1. THE DEFINITION AND IMPORTANCE OF ZAKAT
ZAKAT IN ISLAM
THE DEFINITION AND IMPORTANCE OF ZAKAT

2. Presentation outline Definition of zakat The importance of zakat
Conditions for zakat
People entitle to receive zakat
Methods to determine the sources of zakat

3. Islamic Financial Planning includes:
Savings
Zakat Planning
Debts – Financing & Credit Cards
Investment
Takaful
Estate Planning

4. Islamic Financial Planning includes:
Discipline of wealth management:
Protect
Preserve
Accumulate
Distribute

5. Main difference between saving in Islamic banking & conventional banking?
ABSENCE OF INTEREST!
Profit instead of interest!
So how does it work?
Concept of Guaranteed Custody or Profit Sharing
Profit rate is not fixed; depends on the returns of the investment (ROI)

6. INTEREST vs PROFIT INTEREST PROFIT
Rate based on the amount of money involved
Rate based on the amount of profit obtained
Payment is fixed
Distribution depends totally on the profitability
Amount does not increase even if profit obtained manifold
Distribution of profit increases in accordance to the amount of profit obtained

7. SAVINGS : ISLAMIC PERSPECTIVE
Islam does not favour excessive spending
Execessive spending is HARAM
Nor does it favour hoarding (penimbunan) of money.
Therefore we need to find the right balance : Spend, Donate, Save

8. Why Savings ???!
Basic Needs – Health, Food, House, Vehicle, etc.
Zakat (Wajib)
Pilgrimage/Hajj (WAJIB)
Umrah (SUNAT)
Qurban (SUNAT)
Peace of Mind (HARUS)
Financial Independence
Aid for Others (SUNAT)
Charities (SUNAT)

9. The History of zakat payments
Prior to Hijrah, zakat is only compulsory to those wealthy people who are close with the Prophet s.a.w.
At that time, the obligation to pay zakat is based only on their awareness, willingness, discretion.
An organized system of zakat (for instance having the conditions for nisab, rate and haul ) was only applied after the 2nd year of Hijrah.

10. Definition of zakat
It is considered to be a personal responsibility for Muslims to ease economic hardship for others and eliminate inequality.
It is obligatory for all who are able to do so.
Growth (in goodness) or increase, purifying or making pure of one’s wealth.

11. Definition of zakat Literally Theologically Legally / Syariah
cleansing or purifying of something from dirt or filth (cleaning)
Praise, growth and increase
References: Dr Yusof Qardawi
Theologically
Spiritual purification resulting from paying zakat
Legally / Syariah
Transfer of ownership of specific wealth to specific individual (s) under specific conditions
Religious payment made by a Muslim from his wealth or income or business or crops or animals in the form of money or crops or animal according to certain rate to the zakat authority that is Pusat Pungutan Zakat (PPZ).

12. The Importance of Zakat
One of the five pillar of Islam
Syahadah - is a statement professing monotheism and accepting Muhammad as God's messenger.
Solat - Pray 5 times a day
ZAKAT- giving is the practice of charitable giving by Muslims based on accumulated wealth
Sawm / Siyam – Fasting in the month of Ramadhan
Hajj - is a pilgrimage that occurs during the Islamic month of Dhu al-Hijjah to the holy city of Mecca,
Avoid stinginess
Encourage donations
As a mean to express thanks to Allah
Establish sympathy and avoid jealousy

13. Zakat from the perspective of the Islamic Law
Zakat is an important duty for Muslim as mentioned in the Al-Quran: "Keep up prayer and pay zakat".
While prayer is a physical form of worshipping Allah, zakat is a material form.
Zakat is compulsory :
"Take from their wealth charity (alms) to purify them and to cleanse them thereby, and pray for them."
[At-Taubah: 103]

14. Dalil of zakat
It is considered to be a personal responsibility for Muslims to ease economic hardship for others and eliminate inequality.
It is obligatory for all who are able to do so.
Growth (in goodness) or increase, purifying or making pure of one’s wealth.

