The role of Islamic social financing in humanitarian action

The recent Briefing Paper from Global Humanitarian Assistance ‘An Act of Faith: Is Islamic charitable giving a promising new resource for future humanitarian assistance?’ makes for interesting and pertinent reading. The very nature of the question that it asks points to a paradigm shift in thinking with regards not only to fundraising for humanitarian causes but ultimately program implementation as well. The former to some extent determines the latter in terms of resource allocation and implementation.

We are all too aware of the number and scale of humanitarian crises facing our world today, not least in Syria where an estimated 220,000 people have died in the four year conflict at a rate of more than one death every ten minutes and now in Yemen. These spiralling needs mean we also have a record shortfall in assistance with US$7.5billion of humanitarian funding requirements going unmet last year. More than ever, humanitarians are having to start thinking creatively about how humanitarian assistance is raised, processed and used.

One thinking that has emerged over the last few years has been the potential for Islamic Social financing led by zakat. Islamic financing is a surprisingly underexplored territory. Surprising because previous estimates suggest that anywhere between US$200 billion and US$1 trillion is spent in the form of Islamic charitable giving (zakat) across the Muslim world each year, and the Global Humanitarian Assistance (GHA) programme’s research published today indicates that this area of finance is potentially in the hundreds of billions of dollars, with a significant proportion already going on humanitarian efforts.

These numbers speak not only to the duality of increasing religiosity and wealth in the Muslim world, but also the globalisation of increasing poverty made more immediate through social media. It is estimated that ¼ of the Muslim world is living on less than $1.25 a day (calculated by IRIN based on 2011 HDI) with new spaces opening up in the Muslim world such as Somalia, Syria, Mali (and so on) for humanitarian and peace-building responses.

The concept of charity is central to social justice, which is a sacred value in Islam and a central tenet of the faith. Indeed the Qur’an considers an act of charity as more than just a good deed because of its function in balancing social inequalities. The Qur’an also has numerous references to the importance of creating a just society and provides a framework for justice in inter-personal relationships, toward the poor and needy, and connections between communities and nations.

Zakat, the mandatory Muslim practice of giving 2.5% of one’s accumulated wealth for charitable purposes every year, is one of the main tools of Islamic social financing. It is explicitly intended to reduce inequality and is widely used in Muslim countries to fund domestic development and poverty-reduction efforts. There are clear parallels to be drawn between the eight individual categories of eligible recipients of Zakat listed in the Qur’an and people in need of humanitarian assistance.

The GHA findings show that it is currently impossible to accurately find out how much zakat is being collected globally, where it is being spent, and what opportunities it could present for the humanitarian world. With estimates ranging from the tens to hundreds of billions of dollars, and only a handful of countries formally reporting a proportion of the zakat that is given by their populations, there is a lot of work to do.
However the World Humanitarian Summit does offer an opportunity to take on the challenges to discuss as it strives to seek alternate sources of funding. Islamic Social Finance contributions have to be part of the discussions of humanitarian funding going forward. The task for the WHS is to offer models of operation and partnership.

this originally appeared here

The Role of Islamic Social Financing in Humanitarian Action

The recent Briefing Paper from Global Humanitarian Assistance 'An Act of Faith: Is Islamic charitable giving a promising new resource for future humanitarian assistance?' makes for interesting and pertinent reading. The very nature of the question that it asks points to a paradigm shift in thinking with regards not only to fundraising for humanitarian causes but ultimately program implementation as well. The former to some extent determines the latter in terms of resource allocation and implementation.

We are all too aware of the number and scale of humanitarian crises facing our world today, not least in Syria where an estimated 220,000 people have died in the four year conflict at a rate of more than one death every ten minutes and now in Yemen. These spiralling needs mean we also have a record shortfall in assistance with US$7.5billion of humanitarian funding requirements going unmet last year. More than ever, humanitarians are having to start thinking creatively about how humanitarian assistance is raised, processed and used.

One thinking that has emerged over the last few years has been the potential for Islamic Social financing led by zakat. Islamic financing is a surprisingly underexplored territory. Surprising because previous estimates suggest that anywhere between US$200 billion and US$1 trillion is spent in the form of Islamic charitable giving (zakat) across the Muslim world each year, and the Global Humanitarian Assistance (GHA) programme's research published today indicates that this area of finance is potentially in the hundreds of billions of dollars, with a significant proportion already going on humanitarian efforts.

These numbers speak not only to the duality of increasing religiosity and wealth in the Muslim world, but also the globalisation of increasing poverty made more immediate through social media. It is estimated that ¼ of the Muslim world is living on less than $1.25 a day (calculated by IRIN based on 2011 HDI) with new spaces opening up in the Muslim world such as Somalia, Syria, Mali (and so on) for humanitarian and peace-building responses.

The concept of charity is central to social justice, which is a sacred value in Islam and a central tenet of the faith. Indeed the Qur'an considers an act of charity as more than just a good deed because of its function in balancing social inequalities. The Qur'an also has numerous references to the importance of creating a just society and provides a framework for justice in inter-personal relationships, toward the poor and needy, and connections between communities and nations.

Zakat, the mandatory Muslim practice of giving 2.5% of one's accumulated wealth for charitable purposes every year, is one of the main tools of Islamic social financing. It is explicitly intended to reduce inequality and is widely used in Muslim countries to fund domestic development and poverty-reduction efforts. There are clear parallels to be drawn between the eight individual categories of eligible recipients of Zakat listed in the Qur'an and people in need of humanitarian assistance.

