Zakat Policy
Understanding Zakat
The obligation of Zakat
Distinguishing Zakat from Sadaqah (General Donations)
Zakat is an obligation and Sadaqah is optional
Zakat is a specific amount of 2.5% whereas Sadaqah is not
Zakat generally must be paid to Muslims (except for muallafat al-qulub) whereas Sadaqah does not have this restriction
Zakat can only be paid to an eligible individual from the 8 categories of Zakat as opposed to Sadaqah
Zakat is due on specific assets/wealth.
Zakat Policy and Standards
A) Categories of Zakat:
The 8 categories of zakat are mentioned in the Qur’an (Surah At-lawbah, 9:60). They are the groups of people who are eligible to receive zakat:
- Fuqara (The Poor)
Those who have no wealth or insufficient resources to meet basic needs.
Penny Appeal Canada (PAC) focuses on the direct distribution of this category both locally and internationally, with a major focus on international distribution. - Masakeen (The Needy)
People who have some resources but still cannot fulfill their essential needs.
PAC focuses on the direct distribution of this category both locally and internationally.
- Amil Zakat (Zakat Collectors)
Individuals appointed by an authority to collect and distribute zakat. A portion of the Zakat collected goes towards paying for administrative costs of the project in the field.
PAC deals with this category during the process of on-ground distribution with agreements and a clear MOU in place. Penny Appeal Canada (PAC) will take 0% from your Zakat for their own administrative cost, however, partner organizations deduct admin costs to successfully implement programs.
All administrative costs for PAC are covered by Non-Zakat funds. - Muallafatul Qulub (Those Whose Hearts are to be Reconciled)
New Muslims or those whose hearts need strengthening in faith, or people who might need support for maintaining peace. Zakat may be used to soften the hearts of those who are non-Muslims so they can become Muslims or allies of Muslims.
PAC does not directly deal with this category. In specific situations, PAC’s partner charities distribute to this category. The partner charities also have independent Shariah guidance and policies.
- Rigab (Those in Bondage/Slaves)
Historically, this referred to slaves or captives who could be freed with financial assistance. In modern times, it may extend to freeing people from oppressive situations. Zakat may be used to help the families of those who are awaiting trial and those who have been sentenced as long as proven zakat eligible.
PAC does not directly deal with this category. In specific situations, PAC’s partner charities distribute to this category. The partner charities also have independent Shariah guidance and policies. - Gharimeen (Debtors)
People overwhelmed with debt due to legitimate reasons and are unable to repay it However, one must make sure that the money borrowed by a debtor is/was not used for any un-Islamic or wrong purpose.
PAC does not directly deal with this category. In specific situations, PAC’s partner charities distribute to this category. The partner charities also have independent Shariah guidance and policies. - Fi Sabilillah (In the Path of Allah)
For causes that directly deal with military defense and engagement and those in the path of Allah. These are the people who are striving in the path of Allah far away from their homes.
PAC does not deal in this category directly or indirectly. - Ibn Sabl (Wayarers/Travelers)
Stranded travelers in need of assistance, even if they are wealthy back home.
Zakat may be used to help those who are internally displaced within their nations and those who are forced to seek refuge internationally due to violence and oppression.
PAC does not directly deal with this category. In specific situations, PAC’s partner charities distribute to this category. The partner charities also have independent Shariah guidance and policies.
B) Eligibility Formula
It is our understanding that Penny Appeal Canada (PAC) acts as an agent (wakil) on behalf of the donor and thus PAC takes the responsibility of ensuring that the Zakat received by the donor is delivered to an eligible recipient of Zakat.
Since Penny Appeal Canada (PAC) collects and runs campaigns for international relief the charity signs agreements with the on-ground team distributing the Zakat. These agreements are in place to ensure that the “on-ground team” is clear on its role and completes the full responsibility of ensuring that all those receiving Zakat are eligible.
C) Donation Discharge Time
Penny Appeal Canada has an extremely high demand for beneficiaries that are ever-growing. We run campaigns to collect donations pursuant to the needs of the Zakat recipients. Because of this, we are always discharging Zakat within a timely manner. We abide strictly by a discharge time within 1 lunar year. If any project breaches this then it will be with the exceptions justified by our Shariah Advisors.
D) Management of Overdue Funds
Penny Appeal Canada does not retain any Zakat funds over 1 lunar year, thus all funds are discharged and nothing remains overdue. If the case of overdue funds were to occur we would discharge it immediately.
E) Distribution Limits
The field partners conduct needs assessments to determine the eligibility of the recipients and distribute items to those who satisfy the Zakat criteria.
F) Distribution of Zakat to Charities
Penny Appeal Canada (PAC) distributes to partner charities like National Zakat Foundation (NZF) Canada and others.