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Zakah on stocks: some unsettled issues


  • Islahi, Abdul Azim
  • Obaidullah, Mohammed


Issues relating to zakah on equity shares are far from being settled if one considers the available fatawa and observed practices in many Muslim countries. The most basic questions pertain to the correct method of valuation of equity shares for the purpose of estimation of zakah liability. This paper reviews alternative methods of valuation and argues in favour of marketbased valuation. It also raises serious questions on the permissibility of exemption of fixed assets from zakah liability in the accounting based framework, notwithstanding its actual use in some Muslim countries. A market-based valuation framework is rooted in the notion of market efficiency, which dominates modern finance theories for over a century. The paper seeks to push forward the concept of "average price" as the basis of valuation as also of estimating zakah liability. It argues that the concept not only follows logically from the efficient market theory, but also is backed by sound Shari'ah evidence.

Suggested Citation

  • Islahi, Abdul Azim & Obaidullah, Mohammed, 2002. "Zakah on stocks: some unsettled issues," MPRA Paper 18631, University Library of Munich, Germany, revised 2003.
  • Handle: RePEc:pra:mprapa:18631

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    Cited by:

    1. Hifzur Rab & Syeda Anjum, 2011. "Financial interest causing problems of monetary transmission as evaluated by the Islamic alternative," Humanomics: The International Journal of Systems and Ethics, Emerald Group Publishing, vol. 27(3), pages 184-200, August.
    2. Salman Ahmed Shaikh, 2015. "Welfare Potential of Zakat: An Attempt to Estimate Economy wide Zakat Collection in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 54(4), pages 1011-1027.
    3. Shaikh, Salman Ahmed, 2010. "Proposal for a New Economic Framework Based On Islamic Principles," MPRA Paper 23000, University Library of Munich, Germany.

    More about this item


    Zakah tax; stock evaluatio; application of average price; Islamic economic;

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General


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