Analysing the AAOIFI Sharīʿah standard on zakat
| Pages | 444-458 |
| Date | 18 January 2021 |
| DOI | https://doi.org/10.1108/JMLC-10-2020-0117 |
| Published date | 18 January 2021 |
| Subject Matter | Accounting & finance,Financial risk/company failure,Financial compliance/regulation,Financial crime |
| Author | Khurram Parvez Raja |
Analysing the AAOIFI Sharīʿah
standard on zakat
Khurram Parvez Raja
Zayed University, Dubai, United Arab Emirates
Abstract
Purpose –The Sharīʿah Standard No. (35) issued by the Accounting and Auditing Organization for
Islamic Financial Institutions (AAOIFI) aims to identify the zak
at base for institutions (including
Islamic insurance companies) as well as the subsidiary and the mother company of the instituti on( the
company). By zak
at base, the standard means the items of financial statements that should or should
not be included in the calculation of the zak
at base, and the liabilities or allocations that should or
should not be deducted from zakatable assets. The standard also covers payable zak
at rates,
disbursement of zak
at funds on the eight categories of zak
at recipients and the rulings pertaining to
disbursement. The focus then is on companies or corporations. There is no indication in the aims as to
who owns the wealth of the corporation, that is, whether it is the company itself or it is the
shareholders and whether it is treated as a joint wealth of the shareholders or of a single individual in
the form of the company. The author will rely on this issue as one factor on the basis of which the
standard is to be judged.
Design/methodology/approach –Quran and hadith.Works of earlier jurists.
Findings –In this study, the author has summarized the provisions of zak
at according to the
traditional law, but only those that are relevant for the financial institutions and thestandard issued
by the AAOIFI. After that, the author mentioned the major points that have been addressed by the
standard. In the last section, the author has shown that the rulings of the Islamic Fiqh Academy and
the AAOIFI on zak
at are totally confusing and merely a reproduction of the rulings of traditional law.
The main reason for this confusion is that the nature and entity of a corporation have not been
addressed and have been treated like a partnership, thus, jumbling up the entire issue of zak
at through
banks.
Originality/value –The main purpose in undertaking this original work is to examine the AAOIFI
Sharīʿah Standardsfrom the perspective of traditional Islamiclaw, that is, the law of the senior schools as laid
down in theirauthentic manuals. If there is an extensive deviationfrom this law, then this must be pointed out
in the hope that it will be corrected by the concerned institutionand the banks that adopt these standards.
Neglecting sucha corrective action for long will result in damage notonly to these institutions in the long run
but also to the law of Islam that has been so carefullycrafted over centuries. The purpose is to show how far
this standard deviatesfrom traditional Islamic law and claims to be called the authenticview on a particular
subject. Nevertheless,it is not the purpose of this work to explain and elaborate on the meaning and utility of
these standards.
Keywords Zak
at, Corporation, Sharīʿah standard, Traditional Islamic law, Zak
at base calculation
Paper type Research paper
1. Overview of zak
at as background to the standard on zak
at
1.1 General meaning and significance of zak
at for the Islamic system
The word zak
at means to grow, increase, improve, to become better and to be
cleansed. In Lis
an al Arab,itissaid,“The root of the word zak
at means cleanliness,
growth, blessing, and praise, and it is used in all these meanings in the Qur’an and
Zayed University.
JMLC
24,2
444
Journalof Money Laundering
Control
Vol.24 No. 2, 2021
pp. 444-458
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-10-2020-0117
The current issue and full text archive of this journal is available on Emerald Insight at:
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