Does the data suggest that zakah can eradicate poverty?

We live in a world of immense inequality. A world where abject poverty is ignored by those who squander the riches of this world on lavish lifestyles. One method that Islam uses to eradicate poverty is zakah. Given the development of our financial system, is zakah still a viable method to eradicate poverty or do we need to consider new methods?

Calculating wealth accurately isn’t easy. Calculating the zakah payable on wealth is even harder. However, we do have many public records of wealth that are easy to obtain such as publicly listed companies. Forty of the largest US based companies have a combined total market capitalization of just over 19.64 trillion dollars. There are a few ways for the owners of shares to calculate zakah owed on shares. For the sake of simplicity, I will use the method that uses 2.5 % of the value of the market capitalization as the zakatable amount. That means that if the shareholders of 40 of the top US based companies paid zakah, they would pay more than 490 billion dollars of zakah.

Whether 490 billion dollars is sufficient to eradicate poverty is a bit harder to determine. The most common measure of extreme poverty is the one used by the World Bank. According to the World Bank, extreme poverty is measured as the number of people living on less than $1.90 per day. The World Bank has also estimated that in 2021, 711 million people lived in poverty. Using this as a proxy, every lunar zakah year would require that just shy of 480 billion dollars of zakah be given for poverty to be eradicated.

Put simply: we need 480 billion dollars to end poverty. The zakah payable by the owners of 40 of the top US companies is 490 billion. This may seem like cut and dry proof that zakah of just 40 companies can end poverty. However, there are complexities of redistribution and value that need to be considered. Despite all those complexities, there is a solid case that zakah on shares alone, is viable method of poverty alleviation.

Allah Knows Best

*Figures rounded for brevity.