Halal Money Matters

Episode 18: Zakat al-Fitr

Halal Money Matters welcomes Mustafa Umar, President of California Islamic University, for a conversation about the intentions and obligations of Zakat al-Fitr during Ramadan.

Expand transcript ▼     More about Investing & Zakat »

Halal Money Matters Podcast

Episode 18 – Zakat al-Fitr

[music intro]

CHRISTOPHER PATTON: Welcome to Halal Money Matters presented by Saturna Capital. I’m Christopher Patton. 

MONEM SALAM: I’m Monem Salam.

CHRISTOPHER PATTON: Ramadan Mubarak, Monem.

MONEM SALAM: Ramadan Kareem. It’s a really exciting month for us to be in.

CHRISTOPHER PATTON: We wanted to talk about a very specific financial part of the Ramadan experience for this episode. 

MONEM SALAM: We did. You know, there is an obligation for Muslims to pay what is called Zakat al-Fitr at the end of the month of Ramadan. And so, it’s not a topic that, you know, a lot of people get educated on: why it’s there, what the obligations are, and those types of things. We have a special guest today to help us kind of navigate through that. 

CHRISTOPHER PATTON: Our guest today is Mustafa Umar. He’s got a degree in Theology & Islamic Law, a master’s in Islamic Studies, and currently the President of the California Islamic University.

MONEM SALAM: Let’s get started!

[music interlude]

MONEM SALAM: So, you know, we really wanted to do a show on Zakat al-Fitr. It is, you know, an obligation coming at the end of Ramadan. So, can you give us a little bit of a background about Zakat al-Fitr and kind those kind of things?

MUSTAFA UMAR: Sure, yeah, so Zakat al-Fitr... sometimes it’s just called Fitr or Sadaqa al-Fitr. It’s basically this charity that the Prophet Muhammad—peace be upon him—he mandated that all Muslims that can afford this, they need to give it before the day of Eid or on the morning of the Eid celebration. And really, what Fitr means, the word fitr itself, it means the breaking of the fast. So, when you break your fast it’s called iftar, and fitr means... Eid, the day of Eid is called Eid al-Fitr because you’re not going to be fasting that day anymore, after fasting for an entire month. So, this, Zakat al-Fitr, is directly connected with the fasting being completed and the fasting is over. So, when the fasting is over, what happens is you have this day of celebration called Eid. And the day of Eid, people are supposed to celebrate. It’s a day to have fun. It’s a day to enjoy. It’s a day where people are supposed to wear their finest clothes. They’re supposed to go enjoy and have, like, good food. It’s a festival. It’s a day of festivity and celebration. But what happens is there are a lot of people who are poor, and they can’t even get enough, you know, wealth, that they need to celebrate the day. You know, let alone... we’re not talking about other levels of poverty or what they’re struggling with. On the day of Eid, they would have to either work or they would have to try to find some provision for their food or something like that. So, what Zakat al-Fitr really is... it gives people who didn’t have the opportunity to celebrate and party on the day of Eid, it gives them enough money so that they can actually go and have that party day and that festival day, and they don’t have to worry about what they need—particularly—for that specific day of Eid. That’s really what it’s about.

CHRISTOPHER PATTON: So, it’s both very specific and time sensitive, then.

MUSTAFA UMAR: Yes, yes it is. It’s specific, it has a specific purpose. People... you know, if you just give general charity, right? General charity is people will need money for paying their bills, buying food. This is specific to helping people celebrate on the day of Eid. Now, it could be a little bit more. It could probably last them a few extra days or something afterwards. But it’s really about giving them this opportunity to enjoy Eid like everyone else. And like you said, it’s time-specific. It is supposed to be reaching them on the day of Eid so that they can benefit on the day of Eid.

MONEM SALAM: We talked about the Fitr. What about the Zakat? Why is it called Zakat al-Fitr?

