On Estimates of how much Zakat there is
The most infuriating academic urban legend I have come across whilst doing my research.
Context:
I am researching the cost effectiveness etc. of starting a new organization which redirects zakat to effective charities. One part of that scoping process is to figure out what the market cap/fundraising ceiling within the zakat sector is. I thought this would be really easy because someone else must have already done this, so I googled it…
All over the internet, people repeatedly claim that every year that there is between $500Bn and $1Trn given as zakat. However there is (basically) never any citation for this claim anywhere you read it. If you do a load of rabbit-holling (which I’ve done so that you don’t have to—you’re welcome), you’ll discover that in the few instances when this claim has been cited, the citation leads to this paper[1].
After a couple of minutes and some control-F-ing, you’ll realize that the $500bn-$1trn estimate isn’t even mentioned in this paper.[2] The author, Stirk, claims that estimates of $200Bn-$1Trn have been cited, and then links to a web article . It seems like the estimate actually comes from this anonymous web-article, which attributes the estimate to an unnamed financial expert in Dubai.
At this point, you (and I) are both thinking to yourself : “It cannot possibly be true that every estimate of annual global zakat on the entirety of the English internet is based on this random unsubstantiated anonymous quote?!”. Well, it seems like this is true. And I’ve been looking for contrary evidence every week since December 2023, to no avail.
Sanity Checking the estimate:
I think it makes sense to sanity check the estimate people are using: can it even be possible that there is between $500Bn and $1Trn given as zakat every year? I think the answer (thankfully) is Yes!. Here are some ways to reverse engineer the estimate that are all quite plausible. Worth noting for the following calculations, I’m holding the number of Muslims constant at 2 billion, the average percentage of wealth due in zakat every year at 2.5%.
It doesn’t seem insane to suggest that on average, Muslims give $250-$1000 as zakat every year
Especially since the bottom ~5% of the wealth distribution probably don’t have to pay zakat.
Even if only the top 1% of the wealthiest Muslims were responsible for all zakat, that they’d be giving $25,000-$50,000 a year.
This would put their mean net-wealth at $1M-$2M. Seems reasonable (e.g. pages 21-26 of the 2013 credit Suisse wealth study suggested that 1.1% of the global population had net wealth of over $1M).
Could 2.5% of all Muslim wealth be $1Trn? That would mean that total Muslim wealth is $40Trn.
Global net-wealth is estimated between $400-700Trn. If Muslims are ~20% of total population, then they’d be worth ~ 20% of $400-700Trn, which is $80-140Trn.
Seems reasonable then that Muslims are worth at least $40Trn, which makes the $1Trn figure plausible.
Also seems plausible that the mean net-worth of Muslims is ~$20k.
Pessimistically however:
Some estimates I’ve seen that make the 500Bn-1Trn figure seem unlikely are that the US gives ~$2Bn, the UK ~1Bn, and Saudi ~$18Bn in zakat every year. These are probably 3 of the top 10 countries where I’d expect the net-worth of Muslims to be the highest. It seems really unlikely that the rest of the world would make up at least $480Bn.
On the other hand, most Zakat is not reported/informal, and the figures above are formally reported zakat donations.
Because Zakat is voluntary/unreported, we don’t know how much Muslims are actually giving, or how many Muslims are fulfilling their zakat obligations.
This means it could actually only be a small fraction (maybe 10%?) of Muslims who are actually giving zakat.
However Muslims are known to take their obligations very seriously, especially the 5 pillars of Islam, of which zakat is one
Muslims are also frequently proven to be the most philanthropically/charitably generous demographic in countries like the US and UK.
Overall
I don’t think there’s much reason to suspect that the $500Bn-1Trn figure is wildly incorrect, and actually it seems plausible to me based on estimate 3) that the figure is higher than $1Trn. However since there is no accountability mechanism and people tend to try very hard not to pay tax/zakat, it could also be quite a lot lower than $500Bn.I’d put my 90% confidence interval for global annual zakat at $350bn-$1.2Trn.