15. Dalil in Hadith
In one hadith from Bukhari, Abu Hurairah (r.a.) narrated that the Prophet SAW said:
"Whoever is made wealthy by Almighty Allah and does not pay the zakat of his wealth, then on the Day of Resurrection his wealth will be made like a bald-headed poisonous male snake with two black spots over the eyes. The snake will encircle his neck and bite his cheeks and say, 'I am your wealth, I am your treasure'. "

16. Like prayer, Zakat is from amongst the basic principles of Islam and not paying your Zakat is a major sin.

17. Allah (SWT) said,
“He [Pharaoh] will go before his people on the Day of Judgment, and will lead them into the Fire.” (Surah Hud : 98)

18. Allah (saw) warns those who refuse to pay the Zakat:
Allah (SWT) tells us in the Quran:
“They who hoard up gold and silver and spend them not in the way of Allah, Announce to them a painful torment O Muhammad (saw) On the day when it all will be heated in the fire of hell, and their foreheads and their flanks and their backs will be branded with it, (and it will be said to them). This is the treasure which you hoarded for yourself, now taste of what you used to hoard.” (At Taubah:34-35)

19. The first Muslim Caliph Abu Bakr As-Siddiq (r.a.), said:
"By Allah (SWT), if they refuse to pay me (even) a bridle which they used to pay the Messenger of Allah (pbuh), then I will fight them because of their refusal." [Muslim]

20. In another hadith by Abu Dawud, the prophet s.w.t. said:
“Allah has made zakat obligatory simply to purify your remaining property, and He made inheritances obligatory that they might come to those who survive you.”

21. The main aims of zakat
The worship to Allah for all His bounties to mankind
Al-Baqarah: 267 “Oh ye believe! Give of the good things which ye have (honorably earned). And of the fruits of the earth which we have produced for you..”
Assist the poor and the needy
Al-Dzariyat: 19 “and their wealth and possessions (was remembered) the right of the (needy)..”
Act as a mechanism to distribute wealth
Purify one’s heart and self from being stingy
Al-Taubah: 103 “Of their goods take alms. That so thou mightiest purify and sanctify them..”

22. CONDITIONS FOR ZAKAT Islam. Wise.
Genuinely owned-owner’s asset or asset free of claims by others.
Productive assets -capable of generating profit or revenue and net cash inflows:Cash in hand,Cash at bank,Stocks, shares, bonds, and securities,Inventories of finished goods, Rentals, Net Receivables.
Surplus assets- its value must equal to or above a minimum zakat-able(nisab).
Full year’s possession (Haul).
Fullfil the nisab- a given quantity for the period of an entire year.

23. People Eligible to pay Zakat
Muslim
Independent
Absolute ownership
Nisab
Haul
Purpose of business

24. People Entitle to Receive Zakat / Benefeciaries of Zakat
The Needy/ Poor/Fakir / Fuqara’ - Income is less than 50 percent of daily needs.
Miskin (Masakin) - Just sufficient to finance basic needs.
Amil - The one with authority / responsible to collect zakat.
Muallaf - Individual who convert to become Islam.
Fisabilillah - Individual involve with activities to defend and strengthen Islam.
Ibnu Sabil - Refugees, homeless, Orphanage Muslim.
Gharmin - Suffered many debt and unable to settle them.
Riqab – Slave, after release from the owner.