MUSTAFA UMAR: Yeah, the reason why it’s called Zakat is Zakat is like a charity tax that people who have wealth, they have to pay. They’re obligated to pay. And what this does is it basically redistributes wealth from those to have to the people who don’t have. Right? So, this is a very important wealth redistribution mechanism that exists. And there are two types of Zakat. The normal Zakat is the one you pay once a year, you now, approximately 2.5% of your wealth you’re giving to people who are in a needy category. Here, this is specifically tied to the day of Eid. It’s called Zakat because it’s an obligation. It’s called Zakat because it’s somewhat similar to the other Zakat where you have to meet a certain threshold to have to pay this. Otherwise, you’re going to be receiving this instead. One hadith, it talks about the Prophet, peace be upon him, he said that whoever has—and I’m summarizing this—whoever has this amount of wealth is supposed to be giving a saa, which is kind of like a measure. It’s like four double handfuls of foodstuff like dates or barley or raisins or something like that to people who need it. So, that’s one hadith. There’s another hadith of the Prophet, peace be upon him, that said when you give this charity, it basically compensates for all of your deficiencies that you had when you were fasting in Ramadan. So, if you were slandering, you were gossiping, you were doing stuff that you shouldn’t have done, this actually helps compensate for the mistakes that you made when you were fasting. So, from the giver’s perspective, not only are they helping somebody who is in need to be able to celebrate the day of Eid, but they’re actually compensating and making up for their own mistakes or slips that they had in the month of Ramadan.

MONEM SALAM: Yeah, so if you take Zakat from a perspective of purification, then you’re purifying your Ramadan for any mistakes that you could have done. That’s really beautiful. How do you calculate it and where does the dollar amount come from? There are some people who say it’s $7 in the US, or it’s $10.

MUSTAFA UMAR: It’s about five to seven pounds or some staple food. So, if you go to the market now, food prices fluctuate all the time. You know, dates, sometimes you can get five pounds of dates for like $20. If you do raisins, you’re going to get like, maybe $10, $15, maybe go up to $30. If you do barley, you’re going to get a different amount. So, the reality is that it really was a quantity of food. And now when we try to figure out, “Well, okay, what’s the amount today?” It’s going to vary depending on which country, which market... is this food in high demand or not? That’s why, really, the range is usually somewhere between $10 to $30 that someone is going to pay.

MONEM SALAM: Well, it’s interesting because we just did our last episode about inflation and right now, inflation is really high. I mean, it’s running around 7% or so. But I’ll be honest with you, I’ve been paying $10 for the past 30 years.

MUSTAFA UMAR: Yeah, so what happened was the Fiqh Council of North America, they actually recalculated, and they adjusted for inflation this year. And Dr. Muzammil Siddiqi, who is the Chairman, and the other Fiqh Council agreed as well. They said, “We’re going to put it at $12 this year because food prices have been going up.” So, they put it up higher. Personally, I think it should be even a little bit higher than that. I, personally, I usually give $20 or $30 because you can always pick like the cheapest food. You can go, “Oh, raisins are a little cheaper than dates so I’m going to pick the cheapest food.” It’s really not that much money, you know. Most of us are kind of middle class. I would recommend for the middle-class person, if they can, to do a little bit more. But really, the $12 or the previous year’s $10 that’s there, that was really just an average estimate. In some places it goes down to the range between $5 and $25. They just came up with a balance estimate along those lines and there is a lot of difference of opinion. There’s some subjectivity involved there. The goal is to be able to give something that would suffice a person so they could have some benefit of it the day of Eid.

MONEM SALAM: Hey Chris, we have breaking information, here. Because I was just at the Mosque last night and they still had $10 as the Zakat al-Fitr but now we are hearing and we’re going to break this story on Halal Money Matters that it’s going to be $12.

CHRISTOPHER PATTON: Making headlines.

MUSTAFA UMAR: We just made this decision. It was just a few weeks ago. I have the text message right here. I’ll tell you exactly what it is. “The Fiqh Council of North America has confirmed the amounts for this year. Fidya,” and Fidya for basically for people who are not able to fast. They’re going to feed someone else. So, “Fidya is $15 and Zakat al-Fitr is $12.” So, that’s what was decided by the Fiqh Council.

CHRISTOPHER PATTON: So, $12, is that per person? Per household? Who pays? How does that break out?