If you’d like to help:
I’d really be appreciative of any other ideas of ways to either dismiss the estimate above, or to come up with other BOTECs which seem to land in the same range[3].
I’m still looking for potential co-founders or contributors—if you’re interested or know someone who you think would be interested, please let me know !
- ^
And the author seems to have vanished into thin air—I’ve tried emailing the org which published the paper to see if they know how to get in contact, as well as trying to find her individually via linkedin etc, and no success.
- ^
although in the introduction the author does mention that a combination of countries which make up ~17% of the Muslim population contributed at least $22bn, which would extrapolate to only ~$130bn globally
- ^
(Please don’t suggest I go get country level data for every country and do modeling etc—the data doesn’t exist/isn’t reliable).
Thanks for sharing your calculations!
I’d recommend against thinking along the lines of what Muslim wealth would have to be to make the 1tr figure plausible, given that the figure seems to be made up. But I definitely agree with the idea of forming multiple estimates using different approaches.
Some ideas for getting a good figure:
The combined GDP of Organisation of Islamic Cooperation countries is 10tr, about 10% of global GDP. This does not include most muslims in countries where they are a minority (importantly, India, Europe and North America) but it does include non-muslims in OIC countries
Straight off the bat we can see that $1tr is implausible.
If we assume that OIC countries have 10% of global wealth, this would be $40-70Trn according to your estimate. This implies $1-1.75bn of wealth eligible for Zakat.
Where is all that wealth? Given that, as you say, a big chunk of wealth is help by the top 1%, I would guess that most of the wealth is in shares of companies, plus property and other physical assets. The value of such assets can easily be hidden or obfuscated by those who do not wish to pay Zakat on it.
It seems like Zakat is enforced by law in Saudi, and collected & used by the state(!) [source 1, 2]. So the $18bn figure is probably quite reliable.
Saudi GDP is about 1% of global GDP. Assuming Saudi therefore has 1% of global wealth (probably an underestimate because oil), and that 20% is a hard limit on the share of global wealth owned by muslims, I would guess 20*$18bn = $360bn is a very hard upper limit on global Zakat
More realistically I would assume that 10% of global wealth is owned by Muslims eligible for Zakat and that payment rates outside of Saudi are much lower—I’ll say 75% lower[1]. Then global Zakat would be $18bn*(1+9*0.25) = $85.5bn
Importantly, it seems like Zakat paid in Saudi is not influencable as it is kept by the state. Therefore my best estimate of the amount of influencable Zakat is $67.5bn worldwide.
As a sense-check: where are the Gaza billions? The war in Gaza was a huge huge issue in the Muslim world this past Ramadan, and presumably a lot of Zakat donations went to helping Gazans. If it was ins the tens or hundreds of billions (ie at least 10% of $200+bn), that would be $10,000s for each person in Gaza, which should be easy to spot. But it is not coming up in some brief googling.
I imagine the main factors are (1) simply underpaying or not paying because it must hurt to give away 2.5% of one’s wealth each year and (2) fudging by underrating one’s wealth (not counting or being naive about the value of one’s house, livestock, car etc.)
Yeah the assumption the author makes about Muslim wealth make no sense to me. One can actually look up the GDP of these countries!
I haven’t done any enough research to know how much this would affect the estimates but I do want to point out that zakat is calculated on wealth, and wealth is not the same thing as GDP (maybe you’re already aware of this and think that GDP is a good enough proxy to estimate wealth).
This seems high to me given that a lot of Muslim countries are quite poor and none are in the top 19 for global wealth.
Also, the middle east (probably main source of muslim wealth) has a total GDP of $5-7 T (acc to wikipedia), I’d be surprised if the rest of the world can make up the rest.
My two cents:
I shortly looked into where wealthy Muslims in Türkiye donate to for their zakat. A few people mentioned that one common way businesspeople pay their zakat is through paying bonuses to their employees. I saw quite a lot discussion of this in Islamic jurisprudence websites but I couldn’t identify someone explicitly doing that as people are discouraged from talking about their donations.
