20th Safar 1444AH
Assalamu alaykum warahmatullahi wabarakaatuh
All praise is due to Allah Whom we praise and seek help, guidance and forgiveness from. We seek refuge with Allah from the evils within ourselves and from the burden of our evil deeds. He, whom Allah guides, will never be misled; and he whom He allows to stray no one can guide him. I bear witness that there is no deity worthy of worship except Allah without partners and that Muhammad is His servant and Messenger.
O Allah! Bestow your salutation and peace upon your confidant and messenger, Muhammad (SAW), his family, his companions and all those who believe in him till the end of time.
O Servants of Allah! Fear Allah as He should be feared and be conscious of Him in private and public. Be dutiful to Him and follow up an evil deed with a good one as this will erase it. Deal with people kindly. Allah says: “Verily, he who fears Allah with obedience to Him (by abstaining from sins and evil deeds and by performing righteous good deeds), and is pati ent, then surely, Allah makes not the reward of the good-doers to be lost” (Q12:90).
O Muslims! Zakah is one of the pillars of Islam which is largely neglected and the effect of this neglect is the cause of the wide disparity in income levels and poverty among the Muslim communities of today. While some Muslims try to fulfill the obligations of Zakah but do it wrongly due to lack of understanding and/or failure of scholars within their environment to guide guidance, other Muslims simply do not see the need for Zakah as long as they give sadaqah regularly. It is important to know that sadaqah is a voluntary alm-giving which is highly encouraged and rewarded but does not equate or replace Zakah which is obligatory and a major pillar of Islam.
We are commanded to give Zakah on our wealth when they reach the Nisab. Nisab is that threshold value (amount) which the wealth must attain for there to be Zakah obligation. Each asset class in our possession has its nisab set for it while a global nisab is also set to the fact that one who reaches it is mandated to give the Zakah. The wealth on which Zakah must be paid are basically seven. These include: gold and silver; cash income; agricultural products; livestock; property and mineral resources.
For the ease of comprehension and convenience, we can group the seven classes into:
a. Financial Assets – All items that constitute monetary assets or derivatives thereof such as Gold, Silver, Current and Savings account cash balances, receivables, Stocks/Shares, Bonds/Debentures, Derivative Assets, etc.,
b. Agricultural Assets – Farm produce,
c. Livestock
d. Investment Properties
e. Mineral Resources
Zakah on Financial Assets
1. Gold & Silver
a. Basic Issues
Notwithstanding the usage of paper money in today’s economic system, gold and silver remain two valuable stores of value (wealth). As it was in the time of Rasulullah (SAW) and now, those who possess them either as ornaments or store of value (to hedge against inflation) are required to pay Zakah on them. Allah says: “Those who hoard up treasures of gold and silver and spend them not in the way of Allah; give them the news of a painful punishment, on the Day when that (wealth) will be heated in the Fire of Hell and with it will be branded their forehead, their sides, and their backs, (and it will be said to them:) ‘This is the treasure which you hoarded for yourselves. Now taste of what you used to hoard'” (Q9:34-35).
Asma bint Yazid (RA) reported: “My aunt and I, while wearing gold bracelets, went to the Prophet (SAW). He asked: ‘Did you pay their Zakat?’ She related that they had not. The Prophet (SAW) said: ‘Do you not fear that Allah will make you wear a bracelet of fire? Pay its Zakah” (Ahmad).
Aisha (RA) also narrated: “The Messenger of Allah came to me and saw me wearing silver rings, whereupon, he asked: ‘What is this, Aisha?’ I replied: ‘I made them to adorn myself for you, O Messenger of Allah.’ He said: ‘Did you pay their Zakah?’ I said: ‘No, or what Allah wishes.’ Then he said: ‘Their punishment in Hell is enough for you.'” (Abu Dawud, Daraqutni, and Baihaqi)
A commonly asked question is whether women need to pay Zakat on their gold and silver jewelry. There is a difference of opinion on this:
1. Some scholars state you need to pay Zakah on all gold and silver (above the Nisab level), including jewelry. However, you don’t have to pay Zakat on other precious metals like platinum, nor on precious stones like diamonds. Moreover, some scholars say that mixed metals are only liable to Zakah if half or more of the metal is gold or silver.
