THE ECONOMIC AND SOCIAL IMPACT OF ZAKAT IN CONTEMPORARY MUSLIM SOCIETIES

Abstract

Zakat, one of the five pillars of Islam, functions as a mandatory almsgiving system that has profound economic and social implications in contemporary Muslim societies. This paper explores the multifaceted impact of zakat on poverty alleviation, wealth redistribution, social cohesion, and economic development in Muslim communities today. Economically, zakat acts as an institutionalized mechanism to reduce income inequality by channeling wealth from the affluent to the needy, thereby fostering equitable resource distribution and promoting financial inclusion. Socially, zakat strengthens community solidarity, reinforces ethical behavior, and mitigates social tensions arising from disparities in wealth. Despite its religious foundation, zakat holds practical relevance in modern welfare frameworks, providing an indigenous model of social protection and economic justice that complements state efforts. However, challenges such as inefficient collection systems, lack of awareness, and mismanagement hinder its full potential. This study synthesizes contemporary empirical findings and theoretical insights, highlighting the role of zakat institutions, government policies, and technological innovations in optimizing zakat’s economic and social benefits. The paper further discusses how zakat contributes to Sustainable Development Goals (SDGs) by promoting inclusive growth and reducing poverty. Ultimately, the research underscores that revitalizing zakat in line with contemporary financial systems can significantly contribute to socio-economic stability and development in Muslim-majority countries. Policymakers and Islamic financial institutions are encouraged to integrate zakat frameworks with broader economic strategies to harness its full potential as a catalyst for social welfare and economic empowerment.