Vol. 3    Issue 22   01 - 15 April 2009
About Us
Back Issues
Forthcoming Issues
Print Edition
Contact Us
IOS Minaret Vol-1, No.1 (March 2007)
The Holy Quran A Pictorial Gallery
Muslim Minorities in Non-Islamic Milieus
Virtual Museum of Islamic Arts and Culture

Infaq and the notion of merit sector

Sayed Afzal Peerzade


I. Introduction

An attempt is made in this paper to understand the Islamic perspective of infaq and to explore its significance and relevance in the framework of the “merit sector”. Infaq signifies faith-motivated private spending. In an Islamic economy, the total expenditure at a given point of time can be grouped under the following heads.

  1. Personal expenditure (private consumption and investment expenditure)
  2. Expenditure made by all types of firms, companies, etc
  3. State-sponsored or public expenditure, obligatory and mandated (relating to development, infrastructure, social overheads, etc.)
  4. Zakah-based expenditure (as enumerated in the Quran)
  5. Infaq, which connotes faith-based private spending in the way of Allah, in addition to zakah.

From the economic viewpoint, spending involves the exercise of economic power. This power is exercised only when it either accrues or accumulates. In this context, it is necessary to understand the sources contributing to economic power. Broadly speaking, capital is the key source that contributes to the accrual and accumulation of economic power. Here, capital is understood in a very broad sense as that which encompasses almost all productive sources, including land and human capital. The Islamic approach towards the acquisition and accumulation of capital is very distinctive and yet definitive. It acknowledges that:

  1. The Almighty Allah is the Absolute Owner of all resources.
  2. Man, being the deputy of Allah, is required to act as a trustee. He should efficiently use the material resources to be able to perform his duties towards the Almighty and fellow human beings.
  3. Only legitimate, rightful means should be employed to acquire resources.
  4. The acquired resources should be used for rightful purposes.
  5. There must not be any wilful destruction of one's own or others' resources.
  6. Since none save Allah is the Absolute Owner of all resources, Islam assigns a rightful share for society in general and for the poor in particular in the resources owned by the rich. This share takes the form of zakah and altruistic spending or infaq.
II: Importance of Infaq

Infaq is a frequently used word that recurs in the Quran in nearly sixty places, as compared to zakah and sadqat that are mentioned in about thirty and fifteen places respectively. It is mentioned in the opening verses of Surat al-Baqara: "...Without doubt to those who fear God, believe in the unseen, are steadfast in prayer, and spend out of what We have provided for them..." (2:1). Thus, it is pointed out that God-fearing men are those who spend out of what Allah has provided for them. In several commentaries on the Holy Quran it is stated that the words "what we have provided for them" signify the possession of property and other related resources. The owners of property are, therefore, urged to spend in the Way of Allah. Since it is inseparably linked with belief in the unseen and prayers, altruistic, chatitable spending becomes an integral part of Islamic faith.

There are several verses in the Quran which highlight the importance and need for faith-based voluntary spending. "And Spend of your substance in the cause of God and make not your own hands contribute to (your) destruction, but do good, for God loveth those who do good"(2:195).

Further: "O! Ye believe! Spend out of (the bounties) We have provided for you, before the Day comes when no bargaining (will avail) nor friendship nor intercession. Those who reject faith, they are the wrong doers" (2:254 and also 14:31, 35:29). Those who do not spend are equated with persons rejecting the true faith (107:)

The Prophet explicated the use of infaq in three distinctive ways:

  1. He nominated an individial or group of persons to bear the physical or monetary cost of an assigned task.
  2. He made a general appeal for volunteering by some persons to do a certain job.
  3. He made a general appeal for compulsory and maximum physical and monetary contribution by all.