2. Other scholars say if women are only using that jewelry for personal ornamentation, and it is not used as an asset, then you don’t have to pay Zakah on it.
3. If you are buying jewelry for the purpose of accumulating wealth or selling it later, or if you have what would generally be considered an extravagant amount, then that jewelry is no longer mere ornamentation, and you need to pay Zakat on it.
b. Nisab for Gold & Silver
Rasulullah (SAW) said concerning Gold: “No Zakah on you is due until it reaches 20 dinar” (Abu Dawud). He (SAW) also said concerning Silver that: “There is no Zakah on less than five Uqiyah” (Muslim/Bukhari).
The Islamic dinar (currency) is one mithqal, a unit of weight which weighs four and one quarter of a gram according to some scholars. Uqiyah is equal to forty Islamic dirhams. The nisab is 200 dirhams. One dirham is equivalent to 595 grams. The zakatable amount in both the gold and silver is a quarter of a tenth (2.5%) only.
It is also said that the Islamic Dinar is a specific weight of 22 karat gold (91.7% gold purity) equivalent to 4.25 grams while the Islamic Dirham is a specific weight of pure silver equivalent to 2.975 grams. Sayyidina Umar Ibn al-Khattab (RA) established the known standard relationship between them based on their weights: “7 dinars being equivalent to 10 dirhams.” Thus, the nisab, being 20 mithqals will be 85 grams. Other scholars have also provided their opinion in this regard as tabulated and explained below:
Nisab Grams Ounce
Gold 20 mithqal 87.49 3.0861
Gold 20 mithqal 84.70 2.9877
Gold 20 mithqal 96.00 3.3863
In the dinar and dirham initiative, there are presently two groups of scholars who differ primarily on the weight and purity of the gold dinar. The first group is of the view that the dinar should be 4.25 grams and 22 karats. The second group is of the view that the dinar should be a 24-karat coin of between 4.25 – 4.6 grams. The first Group argues that a 24k coin does not have the durability that a 22k coin (91.67% gold plus silver and copper) has and 24k coins did not existed at the time of the Prophet (SAW). The second Group contended that coins produced at that time were found to contain 97% gold, which shows intent that they tried to produce a pure gold coin. With the weight of 7 dinars having to equal the weight of 10 dirhams, the first Group has its dirhams weighing 3 grams and the second Group has their dirhams weighing around 3.1 grams (both 24k or 99%).
The value of gold content in jewelry depends on the gold’s purity, as well as its weight. Gold purity is measured on a scale of 1 to 24 karats (kts).
Karat % Gold Description
24 100% pure gold, very soft and very easily bent, too soft for jewelry, therefore the gold is alloyed with silver, copper, nickel or zinc.
22 91.7% still too soft for most jewelry
18 75.0% for fine jewelry, the best for beauty and durability
14 58.3% OK for jewelry but the gold is of a duller color
12 50.0% not OK for most western jewelry
10 41.7% legal limit for ‘real’ gold in USA
Zakat on the gold will be according to the gold content in the jewelry (i.e., karats) and its value in the international market. Hence when calculating the value of your gold, you must consult a jeweler for the correct value (depending on the content and weight). Similarly, any stone in the gold are not Zakat-able when intended for personal use.
Scholars are agreed that that whatever contains more than 50% gold will be treated all like gold and Zakat will be paid on its value. Therefore, anything more than 12 karats will be Zakat-able to its value.
Gold and silver are considered as one category for the purposes of zakat. For example, if someone has one hundred dirhams and ten dinars, they should pay one-fortieth (i.e. 2.5%) of each. “It is related that Bukayr ibn ‘Abdullah ibn al-Ashajj that the sunnah is that the Prophet (SAW) joined gold to silver and silver to gold and took zakat from them. This is done where the individual asset may not have qualified for the nisab required for zakah but jointly, they would.
