An Introduction on The Economic and Monetary System in Islam

The Riba-Free Islamic Monetary and Economic System is Base on 3 important pillars:

1. Zakah – The Worship of Purifying One’s Assets and Savings by paying out the Right of God into such assets
2. Miraath or The System of Inheritance which defines the distribution of assets to the deceased’ heirs as revealed in Chap. 4 of the Qur’aan
3. Money & the Monetary System, which is based on using Gold and/or Silver as reference monetary base.

We shall focus here on Zakah.


Zakah is a REQUIRED ritual and act of worship onto each Muslim head of a household. Its purposes are:

1. Mutual caring and support between members of the community rich and poor,
2. Purifying the self, the soul and the assets of each household, and
3. Elevating the spiritual soul of purity and excellence.

Zakah is an import act of ritual and worship in Islam exactly as Shahadah (the witnessing of the ones on God/Allah and the authenticity of all God’s Prophets from Abraham to Ishmael and Isaac to all those who followed them including Prophets Moses (s), Jesus (s) and Muhammad (s.)

Zakah represents the backbone of the Islamic Economic System. In fact, Abu-Bakr, the first Caliph who assumed the running of the State after Prophet, wage a campaign to capture those who did not pay Zakah after the death of Prophet Muhammad (s) and put them on trial.

Zakah may be looked upon as a way to reduce one’s assets when it is paid out but the Prophet Muhammad (s) teaches that your assets NEVER go down because of paying Zakah and the Qur’aan teaches us that it is one of the BEST investments returning 700 times the original investment (see Chap2 (Al-Baqara) Verse 261)

Zakah system and methods are designed to accumulate assets in the Treasury of the Community and reinvest back in the Community. In addition the amount of Zakah that is required to be paid depends on the way the assets of each household are kept. It is designed to encourage the community members to reinvest their savings back in the community (hence paying less Zakah) and not to accumulate it in savings (which requires higher Zakah.) The following is how one calculates how much Zakah One Owes.


1. How much Assets Do you Own – Averaged from Ramadan Last Year to Ramadan This Year?
a. Cash Savings,
c. Cars but NOT your Primary Car,
d. Inventory,
e. Business Value
f. Other

If the value of all these is Equal to or MORE than a minimum (Nisaab) of 3 Ounces of Gold or 22 Ounces of Silver. Then YOU HAVE TO PAY ZAKAH. At a Gold price of $900 per ounce, then the Nisaab is $2,700.

2. Calculation of Zakah: Please NOTE that Zakah is NOT BASED on INCOME like income tax. Also, if your assets are invested according to Islamic Edit (Shari’aa) then you do not pay Zakah on the value of the asset but on the income/profit generated from the asset invested. This is designed to encourage the rich NOT to amass their saving in cash BUT to INVEST BACK in the Community to generate job opportunities, prosperity & growth.

a. Cash in Savings, Checking Accounts and in possession $----- X .025

b. Investments:

i. Dividend Income from Riba-Free Investing $.......X0.10 ii. Net Income from Rental Properties $.......X0.10 iii. Capital Gains from sale of Properties/Stocks $.......X0.10 iv. Portion of Retirement Plan Distribution Representing Profits over the Year $......X0.10
v. Net Income from Land: 1. Irrigated by Rain $.......X0.10 2. Irrigated by Rivers $.......X0.05 3. From Reclaimed Deserts & Lands $.......X0.025
vi. Owned Natural Resources: 1. Oil and Gas $.......X0.20 2. Other Resources $.......X0.20

Total Zakah Due $................

WE STRONGLY RECOMMEND THAT YOU SEND YOUR ZAKAH TO “HELPING GOOD HANDS INTERNATIONAL” a Non-Profit Organization No…….. and is Dedicated to giving Qard Hassan or NO-Interest Loans to those who qualify from the following categories:

1. Needy Newcomers like Doctors, Dentists and Engineers who need immediate cash to obtain necessary licenses and complete examination requirements,
2. Needy Community Members who lost their jobs to help them pay a maximum of 3-months mortgage until they find a job or sell their homes,
3. Distinguished students who want to avoid payment of Interest/Riba.

Who Are Entitled to Receive the Money from THE ZAKAH Fund in the Treasury: (Please see Chap 9 (Surah Taubah – Repentance ) verse 60 of the Qur’an)

1. The Poor: Defined as those who cannot afford to even feed or cloth themselves. The purpose of paying the Zakah is two folds. First is the short-term goal of feeding & clothing them Then, the log-term goal of teaching them a profession that can help them get employed like learning how to drive a taxi and to work as a taxi driver,
2. The Needy: Defined as those who receive income but that income is not sufficient. An example is a low-income taxi driver who does not own a car but leases it through another owner because he, the needy, cannot get credit. So, the needy is given a credit to own a taxi and drive it & eventually grows to own other taxis that would hire the poor in category 1 above and raise his/her status from a poor to status 2 here or a needy.
3. Those who collect, administer and invest it,
4. Those Who Need to Be Brought Closer to the Community to build bridges between them and the community in an effort to create a united, prosperous and peaceful community regardless of faith, color, national origin, political orientation, gender and/or language,
5. The Slaves: in order to free them from their shackles’ and to help them attain freedom and liberty. This applies to many dictatorships that enslaves its people,
6. The Heavily Indebted: Due to unfortunate circumstances that are out of their hands,
7. The way of God/Allah: That can be any charitable effort to please God/Allah like building a school, a place of worship, helping a student, helping a new immigrant..etc
8. The Travelers: These are newcomers and travelers who move to new locations or travel to establish new contacts, relationships, businesses and/or markets. This money can be used to build hostels, hotels, facilities that would make it easier for people to travel, get to know the world and feel at peace doing it. It is interesting to note that each outlet represents 12.5% of the total Zakah collected. If an outlet does need the money then money is redistributed as needed.