25. Discussions on the ISSUES: Are there 8 or 7 Benefeciaries???
Some states in Malaysia have only 7 beneficiaries since nowadays there are no more slaves (captives).
However, there are other states which still maintain the number of beneficiaries of 8 people.
The reason - because it is stated in the Holy Quran that there are 8 beneficiaries of zakat.
Due to that, ar-riqab is implied as zakat for those who would like to free themselves from ignorance for instance zakat paid to people who would like to further their studies

26. Conditions for becoming AMIL
Muslim
Pious person (orang soleh)
Mukallaf (competent person who is in full possession of his faculties)
A freedom man (not a slave)
A fair and just person
Does not come from the descendants of the Holy Prophet (PBUH)
Trustworthy
Is not a blind person
Is not a deaf person
Male

27. MUKALLAF
Mukallaf ialah seorang yang telah mencukupi syarat untuk diberikan taklif Syarak (yakni tuntutan dan kewajipan Syarak).
Orang yang mukallaf wajib mematuhi ketetapan agama dan setiap perbuatan dan perlakuannya tertakluk dengan hukum yang telah ditetapkan oleh agama sama ada wajib, haram, harus dan sebagainya tadi.
Syarat-syarat mukallaf ialah: 1. Telah sampai umur (yakni baligh) 2. Memiliki akal yang waras 3. Sampai dakwah kepadanya 4. Sempurna pancaindera, khususnya penglihatan atau pendengaran.

28. Methods to determine the sources of zakat
Qiyas
Wealth
Al-Nama Binafsih
Al-Mal al-Nami
Favour the poor and the needy

29. QIYAS
A method that will be used by the Islamic jurists and scholars in determining the shariah practice if the subject /case is not mentioned in the Holy Al-Quran, Hadith or consensus (ijmak).
Qiyas is a practice to imply a subject with an existing shariah treatment.
The use of Qiyas in zakat is encouraged and it has been widely practised by the Islamic jurists. For instance, employment income is subject to zakat because it is similar to gold and silver. Therefore, the rate and the haul are equivalent to the rate and haul of zakat on gold and silver

30. WEALTH Taken from several hadith :
For instance, as narrated by Mu’az bin Jabal, the holy Prophet s.a.w had instructed his amil to inform the Yemen people that zakat must be paid by the wealthy people to be distributed to the poor and the needy.
Due to this, there is an opinion that says zakat is payable on all wealth, irrespective of the physical form of the wealth.

31. Al-Nama Binafsih
This is a method to zakat wealth based on the concept of “productive wealth expansion”
Those wealth or property which could in nature expand or grow by themselves for instance the agricultural produce such as paddy will fall under this category of wealth.
There is no haul condition to be fulfilled for this type of wealth. Zakat is payable once the wealth is gained and the quantity is enough to meet the nisab.
Imam Nawawi and some Islamic scholars such as Ibn Abbas, Ibn Mas’ud and Muawiyah for instance suggest that zakat on employment should follow the method of Al-Nama Binafsih.
Thus, according to them zakat on employment income is payable on the day it is received provided that it meets the nisab.
The zakat is imposed based on the method it is gained and not the type of wealth (even though the wealth is received in the form of money)

32. Al-Mal al-Nami
This is another method to zakat wealth based on the concept of “productive wealth expansion”.
However, it is imposed on wealth which is gained from property or wealth which could not grow by itself for instance like business wealth.
Therefore, zakat is ony payable when it meets the haul and the nisab.
For instance zakat on business income will only become payable if it meets the haul and nisab.

33. Favour to the Poor and Needy
This principle is being used by the scholars if there are two reasons from two different schools of thought to pay zakat on the same wealth at the same time.
Therefore, the approach is to choose the method that will favour the poor and the needy
For instance, when there is taraddud which means argument due to similarity or ambiguity between two wealth such as should the rate of zakat for money be based on qiyas on gold or qiyas on silver?

34. Cont… - Favour to the Poor and Needy
The jurists conclude that it is better to base on silver since the value is higher and there is no disagreement on the nisab of silver that subject to zakat
Reared animals for instance could fall under either zakat on reared animals (al-sa’imah) or zakat on business income (al-tijarah).
In this case, normally the jurists will choose zakat on business income rather than zakat on reared animals because it favours more the poor and the needy.

36. End of Lecture