A significant distinction between mainstream and Islamic wealth management is the latter’s planning for zakat, an obligatory charity on the faithful with wealth in excess of needs above a specific threshold. This chapter reviews the concept of zakat, its levying structure, its rules and objectives and the economic impact of its distribution. Furthermore, we consider in brief the evolution of this institutions with its clearly defined principles. There are also challenges: there is no consensus on levying zakat on businesses since individuals could hoard wealth in firms (as do non-dividend paying firms) and most ministries consider it an obligation on individual shareholders, apart from the business. Challenges also exist in the effective distribution to eligible recipients. Without efficient disbursement, the responsibility may continue to burden the zakat-payer as a compulsory duty. Unless the challenges are overcome, the wealth effects of zakat may not achieve the desired objective of poverty-reduction and socio-economic empowerment.
Ziyaad Mahomed, Mohamed Ariff and Shamsher Mohamad
Debt issuances traditionally attracts a negative sentiment, so the corporation’s shares decline in prices around the time of the issuances. Sukuk being another form of debt, none the less, structured differently from a conventional bond, should have some effect on the shares when sukuk are issued and traded. We explore this aspect in the chapter only to find that the market appears to generally favour sukuk issues as good news, so the share prices go up. However, during the Global Financial Crisis era, sukuk issuances attracted negative sentiments.