Quora Answer: What Effect Does Zakat Have on Social Welfare?

بِسۡمِ ٱللهِ ٱلرَّحۡمَـٰنِ ٱلرَّحِيمِ

The following is my answer to a Quora question: “What effect does zakat have on social welfare of the community?” 

There are two types of zakat: zakat al-mal and zakat al-fithr.  Zakat al-mal is the charity tax on unused wealth.  It is incumbent upon the wealthy.  Zakat al-fithr is the obligation of every Muslim to ensure that the poor and destitute have something to eat on ‘Iyd al-Fithr.  Zakat al-mal is what you are referring to in this question. 

When a portion of funds sitting in banks and other instruments are given back to the community, it causes a portion of that locked up wealth to go back into the community and circulate.  This goes a small way towards giving the poor a stake in the economy, and society.  It raises, just a tiny bit, their purchasing power. 

Any society where there is institutionalised poverty, and no mechanism for people to move up socioeconomic classes, creates massive disenfranchisement and disengagement of that part of the population.  If enough of society falls into that category, it threatens the integrity of the state.  We cannot have some people starving, and others consuming to excess.  That is the sin on society.  While zakat al-mal is not the total answer, it does create awareness of the poor and the needy.  It is a subtle means towards building a compassionate society, since the better off are forced to engage with those who are less fortunate through the direct transfer of some of their wealth.