MUSTAFA UMAR: Yeah, so for the Zakat al-Fitr, it’s per person. So, $12 per person and what’s supposed to happen is the head of the household is supposed to pay for their children. So, you know, myself, I have to pay for both of my children. I’m not obligated to pay for my wife but if I do, it’s just nice of me. I encourage women to pay on their own for one reason only. It’s because I think in the Muslim community, in some segments, there’s this kind of financial illiteracy that exists among many women. It’s like a cultural thing. The husband generally takes care of everything. Part of giving the Zakat on their own and giving their Zakat al-Fitr as well, it just gives them a sense of agency, like hey, I’m doing this myself. So, I highly encourage that.

MONEM SALAM: Just to be clear then, even if you have an infant child, you’d still pay on behalf of that child as well?

MUSTAFA UMAR: Yes. On infant children as well. And the interesting thing... I find very interesting is in the books of Islamic law, they say you’re not obligated to pay on behalf of your adult children. And I think that’s also very important for our day and age. What generally happens is that there’s a lot of people that have reached the age of maturity. 16, 18, sometimes 30. They’re very financially immature. So, I think it’s very important for kids, even if they don’t have a job, hopefully they do have some job, that they learn to kind of pay their own Zakat, the normal Zakat, as well as their Zakat al-Fitr, because it gives them the sense of, “Hey, you know what? It’s my responsibility because I now have money, whether I’m an earner or I have some savings somehow. It’s my responsibility to realize that this is a debt on me, basically. I have an obligation to pay this Zakat. So, I highly, highly encourage to not just handle this for the kids. Because I know a lot of parents just do it and all of a sudden, the kid turns 30 and he’s like, “I’ve never paid Zakat in my life; I don’t know what to do.” For me, this is a very basic, very important life lesson and principle that should be imparted to every single Muslim young person as well.

MONEM SALAM: So, let’s get into a little more about the actual... whether you pay in foodstuffs or money or that type of thing. I know in the past they probably did pay with foodstuffs but now, giving somebody $10 worth of raisins, they’ll be like, “Thank you but what do I do with it?”

MUSTAFA UMAR: Exactly, exactly. What’s really interesting is there are four popular schools of Islamic law throughout the Muslim world. There’s the Hanafi, Shafi, Maliki, and Hanbali. And what’s interesting is that three out of four of these schools, they said that you have to give food. You’re not able to give money. You cannot give currency to the poor. You actually have to give food. And it was only the Hanafi school that said, “No, no. You can give whatever is more beneficial to the poor.” And in fact, you know, they said it’s often times better to give money because what are the poor going to do with 20 pounds of barley? Imagine someone is walking to the Mosque on Eid day. And they walk by, and someone has five pounds of barley and they’re like, “Oh, look. You seem like you’re in need. Here’s five pounds of barley.” Now all of a sudden you’ve got 100 pounds of barley stacked up around this person. How is that helping them enjoy the day of Eid? 

MONEM SALAM: So, but traditionally, you’re saying three out of the four schools said you have to give in foodstuffs, but now? Is there still that opinion amongst those schools or have they changed? 

MUSTAFA UMAR: Yeah, so what’s happened is the majority of scholars in the world today... they’re like, “That’s just not practical at all. We have to go with the Hanafi school in this regard. This makes a lot more sense.” Pretty much most people have changed their opinion. They’re like, “We can’t actually apply the hypothetical ruling that we had in the past because it’s just not practical at all.” And it kind of gives you a greater sense into the way that poverty functions today. Not everyone needs food to celebrate the day of Eid. I mean, if the purpose is to celebrate the day of Eid, sometimes it’s clothing that they need. Sometimes it’s transportation. So, I think it’s interesting discussion especially among scholars that are like, you know, when they look back at this issue, they’re like, “What could it have been like when people were limited and restricted to giving food?” The different conception of the needs and how our societies evolved. I find it fascinating.

MONEM SALAM: Can we talk a little bit about the benefits for the giver and the receiver? We talked a little bit about it as far as the word Zakat meaning to purify and thinking about it from an economic perspective, what does it do for both the giver and the receiver?

