In Search of Debt Free Economic Development: The Role of Zakah and Awqaf Funds

Abstract

Most Islamic countries today have a large amount of external debt or public borrowing. The specific reason for public borrowing is that most Islamic countries still need enormous financial resources for building economic infrastructure in order to alleviate poverty. However, in spite of huge amounts of public sector expenditure financed through borrowing, most of these countries have not been able to alleviate poverty at all. The majority of the population in these countries are suffering an extremely low literacy rate and they are living in underdeveloped rural areas with extremely limited transport facilities, severely deficient health care facilities, very serious housing problems and no civic facilities, such as a lack of safe drinking water, electricity, sewerage systems etc. This would seem to indicate that external debt does not play a role in enhancing economic development. As a result, large external debts have become a severe chronic problem in these countries. In an attempt to overcome the large external debt problem, this paper suggests that these countries use internal funds, such as zakah and awqaf funds to accelerate economic growth.
Keywords: Awqaf, Economic development, Poverty reduction, Public expenditure, Zakah.