Page 15 - Zakat & Waqf: Impact on Women and Community Development

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Zakat and Economic Growth
Some authors contend that zakat will boost the economy because it
promotes a healthy flow of money and guarantees the ongoing
expansion and prosperity of the Islamic economy. If other supporting
Islamic institutions are operational and the government is well-
equipped with Islamic standards of efficiency, zakat can yield the best
results for welfare (Adnan et.al, 2019).

However, the effectiveness will be minimal if the economy has non-
Islamic elements, such as the use of riba-based money. If fully and
effectively implemented, the Islamic system can offer a good
alternative. Zakat is supposed to increase investment by punishing the
behaviour of idling the resources, as was already mentioned. Clearly,
this will result in a favourable outcome (Hamid, S.A. and Hamid, M.L,
2020).

Zakat discourages hoarding, which boosts economic growth, and
encourages investment. By encouraging the development of consumer
products and services for the underprivileged, zakat also reallocates
investable resources from the luxury goods industry to those that serve
fundamental necessities (Muhammad Ridwan Abd Aziz, 2016).

While a fiscal system based on zakat involves an automatic fluctuation
in state revenues in response to changes in the size of its base based
on changes in income along with the proper combinations and
permutations of other taxes, it may work for an automatic stabilisation
of total income and employment (Shaikh, S.A, 2016).

Zakat, according to certain Muslim economists, may have some
inflationary tendencies. According to this viewpoint, at least three of
the eight Zakat spending categories—the fuqara', the miskin, and the
gharimin—relate to the less fortunate members of society. However,

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