How to utilize Zakat donations? Guide for Islamic nonprofits

Sep 5, 2023
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Humza Irfan

Muslims give Zakat donation to fulfill one of their religious obligations ordained by Allah. It is a system of worship that brings blessings to the poorest of the poor. Zakat is a symbol of devotion towards Allah and it has the potential to create an equal and just world. The Quran mentions Zakat more than 80 times alluding to its importance as a means of worship. When someone gives Zakat they need to be sure that they are giving in the right manner and to the right charity. You can read more about how to pay Zakat.

This article focuses on the utilization of Zakat. Muslim-led nonprofit organizations are the main recipient of Zakat donations with some raising millions of dollars of Zakat donations each year. Collecting Zakat entails a huge responsibility because it HAS to be spent in the prescribed manner. Failure to do this may mean that the giver has failed in their attempt to fulfill one of their main obligations.

Are You Zakat Eligible?

Not all Muslim charities are Zakat eligible. It must be highlighted that Zakat can only be spent on eight masarif (recipients). These include al fuqara' (the poor), al masakeen (the needy), a’amileen e zakat (those who are appointed to collect Zakat), al-mu’allafah Qulubuhum (those whose hearts are to be reconciled; new Muslims and the friends of the Muslim community), fir-riqab (slaves who want to free themselves), al-gharimin (those who are overburdened by debt), fi sabilillah (in the cause of Allah), and ibnus-sabil (travelers stranded due to limited resources). If a charity is not supporting any one of these masarif, it cannot accept Zakat. Similarly, if you are wholly focused on providing animal welfare you cannot collect Zakat.

Since Zakat can only be spent on the welfare of the people, construction projects and capital expenditures cannot be undertaken with Zakat money. If your charity is involved in installing tube wells or constructing schools, or shelters, you are not eligible to accept Zakat for these projects and if these make up all of your activities, you cannot, as an organization, claim to be Zakat eligible. Some scholars, however, are of the view that Zakat can be spent on the construction of masajid as it pertains to fi sabililah. 

To be Zakat eligible nonprofits also need to maintain separate channels for collecting, handling, and utilizing Zakat. It should not be pooled with other donation instruments.

Make a Zakat Donation Policy

The Zakat policy reflects your commitment to the proper handling and utilization of Zakat. It spells out the internal rules and regulations and serves as a guideline for all employees. We recommend developing a policy tailored to your mission and operational needs. It should specifically highlight how the Zakat will be collected, where will it be spent, and what are the standard operating procedures.

Donors who want to give Zakat have every right to know about your internal procedures and if they conform to the rules laid out by Sharia. Sometimes donors will directly ask you about your policy. Failure to give a satisfactory response might compel them to give their Zakat elsewhere. To ensure you are seen as a legitimate Zakat-eligible charity, be sure to publish your Zakat policy on your website. This will help clear all apprehensions the donors may have when giving to your organization. 

It is also helpful to get the Zakat policy verified by an experienced scholar to ensure that you are complying with the rules laid out by Sharia. 

Develop a Zakat Screening Criteria

Since Zakat can only be spent on the eight masarif mentioned above, it is vital to have a robust screening process to ensure that the Zakat is indeed spent on its intended beneficiaries. A good way to start is by creating a form that allows you to seek vital information about your potential beneficiaries including their religion, background, income, assets/liabilities, and whether they are descendants of the Prophet Muhammad (PBUH). The response to each question will determine if the beneficiary is eligible to receive Zakat. If any one or more of the following conditions are true, one would not be eligible to receive Zakat:

  • The applicant is not a Muslim
  • Their wealth is equal to or greater than the nisab value
  • They do not fall into any of the eight prescribed categories
  • They are the descendants of the Prophet Muhammad (PBUH)
  • They are the immediate family member of the Zakat payers

As part of the process, nonprofits may seek proof confirming the veracity of the information provided. These may include bank statements, identification documents, household bills, etc. 

Sometimes when dealing with a humanitarian crisis it might not be possible to seek such detailed information from everyone. In that case, the Zakat administrators may use their best judgment to disperse Zakat to the right people. 

An additional screening process may involve getting a Zakat declaration form signed by the recipient. In this form, the potential recipient of Zakat solemnly states that they indeed deserve Zakat and grant permission to the nonprofit to collect (through themselves or through designated agents) Zakat for spending on them. This is especially needed when the beneficiaries have a long-term association with the nonprofit organization like in the case of schools, colleges, and medical institutes.

Keep Zakat Separate from the Rest of the Donations

When accepting Zakat, nonprofits should explicitly record the transaction as ‘Zakat.’ If the donor has not made their attention clear, the nonprofit should approach them and seek clarification. Zakat is paid with a clear intention in mind and if the recipient is a nonprofit tasked with disbursing Zakat, they should make ample efforts to record the transaction accordingly. 

Zakat donations cannot be invested in bank accounts or any other financial instrument. Care should be taken to place them in a separate account. No part of Zakat money can be utilized for meeting operational or general expenses. Maintaining a separate account will allow you to keep track of all Zakat donations and their appropriate utilization.

How Feeling Blessed Makes it Easier to Give Zakat?

Feeling Blessed helps donors give their Zakat, Sadaqa, and other forms of charities to more than 340 nonprofits. All organizations listed on the mobile and the web app are verified, registered charities. If you look at the charity profile you will be able to see which ones are accepting Zakat. You can conveniently calculate your Zakat using our Zakat calculator and make your disbursements according to the amount you owe. Nonprofits can easily get on board the app and immediately start collecting Zakat. If you are a nonprofit wanting to collect Zakat please register by clicking here. Nonprofits can also connect multiple bank accounts to ensure that Zakat is collected and utilized separately. 


Charities need to exercise great caution if they are accepting Zakat contributions. The collection, handling, and distribution of Zakat should be institutionalized. If you are accepting Zakat donations please ensure that you have an active Zakat distribution policy. All employees handling Zakat collections should be adequately trained to respect all rules. 

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