MUSTAFA UMAR: From an economic perspective, really, for the giver, is makes them part of a system that is transferring wealth to people who are in need. And that’s important because you have to be appreciative. If you are in a capacity, an ability, where you can have fun and enjoy the day of Eid, right? People go out to restaurants, they buy fancy clothes, they usually buy brand new clothes, some people even like, they rent cars. I know in the UK, a lot of my friends, they tell me they’ll rent a Ferrari or a Lamborghini for like half of a day or something like that on the day of Eid. That’s their way of celebrating, especially younger people. So, when they are able to celebrate all these various ways, I think what it really does is it makes them understand that hey, our wealth, the fact that we have this money... one, we have a responsibility towards them, and two, we have to acknowledge that we are privileged. I think this concept of remembering the responsibility over your wealth. And number two, taking the time out to calculate a certain amount and say, “I’m going to be giving to someone that’s not able to benefit... not able to enjoy the day of Eid that I’m enjoying on a massive level,” it’s a great life reminder that I think all of us need. So that’s from the perspective of the giver. From the perspective of the receiver, I think what it also does is it not only help them to enjoy the day but what happens in society, and you look at this on a macro level when we study history... a lot of history gets interpreted, especially from like a Marxist lens or a Socialist lens, to say a lot of revolutions, a lot of wars, and stuff, they are kind of class wars. And, you know, when people are very wealthy and they have a lot of money, the poor can become envious of them. And one of the benefits is that it helps remove that envy and I think that helps them because they’re like, “Hey all of this influx of money is coming in. It’s coming from my brothers and sisters in Islam who recognize their responsibility for supporting the other people who are either going through some temporary difficulty or who have just not have had the ability to be able to celebrate the day of Eid or have that amount of wealth that other people have.

MONEM SALAM: Zakat al-Fitr is very specific. It’s for that day. And basically telling people, “Come and enjoy this with us.”

MUSTAFA UMAR: Exactly, exactly.

CHRISTOPHER PATTON: Given how specific it is, how is the giving generally done? Is it on an individual basis? Is it through a mosque? Are there organizations that field the donations so that they are used specifically for that purpose? What does that look like?

MONEM SALAM: So, there are three ways. One is if you live in an area, especially like in Muslim majority countries, what a lot of people will do is they will just be walking by a day or two before Eid or maybe even on the day of Eid when they’re walking to the masjid, mosque for the prayer, they will find someone who seems like they are in need or they are asking and they’ll go ahead and they’ll give them that money right there on the spot. So, that’s one way. I think in metropolitan cities, in America, that much more rare. You don’t just walk down the street and find some person, let alone a Muslim, just there and saying, “I’m somebody who’s in need.” So, the second way of giving is basically giving to a charitable organization that’s going to distribute on your behalf. They have a registry of people who usually come to them throughout the year for normal Zakat services, normal Zakat distribution. And they reach out to those people and give them like a gift card or do like a toy drive for the kids by buying certain things or whatever it may be. So, that’s the second way of doing it. And the third way is to give it to your local mosque. Your local mosque will either do the exact same thing that this charitable organization does, or they will actually just pass it off to a charitable organization without taking any overhead or anything like that. So, it will eventually get to the people that need it.

MONEM SALAM: In America, I was very used to just dropping it into a box or charging it on my credit card. When I was living in Malaysia, they have a very, very beautiful custom. So, what they do is, towards the last ten days of Ramadan, they’ll have a table set up, and there will be a person behind the table. And so, you walk up, and you sit down and say, “I want to give my Zakat al-Fitr.” They basically take the money from you, give you a receipt, then he’ll sit there and make a dua for you, he’ll make a prayer for you. I just found that to be so beautiful. It’s a whole experience.

MUSTAFA UMAR: That’s awesome, absolutely. That brings me to your other questions, which is, “Is there a preferred way to do it?” I think the preferred way on a psychological level, is that if you do it in a way where you can connect to this act of worship on a deeper level, it’s more valuable. So, one way would be, like you said, this Malaysian system where you sit down and the person is making a prayer for you and you’re getting the receipt and you’re doing it in a more formal manner than simply walking by a box and throwing it in, passing by. That’s definitely more preferred. I think the most preferred way would actually be to try to find, seek out, someone who’s actually in need and who’s qualified to receive this and then you go, and you give this to them, and you present it to them. I think a lot of Muslims in America, a lot of people in America, they think there’s no poverty here at all. That’s a misconception. So, seeking someone out. “This person is definitely in need.” When you see something, seeing in believing, right? When you see a person who is in need and you kind of see their situation, it really hits home a lot more. It’s not an easy thing to do but I think from a psychological perspective, that is the preferred way to do it because that’s actually the way that the companions of the Prophet, peace be upon him, used to do that, and it kind of gives you more of a connection with the people and a connection just with the reality of your circumstance you know? Sometimes we live in these concrete jungles and we don’t realize what exists outside of our own little bourgeois bubble or something like that.