The GHA findings show that it is currently impossible to accurately find out how much zakat is being collected globally, where it is being spent, and what opportunities it could present for the humanitarian world. With estimates ranging from the tens to hundreds of billions of dollars, and only a handful of countries formally reporting a proportion of the zakat that is given by their populations, there is a lot of work to do.

However the World Humanitarian Summit does offer an opportunity to take on the challenges to discuss as it strives to seek alternate sources of funding. Islamic Social Finance contributions have to be part of the discussions of humanitarian funding going forward. The task for the WHS is to offer models of operation and partnership.

(this was originally published here for the World Humanitarian Summit)

This originally appeared on Huffington Post

Understanding the role of ‘Zakat’ in humanitarian response

Zakat’ is the Muslim practice of charitable giving based on accumulated wealth. It is one of the five pillars of Islam and is obligatory for all Muslims who are able to do so. The past 30 years has seen a growing interest in humanitarian activity among Muslims as part of expressing their spiritual obligations of Zakat.

There is little to no information available on the use of Zakat in humanitarian response. However, estimates suggest that it could be significant in terms of both volume and potential impact upon humanitarian response.

The GHA Programme’s recent report Humanitarian assistance from non-state actors: What is it worth? briefly refers to Zakat as a potentially significant yet largely untapped source of funding for humanitarian assistance. Dr Jemilah Mahmood and Amjad Mohamed Saleem explore this issue further.

UNDERSTANDING CHARITY AND ZAKAT IN ISLAM

The recent report by the Global Humanitarian Assistance (GHA) Programme: Humanitarian Assistance from Non-State Actors: What is it Worth? makes interesting and pertinent reading, pointing to a paradigm shift in thinking around both humanitarian funding and programme delivery as new non-state actors have emerged as key players alongside traditional institutional actors. Here we explore the potential role of ‘Zakat’ in humanitarian assistance as a significant form of non-state humanitarian funding.

The concept of charity is central to social justice, which is a sacred value in Islam and a tenet of the faith. Indeed the Qur’an considers an act of charity as more than just a good deed because of its function in balancing social inequalities. The Qur’an also has numerous references to the importance of creating a just society and provides a framework for justice in inter-personal relationships toward the poor and needy, and connections between communities and nations.

Muslim non-governmental organisations (NGOs) and other Islamic charitable institutions are therefore seen as instruments of social justice, and are part of the theological, intellectual and cultural heritage of the Muslim society. The instruments are divinely entrenched in the teachings of Islam, as illustrated in the following verse from the Qur’an: “If anyone saved a life it would be as if he had saved the life of the whole of mankind…’ (5:32). It is these types of teachings that have inspired acts of charity, concern for others and the provision of social welfare to be an integral role in Muslim societies for the last 1400 years, as without them faith is incomplete.

Charity in Islam, in the traditional sense of a transfer of material resources from the rich to the poor, falls into two categories in Islam: voluntary (Sadaqah) and obligatory (Zakat). These practises are supposed to empower communities and address their needs sufficiently enough to lift them out of their vicious cycle of poverty.

CHALLENGES FACED IN USE OF FUNDS COLLECTED THROUGH THE ZAKAT PROCESS

There is no shortage of funds for charitable causes coming from the Muslim world. The issue is not about the amount to be collected but what is done with it. A study in 2012 has estimated that every year, somewhere between US$200 billion and US$1 trillion are spent in “mandatory” alms and voluntary charity across the Muslim world. In fact, Islamic financial analysts estimate that “At the low end of the estimate, this is 15 times more than global humanitarian aid contributions in 2011 of $13 billion (UN Financial Tracking System)”. However, as economist Habib Ahmed calculated in 2004 – Muslim countries could lift all of their poor people out of poverty with only a third to a half of all potential Zakat collections.

These numbers speak not only to the duality of increasing religiosity and wealth in the Muslim world, but also to the globalisation of increasing poverty. It is estimated that one-quarter of the Muslim world is living on less than $1.25 a day (calculated by IRIN based on 2011 Human Development Index) with increasing needs for humanitarian response, recovery and peace-building in the Muslim world from Somalia, Syria, Mali among many other countries.

However in recent times, there has been a lack of understanding (and spirit) with regards Zakat (and Sadaqah). Zakat is largely regarded as charitable giving and its potential to go one step further and empower communities has not been adequately realised. As a result, the wide breadth of possibilities, which includes supporting non-Muslims; the levying of administration costs for the collection of Zakat; vital infrastructure projects; peace building and human trafficking initiatives remain grossly under funded and unexplored with Zakat. Herein lies the major challenge of balancing the role of Zakat in its conventional understanding with the contemporary demands of society today.

THE WAY FORWARD

If we are to move forward in terms of really contributing to humanitarian and development initiatives, we need to evaluate and understand the empowering concepts of Zakat in order to develop new models for implementation that are not only congruent with the times but address the empowering aspects of Zakat. At the end of the day, charity in Islam is about redistributive justice as the hoarding of wealth is not permissible and carries penalties if found guilty of such practice.

Private donors – including Muslim NGOs and other Islamic charitable institutions involved in the allocation of funds collected through Zakat – need to move away from the idea that humanitarian response is merely an act of charity and philanthropy, but a tool for empowering communities to build resilience to poverty and humanitarian assistance.

this originally appeared here