The last situation where the entire population was urged by the Prophet to contribute without any exemption or excuse arose in the post-migration period. In Muslim countries, it may still develop in the context of ever-increasing public expenditure. It requires the universalisation of infaq in such a way that everyone contributes something, failing which sufficient revenue may not be generated to meet social and economic obligations of the Islamic state. Further, in the context of its repeated mention in the Quran and in the Traditions of the Prophet, the practice of infaq could be viewed as one of the three means of strengthening social bonds and reinforcing social solidarity, the other two being zakah and the state's welfare-oriented public expenditure.

III: Salient Features of Infaq

After noting the fact that there is sufficient scope for faith-based additional private spending, we proceed to identify certain salient features of infaq, which are derived from the Quranic verses and the Traditions of the Prophet. First, a quantitative and propor¬tionate relation between the size of means owned and the amount of spending is not established. What is more important is the fact that there must be some spending, or in other words, there must be a transfer of funds favouring the poor. There is a Quranic verse to this effect: "Those who spend whether in prosperity or in adversity, who restrain anger and pardon (all) men; and God loves those who do well" (3:134). In this verse spending is visualised both in the periods of prosperity and adversity. There is no direction to stop spending simply because one is experiencing a difficult period. The following verse from Quran makes it further clear: "Let the man of means spend according to his means and the man whose resources are restricted, let him spend according to what God has given him. God puts no burden on any person beyond what He has given him. After a difficulty God would soon grant relief"(65:7). At the same time, the Quran has taken a note of those who are infirm or ill or who find no resources to spend. It is sufficient if they are sincere in their duty to the Almighty Allah and His Apostle.

In the case of zakah, as it is clear from the Quranic verses and the Traditions of the Prophet, the relation between zakah payment and the ownership of different assets is proportional. It is 2.5 percent in case of articles of gold, silver, merchandise and several other productive assets. On agricultural produce it is 5 percent or 10 percent depending upon the type of irrigation facilities. For infaq, however, no such quantitatively proportional relationship is visible between "means", "sustenance", "and goodly favours" as provided by the Almighty and the size of commanded spending. The scale tilts heavily in favour of a progressive transfer of funds when we note this Quranic verse:"( And when) they ask thee how much they are to spend; Say: "What is beyond your needs" (2:219). Since neither the Quran nor the Prophet has spoken about any quantitative relationship between the means and spending, it is, therefore, maintained here that the scale of progressive transfer of funds or spending cannot be expressed in percentage terms.

Second, infaq does not establish any quid pro quo relation between the transferor of funds and the transferee. This also holds well in the case of zakah. The purpose of transfer of funds is defeated if the transferor in return expects some material gain or service. Such a spending, then, is devoid any religious merit. Furthermore, it does not serve the purpose of social solidarity. The much desired and extolled humane rela¬tionship now turns into that of a servant and paymaster getting itself measured in terms of units of service rendered and amount of money paid. Islam does not approve any spending where an element of explicit or implicit expectation is involved. Even a reminder nullifies the religious merit in its totality. It is commanded in the Quran: "O ye who believe! Cancel not your charity by reminders of your generosity or by injury... like those who spend their substance to be seen of men, but believe neither in God nor in the Last Day. They are in parable like a hard barren rock on which is a little soil; on it falls heavy rain, which leaves it (just) a bare stone. They will be able to do nothing with aught they have earned. And God guides not those who reject faith" (2:264). On the contrary there is a good tiding to those who are altruist and do not hurt feelings of recipients. "Those who spend their substances in the cause of God and follow not up their gifts with reminders of their generosity or with injury---for them there is reward with God; on them shall be no fear, nor they shall grieve" (2:262).

Third, the practice of infaq never goes without a reward. Undoubtedly, there is a reward both in this world and in the hereafter. This reward is in no way in proportion to what is actually spent. There is no measure; it could be twice, thrice or even more. The Quran speaks: “Those who spend their goods by night and day, and in secret and in public, have their reward with their Lord. On them shall be no fear, nor they shall grieve" (2:274). Further "twice they will be given their reward, for what they have preserved, that they avert evil with good and that they spend out of what we have given them" (28:54).

