The Pareto Principle
Mar 01, 2024
Today we are going to talk about a topic that I am not sure a lot of you are aware of, considering I didn’t even know about it until now.
This is so exciting to me, because even being well-versed in finance, I wasn’t familiar with this particular principle, and I think it’s going to be very useful for you!
Let’s discuss the Pareto principle…and what it has to do with the concept of zakat in Islam.
What is the Pareto Principle?
The Pareto principle is actually a phenomenon that was observed and documented within the last century. It typically dictates that 80% of consequences come from 20% of causes.
For example, 20% of the richest people on the planet have 80% of the total wealth on the planet. In the technology sector, they noticed that if you were to solve 20% of bugs in a particular software, 80% of the problems went away.
Zakat and the Pareto Principle
So how did I match the Pareto principle with the concept of zakat?
It's very simple. Typically, the Pareto principle dictates that 20% of causes resulted in 80% of consequences. And if you apply this in your life, It's mind-blowing how Zakat, which is only 2.5% of your wealth, can help us break through the Pareto principle and have a more equitable world.
If every single person on the planet were to give at least 2.5% of their wealth in zakat, or in charity, we would not have such an inequitable distribution of wealth in this world.
This is a genius method, because 2.5% is not a big deal to most of us, but the amount of change it can create is huge.
The Ripple Effect
If we were to take the wealth of 20% of the richest people on the planet and start distributing only 2.5% of that wealth amongst our immediate families and neighborhoods, it would have an impressive ripple effect.
It would end hunger. It would end poverty. It would have a massive ripple effect on economy.
Currently, the capitalistic society—which favors the rich and is all about making more money—does not take into consideration that the difference between the have and have-nots is rapidly increasing. The lust to accumulate more and more is creating an extremely unstable and inequitable world.
Our Communities Could Flourish
I personally feel that if you study Islamic finance, you will see a system that ensures community development rather than ensuring the demise of community over accumulation of wealth by the few.
If common sense prevails, we can see how this would benefit our world.
When a community is flourishing, we can eradicate many of the unfortunate events that leave people in generational poverty. We as a community would be a lot more successful, a lot safer, and a lot more content.
That said, I suggest looking into the concept of the Pareto principle, then match it to the Islamic principle of zakat and calculate how much of a difference only 2.5% of paying zakat on your wealth makes.
We are going to move forward as a society, inshallah, by the help of Muslim women who are confident and eager to invest.
For that purpose, I am creating a quiz that is going to identify your personality type and what kind of investments would suit you best. You can sign up for the waitlist below and get access to the quiz as soon as it’s ready!
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