INSTITUTIONALIZATION AND REGULATION OF ZAKAT FOR

POVERTY REDUCTION IN BENIN

Proposal for Practice Paper in a Partial Fulfilment for a Masters in

Islamic Finance Practice

By

Souliyat Damilola SODJETE

1800078

Suggested Supervisor:

Mr Ezamshah Ismail
 1. Introduction and Background of Study

Absolute poverty is defined by the United Nations, in 1995, at the World Summit for Economic
Development as “ a condition characterised by severe deprivation of basic human needs,
including food, safe drinking water, sanitation facilities, health, shelter, education and
information. It depends not only on income but also on access to services.” Recent estimations
for 2018 indicate that 8% of the world population live on a dollar or below (Khalifa 2019).
Alleviating poverty has long been a huge concern for most countries and international
organisations. Khalifa (2019) stated that efforts in finding efficient remedies to this global
problem has led to the introduction of social finance, explored in all possible forms.
Islamic Finance, a prominent industry based on Shariah Rulings (Islamic laws), proposes a form
of social finance which has historically proven its potential for poverty alleviation . The
following are the main Islamic social finance tools renown for the eradication of poverty and
socio-economic development since the onset of Islamic religion from around 1400 years ago:
Zakat (Alms), Waqf (Endowment) and Sadaqah (Charitable acts). Driven by the Maqasid Al-
Shariah (Objectives of the Shariah). These instruments contribute in enhancing and developing
social welfare by positively impacting the society through improvement of education and
healthcare accessibility, development of infrastructure and maintenance of social welfare
provisions for poor and needy. Notwithstanding the extent of other tools’ impact, Zakat is highly
important due to its obligatory nature. In 9AH, the obligation to pay zakat on wealth was
received by the Prophet Muhammad (PBUH) (Nazri, Rahman and Omar 2012). The payment
of Zakat is the third pillar of Islam right after performing Salat and all Muslims meeting the
minimum requirement are obliged to pay Zakat to eligible collectors. It is the duty of the
collectors to efficiently manage and redistribute the funds to attain the expected positive result.
During the time of the Holy Prophet (PBUH), Zakat was collected and distributed by the state,
hence state individuals would collect Zakat during the time that it was due and would then
distribute it amongst those who were eligible for it (Shiwani 2018). The impact of Zakat has
fully been experienced in the times of the rightly guided caliphates where it was seen to totally
eradicate poverty. A number of scholars claimed that during the period of Umar bin Al-Khattab
(13-22H) and Umar bin Abdul Aziz (99-101H) poverty was completely eliminated (Ahmed,
2004; Hidayati & Tohirin, 2010; Md. Isa, 2011; Qaradawi, 1999). In that period, it was
observed that Zakat money could not be distributed in some regions due to the non-existence of
poor people (Nazri, Rahman and Omar 2012
Given its obligatory nature, the practice of Zakat should be present in any country with a Muslim
population. Therefore, its positive influence is expected in states where its collection and
redistribution are properly managed. Benin is a francophone West African underdeveloped
country and by the estimate stipulated by INSAE (2013) 27.7% of its total population is
represented by Muslims. Bordered by Togo, Nigeria, Burkina Faso, and Niger, Benin has a
population of close to 11.4 million (The World Bank, 2019). The Muslim population of around
3.2 million is expected to be paying an amount of Zakat if meeting the Nisab (Minimum amount
of wealth a Muslim must possess to be eligible to pay Zakat) on a yearly basis. The expected
Zakat yearly collected from eligible Muslim population should have contributed in reducing
Benin’s level of poverty which has not really improved in the last decade. Despite steady,
robust economic growth over the past two decades, poverty remains widespread owing to
limited growth in per capita terms (only 1.6% during 2006–2016). National headcount poverty
rates were estimated at 40.1% in 2015 (The World Bank, 2019).
The situation will not have been this bad unless there is an existing gap between the current
Zakat practice in the country and what ought to be practiced from the classical Zakat. Bridging
this gap will not only contribute to eradicate poverty through efficient wealth redistribution but
also by providing job opportunities and improving social welfare availability in the country.
Countries like Malaysia are role models in significantly benefiting from institutionalized and
regulated Zakat collection system. Presently, the development of zakat institutions in Malaysia
is constantly improving in terms of zakat collection….In Malaysia, the zakat management
authority is called the Center of Zakat Collection (Pusat Urus Zakat—PUZ) and is under the
supervision of each state and territory (Malaysia has 13 states and one federal territory).The
system will be able to generate up to approximately US$1.617 billion zakat on income alone
calculated by multiplying the estimated average zakat of US$365 per person per year (Osman,
2011). (Alli and Hatta 2014)
This paper aims to gauge the aforementioned gap by comparing the present practice of Zakat
in Benin to the ideal practice derived from the classical practice in the times of the Prophet
(S.A.W) and the rightly guided caliphates. Furthermore, it will propose an institutionalized and
regulated Zakat system inspired from successful practices as an attempt to bridge the gap.
Finally, it will provide recommendations on how to implement the proposed system, given the
possible challenges that might occur.
 2. Research Objectives
The general objective of the present paper is to propose an institutionalized and regulated Zakat
system that will contribute in alleviating poverty from Benin. This aim can be attained by
realising the following subobjectives of the research :