Fourth, ostentatious spending is not approved. This assumes a special significance in the context of the fact that Islam is not opposed to the right of private property. This right should not be exercised in an unrestricted way; extravagance is strongly deplored. In Quran, the condemnation of extravagance runs along these lines: "Oh ye who believe! Eat not up your property among yourself in vani¬ties"(4:29). "..... squander not (your wealth) in the manner of a spendthrift. Verily spendthrifts are brothers of evil ones; and the evil one is to his Lord (himself) ungrateful"(17:26-27). Islam favours moderation even in consumption. The righteous are those who (among other things) "when they spend, are not extravagant and not niggardly, but hold a just (balance) between those (extremes) (25:67).

The Prophet led an exceptionally simple life. His faithful Compan¬ions too modelled their lives on the path shown by him. It is reported in Sahih al-Bukhari that the Prophet remarked "Eat and drink (only lawful things), give charity, these should be devoid of any element of waste and vanity". The reason as to why a restraint was favoured by the Prophet and his noble companions was that the lifestyles of men of affairs do affect lifestyles of commoners. There is very interesting discussion on this issue in the writings of Ibn Khuldun and Shah Waliullah Dehlvi who were eyewitnesses to the ups and downs of mighty Muslim empires.

Fifth, the practice of infaq under the Islamic economic set-up leads to the emergence of what could be appropriately termed as the "merit sector" Of course, spending is purely faith-based, nonetheless it has significant economic implications for a society, particularly for its vulnerable and deprived sections. Each dose of spending pumps in resources, real as well as monetary, having favourable backward and forward linkages.

IV: The Idea of Merit Sector

Economists usually speak of three sectors, namely public, private and voluntary (non-government) sectors. Public sector is owned and man¬aged by the state. It is normally engaged in the provision of ‘public’ and ‘merit’ goods in which the private sector is least interested but these are very important from the viewpoint of economic equity and social security. The justification for private sector runs on the line that it manages scarce resources, both monetary and physical, more efficiently than the public sector. Voluntary sector will be distinct from public sector in as much as it will be totally free from any element of compulsion and from private sector where economic agents crave for material gains in relation to their spending.

In a number of countries across the world, the voluntary sector, in most of the cases, supplements efforts of both the government and private sectors. In several countries, because of its flexibility and adaptability, the voluntary sector has carved out a niche for itself. This sector is characterised by the presence of non-governmental organisations [NGOs] of different types. In Western countries, a few NGOs are so big that their annual budgets are larger than the budgets of several poor countries combined together.

In the context of infaq, an eminent Islamic economist, Fazulr Rahman Faridi, has explored the possibility of “voluntary sector”. He argues that an Islamic economy may be characterized as a three-sector economy comprising of public, private and voluntary sectors. He argues that this concept is derived from the value premise of an Islamic society that a suitable part of total resources is spent on such activities that are considered conductive to the welfare of al-akhira (life hereafter) but will have significant economic implications for the society Even though Faridi has very perceptively analysed and emphasised the voluntary sector, it is argued here that, at least in the Islamic context, the term is rather misleading. The Oxford Dictionary (1942) explains the term voluntary as: “having free will”, “depending upon the exercise of will”, “not subject to or done or brought about by compulsion”. As against this, the Quranic verses and traditions of the Prophet demand that the faithful must necessarily practice infaq. These two speak of an entirely different nature of infaq. For example, it appears in Quran: “By no means shall ye attain righteousness unless ye spend (freely) of that which ye love; and whatever ye give, a truth God knoweth it well”, (3:92). Thus, when righteousness is conditioned to infaq, every Muslim senses the implicit command of the Almighty. He realizes that the practice of infaq is not left to the exercise of his personal will. The words “by no means” kill the voluntary character of infaq. Furthermore, one cannot avoid spending, be it in prosperity or adversity. The Quran says: “Those who spend (freely) whether in prosperity or in adversity... (3:134). After prayers (salat), maximum importance is, thus, attached to infaq. It occupies first place in the Quran in respect of injunctions concerning the material life of a man. Absence of any restriction on the size of spending has its own distinct socio-economic advantages. It encourages an individual to spend and thereby earn merit and step into the “merit sector”.

