zakat, the single-most important economic institution. Anecdotal evidence suggests that the cost of collection of zakat as a percentage of total zakat collection in India (with a large private army of individual zakat collectors) is perhaps among the largest in the world. While any role for the state in the management of zakat will perhaps be an unwelcome proposition for the community leaders, one may realistically argue in favour of creating a private national umbrella organization by the community to collect and disburse zakat efficiently. It will undoubtedly be in a position to employ modern tools and strategies for mobilizing zakat (e.g. use of ICT, collection and payment platforms, corporate agents, use of mass media for public education and awareness regarding zakat obligations, imparting skills to zakat collectors and professionals and many other measures that have delivered good results elsewhere). The umbrella organization or network of organizations will enjoy far greater credibility by adopting transparent methods of collection and distribution (e.g. giving due respect to the wishes of the muzakki or zakat payers). The sooner the community decides to shun the status-quo and give serious thought to improving its zakat management systems, the better it is for the well-being of the community inshaAllah.

Mohammed Obaidullah | February 20, 2014