The power of zakat to fight poverty

Better use of Islamic giving could unlock billions of dollars in funding for sustainable development, writes Tariq Cheema.

What is Islamic giving?

Zakat is a pillar of Islam and a means of wealth distribution. Each year, all practising Muslims are required to donate 2.5 per cent of their cumulative wealth to the poor, in the form of zakat. Sadaqah is voluntary charity, and is given on an ad-hoc basis.

In humanitarian circles, zakat is the issue of the day. A concept that only a decade ago was largely unknown outside the Muslim world is today heralded as a partial solution to the deficit in global aid funding, with enormous potential to be leveraged and scaled.

To call this evolution a step change would be an understatement. In the wake of the 9/11 attacks, many Islamic charity organisations found themselves under suspicion. Stringent anti-terror legislation led to Muslim organisations being heavily scrutinized as potential fronts for terrorism and jihad, and in some cases discriminated against.

However, in the years since – and in lockstep with the growth in global humanitarian needs – this narrative has subsided. Now, there is rising recognition of the role that Islamic giving can play in delivering much-needed financing, for issues ranging from refugee aid to poverty alleviation.

This trend has been accompanied by a surge in zakat-focused funds. Organisations ranging from UNHCR, the UN’s refugee agency, to Save the Children, and UNICEF have dedicated Islamic philanthropy teams, in addition to sharia-compliant fundraising platforms and vehicles.

Enabled by technology, paying zakat is easy these days – credit cards, websites and mobile apps make the process seamless, and Muslims can shop around online for causes to donate to. Some platforms even offer zakat and sadaqah calculators so donors can gauge how much they need – or want – to pay and keep tally of their giving over the year.

With progress, however, come ethical questions. I increasingly see slick advertising campaigns from global organisations, designed to encourage Muslims to donate their wealth tax to a specific cause. Smaller charities cannot compete.

The result is that just a few bodies manage zakat money with substantial decisive power, making it ever more important that we monitor its social impact.

"Zakat is a considerable responsibility. We are all accountable for ensuring our giving is effective."

Islamic giving is estimated to be worth anywhere between $300bn and $1trn a year. This sum could transform the lives of millions around the world, if given effectively. It is my view that zakat should not be seen as an annual handout for the poor, but as a tool for development and to lift people out of poverty.

With better use of technology, we could collect and manage data around who is in need, how we distribute funds and monitor their impact – and create pathways for beneficiaries to become self-sufficient.

As an example, zakat qualifiers are typically poor and lack resources. Many are financially excluded. Mobile money solutions could be leveraged both to ensure zakat reaches its intended recipient – speedily and transparently – and, to grant access to mainstream banking services, empowering people to manage their money directly.

Imagine if zakat recipients knew that they would receive a certain amount of money every year directly into their account. That knowledge would shape their security and their approach to life decisions.

They might, for example, choose to send their children to school, invest in livelihood skills or begin a small business. Imagine, in time, receivers paying zakat rather than receiving it.

The UK’s National Zakat Foundation is just one example of how zakat can be used to empower recipients. As well as collecting zakat, the foundation distributes it via four funds, to which individuals can submit applications specific to their needs.

There is a hardship relief fund, to help with emergency payments; a housing fund, to pay rent, arrears, and council tax; funding for job training or qualifications; and an education fund to help with tuition fees. This type of localised giving addresses direct needs and helps individuals, creating a groundswell of impact over the longer term.

In Indonesia, the National Board of Zakat (BAZNAS) – the country’s sole official entity to manage zakat funds – has been using zakat to support smallholder farmers. It has recently partnered with the Jeddah-based Islamic Development Bank for a pilot initiative to integrate zakat with some of Indonesia’s existing anti-poverty and community-based development programmes.

As Muslims, we sometimes have a simplistic attitude to zakat. Many of us think that our responsibility ends the moment the money leaves our accounts. This is not the case. While some agencies put zakat to good use, many do not. Funds can be used haphazardly, with less-deserving people receiving multiple handouts from various sources, and others who are in more urgent need, nothing at all.

We need a collective effort to rethink and redefine the current distribution of zakat globally, to move away from viewing it as a form of emergency relief, and instead as a tool to alleviate poverty and promote socioeconomic sustainability.

Zakat is a considerable responsibility. We are all accountable for ensuring our giving is effective, and to work together to find a purposeful way forward. - PA