The above discussion helps us to develop an argument that in the Islamic schema of sectors the notion of voluntary sector should be replaced by the merit sector. It comprises of public, private and merit sectors. Infaq is not just desired but it is commanded and amply rewarded too. Every bit of spending in the merit sector has ethereal and economic implications. While it is not possible to quantify ethereal implications, the economic implications can be quantified and explained with the help of "multiplier and accelerator principles". A sustained level of infaq helps to maintain a desired level of output, income and employment at times when expenditure in public and private sectors is insufficient.

The merit sector and the ultimate goal of human endeavour, at least in the Islamic context, are interrelated. Every activity in the merit sector ensures a heavenly reward. The Holy Quran speaks of a “divine multiplier” “…those who spend their goods by night and by day and in secret and in public have their reward with their Lord. On them there shall be no fear, nor shall they grieve” (2:274) At some other place it is mentioned: “Twice they shall be given their reward for what they have preserved, that they avert evil with good and that spend out of what We have given them”, (28:54).

The current stream of thought, in the context of worldwide economic slowdown, is favouring a huge increase in public spending. In case of private spending, it can be maintained here that it responds well only to the favourable market prospects. It falls short of a desired level when market indicators are weak, making an economy still more susceptible to disasters. It is here that the practice of infaq, without regard to circumstances (be it "the period of adversity or prosperity") and expectations ("more or less return as the ultimate reward is with the Almighty Allah") come to the help of an economy in moving forward.

V: The Regime of Faith-based Spending

The above discussion helps us to enter into a regime of faith-based spending which may be classified into two broad categories namely zakah based spending and infaq based spending [Chart No. 1].

Faith-based Spending

The zakah based spending follows the Quranic classification [9:60]. From the economic viewpoint, it is reclassified as under.

  1. "On socio-economic and income redistributive purposes". Here the beneficiaries are poor and needy.
  2. "On political purposes". Here expenditure is on freeing slaves and reconciliation of hearts.
  3. "On administrative purposes". This includes expenditure on zakah collecting machinery.
  4. "On monetary and financial reasons". Here debtors are covered.
  5. "On general welfare". This covers expenditure in the "cause of Allah" and wayfarers.

It is, thus, abundantly clear that Quranic classification and identification are natural enough to emphasise and cover those heads of expenditure which are today the prime favourites of policy makers. It is indeed remarkable that these were stressed at a time when such a classification was totally unheard of. The revenue raised from other levies was utilised by the early Islamic state, among other things, for financing government's own administrative expenditure, social overheads and development expenditure. These are the heads which are not covered under zakah based spending.

The infaq-based spending may be utilised for internal status transformation, promotion of cultural and social capital. Activities undertaken here are not intended for any personal economic gain or material benefit. In this context the following questions can be raised: Is infaq better than private secular spending? If so, what are the major reasons?

Normally, the faith-based spending programmes are more compassionate and effective. At the same time these are altruistic programmes. If the intention is not to subordinate someone (or a group of people), but to help them achieve self-determination, then the important issue revolves around the bias in the act of spending. Certain forms of private secular spending contain an inherent element of bias. These may be enumerated as under:

  • Means-tested aid given to the “needy” stigmatizes the receiver;
  • Conditional aid given to the “deserving” aligns the recipient with donor;
  • Universal aid given to needy respects the autonomy of both the donor and recipient, but permits free-riding and exploitation and may weaken social bonds;
  • Hired help —the most common form of aid- may reduce the donor to the status of dependency;
  • Aid given in exchange for services, equally common, promotes autonomy, self-respect and self-esteem, but does not help those who have little to give in exchange.

