Zakat is one of five fundamental concepts in Islam, and all Muslims who meet certain conditions must give zakat to the needy.NSTP/File pic

Pursuing economic development with the theme of ‘shared prosperity’ may be another dimension of social inclusion for which the nation has been noted for in the past, although under different slogans.

‘Economic Growth with Distribution’, a phrase used by the World Bank in the early 1970s, is but one of these.

The essence is about the same although the specific thrusts may differ somewhat to reflect the political-economic emphasis of the time.

Social inclusion means the pursuit of a set of public policies aimed at addressing the poor and low-income folk as well as other groups, marginalised from the mainstream of economic development, for one reason or another.

We do have some experiences in the past of achieving balanced development, meaning we are not at ground zero, so to speak.

We need to have more thorough analyses and consultations of issues of concern like we did in the past.

When we did the planning of the New Economic Policy,thorough analyses of household income distribution and expenditures and employment data as well as data on the productivity of traditional sectors, agriculture in the main, were done, and these included visits and consultations at the farm levels.

That culture and approaches of data-gathering must be continued using most recent data and information to bring relevance and currency to our analyses and policy-making. This appears to be lacking.

Malaysia is rich with data because we have been religiously collecting data which can be used for policy-related research.

The Department of Statistics is commended for its good effort but the challenges remain as to how researchers can avail themselves of this database.

Perhaps we need to explore new approaches of economic development to complement existing techniques towards greater social inclusion.

The Islamic approach has yet to be explored beyond just the emphasis on financing based on the non-interest bearing technique.

If the traditional economic model which has improved from focusing only on the domestic economy (Y=C+I+G) to a model open to external source of growth, namely net trade, (therefore Y=C+I+G+ [X-M]), how then can we incorporate the elements of zakat, sedekah and waqaf into the elements of social development financing?

If these - zakat, sedekah and waqaf - are parts of national savings but not acknowledged thus far, mobilising and harnessing them for consumption and investment financing may push the production frontier further, beyond what the current models can measure.

Because sedekah, zakat and waqaf technically transfer income from the rich to the poor and low-income population, whose marginal propensity to consume or to spend is much higher than the rich, total expenditures will be higher, meaning greater money in circulation, and more income and jobs can be created.

In macreconomic terms, additional growth can be achieved based on higher multiplier effects of consumption by the low-income population as well as greater investments in small business and industries by them.

However, how much more growth in production, income and jobs is generated from this approach of economic development needs rigorous empirical investigation.

Assuming that this line of economic development can be planned and implemented, there may be more advantages a society can derive.

The society may have less economic inequality and there may also be more goodwill between the rich and the poor in the sense that the rich helps the upkeep and improvement of the low-income population.

Of course, such a development planning approach has implications on many fronts.

A deeper appreciation of Islamic economics and development is important because the tenets of Islamic economics are deeply ingrained in the philosophy of the religion.

First, the role of man is just like a caliph of the society; man is a vicegerent on this earth taking care of society and resources which belong to God. Man has therefore a duty of trust or amanah, and social relations and economic relations are based on the need to strengthen brotherhood or ukhuwah, hence the importance of sedekah or philanthropy and charity, and wakaf (donating for endowments for social good).

Such an approach also has a bearing on the fiscal system or the role of financial transactions in the public sector. Surely the role of zakat becomes more pertinent as a source of public sector revenue.

Perhaps the authority’s revenue assignment cannot exceed 2.5 per cent of the total gross domestic product (GDP) of the country, the flat rate of zakat being paid.

The government can, however, earn revenue from sources such as fees, fines, privatisation, and charges for rendered services.

Such a system will promote greater fiscal discipline because the amount of revenue assignment cannot exceed the contributions of zakat to be collected (2.5 per cent of GDP).

There will also be greater social equity and goodwill between the various components of society.

The writer is Adjunct Professor at

International Institute of Public

Policy and Management, Universiti