Zakat for Development (Z4D)

1. Zakat for Development(Z4D) RE-EXAMINING THE POTENTIAL FOR INCREASING THE CONTRIBUTION TO SOCIAL JUSTICE OF A CORE ISLAMIC INSTITUTION DR. JENNIFER BREMER AMERICAN UNIVERSITY IN CAIRO

2. Review of international models • Evolution of US zakat funds • Egyptian models • Diaspora fundraising as an opportunity Overall approach

3. What is zakat? A nontraditional perspective

4. Zakat: one of Islam’s 5 pillars • Obligatory annual donation • 2.5% of assets above those needed for a decent standard of living • Eight designated purposes • Most important: donations to the poor • Sometimes seen as core of Islamic public finance • Intended as redistributional, not only charitable What is zakat?

5. Often managed by direct giving: “hand-to-hand” • Overemphasis on how zakat is calculated as opposed to how it is USED • In Arab world, state institutions exist to channel it • Increasing use of nonprofit institutions to channel zakat in West and Asia • Zakat has huge potential to contribute to social justice and more equitable economic growth How is zakat managed?

6. Issues in managing zakat for development and accountability

7. Three issues in zakat management for development impact: • Can zakat be channeled through support institutions that manage donations, whether to individuals or to programs that combat poverty? • Is collection of zakat the preserve of the government? • Can zakat be used for program administration? Issues in zakat management

8. Other issues: • Accountability in donation and use of zakat • Interpretation of the categories in the modern era • Role of zakat in redistribution of wealth

9. Sufficient funds must be collected to meet the needs of at least the first two categories, the poor and the destitute, • Distribution of the funds must reach the appropriate beneficiaries, and • Impact of the funds received on the beneficiaries must actually be effective in raising their standard of living. Requirements for effective use of zakat to achieve economic impact

10. Sufficient funds must be collected to meet the needs of at least the first two categories, the poor and the destitute, • Distribution of the funds must reach the appropriate beneficiaries, and • Impact of the funds received on the beneficiaries must actually be effective in raising their standard of living. Requirements for effective use of zakat to achieve economic impact

11. 2. Distribution of the funds must reach the appropriate beneficiaries Emergence of more formal mechanisms in private sector may reflect increased complexity and reduced informal contacts between rich and poor. Requirements for effective use of zakat to achieve economic impact

12. 3. Impact of the funds received on the beneficiaries must actually be effective in raising their standard of living. • Has received much less attention • Traditional maxim that zakat should be managed so as to transform the zakat receiver (mustihaq) into a zakat donor (muzakki) • But how is this is to be achieved? • Arguably the crux of the matter Requirements for effective use of zakat to achieve economic impact

13. How can zakat be used for asset creation?

14. Accumulation of productive assets controlled by the poor KEY to eliminating poverty • Zakat’s fundamental value as a grant mechanism to support small enterprise • Importance of cumulative return over sustained periods • Implies continuing support over time, not one-off donations • Should also include advice, technical assistance from donors Application of zakat to asset creation

16. Recipient Donor impact Illustration of potential of zakat to achieve rebalancing and social justice

17. Recipient Donor impact Illustration of potential of zakat to achieve rebalancing and social justice

18. Recipient Donor impact Illustration of potential of zakat to achieve rebalancing and social justice

19. Illustration of potential of zakat to achieve rebalancing and social justice

20. Illustration of potential of zakat to achieve rebalancing and social justice

21. Illustration of potential of zakat to achieve rebalancing and social justice

22. International models for zakat management

23. Indonesian and Malaysian experiences • Introduction of corporate and public-private models • Emerging US and UK zakat funds • New practices in international giving – diaspora funding • Shift from traditional charity to incorporate greater support to sustainable poverty alleviation • Potential to mobilize greater zakat donation, • Increased transparency and accountability • Expanded scope for collaboration with community-based civil society groups and corporations • Increased impact of this central Islamic institution. International models

24. Source: Moneyjihad website and Powell (2009). Variations in legal structure for zakat across Muslim-majority countries

25. Source: Moneyjihad website and Powell (2009). Variations in legal structure for zakat across Muslim-majority countries

26. Diaspora giving and zakat

27. Emergence of formal institutions established by diaspora • Part of global movement to formalize Islamic giving – U.S., UK, other • Most active in South Asian communities reflecting size and more developed institutional structures in home countries • Strong transparency systems in US permit analysis based on tax reporting and annual reports, websites, etc. Evolution of US zakat funds

28. Growth of zakat collections, selected U.S. zakat organizations, 2001-2012

29. Asset growth by major zakat organizations in the U.S. 2001-12

30. Asset growth by major zakat organizations in the U.S. 2001-12

31. Research conducted by George Washington University – pioneering study of diaspora giving • Focus on Coptic community (tithing tradition) • 1559 respondents, 71% in US • Average remittances (including charity) around $5000/year • 95% indicated Egypt’s future important to them • Respondents most interested in making contributions to: • social development (80%) • economic development (69%) • political development (67%) Brinkerhoff and Riddle (2012) Egyptian diaspora fundraising context

32. Large diaspora institutions • Organized at local level (cities) • Conduct some charitable activities • But size of donations and use of individual as opposed to organized institutional structures unclear • May be more affected by post-9/11 concerns, but further research needed Next step – examination of Egyptian Muslim diaspora practices in the U.S.

33. Egyptian experience and model

34. Nasser Social Bank – first Islamic bank • Manages zakat funds established on national level but operated locally • Local oversight, but no public reporting • Extensive private donation • Emerging non-profit models for accumulating zakat and other donations • Some liberalization through fatwas Egyptian models -- overall

35. Isolated but potentially very important experiences • Tafahna al-Ashraf experience demonstrates potential to use zakat for self-financed, sustainable development over extended period (20 years+) • Examples identified in Qena and also in India, but not yet documented Egyptian models – self-help at village level

36. Started by local youth • Example of “self-help,” highly encouraged in Islam (guhoodzatiya) • Broad participation • Focus on income generation • Reliance on local generation of funds • Continual reinvestment over two decades • Eliminated poverty in the village Tafahna al-Ashraf – an inspiring success in local transformation

37. One of poorest villages in Delta prior to Z4D initiative • Mobilized entire village through formal consultation process • Began with one small project (chickens) and dispute resolution program • Successive 5-year plans launched range of income-generating, infrastructure, and educational projects (Azhari campus) • Active leadership by youth of the village • Substantial engagement/support for women’s enterprise Tafahna al-Ashraf model

38. Broad engagement to reach entire village • After 1st 10 years, all able-bodied in village employed • No one receiving zakat – zakat directed to support Azhari students and other villages • Azhari campus generated approx. $50,000 in local revenue annually by 2003 (latest info) Tafahna al-Ashraf model

39. Main concluding points Plus two commercial announcements!

40. Institutional use of the “amil’s share” – facilitates institutional formalization, but other approaches possible • Use of zakat for construction, e.g., schools, hospitals • Use of zakat for organized assistance to SMEs and poor communities – potential for greatest impact Unresolved issues in zakat management – how zakat can be used for development within doctrinal limits

41. Z4D Main point: zakat has huge potential as a tool for social justice AND GROWTH

42. Zakat for Development – Z4D • Has tremendous potential for social transformation • Need to expand institutional experimentation in MENA and elsewhere • Local models exist for replication, but need to be documented and studied • Potential channel for engaging diaspora in broad-based development processes Main points

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