Aid given in the form of infaq does not suffer from bias, as the ultimate reason behind it is to earn merit in the world hereafter. This particular perception of the donor strengthens social solidarity by creating a new social-bond. It is not biased and does not centre around the considerations of colour, caste, creed, religion and region.


The zakah-based spending is purely earmarked and its scope can not be extended to cover beneficiaries other than those enumerated in the Quran [9:60]. Spending programmes financed out of revenue raised from other levies happen to be too broad and general in their scope. The revenue is used to finance development include human resource and infrastructure development. Mainly the rich, who are highly knowledgeable people, succeed in getting benefits because they know the art of extracting benefits. In this context, the faith based private spending makes a huge difference. It empowers beneficiaries in terms of internal status transformation, cultural capital and social capital.

Internal Status Transformation

In case of infaq the donor has a sense of satisfaction internally while donee is benefited in economic terms. Despite the early prejudiced theories against religion, there is a growing evidence that religious people typically have higher self-esteem than non-religious people. Internal status transformation generated by religious spending makes an appeal to a transcendent being who powerfully cares for other individuals. In religious schema, this helps the poor. It is not known if secular appeals and status transformation have a deep or a long lasting an effect.

Religious Cultural Capital

Infaq contributes to the formation of religious cultural capital. It may the used to strengthen religious values by infusing the importance of religious culture on one hand and discipline on the other. This culture helps people to love those who are difficult situation. They may be, for one reason or the other, under a great socio-economic stress. A timely help without strings attached to it may help them to come out of a trying situation.

Secular spending does not generate religious cultural capital that include knowledge of the Quran and traditions, how to pray and supplicate and how the develop the feeling of oneness and belonging. Whereas, faith based spending programmes provide beneficiaries an opportunity to better “fit in” to religious schema where they gain additional resources such as material goods and services, in addition to monetary benefits. Religious capital may not be essential for someone to get a good job; however, it is quite important in keeping it going in the right direction for life—including in the workplace.

Religious Social Capital

There are three aspects of social capital that can be potentially affected by religion. First, the richness of religious traditions in creating and maintaining rituals and values that promotes social ties; second, the development of a sense of unity and oneness and thirdly, inter and intra group cooperation within the community. Overall, supportive relations are developed. The informal, multifaceted relationships that develop greatly create a sense of belonging and speak of real tensions and joys. The faith-based programs also add to the group solidarity and sense of mutual support.

The self-motivated and dynamic role of merit sector, thus, needs to be vigorously highlighted. Where necessary, in Muslim countries, it should be promoted on one hand and strengthened on the other. It should be made to help and support public and private sectors. The merit sector spending ensures steady flow of resources into the market. It helps in improving the current level of output and employment and checking economic slide, if any. These are the advantages in addition to internal status transformation, promotion of religious cultural and social capital.


Faridi F.R., "A Theory of Fiscal Policy in A Islamic State", in Ziauddin Ahmed and others(eds.),Fiscal Policy and Resource Allocation in Islam, Institute of Policy Studies, Islamabad, 1983.

Hasanuz Zaman S.M., "Islamic Criteria of Distribution of Tax Burden: The Mix of Direct and Indirect Taxes and offsetting Function of Zakah", Journal of Islamic Economics, Vol.3, No.1, 1993.

Peerzade, Sayed Afzal., "The Idea of Merit Effect: Islam's Contribution to Economics", Journal of Objective Studies, Vol. 3, No.1, 1991. -------------- Islamic Public Finance and Policy, Idarah-i Adbiyat-i Dilli, Delhi, 2004.

Sadeq, Abulhasan M., (ed.) Financing Economic Development: Islamic and Mainstream Approaches, Longman Malaysia, 1992.

Name * :
E-mail * :
Add Your Comment :
Home About Us Announcement Forthcoming Features Feed Back Contact Us
Copyright © 2009 All rights reserved.