Use of Blockchain Technology in addressing the issues in Zakah Collection and Disbursement in Pakistan: A Conceptual Model

Abstract

Abstract

One of the five pillars of Islamic law is Zakah, which applies to all qualified Muslims and demands that they contribute a portion of their income or wealth for the benefit of the Muslim community. Muzzaki  prefers to pay Zakah to Mustahiq  directly due to perceived ineffectiveness of Zakah institutions in the distribution and management of funds. As a result, there is a lack of confidence between Muzzaki and Zakah institutions. In this context, a blockchain-based Zakah management model is proposed in this paper with the intention of paving the way for Zakah institutions to operate in a digital and innovative ecosystem within block-chain components which is more reliable, trust worthy, and transparent. This study relies on qualitative approach to develop and describe the role of blockchain technology in Zakah organizations. Through the development of a conceptual model that combines the institution of Zakah management with the elements of blockchain technology and smart contracts, we have attempted in this research to highlight the significance of blockchain and the use of smart contracts in the management of Zakah. This study anticipates that the usage of blockchain technology will increase Muzakki's trust in Zakah institutions. Zakah institutions’ transparency, competency, and trustworthiness in Zakah management are the most important characteristics that influence public willingness to pay Zakah through Zakah organizations. As a result, incorporating block-chain technology into Zakah management can track the status of Zakah funds and make the distribution and transaction of funds more transparent.