Bangladesh is at a pivotal point in its development journey. The country has shown amazing strength and economic growth over the past fifty years. It has maintained its gross domestic product (GDP) growth, improved social indicators, and expanded its industrial base. But policymakers still have a lot of work to do, given chronic poverty, growing inequality, youth unemployment, and the economy’s vulnerability to shocks. In this situation, Zakat is a potent yet underused tool for social financing that needs to be addressed right away.
Zakat is not just a way to help others. It is a divinely designed system of wealth redistribution with deep ethical, spiritual, and socio-economic roots. When properly established, Zakat can serve as a systematic financial adjunct to state welfare initiatives, leveraging domestic resources to alleviate poverty, promote financial inclusion, and advance human development. Zakat has significant potential to help Bangladesh flourish, given that it is a Muslim-majority country. However, to make the most of that potential, the government needs to change how it runs, how institutions work together, and how policies work together.
Basic Ideas of Zakat: One of the five pillars of Islam is Zakat, which requires eligible Muslims to give a set amount of their wealth each year to designated recipients. Zakat is not a voluntary form of philanthropy; it is a mandatory social tax that aims to prevent excessive wealth from accumulating and to ensure that the most disadvantaged members of society are treated with respect.
Its goals are naturally progressive. Zakat wants to: (i) spread wealth among different income groups; (ii) keep the impoverished from becoming homeless; (ii) encourage social unity; (iv) clean up wealth by being morally responsible; and (v) move unused resources to people who need them more to get the economy going again.
So, Zakat readily fits with current development goals, including reducing inequality, protecting the social safety net, and promoting growth that includes everyone.
Bangladesh’s Socio-Economic Landscape & Zakat: Bangladesh has made great strides in reducing poverty, but almost one-fifth of the population still lives below the national poverty line. A significantly bigger group is nonetheless economically susceptible and could fall back into poverty because of health problems, losing a job, or disasters caused by climate change.
There are still a number of structural problems: (i) informal jobs make up most of the job market; (ii) poor people still have trouble accessing official financial services; (iii) the gap between urban and rural incomes is widening; (iv) financial problems are affecting social safety-net programs; and (v) the number of young people out of work is going up because of demographic pressures.
These problems can’t be solved in the long term by public welfare programs alone. Bangladesh must consequently organize domestic, faith-based social financing systems that complement official initiatives. Zakat is exactly that kind of way.
How Much Zakat Could Bangladesh Get: If properly analysed and mobilized, Bangladesh’s annual Zakat potential might reach billions of dollars, according to estimates done in 2023. The potential Zakat base is very high because over 90 per cent of the population is Muslim, the middle class is developing, and more people own assets.
But most Zakat money is still flowing through informal channels, such as contributions to family, friends, or local religious leaders. Even while these kinds of fragmented distribution are well-meaning, they don’t have a significant strategic impact, lead to redundancy, and hinder large-scale poverty programs.
If even a little amount of this Zakat were put together by trustworthy groups, it could pay for: (i) big programs to help people make a living; (ii) growth of small businesses; (iii) programs to teach people new skills; (iv) help with health and education; and (v) housing for those who are very poor.
In reality, Zakat might become a domestic development fund grounded in faith and confidence in society.
Institutional Landscape: Currently, the management of Aakat in Bangladesh works in a number of ways: (i) Zakat Boards run by the government; (ii) nonprofits and organisations that are Islamic; (iii) community collections at mosques; and (iv) unofficial familial networks.
Even if each is important, coordination remains weak. Institutional fragmentation causes: (i) lists of beneficiaries that overlap; (ii) distribution is not even across regions; (iii) little monitoring and evaluation of effects; and (iv) inefficiencies in administration.
A contemporary Zakat system needs to be run by professionals, use data to target the right people, and have platforms that work together to make sure everything is clear and works well.
