Is it permissible for charitable organizations that collect Sadaqat (voluntary charity) and Zakat (obligatory charity) funds to allocate a portion of the Zakat funds for prizes in religious competitions, such as memorizing the Quran and Sunnah?

It is not permissible to disburse Zakat (definition) except to the eight categories mentioned in the Holy Quran. If the winner of the incentive award is among those eligible for Zakat, then it is permissible to give it to him; otherwise, it is not. Zakat is given to poor Muslims as prizes. As for disbelievers, it is not given to them if their obstinacy is known. It is not permissible to disburse Zakat for purposes other than the eight categories, such as public projects, schools, or mosques, because these are funded by donations and endowments.