ZAKAT AND ITS ISLAMIC CONCEPT AND ANALYSIS OF ECONOMIC EFFECTS: A LITERATURE REVIEWS

Abstract

Zakat (almsgiving) is a religious duty for every well-off Muslim to donate 2.5% of his/her wealth to help out those in society who are less fortunate.  Based on the requirements  of Shariah, only those Muslims are required to give zakat who have the means to do so. Although in Islam, there is no Taxation system, however, a Muslim should pay taxes made applicable by the state on its citizens as taxes will help the country flourish. This study examines the previous researches from various countries to analyse the Economic impact of Zakat on the society. This analysis of previous researches finds out that there is a big impact of Zakat on both micro and macroeconomic factors. Zakat has a greater projected macroeconomic impact on economic development, wealth and income distribution, eradication of poverty, social security, and economic stabilization.. There are strict rules in accordance with Islamic jurisprudence, that  only needy or deserving person should be given zakat for his/her consumption. Based on previous research, the current study suggests that, Zakat might be a useful instrument for promoting economic growth. This imply that zakat might, in the long term, contribute to the economic growth of the ummah by reducing inequality as well as the gap between the rich and the poor. In order to increase the efficiency and effectiveness of zakat collection and distribution, however, much more has to be done in real terms.