Muslim Majorities Development: Zakat and Waqf Institutions

Summary

Zakat and waqf form a vast, mostly non-state welfare system for Muslims, now drawing state bureaucratization, fintech investment and reform calls, amid open questions about equity and governance.

What it argues

1. State bureaucratization of religion

   Gulf states built ministries administering mosques, charities, education and sharia courts, Carnegie reports. Oversight has shifted from autonomy for trusted clerics toward closer state monitoring of religious institutions. Religious charity and worship in the Gulf now sit inside state bureaucracies, not independent clerical networks.

2. Mandatory zakat payment

   Pakistan, Malaysia and Saudi Arabia enforce zakat by withdrawing it directly from savings accounts, a PMC study finds. Despite this, state attempts to direct zakat toward crisis response are often ineffective, the same study says. Legal compulsion has not made state-run funds the dominant channel for zakat giving.

3. Ottoman roots of endowment law

   The Ottoman Empire bureaucratized oversight of waqf endowments funding mosques and schools, Carnegie reports. Gulf states inherited and adapted these frameworks for sharia courts and charity administration after 1918. Current legal regulation of Islamic charity traces back to Ottoman-era administrative models.

4. Push for governance reform

   Experts at a Pakistan conference called for stronger regulation, transparency and governance autonomy for zakat and waqf bodies. They said large informal contributions bypass formal systems, reflecting distrust of institutional credibility despite a decades-old zakat system. Speakers blamed weak governance, not lack of funds, for limited poverty outcomes.

5. Scale of Islamic social finance

   Zakat is estimated at $200 billion to $1 trillion a year globally, potentially exceeding OECD overseas aid. Global Islamic finance assets stood at $2.5 trillion in 2018, projected to reach $3.5 trillion by 2024; researchers propose linking waqf to microfinance, banking and fintech to mobilize it further. Islamic social finance is a resource pool comparable in scale to international aid, now being reengineered as finance tools.

6. Equity questions in zakat giving

   Higher-income individuals are more likely to pay zakat even after accounting for eligibility, a PMC study finds. Because zakat is flat-rate and mostly given through personal networks, it may be regressive and reproduce existing exclusions. Zakat's redistributive reputation sits alongside unresolved questions about who actually benefits.

7. National zakat collection drives

   Indonesia's Baznas aimed to collect Rp41 trillion in zakat by end-2024, with 40% going to poverty-alleviation programs and some to stunting-reduction health work. Public zakat-giving there has risen about 30% a year; elsewhere, a $350,000 zakat fund financed a micro-hydro plant giving electricity to about 4,448 people, schools and clinics. State-linked zakat bodies are channeling rising public giving into concrete welfare and infrastructure projects.

8. Crisis solidarity through zakat

   In Pakistan, Egypt and Morocco, large majorities of the public and of zakat-payers saw zakat as especially important during Covid-19, more so than taxation. Sadaqah giving rose despite personal economic hardship, a PMC study finds. Communal religious giving strengthened rather than receded under pandemic strain.