Bayt al-mal (بيت المال) is an Arabic term that is translated as "House of money" or "House of wealth". Historically, it was a financial institution responsible for the administration of taxes in Islamic states, particularly in the early Islamic Caliphate. It served as a royal treasury for the caliphs and sultans, managing personal finances and government expenditures. Further, it administered distributions of zakat revenues for public works. Modern Islamic economists^[who?] deem the institutional framework appropriate for contemporary Islamic societies.

Bayt al-mal was the department that dealt with the revenues and all other economical matters of the state. In the time of Muhammad, there was no permanent Bait-ul-Mal or public treasury. Whatever revenues or other amounts were received were distributed immediately. The last receipt during the life of the Prophet was a tribute from Bahrain amounting to 800000 dirham which was distributed in just one sitting. There were no salaries to be paid, and there was no state expenditure. Hence the need for the treasury at public level was not felt. In the time of Abu Bakr as well there was no treasury. Abu Bakr earmarked a house where all money was kept on receipt. As all money was distributed immediately the treasury generally remained locked up. At the time of the death of Abu Bakr, there was only one dirham in the public treasury.

According to Rahman, the word 'bayt mal al-muslimin' (or 'bayt mal-Allah') referred originally to the building in early Muslim history where war spoils and other public properties of the caliphate were stored and re-distributed to the community, but over time the term evolved to refer to the societal institution owning such public properties of the Muslims, and hence encompasses the authority in control of the state's public revenue and expenditures.

In the time of Umar, things changed. With the extension in conquests money came in larger quantities, Umar also allowed salaries to men fighting in the army. Abu Huraira, who was the Governor of Bahrain, sent a revenue of five hundred thousand dirhams. Umar summoned a meeting of his Consultative Assembly and sought the opinion of the Companions about the disposal of the money. Uthman ibn Affan advised that the amount should be kept for future needs. Walid bin Hisham suggested that like the Byzantines, separate departments of Treasury and Accounts should be set up.

After consulting the Companions, Umar decided to establish the Central Treasury at Madinah. Abdullah bin Arqam was appointed as the Treasury Officer. He was assisted by Abdur Rahman bin Awf and Muiqib. A separate Accounts Department was also set up and it was required to maintain record of all that was spent. Later, provincial treasuries were set up in the provinces. After meeting the local expenditure, the provincial treasuries were required to remit the surplus amount to the central treasury at Madinah. According to Yaqubi, the salaries and stipends charged to the central treasury amounted to over 30 million dirhams.

A separate building was constructed for the royal treasury by the name bait ul maal, which in large cities was guarded by as many as 400 guards. In most of the historical accounts, it states that among the Rashidun caliphs, Uthman ibn Affan was first to struck the coins, some accounts however states that Umar was first to do so. When Persia was conquered, three types of coins were current in the conquered territories, namely Baghli of 8 dang; Tabari of 4 dang; and Maghribi of 3 dang. Umar ( according to some accounts Uthman ) made an innovation and struck an Islamic dirham of 6 dang.

The concepts of welfare and pension were introduced in early Islamic law as forms of Zakat (charity), one of the Five Pillars of Islam, under the Rashidun Caliphate in the 7th century. This practice continued well into the Abbasid era of the Caliphate. The taxes (including Zakat and Jizya) collected in the treasury of an Islamic government were used to provide income for the needy, including the poor, elderly, orphans, widows, and the disabled. According to the Islamic jurist Al-Ghazali (Algazel, 1058–1111), the government was also expected to stockpile food supplies in every region in case a disaster or famine occurred. Thus, according to Shadi Hamid, the Caliphate can be considered the world's first major "welfare state".

During the Rashidun Caliphate, various welfare programs were introduced by Caliph Umar.^{[additional citation(s) needed]} Umar himself lived "a simple life and detached himself from any of the worldly luxuries," like how he often wore "worn-out shoes and was usually clad in patched-up garments," or how he would sleep "on the bare floor of the mosque." Limitations on wealth were also set for governors and officials, who would often be "dismissed if they showed any outward signs of pride or wealth which might distinguish them from the people."^{[additional citation(s) needed]} This was an early attempt at erasing "class distinctions which might inevitably lead to conflict." Umar also made sure that the public treasury was not wasted on "unnecessary luxuries" as he believed that "the money would be better spent if it went towards the welfare of the people rather than towards lifeless bricks."^{[additional citation(s) needed]}