Prospects of poverty eradication through the existing Zakat system in Pakistan.

In the Muslim system, Zakat functions as a means to reduce inequalities and eradicate poverty. Zakat means growth, extension, and purification. It is a usually annual premium charged on all accumulated productive wealth and on a variety of agricultural produce. Various rates are used. In the past, Zakat was paid on a self assessed basis and given to the needy. Due to influence on Sunni Muslims, in 1980 collection and disbursement was deemed the function of an Islamic state and the state system was introduced. The formal system is described in detail. A random sample (1050) of Local Zakat Committee (LZC) members, Zakat recipients, and the general population was conducted in 1988 to see to what extent poverty has been eradicated with this system. Zakat recipients were either those receiving a subsistence allowance or those receiving funds for permanent rehabilitation. Estimates of Zakat and Ushr (for agricultural produce) received and the maximum limit to collection and the maximum potential are given by region. Estimates are also given for the number of Mustahqueen-e-Zakat (MZ) (needy) by province. The total number is 5.46 million households, or 32.22% of all households in Pakistan, which is slightly higher than other prior estimates. Those receiving Zakat number 3.967 million or 23.43% of total households. Clearly not all those in need are receiving aid. The range of needy is 18.4% to 42.58% and could include those who are not poor but qualify for receiving Zakat according to Islamic principles. Estimates are given for the shortfall in funds needed to fill the gap. Other funding is needed to retrain MZ and estimates by province are generated to this end. It is clear that the present system needs to be reformed because the estimated funding requirements exceed the potential; there is a gap in the number needing aid and those receiving aid; and there is a gap in funds secured to rehabilitate and those requesting rehabilitation. To augment the system, it is suggested that Zakat exemptions be removed, stock in trade should be included, all agricultural produce should be included, subsistence should be given to only the most poor and disabled and the rest should receive a modest amount for starting a project on an annual rotation, and greater government emphasis at all levels must be placed on eliminating poverty.