I. To examine the gap between the current practice of Zakat collection and
redistribution in Benin and what ought to be practiced
II. To bridge the discovered gap by proposing an institutionalized and regulated
Zakat system for Benin based on success practices; and
III. To evaluate the possible impact of the proposed system on contributing to
alleviating poverty in Benin.

3. Literature Review

Benin is a relatively small country located in West Africa and is home to approximately 11.7
million people (Newsome 2019). Ranked 167 out of 188 countries on the 2016 Human
Development Index, Benin continues to struggle with a high population growth rate, a low
average life expectancy and food insecurity (Quinn 2017). It has been predicted by the World
Population Review (2019) that the population of Benin will be 12,122,985 in 2020; 15,628,437
in 2030; 19,613,944 in 2040 and 23,929,846 in 2050. In the last two decades, Benin’s poverty
rate, however, has increased from 35.2 percent in 2009 to 40.1 percent in 2015. According to
Quinn (2017) some of the root causes of poverty in Benin include a vulnerable agricultural
sector which employs 45 to 55 percent of the population, inequality in education and the
economic gender gap. She relates that Benin relies heavily on its agricultural sector for both
economic development and food security. Approximately 33.6 percent of households in Benin
are food insecure, and 45 percent of children under the age of five suffer from chronic
malnutrition (Quinn 2017). As mentioned by Newsome (2019), the Global Hunger Index rates
Benin at a 24.3, which means that Benin is labeled under the “serious” category for hunger. In
recent years, there have been many efforts to combat underdevelopment and improve living
conditions in Benin. Organizations, such as UNICEF and USAID, are working to improve the
quality of living conditions in the country. They have started programs in Benin to reduce
poverty and alleviate the problems associated with it (Newsome 2019). Additionally, Quinn
(2019) stated that the Beninese government adopted a new development plan aimed at
improving productivity and living conditions in December 2016. She further states that the plan
is to focus on reducing the root of poverty in Benin and promoting inclusive prosperity through
education and economic opportunities, the country may see an improvement in the severity of
poverty in the years ahead. The potential of Zakat as a tool for achiving that goal is not yet
explored by Benin despite the presence of 3.2 million muslims representing 27.7% of the total
population.

