Zakat is one of the five pillars of Islam. In Islamic law, it is a mandatory annual tax paid from various types of income and property by all independent, free, capable Muslims in favor of needy co–religionists. Zakat is a mechanism for the fair distribution of income and a special tax tool for solving social security issues. Historically, zakat has been proven to be effective in solving socio-economic problems, such as poverty.
Financial innovations, accompanied by the growth of fintech projects and digital technologies, continue to transform the Islamic financial system, in which the payment of zakat is greatly simplified, forming new trends and creating new ways of interaction of Muslims, regardless of where they live. The growing number of clients of Islamic banks and Islamic fintech projects is evidence that blockchain technologies have an important role in improving financial relations in the Muslim world, where cryptocurrencies are becoming a way to quickly and securely pay not only zakat, but also other tax obligations.
Use of decentralized financial technologies when collecting zakat does not require the payer to visit the place of payment, eliminates difficulties arising from technical problems, long distances to travel, lack of time, inefficient expenses and so on.
The increased use of digital devices, financial technology and innovation improves the way zakat is collected. Since many people are not sure how to calculate the amount of payment, they can calculate and save the total amount of zakat taking into account income, business availability, ownership of gold and silver. All the data provided is securely stored in the blockchain and is always available for viewing by any interested person.
Zakat collection with the help of blockchain systems is still in the initial stage of development and cannot compete with traditional methods of fundraising yet. For example, in Malaysia, online payments made using Islamic credit and debit cards and other payment methods are examples of alternative payment methods. Less than a quarter of all institutions involved in the payment of zakat (eight out of fourteen) use online payments as the main method of obtaining zakat (57%). However, more than 14% of Muslim organizations collecting zakat face problems of cyber fraud, long transaction times and other problems. In addition, online payment methods, wallets and transfer systems may be considered unacceptable for transfers.
It is estimated that nine out of fourteen zakat collection institutions use the Internet banking system as an acceptable means, which accounts for 64% of the total Zakat intake. While 36% of zakat institutions do not accept payments made via Internet banking, and another 28% do it without hesitation. The use of blockchain allows the zakat payer to calculate the payment amount, securely save it and track payments by pressing one button in the blockchain explorer, while being anywhere in the world. As a result, digital financial technologies will provide their users with a more flexible and user-friendly system together with practical, efficient, transparent and fast services.
Taking into account the peculiarities of the work of zakat collection institutions as intermediaries between Muzakki (giving zakat) and Asnaf (recipient of zakat), the effectiveness of their intermediary role largely depends on the data they have on the sources and use of funds. Based on the availability of data and the collection strategy, decisions can be made in the shortest possible time and with maximum efficiency. Blockchain technologies for real-time data transmission can be used in various ways. They also provide a lot of advantages to institutions that pay zakat.
Information about payments and distribution of zakat funds can be distributed digitally, which allows muzaki to pay zakat from anywhere. As a result, it can increase people’s motivation to pay zakat. An important factor is that in blockchain systems, transaction costs when paying zakat are much lower than costs in traditional banking systems, and technological means maximize transparency and accountability.
HAQQ blockchain can be used in the implementation of projects for the payment and collection of zakat based on the principles of Islamic finance. This blockchain network fully complies with the rules of Shariah, has its own digital currency and a Fatwa issued by well-known Shariah scholars.
The Evergreen DAO Fund, funded by the issue of Haqq base tokens and managed by network participants, is designed to support innovative projects for the international Muslim community. High bandwidth makes Haqq an ideal tool for implementing digital campaigns.
IslamicCoin is a digital currency conforming to the norms of Islam and Shariah, functioning in its own blockchain Haqq, which means “Truth”. Already at the stage of closed sales, IslamicCoin aroused huge investor interest and was able to raise more than $ 200 million in just a few weeks. Unlike technically outdated Bitcoin and Ethereum, which have a lot of problems, IslamicCoin uses the full power of the most progressive blockchain technologies and is based on the most fair and reliable ideology and rules of conduct.
Successful investors choose ideologies, technologies and prospects based on something more than minor fluctuations in price charts. For almost 20 years of the existence of a new type of digital money, cryptocurrencies have not brought a drop of real value into this world, have not made people free, independent and happy. And this means that it’s time for a new type of finance based on responsible choices and new values!