The argument also exists as to which of the two metals (Silver or Gold) should be used to determine the general Nisab for holders of non-gold/non-silver financial assets. Two groups emerged in this regard:
The first group claims Silver, not gold, had a larger circulation and as such silver should be the standard for the paper currencies of today. Silver should be used as a standard to assess Zakah annually, not paper currency, even if the currency is hard currency like the US dollar, Euro or Pound Sterling. Because these currencies are backed by political decisions that may not have anything to do with the economy, the value and strength of this paper money depends largely on the usury system of interest rates. The nisab calculated with the silver standard is significantly lower than its gold counterpart because the value of silver has plummeted since the time of the Prophet (SAW). Many scholars say that it is better to use the silver nisab since it will increase the amount of charity distributable.
The second group claims that the gold nisab is closer to the nisab in use at the time of the blessed Prophet (SAW) and have therefore emphasized the use of Gold as the standard for measuring the nisab. Incidentally, this is the view preferred by the Islamic Authority in most countries including Nigeria.
Regardless of these views, if your assets consist entirely of gold or silver you must use the gold or silver nisab as prescribed by Rasulullah (SAW).
Aside the weight and purity levels of the metals as earlier highlighted, there also is the issue of expressing the value of gold and silver in terms of contemporary currencies. The value is obtained by first obtaining the international market price on the day in question and multiply by the weight (in Ounce – as prices are stated per ounce). Because the prices are in hard currencies, we need to also convert the stated foreign currency amount to the local currency.
Using the spot price of Gold as at the close of trade on 07/09/2022 and the Naira/USD exchange rates, our earlier table above will give us the possible Gold Nisab values as tabulated below:
Nisab Grams Ounce Price Value NISAB FOR NIGERIA ?
Gold USD USD Official Rate @ N428.10/$1 Black Market Rate @ N697/$1
Gold 20 mithqal 87.49 3.0861 1,716.83 5,298.31 2,268,206 3,692,922
Gold 20 mithqal 84.70 2.9877 1,716.83 5,129.37 2,195,883 3,575,170
Gold 20 mithqal 96.00 3.3863 1,716.83 5,813.70 2,488,845 4,052,149
The nisab for silver is 595 grams (though the Hanafi scholars consider it to be 625.00 grams), the Nisab will be between N99,811.25 and N154,687.50. You can make your decision based on this band.
Nisab Grams Ounce Price/oz Value NISAB FOR NIGERIA ?
Silver gm Oz USD USD Official Rate @ N428.10 Black Market Rate @ N697
Silver 5 Uqiya 595 20.99 18.86 395.87 169,472 275,921
Silver 5 Uqiya 625 22.05 18.86 415.86 178,030 289,854
The above figures are subject to change due to changes in the commodities and foreign exchange markets and the decision as to which of the values to use becomes a challenge for the scholars to resolve. There are a number of organisations that advise the Nisab rate applicable to guide the Ummah. Some are quite active and advise the rate on weekly and monthly basis while others advise once a year either in Ramadan or Muharram.
The National Moonsighting Committee Nigeria normally advise the Nisab for each Hijrah Year in Ramadan and their last advised Nisab as at 21st Ramadan 1443AH /22nd April 2022 is N2,212,560 based on the Gold standard. This figure changed to N2,116,160 @ June 3, 2022/ Dhul Qa’adah. The most current rate is the one advised by Prayer Time and Research Committee of N2,020,480 as at Safar 9th, 1444 (9th Sept. 2022).
O servants of Allah! Know that the zakat year begins on the date on which you were first in possessions of wealth above the nisab. This will be your commencement date and the count of one year will be referenced to this date which should ideally be a Hijrah calendar date (if you can ascertain it). Whenever the date comes around you check your assets and evaluate to zakatability.