The religion of Islam gives a particular importance to Zakat for solving social and economic
problems and reduce the inequality of people in the society which will lead to a peaceful and
harmonious society (Hayeeharasah, Sehvises and Ropha 2013). Gamieldien (2010) mentions
the description of the philosophy and objective of Zakat provided by Hãfiz ibn Qayyim in the
following words: “Therefore Allah in His wisdom imposed an obligation on wealth which may
not be (too much of) a burden on (the wealthy) but should be adequate for the needy so that
they do not have to turn to any other direction” . According to Gamieldien the objective of
Zakat can be found at the ideal Islamic state as it existed in the time of ‘Umar bin al-Khattāb
who succeeded in creating a society free of want in what may be termed as the first true welfare
state. Bearing in mind that poverty breeds unbelief, as taught by the Holy Prophet, ‘Umar saw
the objective of Zakat not as the eradication or elimination of want and poverty but as its
prevention. Gamieldien relates how Umar managed zakat funds by giving a stipend to ever y
man, woman and child: “The inhabitants of Madinah were given 25 dinars each. The people of Yemen,
Syria and Iraq were given allowances varying from 200 to 300 dihams annually. women were also
awarded allowances according to their preferences in embracing Islam, relationship to the Prophet, etc.
Major children of those who participated in the battle of Badr were awarded 2 000 dirhams each. Every
other major child received 300 dirhams. Infants were given 100 dirhams from the day they were born.
Orphans were treated in line with other children. They received an allowance of 100 dirhams which
increased as in ordinary cases. Guardians of such children were given separate pay and allowance.
Clothing, shelter and education of such children was a state duty.” Umar did not limit his management
to spreading the funds to eligible receivers. He also advised the poor Arabs to buy goats when he
receives his allowance and to add cattle to his herd when he receives it again. He encouraged them to
manage their allowances efficiently in order to have enough capital to spend their life easily even if the
next amīrs do not give them allowances. After providing Umar’s examples, Gamieldien questions
if the failure is from the institution of Zakat or the people not adapting it in accordance with
the Shariah. He furthermore advices that the law should be adapted to changing circumstances
as expressed in the maxim: Taghyirul ahkãm bi taghyiril azmãn (Changing circumstances
necessitates adaptation of the law). As stated by Hayeeharasah et al (2013), the payment of
Zakat is obligatory upon a Muslim when he meets following conditions : possession of assets
that cover a specific amount according to Islamic rule (Nisab) and reach the time period of a
year (Hol). They furthermore cited several philosophies beneath the importance of zakah
payment. The first philosophy given states that paying zakah helps cleanse the mind of the
payer and such person is restrained from misery and selfishness. Others relate that paying zakah
creates the spirit of love and unity among Muslims and it creates strong society from the mutual
assistance. (Hayeeharasah et al, 2013). Zakat funds, as ordered in verse 60 in Surah At-Tawbah
in the Holy Quran by Allah Subhanahu wa Ta'ala, are used to provide for these 8 types of
people: to the poor (al-fuqarâ meaning low-income earners), to the needy (al-masâkîn meaning
someone who is in difficulty), to those who work on administering (Zakat administrators), to
those whose hearts are to be reconciled (new Muslims and friends of the Muslim community),
to free those in bondage (slaves and captives), and to the debt-ridden, and for the cause of God,
and to the wayfarer (those who are stranded or traveling with few resources). As mentionnend
by Hassan (2010), there is general agreement that the first priority in the use of Zakat funds
has to be accorded to the alleviation of poverty through assistance to the poor and the needy,
although eight heads for spending Zakat revenue have been mentioned in the Qur'an. Bringing
zakah system into solving economy and social problems requires detailed research on the
different types of zakah on their own specific details concerning what is zakatable, the scope
of Zakat and the duration of payment. Hassan (2010) indicates several opinions regarding
zakatable items. An opinion considers that Zakat is only imposed on four types of agricultural
products (wheat, barley, dates and resin), gold and silver, and freely pastured camels, cows,
and sheep. However, Hassan (2010) argues that such items would only constitute a part of the
wealth of rich people of modern societies, as wealth and income have taken other forms. He
also referred to Hassan and Khan (2007) that consider that Zakat must be imposed on the wealth
and income of the rich that exceeds the normal and customary personal and family
expenditures, like: business assets, bank accounts, financial assets and rentable buildings.
Regarding the scope of Zakat, Hassan (2010) referrred to the views expressed by the founder
of three scholars of jurisprudence (Shafi, Malik, and Hanbal). According Hanbal, the amount
paid in Zakat must be enough for one year's requirement. Imam Shafi treats this in a life term
perspective and maintains that the poor should be given Zakat enough for their lifelong
requirements of a normal life span. He also mentionned a Fatwa issued by the International
Shari’ah Board on Zakat (ISBOZ) explaining that Zakat funds might be used in undertaking
development projects, educational services, and health care services as long as the beneficiaries
of such projects fulfill the criteria to be recipients of Zakat. Hayeeharasah et al (2013) clarify
the duration for the year of zakat eligibillity. It begins on the date that a person pays zakah for
the first time (the day the person meets the Nisab). After that, if the person still possesses the
asset when reaching one year or days according to the lunar calendar, he must pay again with
the same method because zakah is not calculated from the accumulation of assets.

