The Role of Zakat in Supporting Monetary and Financial Stability

Abstract

Objectives: The study aimed to demonstrate the role of zakat in supporting financial and monetary stability, stimulating economic activity in order to achieve economic growth, and improving individuals’ living standards by increasing their share of the gross national product.

Methods: The study was conducted by tracing and analyzing the role of zakat in combating poverty and unemployment, addressing inflation, and correcting monetary and financial instability in the economy. It also examined the extent to which zakat contributes to stimulating economic activity, its monetary role in controlling the volume of money supply in the economy, and its fiscal role in increasing the level of gross domestic product by controlling effective aggregate demand.

Results: The study found that the zakat mechanism can be used as a tool within both fiscal and monetary policies to achieve monetary and financial stability and to increase economic growth and national income without negative side effects. This could help the economy address economic disturbances such as stagflation and eliminate the conflict of objectives that occurs within capitalist economic systems.

Conclusions: The study concluded that zakat plays an effective role in maintaining monetary stability and achieving economic growth. It recommended developing an effective mechanism to adapt conventional economic systems to the implementation of zakat, in order to overcome persistent economic instability and to replace interest rates, which are considered inhibitors of economic growth and a major driver of ongoing economic fluctuations, with zakat.