Impact of Zakat and Ushr in Socio Economic System.

Riphah international University Islamabad

Impact of Zakat and

Ushr in socio economic system

Submitted by

Anees ur Rehman 22196

M Rafay Munir 21875

Umair Javaid 21851

(MS Accounting & Finance)

Abstract

Zakat and Ushr are the most cardinal and vital system in Islam. In the overall perspective of the Islamic economic system, nature, structure and function should be considered in a better way. Therefore, it is important to clarify the basic principles of Islam, to emphasize the zakat and to justify it as a basic system in sociological terms.

The teachings of Quran wisdom and Sunnah evolves and develops a social and economic order on such grounds which are the strongest and stable including the system of Zakat, ushr and other Sadaqaat. As Zakat and ushr are an important system of Islamic ideology therefore it plays active role in Islamic system. The payment of Zakat and Ushr is not only mandatory and obligatory but as an institution and system Zakat are the important source of the stability of the economy. The system of Zakat and Ushr ensures proper distribution of wealth and has wide impact on the entire set up of the society. If Zakat and Ushr established as an institution, it will create a collective social security scheme for mutual help/sympathy and the resources can be further utilized for social development. This research paper is focused: to explicate the significance of Zakat and ushr, to elaborate impact of Zakat on socio economic system.

1. Introduction

The role of zakat in Islamic economics is important. The word zakat derived from the words (zakāh), "that which purifies", also Zakat al-mal [zaˈkaːt alˈmaːl], "zakat on wealth", or Zakah is a form of alms-giving treated in Islam as a religious obligation or tax, which, by Quranic ranking, is next after prayer (salat) in importance. Salehi, M (2014),

Zakat is based on income and the value of all of one's possessions. It is customarily 2.5% (or 1/40th) of a Muslim's total savings and wealth above a minimum amount known as nisab, but Islamic scholars differ on how much nisab is and other aspects of zakat. The collected amount is paid to the poor, the needy, Zakat collectors, those sympathetic to Islam, to free from slavery, debtors, in the cause of Allah and the stranded traveler.

Volker Nienhaus (2006), Ushur or ushr, in early Islam, is a 5 percent for irrigated lands or 10 percent for non-irrigated lands levy on agriculture produce. Caliph Umar expanded the scope of ushr to include border trade tax. It literally means a tenth part, and it remained in practice in Islamic ruled territories from Spain and North Africa through India and Southeast Asia through the 18th century. Ushur was applied only on non-Muslim traders, at a rate of 10% of the value of the merchandise that was either imported or exported across the border controlled by the Islamic state. It applied to non-Muslim traders who were residents of the Islamic state (dhimmi), as well as to non-Muslim traders who were foreigners and wished to sell their merchandise inside the Islamic state. Historical medieval era trade documents between Oman and India, refer to this tax on ships arriving at trade port as ashur or ushur. The tax created an incentive for non-Muslim traders to convert into Muslims thereby escape the Ushr tax disadvantage.

Islamic commercial jurisprudence entails the rules of transacting finance or other economic activity in a Shari'a compliant manner, i.e., a manner conforming to Islamic scripture (Quran and sunnah). Islamic jurisprudence (fiqh) has traditionally dealt with determining what is required, prohibited, encouraged, discouraged, or just permissible, according to the revealed word of God (Quran) and the religious practices established by Prophet Muhammad (S.A.W). This applied to issues like property, money, employment, taxes, along with everything else. The social science of economics, on the other hand, works to describe, analyse and understand production, distribution, and consumption of goods and services, and studied how to best achieve policy goals, such as full employment, price stability, economic equity and productivity growth.

Several studies on the relationship between zakat and development can be seen in the literature, for example, Ali (1963), Khan (1974), Qadri (1963), Qureshi (1979; 1978). Abdus-Salam (1976), Ahmad (1981), Hasanuzzaman (1976), Abdul et al (1995), Al -Qardawi (1999) and Shirazi (1996). Their analysis is very important but it could not be able to cover the whole issue. Some of them are discussing development only. Others are relevant to zakat only. Relationship among zakat, ushr and socio economic is not given appropriate attention. This study is aimed to establish this link. The main objective of this study is to provide a comprehensive description as well as evaluation of the emergence of zakat and ushr System. Consequently on the basis of this analysis, we may be able to establish a significant relationship in between zakat and social/economic development.