Dr. Tariq Lissawi: The impact of zakat on reducing monetary inflation

Dr. Tariq Lissawi

In the article “Zakat is the border between a slavish usurious economy and a charitable zakat economy”, I pointed out that zakat achieves two purposes, one of which is a pious one that belongs to the individual owner, and which is expressed in cleaning and purification, and the other goal is economic and material , and that is to prevent the monopoly of wealth in the hands of a few rich people and to expand the circle of its distribution to the widest possible social circle. then zakat funds should be removed from the traditional way of distributing financial subsidies or presented in the form of liquid funds. funds, The need to pay attention to the institutionalization and good investment of zakat resources, in order to expand the benefit and invest the zakat base…and I will try to clarify two very important issues through this article:

First question – Zakat is not pure worship:

Although zakat is one of the pillars of Islam and a financial act of worship, this act of worship has its specifics in relation to other acts of worship. Like prayer, fasting and pilgrimage, it is not correct to make an analogy with it, but zakat has another. thing..

This is because zakat is not pure worship, but is a known right, a prescribed tax and part of the financial, social and economic system of the state, in addition to what contains the meaning of worship, and the reason for its legislation and decisions is generally clear, so that many jurists and scholars allow an analogy according to the above Is there anything similar to it and does it share the cause? It is known that the Prophet, peace and blessings be upon him, took zakat al-fitr from some grains and fruits, such as barley, dates and raisins, so ash-Shafi’i, Ahmed and his companions measured it with him. with everything that is eaten, or most homemade food, or most own food. . ..

Likewise, regarding the zakat of crops and fruits, most of the Imams used to measure many grains according to what was mentioned in the texts, and they did not limit the zakat to what came in some hadiths about wheat, barley, dates, and raisins. , when it became clear to him that what was in them, the value of one mare is the price of a hundred camels, so he said: Let’s take forty sheep and not take anything from the horses? (= For more details on this topic, see the book “Fiqh Zakat” by Shaykh Yusuf Al-Qaradawi, may God have mercy on him)

Zakat – although it is mentioned in the chapter on worship as a sister to prayer – is actually part of the Islamic financial and social system. Quickly to some of its most important roles:

1- Zakat works to ensure the limit of sufficiency and the satisfaction of the basic needs of every needy person in Islamic society, because the principle in Islam is to guarantee the limit of wealth for all members of society, and therefore it is considered the best social security for individuals.

2- It also leads to an increase in consumer spending directly by directing part of the income from zakat to achieve a level of sufficiency for the poor and needy..and indirectly through stimulating zakat to an investment function…because it leads to an increase in total private investment, and this is achieved by using part of the income from zakat to purchase machinery and equipment and establish small and large projects and own them for the poor.

3- The obligation of zakat is under pressure to release accumulated funds and unused funds and direct them into investments so that they are not consumed by zakat money.

4- The obligation of zakat helps to reduce state spending in the general budget of the state, because zakat finances many aspects that are mainly financed from the funds of the general budget, such as social welfare and social security, and also helps to reduce allocations for military and defense spending, and reducing education and health…

Perhaps this leads us to focus on an important part that is a chronic problem in a positive economy, and I mean monetary inflation, and how the proper application of zakat effectively contributes to the reduction of inflation by affecting several factors and variables…

Second question – zakat and monetary inflation:

Monetary inflation is the preoccupation of thinkers and economists. This is due to the worsening of this problem and its transformation into a global phenomenon. Attempts to control and treat it with known means and policies have become futile and do not lead to the estimated results. Instead, these treatments may have been reflected in an important negative way in the economy. such as growth and unemployment. Monetary inflation is one of the economic diseases that resembles the chronic disease of the capitalist economy. It arises as a result of an imbalance between production, consumption, savings and investment, and as a result of weak production capacities of the national economy. These imbalances result in continuous and long-term price growth.

Traditional theory attributed the phenomenon of inflation to an imbalance between aggregate supply and real demand. That is, real or monetary demand exceeds the total amount of output that the economic system can produce at its higher levels. Monetary inflation, according to classical economists, is mainly the result of a monetary phenomenon that is reflected in a high rate of demand as a result of an increase in the amount of money in the economy.

Based on the traditional theory, we can define monetary inflation as follows: “It is the excess of demand flows for goods in relation to the supply potential.

Through this definition, two basic characteristics of monetary inflation are visible:

1- Constant price growth that cannot be reversed.

2- This rise in prices causes an increase in the rate of inflation, which in turn will lead to an increase in prices.

Zakat is a monetary and financial mechanism to deal with inflation in the event that demand exceeds supply, since money available in society is greater than the value of goods offered, which is the basis of Islamic economic policy.

Therefore, it is natural that we study the impact of zakat on reducing inflation, because the application of zakat practically leads to curbing inflation through:

The periodic flow of zakat continues at the beginning of each year, providing the amounts of cash needed for circulation without the monetary authorities having to resort to cash-issuing operations.

The application of zakat legislation ensures the supply of a sufficient amount for all members of society, and society generally tends to demand for basic goods, and this precludes a high level of demand for luxury consumption.

– The goal of zakat distribution is to achieve enrichment for its banks, and this can only be achieved by providing adequate production tools and capital for them, which in the long run leads to an increase in production, which meets demand no matter how much it grows, so an increase in demand at that time does not result inflation.

The distribution of zakat on crops, fruits and livestock in kind greatly contributes to the preservation of money in its purchase value without decay.

Imposing zakat as a cost on real growing capital or an assessment that encourages capital owners to continue investing even if the expected rate of return is less than the zakat rate (2.5%), as long as the rate is greater than zero. This is due to the fact that the possible choice before investors in this case is between investing or hoarding money, rather than choosing between multiple investments. Since hoarding is not an option for a Muslim, it is better for Muslims to continue investing than not to invest at all, as this makes their loss due to zakat less than the total rate of zakat…

However, the effectiveness of zakat is related to the adoption of parallel financial and monetary tools derived from Islamic economic thought, which prevents monopoly and accumulation of wealth, encourages investment, investment and development of financial resources, and encourages work and production. Among the effective policies in reducing and curbing inflation is finding channels of savings Productivity, in terms of supporting production agencies, and transferring savings to the field of production.

The imposition of zakat must necessarily be followed by the prohibition of usury/interest on deposits, which will push savings into the field of investment, because this is the only way for capital growth, because there is no room for lending with interest, nor for depositing savings in banks in order to obtain a limited increase. Zakat on capital every year will force the owners of this money to develop it in the field of production, because this continuous refusal every year will inevitably reduce wealth, and there is no way to fill this deficiency and then develop wealth except by entering into productive projects and increasing development projects, and this thing will eventually lead to an increase in general growth rates… And we will try to expand on these elements in the next article, God willing… And God is dominant over his affairs, but most people do not know.. .

Journalist and academic specializing in the Chinese and East Asian economy, professor of political science and public policy.