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Allaah has spoken about zakaah funds in the verse (interpretation of the meaning):
“As-Sadaqaat (here it means Zakaah) are only for the Fuqaraa’ (poor), and Al‑Masaakeen (the poor) and those employed to collect (the funds); and to attract the hearts of those who have been inclined (towards Islam); and to free the captives; and for those in debt; and for Allaah’s Cause (i.e. for Mujaahidoon — those fighting in a holy battle), and for the wayfarer (a traveller who is cut off from everything); a duty imposed by Allaah. And Allaah is All-Knower, All-Wise”
[al-Tawbah 9:60]
The majority of scholars are of the view that what is meant by the phrase “and for Allaah’s Cause” is jihad for the sake of Allaah.
See the answers to questions no. 21805 and 6977.
Based on that, it is not permissible to build schools or mosques or musallas (prayer rooms) with zakaah funds.
The same applies to Qur’aan competitions; zakaah funds should not be spent on them. There are many ways of doing good that can help these projects, such as giving voluntary charity (sadaqah), establishing waqfs and giving gifts.
Shaykh Ibn Jibreen (may Allaah preserve him) was asked: We have a group which is undertaking a major project, which is to build a jaami’ mosque and an Arabic Islamic school in which there is a section just for memorizing the Holy Qur’aan, and a medical clinic. Is it permissible for this organization to accept zakaah funds for this project?
He replied: The basic principle is that zakaah may only be given to the eight categories mentioned in the Qur’aan, which are: the poor, the needy, those who work to collect zakaah, to attract those whose hearts inclined towards Islam, slaves who have a contract of manumission, debtors, mujaahideen and wayfarers. Some scholars are of the view that charitable projects come under the heading of “for the cause of Allaah”, but the preferred view is that this refers to jihad only.
Based on this, you should look for funds other than zakaah for this project. And Allaah knows best. Fataawa al-Shaykh ibn Jibreen.
It says in Fataawa al-Lajnah al-Daa’imah (9/447): With regard to Qur’aan schools, if the zakaah-giver gives it to one of the people in charge of this school for him to give it to poor students and others, that is permissible, even if it is transferred to them from one country to another, if transferring it will serve some interest. But if the zakaah-giver spends it on the school’s budget so that it will be spent on teaching Qur’aan and religious knowledge, that is not permissible. End quote.
Shaykh Ibn ‘Uthaymeen (may Allaah have mercy on him) was asked: Is it permissible to spend zakaah on building mosques and schools and on places for teaching the Holy Qur’aan?
He replied: This is a matter concerning which there is a difference of scholarly opinion, which stems from different interpretations of the aayah in which Allaah says (interpretation of the meaning): “and for Allaah’s Cause” – is what is meant everything by means of which a person may draw closer to Allaah of righteous deeds which serve the public interest, or does it mean fighting for the sake of Allaah only? It seems to me that what is meant is fighting for the sake of Allaah only, because this is what is known when the phrase is used in general terms, and because if we assume that it is general in meaning, then there would be no point in the restriction reflected in the words “As-Sadaqaat (here it means Zakaah) are only for…”. And because restricting it to fighting is more on the safe side, and whatever is more on the safe side is more appropriate to be followed.
With regard to what the questioner referred to of building schools and so on, these are good deeds which people are encouraged to do. They may be spent on from other charitable sources.
End quote from Fataawa Noor ‘ala al-Darb
And Allaah knows best.