Zakat which literally means growth, extension and purificationis a premium (in most cases annual) on all forms of accumulatedproductive wealth and on a variety of agricultural produce. It iscalculated at various rates according to the nature of the asset orproduct, and is due to ‘the needy’ (Mustahqueen or Mustahiq forsingular) of the Muslim community.! It is one of the five basic tenetsof Islam and besides being an obligatory act of worship, it is a systemthrough which a Muslim society can eradicate poverty and inequalities[Qardhani (1981)]. In Pakistan till recent years people used to paytheir zakat to the needy on self-assessed basis Without involving statefunctionaries. However, following the Sunni Muslim view that collectionand disbursement of one of the functions of an Islamic state, a systemto this effect was introduced for the first time in Pakistan in 1980.Accordingly the collection of zakat on non-agricultural assets startedin June 1980 (Ramdall 1400) and that of ushr (i.e. zakat on agriculturalproduce) from Rabi season of 1983. The introduction of the zakat systemin Pakistan is indeed a unique experiment of transforming religiousideals in practical institutions. Given the experience of one decadenow, it would, therefore, be useful to see as to what extent the systemas practiced in Pakistan has the potential to eradicate poverty fromsociety. The present paper is an attempt in this ‘direction. It is drawnfrom an overall study of the zakat system in Pakistan based on primarydata collected through a random sample survey.