First of all, I love the idea of redirecting Zakat to the most effective charities, and regardless of the size of global Zakat, this seems neglected and a large opportunity. I do however think your estimates are off.
I refer to @Stan Pinsent for his great data, and that is basically my view on it too, but I wanted to add a couple of things to that.
Total yearly global philanthropy seems around 841 billion. 590 of which are remittances, which some don’t even see as philanthropy. More than 90% of philanthropy flows from wealthy countries that are either non-muslim or where a significant part of muslims are secular and/or don’t follow zakat rules.
I would put my confidence interval that Zakat is less than 350 billion USD at 90%. It seems incredibly unlikely that more than 30% of global philanthropy stems from Zakat for the reasons stated by Stan, and looking at global giving.
This is not hard data, but I’ve also run ad campaigns for large NGO’s, and they promote more during Zakat, and I know it was driving less than 10% of yearly donations for these charities (and one of these was a popular charity for muslims).
On 2. Have you reached out to AIM? Given their recent work in incubating new effective giving organisations they might be well equipped to support you.
Best of luck with this!
Executive summary: Estimates that Muslims give $500 billion to $1 trillion in annual zakat donations are widely cited but poorly sourced, though some back-of-the-envelope calculations suggest the true figure could plausibly be in that range.
Key points:
The $500B-$1T estimate for annual global zakat comes from an unsubstantiated quote in an anonymous web article, yet is widely cited without proper sourcing.
Rough estimates based on Muslim population, wealth distribution, and zakat obligations suggest the $500B-$1T range is plausible.
However, limited data on formal zakat donations from the US, UK and Saudi Arabia imply the global total is likely much lower than $500B.
Since most zakat is informal and unreported, the true figure is highly uncertain. The author’s 90% confidence interval is $350B-$1.2T.
The author seeks additional ideas and evidence to refine or challenge the existing estimates.
This comment was auto-generated by the EA Forum Team. Feel free to point out issues with this summary by replying to the comment, and contact us if you have feedback.
Calculating the rest of the world, geographically (2010 population numbers, 2022 GDP numbers):
242M in Sub-saharan Africa, GDP per capita ~$1600 (source)
275M in Southeast Asia, Indonesian GDP per capita is $5000 (source), so another
500M in South Asia, where GDP per capita is <$2000 (source)
195M in North Africa where GDP per capita is <$4000 (source)
155M in Central-West Asia (excl. Turkey) where GDP seems to be <$5000 (source)
74M in Turkey with a GDP of $14K (source)
This accounts for something like 87% of Mulisms in 2010. I believe this distribution is basically accurate in 2024 (or if anything, accounts for even more of the population because the main population growth comes from LMICs).
Cumulatively I’d expect that these regions could (being fairly generous) give maybe ~$206B per year (accounting for population growth from 2010 to present) if everyone was giving 2.5% of income, but I’d expect the number to be much lower.
Zakat is paid on wealth, not income, so GDP is not a great proxy. Globally there appears to be $450tr in wealth and $100tr in GDP, so perhaps multiplying GDP by 4.5 gives a decent estimate for wealth.
Also global GDPincreased 43%between 2010 and 2022.Oh thanks for the clarification, I didn’t realize that! I’d expect there to be less wealth in LMIC countries though—I assume the vast majority of wealth (not sure what reasonable numbers are here) is held in HIC’s and by HNWIs / corporations / governments in those countries.
GDP per capita numbers are 2022 estimates, didn’t make that clear earlier.
I’d also add that Zakat is paid on a certain portion of wealth that meets specific criteria, not on all wealth necessarily. For example, there is no obligation to pay Zakat on owned properties that are not used for commercial purposes, and the same applies to cars, among other items...
There are HUGE differences between Islamic scholars and sects on this issue.
This is a great idea Kaleem and addressing a gap that I’ve been looking at solutions for!
Beyond the issue of figuring out the market cap, what are your next steps? I’d be interested in seeing Zakat be redirected to effective charities while meeting the requirements for recipients.
I’d love to see this happen! What sort of help would you be looking for?