Deficit of Trust, Governance, and Accountability:
One of the main reasons why institutions don’t collect Zakat very often is that people don’t trust them. Because they are afraid, many contributors choose to give directly. The apprehensions include: not using money properly; bureaucratic wastefulness; interference from politics; and not being clear about how beneficiaries are chosen.
Strong governance reforms are the only way to close this trust gap. These include: (i) boards of independent oversight; (ii) audits by third parties; (iii) keeping track of money digitally; (iv) making impact reports public; (v) standards for professional management.
Technology can make a big difference. Digital payment platforms and mobile financial services can make it easier to track money, stop leaks, and make donors feel more confident.
Financial Inclusion and Poverty Alleviation:
Traditionally, Zakat has been given to people who need it right now. While this remains very important for the very poor, some of the Zakat money can be used in useful ways to help people earn money.
Programs funded by Zakat can help: (i) capital for small businesses without interest; (ii) inputs for small farmers in agriculture; (iii) training for young people in a trade; (iv) businesses run from home by women; and (v) tools for starting a business for informal workers
These kinds of programs turn zakat from short-term help into long-term empowerment, helping people move from dependence on others to self-sufficiency.
Zakat in National Development Policy: Zakat shouldn’t operate in isolation, separate from national planning. Instead, it should complement Bangladesh’s development strategies, including: (i) initiatives for the poverty reduction strategy; (ii) financial inclusion roadmaps; (iii) policies for the growth of small and medium-sized businesses; (iv) programs for rural development; and (v) frameworks for social protection.
Strategic alignment ensures that programs funded by Zakat complement the state’s work rather than merely copying it. This connectivity also makes it possible for blended finance models, in which public funding and Zakat resources work together to support big social projects.
Plan for Policy Changes: Bangladesh requires a broad reform program to make the most of Zakat: National Zakat Database.
Create a centralised digital system to identify eligible beneficiaries and prevent duplication. Institutional Capacity Building. Teach Zakat managers how to handle money, run a business, and evaluate the effects of their work. Updating the rules. Introduce clear legal frameworks to standardise Zakat collection and distribution. Platforms on the Internet. Leverage mobile banking and fintech solutions for efficient Zakat payments and tracking. Public Awareness Campaigns. Educate citizens about the developmental impact of institutional Zakat. Impact Measurement. Develop performance metrics to evaluate poverty reduction outcomes.
Political Economy and Implementation Challenges: Reforming Zakat institutions is not merely a technical task; it is deeply political. Resistance may arise from: groups benefiting from informal systems, administrative inertia, lack of coordination among ministries, and concerns about centralisation of religious funds. Successful reform, therefore, requires inclusive stakeholder consultation, gradual implementation, and respect for community practices.
Reviving Ushr for Rural Development:
Alongside Zakat, another traditional Islamic fiscal instrument deserves attention: Ushr, a levy on agricultural output. Ushr offers three natural advantages as it links social finance directly to agricultural productivity. It also provides rural safety nets without complex taxation systems and strengthens community-based redistribution mechanisms.
Properly administered, Ushr could support irrigation, rural infrastructure, and smallholder resilience, particularly in climate-vulnerable regions.
From Faith-Based Charity to Development Finance: Bangladesh has demonstrated innovation in microfinance and social entrepreneurship. The next frontier lies in integrating Islamic social finance into national development architecture. Zakat is not merely a religious obligation; it is a moral-economic system that can reduce inequality, expand financial inclusion, empower marginalised populations, strengthen social cohesion, and support sustainable development goals.
The choice before Bangladesh is clear: continue treating Zakat as fragmented charity, or transform it into an organised engine of inclusive development.
The path forward requires vision, institutional reform, and collective commitment. If managed professionally and transparently, Zakat can become one of the most powerful domestic resources for building a just and resilient Bangladesh.
Dr M Kabir Hassan is a Distinguished Professor of Finance at LSU-New Orleans (formerly University of New Orleans), USA.
mhassan@uno.edu; KabirHassan63@gmail.com
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