Zakat as a Market Regulator and Its Role in Economic Development

Economic development persists as a global objective despite numerous hurdles. Attaining it requires implementing comprehensive strategies that involve collaboration between national and international organisations, as well as drawing on both orthodox and heterodox economic theories and schools of thought that can help to serve this purpose. This study posits that zakat, an essential form of devotion in Islam denoting the mandatory financial assistance affluent Muslims offer to the impoverished, can substantially enhance economic progress. In doing so, it examines the institution of zakat, not through the lens of its beneficiaries but rather through the lens of those who fall within the scope of the obligation to pay it. Such a perspective presents a contrast from previous scholarly examination of the relationship between zakat and economic development. The main objective of this study is to demonstrate that zakat functions primarily as an economic policy aimed at decreasing investment preferences and savings that are detrimental to social welfare and economic growth, in addition to serving the secondary function of acting as a redistributive tool. In this regard, the study contends that zakat can inspire contemporary economists and politicians to formulate innovative economic policies and tax models aimed at fostering economic development.