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IIUM Institute of Islamic Banking and Finance. (IIiBF) INDIVIDUAL ASSIGNMENT: Literature review on zakat paying in Malaysia

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IIUM Institute of Islamic Banking and Finance. (IIiBF) INDIVIDUAL ASSIGNMENT: Literature review on zakat paying in Malaysia
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  1 IIUM Institute of Islamic Banking and Finance. (IIiBF) INDIVIDUAL ASSIGNMENT: Literature review on zakat paying in Malaysia ASST PROF DR: Syed Marwan ISLAMIC FINANCIAL SYSTEM (IFS) By: MOHAMED ABDIWAHID HASHI (G1819903)  2 Contents 1. Introduction .............................................................................................................. 3 2. Literature review ....................................................................................................... 4 Overview of zakat .......................................................................................................... 4 Zakat administration in Malaysia ................................................................................... 5 3. Issues and gaps .......................................................................................................... 6 1. Issues pertaining to zakat management ................................................................. 6 2. Issues pertaining to zakat collection ....................................................................... 8 3. Issues pertaining to zakat distribution .................................................................... 9 4.  The importance of zakat on the sustainability and efficiency of Islamic financial institutions ...................................................................................................................... 11 5. Conclusion ............................................................................................................... 12 6. References............................................................................................................... 13  3 Literature review on zakat paying in Malaysia 1.   Introduction Zakat is undoubtedly one of the most widely discussed and analyzed aspects of the Islamic economy. This is perhaps because Zakat is one of the five principal pillars of Islam along with Shahadah (declaration of faith), Salat (daily prayers), Sawm (fasting during Ramadan) and Hajj (pilgrimage to Makkah). Zakat also mentioned repeatedly in Quran and some Hadith. (Mahyuddin and Abdullah, 2011) mentioned in their research that the term zakat has been mentioned 58 times in the AL Quran. It has been mentioned 32 times in isolation and 26 times together with salah (prayers). Allah (S.W.T) said in Surah Al baqarah: “Those who behave and do righteousness establish daily prayers and pay poor will ha ve their reward with their Lord” (Al -Baqarah 2: 277). Past research on the concept of zakat and poverty alleviation describes how zakat has in one way or another helped to improve the welfare of people and bridge the gap  between the rich and the poor in society. It is a medium of creating equality among  people in the society (Mujaini, 2005, Ahmad Fahme et al., 2013). Some scholars consider zakat as a social insurance for members of the Muslim community through which a better future is granted (Mahyuddin and Abdullah, 2011)  (Bilqis, April 2017) have cited in their research . Zakat payment has been specified by Allah (s.w.t.) through His Messenger Muhammad (pbuh) with objectives to achieve. In fact, the population of a country is not similar in terms of their economic standing. There are the rich, the poor, the needy, the orphans, single parents and so on. Zakat has a number of objectives. Purification of one’s wealth  is one of the objectives.   Other objectives of zakat are to discourage the concentration of wealth and to reduce the amount of poverty. Furthermore, the main objective of zakat is to achieve socio-economic justice, poverty eradication and economic growth.   The ultimate objective is  4 to seek the pleasure of Allah, while taking into consideration the requirements of the shari’ah.  Well managed zakat system will certainly have a positive impact on the socio-economic positions of the poor and needy between the Ummah. The next part of the paper presents the literature review beginning with the meaning of zakat followed by zakat administration in Malaysia. In the third part issues and gaps pertain the practice of zakat in Malaysia was clearly presented. In the fourth section states the importance of zakat on the sustainability and efficiency of Islamic financial. The final part is the conclusion. 2.   Literature review Overview of zakat Zakat literally means to grow and to increase (Qardhawi, 2000). The term zakat has three different connotations; linguistically, theologically and legally. Linguistically, zakat means cleansing or purification of something from dirty or filth. Theologically, it means spiritual purification resulting from giving of zakat. According to Maududi (1 988), person’s wealth is impure if he does not pay the right of Allah’s servant from the wealth bestowed by him. It also means growth or increase which has two dimensions; first, spiritual development by pleasing Allah, and second, redistribution of income (as Islam forbids accumulation and hoarding) which will lead to greater enjoyment and in turn, will stimulate production and growth. Legally, zakat means transfer of ownership of specific property to specific individuals under specific conditions. Muslims have the obligation to give a specific amount of their wealth (with certain conditions and requirements) to the specified  beneficieres and in fact, the payment of zakat is one of the five pillars of Islam.  There are many evidences from Quran and Sunnah for the obligation of zakat. “And establish prayer and give zakah and obey the Messenger - that you may receive mercy’’. Surah an-Nur (Verse 56) “Take, [O Muhammad], from their wealth a charity by which you purify them and cause them increase, and invoke [  Allah’s blessing] upon them. Indeed, your invocations are reassurance for them. And Allah is Hearing and Knowing’’. Surah At-Tawbah (verse 103)  5 There are two types of zakat. One is Zakat Al-Fitri and Zakat Al-Mal (of wealth). Zakat Fitri: is a one off payment that is made once in every Muslim Hijri calendar year at any time between the first day of the month of Ramadan and the first day of Shawal. All Muslims are obliged to pay this, regardless of their age, status or wealth.   The amount of zakat payable is approximately 3kg of staple food in the relevant country or an amount of money that is equivalent to the price of the food. Zakat al-Mal is an annual payment based on the amount of wealth owned by an individual Muslim or organization. This payment is obligatory upon any individual Muslim or organization that has completed the requirement of Nisab (minimum taxable amount) and Haul (one Muslim Hijri calendar year). The payment is 2.5% out of the total wealth deemed for zakat. For zakat of Al-mal, there are a few categories under it, including zakat of business, zakat of saving, zakat of income, zakat of gold and silver, zakat of poultry (for instance like cow, goat and so on), zakat of fruits and grain, zakat of entrenchment, zakat of investment as well as zakat of Employees Provident Fund (EPF) saving (Muharman et. al., 2011). There are eight groups of people who are the recipients of Zakat, as mentioned by Allah in His Holy Quran (QS: At-Tawbah: 60), including al-  Fuqara’ (needy/strained), al-    Masakin (poor/deficient/lacking), amil (has right to collect zakat), mualaf (convert/reconciled to Islam), al-    Riqab (slave), al-Gharimin (people in debt),  fi-sabililLah (Allah’s cause) and  Ibn as-Sabil (traveler/wayfarer). Allah s.w.t has determined these categories when He says: “ Sadaqat (zakat) are for the poor and the needy, and those employed to administer (the Zakat), for those whose hearts are to be won over (  Muallafat-al-Qulub )  , and for the freeing of human beings from bondage, and (for) those who are burdened with debts, and (for every struggle) in Allah ’   s cause, and (for) the wayfarer: (this is) an ordinance from Allah, Allah is All-Knowing, full of Wisdom. ”  (9:60) Zakat administration in Malaysia In Malaysia, zakat is managed under the respective states authority as part of the administration of the State Islamic Religious Council (SIRC). The law on zakat is governed by each state’s own zakat law (Bakar, 1998). SIRCs are fully  responsible in managing zakat affairs including its collection and distribution. Each state has its own SIRC but they are all referred to as zakat institutions in the Malaysian context.
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