Zakat Explained
Zakat is one of the five main pillars of Islam and involves the charitable donation of 2.5% of a muslim’s uninveseted liquid assets. Zakat was used historically to create a societal safety net as the proceeds from Zakat are used by people who are in need of financial assistance. Many less fortunate muslims around the world rely on Zakat in order to meet their basic needs.
Each year $0.2-1 trillion is spent by Muslims on Zakat globally. This is roughly equal to the entire size of US charitable donations, making it a significant industry. However, the Zakat industry in the US is facing challenges today both on the donation and distribution side. This an area Fardows has spent significant time in and is working with mosques, Islamic charities and muslim communities to solve.
Muslims in the US are looking to donate their yearly Zakat but face difficulty calculating how much they are supposed to allocate to such donations. This is mainly caused by a lack of proper Islamic based financial advisory services. The few Islamic financial advisory services available in the US are too expensive for the average muslim consumer to use, resulting in a lower zakat collection. A similar problem exists on the distribution side whereby muslims in need of Zakat donations are not aware that they can benefit from local zakat based charities. This causes US based zakat money to not benefit the local US muslim community as much as it could be. It is made even worse considering most muslims in the US do not have access to halal loans or halal bank accounts.
Fardows’ financial platform is launching a smart Zakat advisor that will provide advice on how much money users need to donate for Zakat every year. Users will be able to input their various financial assets and get a quick answer with detailed explanations on the amount they should donate. Fardows is also partnering with several well reputed US based Zakat charities that are helping the local Muslim community. This will allow Fardows’ users to be able to easily contribute their Zakat each year in an efficient manner to the people who need it most. Fardow’s halal Zakat advisor will be offered free of charge to all of Fardows’ members! Fardows is similarly, working on expanding muslim access to halal loans and halal bank accounts through the Fardows app.
Some features of Fardows Zakat offering include the pooling charity feature and the impact demonstration. Fardows’ pooling charity feature will allow muslims to not have to worry about both high transfer fees and charity selection difficulty. The pooling feature will essentially group many Islamic compliant charities together and distribute the money a person donates to these charities proportionally. This feature will remove the burden of time of selecting/screening the charities and reduce transaction fees. This will also benefit charities as it will be less expensive to receive funds. This ETF-like charity solution will also be customizable by geography or cause e.g. charities for orphans or charities for a specific country. The impact demonstration feature, will allow charities to more easily share with the zakat donors what their money was used for because the quantity of funds they receive will be larger and hence more easily traceable.
If you have any questions about Zakat or about Fardows’ halal checking accounts and halal loans feel free to contact us!
