Reducing poverty and income inequalities: Current approaches and Islamic perspective

Abstract

The Islamic approach to reducing (income) inequalities and alleviating poverty focuses on the mechanisms historically used and succeeded in reducing inequalities. Both obligatory (zakāh) and voluntary (sadaqat) mechanisms are used to motivate the rich to spend generously on poverty reduction programs. It is an obligation on the rich to pay the compulsory (zakāh) on their wealth but they are also encouraged to spend more above the obligatory sum by way of charity (sadaqah). In return, they are promised eternal bliss and everlasting happiness in the life to come. On the other hand, zakāh evasion is considered a punishable crime (in this life and the hereafter) and denying the zakāh altogether is equivalent to rejecting Islam. This belief in reward and punishment plays as a strong incentive and motivation for charitable behavior. Hence, effective collection and utilization of the proceeds from zakāh and sadaqat are the mechanisms advocated by Islam to redistribute wealth and reduce income inequalities.