MONEM SALAM: Now the person that’s receiving the Zakat al-Fitr... are they only people that are eligible for Zakat al-mal? Or can you give us an example of somebody who is not eligible for Zakat on your wealth but still would be eligible for Zakat al-Fitr?

MUSTAFA UMAR: There’s actually a pretty big difference of opinion among scholars but I’ll tell you, according to even the lowest opinion, yes, there are people who either are going to qualify for Zakat or there are people who are one notch above, which means, for example, there is two ways to calculate it. Let’s say someone qualifies for Zakat normally—and this is according to the Hanafi school which is a very prominent school of thought—so someone would normally qualify for Zakat, and they would receive Zakat. When it comes to Zakat al-Fitr, there’s an interesting threshold that they have. They say that you remove the surplus wealth that they have when you’re determining whether they’re Zakat-eligible or not. When you’re calculating Zakat, you exclude all personal items. Right? So, if you have three TVs, three sofas, and three computers, right? None of that qualifies for your eligibility of whether you need to pay Zakat or not. You have not meth the threshold where you need to pay Zakat yet. You look at how much money you have, three ounces of gold, that’s $6,000 approximately. But when it comes to Zakat al-Fitr, it’s very interesting. The Hanafi rule, which is an Islamic law rule, is that you exclude things which are not needed under the personal item category. So, what you do is you go, “Oh, well, you do need a sofa, but you don’t need three sofas. So, we’re going to count the other two sofas as having a value and that’s going to put you in the category for this for whether or not you’re going to be receiving. You can’t even argue that you need a TV, so all three TVs would be included, whatever the market value is going to be.” So, you’re going to calculate those personal items which are actually not in the category of need when it comes to Zakat al-Fitr. When it comes to normal Zakat, it’s everything. You can have jet skis in your garage. You can have a speedboat. And none of that counts as you become Zakat-eligible and you need to pay Zakat for that. When it comes to Zakat al-Fitr, all of that is considered. So, we do look at the personal things that you have which are superfluous. You don’t really need them. You’re going to consider that as part of your wealth when you become obligated to be paying Zakat al-Fitr.

MONEM SALAM: What’s, kind of, the consequence for not paying it?

MUSTAFA UMAR: Ah. So, the consequence of not paying it is pretty severe. So, when something is mandated in Islam and the Prophet, peace be upon him, obligated this... it is considered to be a major sin. Zakat is a pillar of Islam, in general, right? And since Zakat al-Fitr kind of falls under the category of Zakat, you’re basically violating one of the pillars of Islam. A pillar is like a column which holds up the structure of your religion. If you’re violating one of them, you’re breaking one of them, what’s happened is your foundation for your entire religion starts to become shaky. So, that’s one very severe warning against not paying Zakat al-Fitr. This is something we don’t take lightly. The sin of neglecting Zakat is something that no Muslim should even consider because, from our perspective in our religion, we are going to be held accountable if we don’t fulfill this important pillar of Islam.

MONEM SALAM: Is there something about your Ramadan not being accepted if you don’t pay prior to the Eid prayer?

MUSTAFA UMAR: I don’t recall the detailed hadith on that but I know that basically, it’s as if your fasting is not complete until you have paid the Zakat. Yeah. 


CHRISTOPHER PATTON: Monem and I have talked in other episodes, and this might not be appropriate when you’re giving to someone directly or even to a mosque, but we’ve talked about giving, donating something like a stock or a security to a charitable organization. If the organization could handle that, would that be appropriate in this case or is that getting away from the intent? 