It is also important to know (and this applies to all classes of asset eligible for Zakah) that only the balanced value of these assets at the end of the year is the subject matter of Zakah. No Zakah is obligatory on the amount spent over the whole year. It means that possession of nisab value should be both at the beginning and end of a lunar year. It is not necessary that a complete year passes on every single Naira/Gram of Gold/Silver. Rather, when a person is possessor of the qualifying amount of Nisab in the beginning and the end of the year, then he will be considered as sahib-un-nisab and the fluctuating amount during the year will not be considered as the subject matter of Zakah.
As an example: If someone acquires a property before the completion of his Zakah year and he is the owner of the wealth above the value of nisab, then one of the following situations may arise:
a) The addition during the year is not the same kind or category as the existing property. For example, a person has gold or silver and thereafter during the course of the year acquires sheep. In this instance, the year for the gold or silver and sheep will be calculated separately as the sheep will run its course from the date of acquisition subject to its own Nisab (which is difference from that of Gold and Silver).
b) The addition is of the same kind or category as that of the existing property. This addition may be derived from the existing property, for example, profit arising during the year from sale of trading stock; or acquired from another source, for example, a person has cash and thereafter during the year acquires further cash by way of inheritance. In this case, the subsequent acquisition will be added or joined to the existing property for Zakah purposes and the Zakah for both will be paid together at the end of the Zakah year for the existing property. In other words, Zakah years will not be calculated separately for each subsequent acquisition.
It should be kept in mind that if the subsequent acquisition is made after the expiry of the Zakah year, then a new year will be calculated. Similarly, if the existing property is below nisab, the subsequent acquisition cannot be added to the existing property.
Zakah on Cash Holdings
The amount of cash held, whether in a bank or personally on hand, at the end of the relevant Zakah year will always be subject to Zakah. Zakah on cash also includes bonds, travelers’ cheque, and other cash equivalents. Moneys lent and advanced are, for Zakat purposes, treated as cash and Zakat must be paid on such loans each year. Several views are available on the treatment of moneys lent. This will be discussed in detail later.
The Nisab for cash is equivalent to the value of gold or silver. You are equally allowed to use the gold or silver nisab but the Scholars in Nigeria have opted for the Gold standard. However, if your assets consist entirely of gold, you must use the gold nisab, and similarly, if they consist entirely of silver then the silver nisab must be used.
If a person has some amount of cash, some gold, and some silver and neither of the three individually reaches nisaab, then the value of gold and silver will be added to the amount of cash, and if the combined amount reaches nisab, Zakah is obligatory. If the combined amount does not reach nisab, no Zakah is to be paid.
If a person has cash equivalent to nisab. He got some more cash a few days before completion of year. This additional amount of cash will be subject to Zakah after completion of the year of previous amount of cash.
O servants of Allah! This is time to re-assess ourselves and change our selfish ways so that Allah can shower His Kindness and forgiveness upon us. Let us pay our Zakah and extend hands of generosity to all and sundry to reduce the poverty and hardship in the land. Remember that Allah had cautioned us about: “The mutual rivalry (for piling up of worldly things) diverts you, until you visit the graves (when you are buried upon your death). Nay! You shall come to know! Again nay! You shall come to know! Nay! If you knew with certainty of knowledge (the end result of piling up, you would not have occupied yourselves in worldly things). Verily, you shall see the blazing Fire (Hell). And again, you shall see it with certainty of sight!” (Q102:1-7).
PART 2
All Praises are due to Allah who sent His Messenger with Guidance and the Religion of Truth to prevail above all other ways despite the protests and rejection by the unbelievers. O Allah! Bestow your salutation upon your confidant and messenger, Muhammad (SAW), his family and all his companions.
Shares, stocks, securities, bonds, debentures, certificates of deposits, investments, etc.
Shares and stocks of joint stock companies and securities, bonds, debentures, certificates etc. issued by the governments, local authorities, corporations, companies or other institutions, form lucrative assets these days and attract large amounts of investments. According to some of the modern jurists, these assets should not be charged to Zakah and only their profit and dividend should be charged to Zakah. However, the predominant opinion of the majority is that such assets should be charged to Zakah, though the Zakah should be collected at the time of payment of profits on these assets.
