Ramadan Charitable Giving Seen as Potential Lifeline for Global Economic Recovery
Sat, April 10, 2021

Ramadan Charitable Giving Seen as Potential Lifeline for Global Economic Recovery


Alms-giving known in Islam as Zakat is an important religious obligation and Muslims consider it non-negotiable.  / Photo by Fevziie via Shutterstock


The scale of economic activity paused and jobs lost worldwide due Covid-19 pandemic have made it clear that the world is facing an economic downturn.  Experts even believe that some countries are already in a deflationary depression and not just recession. To help protect many parts of the world from the economic damage caused by the pandemic, economists are looking for solutions in unlikely places, such as religion.

Charitable organization Mercy Mission UK CEO Azim Kidwai, who also serves as a special advisor to the UN on Islamic philanthropy, shares that Ramadan charitable giving may offer an economic lifeline for billions of people around the world. He said that Ramadan is a time for communal togetherness and a spiritual perspective. However, if you consider it from an economic perspective, such a sacred month in Islamic culture is also a period when Muslims are spending money. They splurge on Eid outfits, gifts, and food.


The economic impact of Ramadan

The Ramadan economy is worth at least £200m annually. In 2018, supermarket chains Morrisons, Asda, Sainsbury’s, and Tesco protected special offers and products during Ramadan, particularly in locations with a large Muslim population. Cosmetic brands, including The Body Shop and MAC, also labeled their packages as Eid gifts during Ramadan.

Islamic marketing consultancy Ogilvy Noor's study also found that two-thirds of Muslims plan financially for Eid and Ramadan. Aside from family gatherings, eating out, buying new clothes, and gift-giving, charitable donations increase as well, especially among 25- to 34-year-olds.


The non-negotiable Zakat among Muslims

Alms-giving known in Islam as Zakat is an important religious obligation and Muslims consider it non-negotiable. They believe that giving away money to the poor will purify their yearly earnings. Muslims who are at a certain income level are required to donate 2.5% of their wealth every year. Zakat collective bodies also share that 85% of their donations usually come during Ramadan.

Kidwai pointed out that a stimulus package worth billions of dollars will be available in Muslim-majority nations and countries with Muslim minorities.


The fund focused on Muslim giving recognized that every child has the right not just to survive but to also thrive. / Photo by Mama Belle and the kids via Shutterstock


Zakat bailout

As the world is threatened by economic difficulty, the “Zakat bailout” may prove crucial. Since Ramadan charitable giving is mandatory to Muslims, it compels the money to flow in an economy that would otherwise be illiquid because consumers would prefer to conserve their money. It is estimated that global yearly Zakat contributions may reach US$600 billion. Considering the words of Zakat collective bodies that 85% of Islam donations come during Ramadan, this means that 85% of the $600 billion this year can serve as a boost to the economy. This is why the worst-affected region may find Islam’s mandatory wealth tax helpful.

Usman, a fisherman from North Sumatra, Indonesia, used to have an unsteady fishing boat and it only allowed him to fish as far as the mouth of the river. He said via The Guardian that he could not catch enough to help feed his family. However, things changed when he was able to buy a new boat with the assistance of Islamic donations. As he can already sail further into the sea, he can catch more fish and he is earning enough for his children’s school fees. This is only one of the many examples of how Zakat can reduce poverty and improve livelihoods worldwide.

Considering that Zakat  accounts for 2.5% of all net savings, cash on hand, bonds, bank savings, and other objects of monetary value are covered. Even gold and jewelry are not exempt from Zakat. Hence, it may be critical for economic recovery.

Last year, the Islamic Development Bank and UNICEF also launched a global Muslim philanthropy fund for kids. The fund focused on Muslim giving recognized that every child has the right not just to survive but to also thrive.


Combating coronavirus in Pakistan with Zakat

In Pakistan, the Muslim law of generosity has also helped people who are out of work because of the pandemic. Pakistanis helped assist the less fortunate by offering their zZkat for the daily wage earners who have no financial safety net, health insurance, and paid leave as other workers in the country.

M Sohail Khan, a Pakistani who is living in Loughborough, UK, also said that they may not have a lot, but they have “big hearts.” Some Pakistanis are also giving more than the required 2.5%.



Size of major religious groups

Worldwide, there are 5.8 billion religiously-affiliate adults and children, and 23% or 1.6 billion are Muslims. This means that Islam has the religion with second-highest number of followers in the world. This is according to the American research organization Pew Research Center. The data also shows that 3.2% (2.2 billion) of the world’s population are Christians, 15.0% are Hindus, 16.3% are unaffiliated, 7.1% are Buddhists, 5.9% are folk religionists, 0.2% are Jews, and 0.8% belong to other religions.

The Asia-Pacific region is home to 62% of the world’s Muslims. About 20% of them are living in North Africa and the Middle East, and nearly 16% are in sub-Saharan Africa.


Muslim-majority countries

A Muslim-majority country is one where Islam is widespread. According to the demographic data platform World Population Review, India is a Muslim-majority country. Out of 273,523,615 population in 2020, 87.20% or 229,000,000 people are Muslims. A 2004 study also estimated that Zakat in Indonesia reached IDR 6,132 trillion.

Other Muslim-majority countries are Pakistan with 200,400,000 Muslim population, Bangladesh (153,700,000), Nigeria (99,000,000), Egypt (87,500,000), Iran (82,500,000), Turkey (79,850,000), Algeria (41,240,913), Sudan (39,585,777), and Iraq (38,465,864).

This does not mean, however, that all of these Muslims are rich. This is why there is an income level observed for them to contribute 2.5% of their wealth to Islamic finance. Some Muslims are also living in poverty with widespread job losses. Not to mention that a high proportion of them are self-employed. During these trying times, many Muslims have turned to their faith for inspiration and hope. One Islamic concept they highlight is Sabr, the patience to persist in doing what is right even if it’s hard.

With proper management of Zakat, it can serve as a form of economic value that can reduce the negative impacts of Covid-19 not just on people’s health but on the economy as well.