Potential of Eradicating Poverty through Zakah on Minerals

Abstract

Pakistan, with its scarce financial resources, has been suffering from the incidence of poverty. However, our religion Islam has provided its solution in the shape of Zakah. By implementing this system in its true spirit, we can win our fight against poverty. One way of reducing the pressure of poverty is to implement the zakah levy on minerals. Zakah is the right of poor sanctioned by the Almighty Allah and, an Islamic state is supposed to provide this right to the poor. This study aims to estimate the potential of reducing incidence of poverty through zakah on minerals as per Hanafi law, the widely followed fiqh in Pakistan; Khums (20%) of the total value is to be paid as zakah. As a case study, zakah on extraction of crude oil and natural gas in the country has been estimated, which depicts very inspiring results. Our analysis proved that imposing zakah on only two minerals, natural gas and crude oil, could lead to reduce poverty by more than 20%. This indicates that if resource rich Islamic countries such as: Qatar, Saudi Arabia and Iran impose zakah in the same manner, they are expected to cause spillover effect into other Islamic countries by helping them with the income raised through zakah on minerals, once their own country has eliminated poverty completely.