MUSTAFA UMAR: I don’t think it’s getting away from the intent. It’s probably... I’ll give you an example. I’m on the board of UPLIFT charity. It’s a well-known charitable organization here in southern California. And what they do is they know that a lot of Muslims give their Zakat al-Fitr kind of near the end of the time, like right before Eid, and then they don’t have enough time to distribute it to all of the people who are in need so that it reaches them for Eid. So, what they do... I said to them, “So what’s your policy?” They say, “Our policy is we estimate approximately how much we are going to be distributing anyways to these people based on previous years, and we earmark that amount that we have from general donations, and we distribute it and then when people give all of the actual Zakat al-Fitr, we offset what we had distributed, and we usually come out pretty close.” So, if that’s the way that, you know, charitable distribution is functioning, especially in the United States of America, here. If we talk about transferring of stocks, maybe we’re trying to get some tax advantage or something like that, then I don’t see why this would be a problem at all, especially when this is the way things are functioning. As long as the money is getting to the same person, and you know that... You know what? Muslims are supposed to be intelligent. You know? And hopefully they usually are, right? And you’re supposed to take advantage of any tax breaks. Anyone who is intelligent knows that hey, you get a good accountant, and you try to get as many tax advantages as you possibly can. So, Muslim charitable organizations should definitely utilize the same thing. I don’t see why they shouldn’t. I don’t think it takes away from the purpose, especially when we look at the distribution mechanism and the way that, you know, kind of transfers. Many people cannot find their own people to give directly, by themselves, so I see know problem with that and it’s probably a smart move to do.

MONEM SALAM: One thing to keep in mind is the Zakat al-Fitr is such a small amount, like for example in my family it would only come out to about $40 or $50. And probably giving that amount to a charity, the transaction costs for the charity to sell it and do all of that stuff is probably going to be more than the actual sum, so yes you can do it, but maybe economically speaking, it might not be the best thing to do. Maybe, Chris, for you, you have about 20 kids?

MUSTAFA UMAR: [laughs] 

CHRISTOPHER PATTON: At least 30. Who knows? 

MUSTAFA UMAR: When it comes to Zakat in general, yeah that would be definitely a great option. I think that there’s a lot of people who don’t understand what Zakat al-Fitr is and it’s very important that everyone in the Muslim community be educated. I see in so many masjids, they just make an announcement, they’re like, “Oh, Zakat al-Fitr this year is $12,” or $15 or whatever it is. And I notice that everyone who’s over 40, they understand. And anyone who is under 20, they just ignore the announcement because they don’t even understand what it is. I think this basic, core education about something as important as Zakat al-Fitr, it should not be undermined. We should explain what Zakat al-Fitr is so that when people are giving it, they understand why they are doing what they are doing and they don’t neglect this important part of our religion.

[music outro]

DISCLOSURES (read by Christopher Patton):

Please consider an investment's objectives, risks, charges and expenses carefully before investing. To obtain this and other important information about the Amana Funds in a current prospectus or summary prospectus, please visit www.amanafunds.com or call toll free 1-800-728-8762. Please read the prospectus or summary prospectus carefully before investing. The Amana Funds are distributed by Saturna Brokerage Services, member FINRA and SIPC, and a wholly-owned subsidiary of Saturna Capital, the investment adviser to the Amana Funds.

Investing involves risk, including the risk that you could lose money. The Amana Funds restrict investments to those companies consistent with Islamic and sustainable principles, which limits opportunities and may affect performance.

This material is for general information only and is not a research report or commentary on any investment products offered by Saturna Capital. This material should not be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal.

We do not provide tax, accounting, or legal advice to our clients, and all investors are advised to consult with their tax, accounting, or legal advisers regarding any potential investment. Investors should not assume that investments in the securities and/or sectors described were or will be profitable. This podcast is prepared based on information Saturna Capital deems reliable; however, Saturna Capital does not warrant the accuracy or completeness of the information. Investors should consult with a financial adviser prior to making an investment decision. The views and information discussed in this commentary are at a specific point in time, are subject to change, and may not reflect the views of the firm as a whole.

All material presented in this publication, unless specifically indicated otherwise, is under copyright to Saturna Capital. No part of this publication may be altered in any way, copied, or distributed without the prior express written permission of Saturna Capital.