It is not permissible to purchase interest based financial instruments such as bonds and investment certificates. However, if one has these in his ownership, Zakah should be paid on the amount of money paid (i.e., the principal sum) in purchasing these assets. Zakah for all financial instruments other than company shares is calculated on this basis.
Insurance policies and provident funds
In case the contributions to insurance policies and provident funds are compulsory, Zakah would be paid only when their amounts are received by the holder. But in case of voluntary contributions to such policies and funds, in the opinion of some scholars, it will be treated as Savings and Zakah on the accumulated deposit in these policies or funds should be levied on year to year basis at 2.5% if it reaches Nisab on its own or when combined with other assets.
DEBTS RECEIVABLE:
Debts which are receivable by the Zakah payer i.e., which are due to him from others, are treated on the strength of claim they contain. In this respect, debts receivable have been categorized by the Islamic jurists into three classes, namely, strong debts, medium debts and weak debts.
1. No Zakah on money owed until it is received. If the debt has been outstanding for a number of years you only pay one year’s Zakah on it after it is repaid. This pertains to loan and unpaid (credit) sales. It does not matter how many years pass: the Zakah of its owner is due one year after it is received if it is up to the Nisab or is added to money he has and it reaches the Nisab.
2. Claims which are inherited: If the debt owing to you on the goods has been inherited by you, you wait for one year after receiving payment before paying the Zakah due. If there is an inheritance which was not received for some years, or the goods which were sold are from inheritance, i.e. he inherited goods and sells them but does not receive that price for some years, or the debt is from a gift or sadaqa in the possession of the giver or a bride price in the hand of the husband or khul’ which he pays, or the fine of a tort in the hand of the perpetrator or his guardian, there is no Zakah on it except after a year from when he takes it, even if he delays it out of avoidance.
Debts classified according to their strength are treated upon the guidance above. Strong debts in which there is certainty of collected may be included in the Zakah asset, according to some scholars, and not to the others.
O servants of Allah! The issue of Zakah to some of us is taken very lightly when it is known and explained that it is a pillar, a strong one at that, which competes favourably with Salat. This state of affair is very dangerous. The discussions around this topic are to awaken us all to the dangers that we play with when we do not take the issue of Zakah serious.
Abu Hurayrah (RA)) reported Allah’s Messenger (SAW) said, “Whoever is made wealthy by Allah and does not pay the Zakat of his wealth, then on the Day of Resurrection his wealth will be made like a bald-headed poisonous male snake with two black spots over the eyes. The snake will encircle his neck and bite his cheeks and say, ‘I am your wealth, I am your treasure.’ “Then the Prophet recited the verses: — ‘Let not those who withhold…’ (to the end of the verse). (Q3:180). (Saḥīḥ al-Bukhari).
O servants of Allah! Can we withstand the threat of Allah who said: The verse which the Prophet recited was: “And let not those who covetously withhold of that which Allah has bestowed on them of His Bounty (wealth) think that it is good for them. Nay, it will be worse for them. The things which they covetously withheld shall be tied to their necks like a collar on the Day of Resurrection. And to Allah belongs the heritage of the heavens and the earth, and Allah is Well-Acquainted with all that you do” (Q3:180).
O servants of Allah! “Verily, Allah commands justice, and the doing of good and giving (help) to the kith and kin and He forbids evil deeds, polytheism and oppression. He admonishes you that you may take heed” (Q16:90). The fulfillment of the obligation of zakah is part of doing good.
O Allah, grant us what we desire among what You wish; and make our choice be among Your own choices; and do not direct our plight to anyone except you.
Our Lord, the Creator of the universe, disassociate us from every wrong doer, and reward everyone that is good to us and bless them abundantly for us. O Allah, cast trouble, hunger and blame away from us and guard us against calamities that no one except You can forestall. Our Lord, give us good in this world and good in the hereafter and save us from the torment of fire. Aaaamiiiin Ya Rabbil Aaaaalameen.
Aquulu qawliy hadha wastagfirullah liy walakum innahu huwal ghafurun Raheem.
Suleiman Zubair