There are not much literature on the practice of Zakat in Benin. It was only mentioned in a
chapter dedicated for the application of Zakat in Benin derived from the proceedings of a
Seminar held in Benin by IDB on the topic of Zakat and Waqf in 1997. SOUMANOU (1997),
the author of the chapter, firstly referred to article 23 of Benin’s Constitution of 11 December
1990. The article states that everyone has the right to freedom of thought, conscience of
religion, worship, opinion and religion. expression in the respect of the public order established
by the law and the regulations. The exercise of the cult and the expression of the beliefs are
carried out in the respect of the secularity of the State. Institutions, religious or philosophical
communities have the right to develop without hindrance. They are not subject to the
supervision of the State. They regulate and administer their affairs in an autonomously. Based
on the referred article, SOUMANOU (1997) stated that the legal dimension of the
establishment of a Zakat based institution in Benin does not pose any problem which will be
governed by the law of 1901 governing the creation of non-governmental organizations. With
regard to the structure itself in its organizational aspect, SOUMANOU (1997) firstly proposed
a national body, in charge of guiding and centralizing the funds, to serve as an instrument of
equalization, supervision and control. At the level of each district he also proposed the
installation of the same structure or almost and in concentric circles they would be communal
structures, villages etc. Furthermore, he proposed that each structure will have to be
autonomous in its management but not independent of the central structure which will have to
check if the different substructures have an operation or an optimal return. He concluded the
chapter by stating that the installation and implementation of such an institution requires
collective support from the Muslim Community of Benin as the most important condition is
required from them is trust. The practice of Zakat in Benin is facing similar hindrances as most
Muslim countries. Hassan (2012) explained that in most Muslim countries, the contribution
received from Zakat donors has been less significant because of different reasons. Firstly
individual Zakat donors usually have preferences in the choice of receivers and generally they
choose their close relatives and neighbours. The low credibility of management because of
government involvement and more importantly, in National Zakat Management Fund, which
has little knowledge regarding the eligibility of recipients. It should be noted that only the first
reason that is common to Benin’s situation given the fact that the government nor any Islamic
authority is involved in the management of Zakat funds. The notion of Zakat not being alien to
Benin but the lack of a monitored institution and proper regulation limits its effectiveness in
contributing to alleviating poverty.

Hudayati and Tohirin (2010) state that Zakah is more than a personal ibadah, it also is a social
institution. As a social institution they insist that even in the absence of an enforcement agency
like an Islamic state, zakah should be playing a significant role in the society. Consequently,
they referred to Sidiqui (1968) who argued that even though there is no rule that someone has
to pay zakah through some institutions, paying zakah individually loses much of its
significance. Zafree and Amin (1998), according to Hudayati and Tohirin (2010) also
recommended that Zakat should be collected and disbursed through state mechanism to remove
any overlapping between Zakat and taxes. In addition to stating the importance of zakat
management through state, they presented zakat intitution and its effectiveness in muslim
countries such as Indonesia and Malaysia.

