Many Businesses Give but Are They Paying Zakat Al-Mal?

Many Businesses Give But Are They Paying Zakat Al-Mal?

Lack of awareness around calculation and eligibility leaves Zakat al-Mal widely overlooked among companies.

With Ramadan now underway across the Maldives, charitable activity has increased across the business community, with companies supporting food drives, community programmes and social initiatives. Yet experts say an important obligation often receives less attention within the private sector. Zakat al-Mal remains widely misunderstood among companies, particularly when it comes to how it is calculated and what assets are included.

Recent statistics highlight the growing scale of Zakat al-Mal contributions nationally. According to figures released by the Maldives Zakat House, a total of MVR 483.79 million was collected as Zakat al-Mal over the past five years, with last year recording the highest collection at MVR 107.21 million. While the data suggests increasing participation, observers note that the potential contribution from companies remains significantly higher.

Misconceptions Around Zakat Al-Mal

One of the most common misunderstandings is that Zakat al-Mal applies only to personal savings. In practice, company wealth such as cash reserves, retained profits, inventory and receivables may be subject to Zakat al-Mal once it meets the nisab threshold and is held for one lunar year.

Some business owners also assume that paying taxes or making donations fulfils the requirement. Scholars emphasise that Zakat al-Mal is a separate obligation linked to wealth purification and redistribution, distinct from voluntary charity or corporate social responsibility initiatives.

Why Companies Struggle

Modern companies operate with diverse financial structures including digital transactions, credit sales and reinvested earnings. For many small and medium sized enterprises, determining which assets qualify and how to calculate the amount can appear complicated.

Without clear guidance or accounting support, Zakat al-Mal may be delayed or unintentionally missed. Experts say simple calculation frameworks and digital tools could help companies integrate Zakat al-Mal into routine financial reviews rather than treating it as a separate exercise.

How Zakat Al-Mal Is Calculated

Zakat al-Mal on business assets is generally based on working capital, which refers to the liquid wealth used in day to day operations. Once the nisab threshold is met and assets are held for one lunar year, Zakat al-Mal is calculated at 2.5 percent of net zakatable assets.

Assets typically included are cash and bank balances, inventory and stock, retained profits, money owed by customers and short term investments.

Before calculating the amount, companies may deduct immediate liabilities such as short term debts, supplier payments due and bills or expenses payable. Long term fixed assets such as buildings, machinery and office equipment are generally not subject to Zakat al-Mal.

Basic formula:
Zakatable Assets – Immediate Liabilities = Net Amount
Net Amount × 2.5% = Zakat Payable

The minimum threshold for Zakat al-Mal in the Maldives was revised in August 2025 to MVR 11,191.95, calculated based on the market value of silver. Any wealth equal to or above this amount that is maintained for one lunar year becomes subject to Zakat al-Mal at the standard rate.

The Economic Role of Zakat Al-Mal

When companies pay Zakat al-Mal consistently, the impact extends beyond individual giving. Zakat al-Mal can support vulnerable households, livelihood initiatives and education programmes, helping circulate wealth within communities.

From an economic perspective, Zakat al-Mal functions as a redistribution mechanism that strengthens consumption at the grassroots level while supporting social stability. The steady rise in national collections indicates growing awareness, yet analysts say structured participation from the private sector could significantly expand its economic impact.

Closing the Awareness Gap

Observers say the current awareness gap represents both a challenge and an opportunity. As Maldivian companies grow in scale and complexity, integrating Zakat al-Mal into financial literacy initiatives could unlock substantial social value.

With clearer guidance and accessible tools, Zakat al-Mal has the potential to shift from an overlooked obligation to a standard component of responsible business culture, ensuring that growth is accompanied by meaningful social contribution.