Indonesia has the biggest Muslim populous in the. It has a National Zakah Agency established
in 1996 throughout all provinces in Indonesia. The volume of zakah funds, in 1997/1998, zakah
al maal and zakah al fitr accounted for Rp 187,014,659,053.00 (Kasubdit Zawaib Depag,
2002).Besides government sponsored zakat agency like BAZIS, there also emerges many
private-community-sponsored zakat agencies known as LAZIS (Lembaga Amil Zakat Infaq
dan Sedekah or Institutions of Amil Zakah Infaq and Shadaqah). (Hudayati and Tohirin 2010)
stated that Hafidhuddin (2009) mentioned that in 2006 the collection of zakah at national level
amounted to Rp300 billion, and it increased to Rp700 billion in 2007. In 2008, the number rise
to Rp 900 billion. However, they mentionnd that the potential number aimed is Rp 19 trillion
per year.

Malaysian Constitution has listed zakah under state authority. Islam is the religion for the
Federation but the Federal Government does not have the fullest authority in religious affairs.
The Malay Ruler or Yang Dipertuan Agong has formed its own Islamic Administrative law
that is in line with the constitutional provision to execute its authority over religious matter.
Normally provision related to zakah is part of the law (Hudayati and Tohirin 2010).

Zakah institution in Malaysia has been established for the past 70 years. At that time Islamic
Religious Council has been concentrating on zakah fitr and zakah on agricultural/zakah on
paddy or rice farmers who actually the poorest section on the society. (Mohd Rais Haji Alias,
2004). There is no zakah on other agricultural products such as rubber, palm oil, and cocoa
(Mohd Daud Abu Bakar, 1998). Thus serious consideration on the true potential of zakah of
property is not given proper emphasis, such as salary earners, the managers and the
businessman income. The corporation has proven to be successful with the encouraging
increase of zakah collection through the years. From 1995 to 2003 zakah collection increased
by 3703 percent in Federal Territory, while in Malaysia, zakah collection increased by 886
percent during 1990-2002. In addition, average payment every year in Federal Territory is RM
34.11053 million and in Malaysia RM 190.2571 millions (Hudayati and Tohirin 2010).
Hudayati and Tohirin (2010) present Malaysia’s experience in term of Zakat as an interesting
learning in term by centralising it at the state level, due to the authoritative power of each
Sultan on the religious matter, including Zakat. They deliberate on the approach as being very
positive to make zakah collection effective and efficient.

Gamieldien (2010) believes that the application of the correct interpretation of the institution
of Zakat will provide the solution for the ultimate prevention and eradication of poverty.
Hayeeharasah et al, (2013) emphasized on the importance of institutionnalizing Zakat as an
important factor in building strong society and nation. They argue that if there was an
organization taking administrative role in Zakat management it would tremendously benefit
the Muslim society. Hence, social issues will be reduced as resources would be allocated and
distributed at all levels of society especially the poor.

4. Research Methodology

The methodology used in this research to gather data is a qualitative method. Primary sources
will be extricated through questioning and interviewing possible zakat payers and receivers;
zakat collectors; distributors and possible regulators. The target sample size comprises of:
- 60 Muslims with 5 Muslims (from different standard of living) per district (there are 12
districts in Benin)
- 13 mosques: 1 main mosque per district and the national central mosque
- 12 other collectors if existing.
Secondary data are extracted through a desk research. Previous literatures will be reviewed to
derive conclusions from books, research articles, industry reports, various websites and other
reliable sources.

5. Proposed table of content

I. Student Declaration of Originality Form & Permission for academic use
of work by INCEIF
II. Supervisor’s Declaration
III. Abstract
IV. Introduction
V. Research Objective
VI. Literature Review
o Social Structure and Poverty level in Benin
o Zakat and its role in poverty alleviation
o Zakat Practices in Benin
o Effectiveness of institutionalizing and regulating Zakat Practices in poverty
alleviation (Country Cases)
VII. Research Methodology
VIII. Findings
o Gap between the Zakat Practices in Benin and Best Practices
o Bridging the gap by:
▪ Institutionalizing Zakat in Benin
▪ Develop or Enhance Zakat Regulations in Benin
IX. Conclusion & Recommendations
 6. References (Chicago Style)

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