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Need to streamline Zakat & Sadaqah administration in the world

Dr Syed Zafar Mahmood, President, Zakat Foundation of India

Circulation of wealth: Zakat & Sadaqah
Bringing about economic equality through circulation of wealth in the society is one of the fundamental objectives of Islam. The instrumentality prescribed to achieve this goal is popularly known as Zakat that is considered, like Namaz or Salah, as a prescribed mode of mandated worship. Zakat is yearly donation of 2.5% of the individual's wealth plus annual savings. The eight heads of distributing Zakat are defined in chapter 9 verse 60 of the holy Quran. These are (i) the poor, (ii) the needy, (iii) those employed to administer the funds, (iv) those whose hearts have been recently reconciled to Truth, (v) those in bondage (literally and figuratively), (vi) those who are in debt, (vii) in the cause of God and (viii) for the stranded traveler. Such deserving persons are identified and helped by individual or organized effort.

A deeper understanding of Quran, however, reveals a wider methodology of the circulatory mechanism of the society's wealth. As against Zakat the term Sadaqah has a more far-reaching connotation. In the above-referred verse 9.60 also, the term used to indicate charity is Sadaqah though, as per general consensus, this specific verse has been accepted the world over as the divine instruction for Zakat heads. On the other hand, Sadaqah is ordinarily considered as optional charity and most of the Muslims - though erroneously - do not attach much importance thereto except sporadically giving away very small amounts (much less than one percent) of their financial holdings.

Qulil Afwa
In this context we must appreciate that if the economically higher ranked 15-20% of the community contributes only 2.5% of its wealth and savings that would not suffice to lift the remaining 80-85% of the people to a higher economic status aspiring to be in the vicinity of the one enjoyed by the top 15-20%. That is the reason why God has emphasized the significance of voluntary charity that is broadly referred to by Muslims as Sadaqah. But here is a catch. Most of us Muslims are not aware that God has also prescribed a directive principle for us to decide as to how much we should volunteer to donate as Sadaqah on top of Zakat. Here comes the principle of Qulil Afw as indicated in the Quran (2.219). Says God: O Prophet (S), they ask you as to how much should they spend in the cause of Allah; say, whatever remains after taking care of yourself and your dependents. Thus, God has minced no words in His prescription. In fact, before closing the conversation, He adds, "Thus Allah makes clear to you the verses of revelation so that you give thought."

In this way, Islam's mechanism of redistributing the community's earnings and wealth begins from Zakat and completes with 'Sadaqah to the extent of Qulil Afw'. Daily five times prayers generally consume not more than one hour of the individual. But these prayers provide the spiritual skeleton on which the human body must rest during the remaining 23 hours. Likewise, Zakat is the fundamental indicator to facilitate the comprehensive human understanding and action. The spirit of Zakat must permeate the remaining 97.5% of the individual's earnings, savings and wealth. God says, out of that, spend on yourself and your dependents as much as is required, but whatever remains does not belong to you and must be spent on those who need to be helped. Such a matrix of compulsory and benevolent charity would keep the community economically robust. However, meshing with the broader divine mandate, it is the extent of voluntary charity that would decide the worth of the individual in the divine evaluation.

Islamic charity matrix: panoramic view
Being aware of this panoramic appreciation of Islam's emphasis on charity yet, for purposes of linguistic convenience, naming it largely as Zakat, the world administrators of Islamic charities assembled in the Indonesian port city of Banda Aceh recently (8-10 June 2015) and mutually agreed to the core principles for Zakat's good governance, safety net, strong legal foundation, international collaboration, risk management and financial integrity. The draft of these principles was discussed, debated and amended at the international seminar. Thus the following was agreed to.

Core principles of Zakat administration
The Zakat organizational activities must comply with the Shariah regulations (under the watchful eye of a Shariat advisory body) as well as the country's constitutional and legal requirements; it should cooperate with the authorities concerned. Latest accounting standards and integrated tools of information technology must be deployed to collect, process, disburse, monitor and analyze the receipts and expenses. These may include Zakat, Infaq, Sadaqah and other similar religious charitable funds. The amounts pertaining to the Corporate Social Responsibility (CSR) fund may be classified as Infaq and may also be collected and managed by the same organization that should have a comprehensive internal control system. The Zakat organization should ensure standard book-keeping and preparation of financial statements in accordance with the accounting practices that are widely accepted at the national and international levels. The accounts must be annually audited. The financial statement should be issued annually to the public and should bear an independent external auditor’s opinion. The activities of the organization must be regularly reflected on its website for use by the general public. The administrators need to be properly qualified, trained, experienced and of proven integrity. All required legal reporting to the Government must be punctually complied with. Manpower must be honest, trustworthy, upright, and virtuous. They should be having character, integrity and the basic knowledge of Shari'at and financial accounting. Instances of administrative or financial indiscipline need to be firmly dealt with in time; these may include imposing fines, penalties and sanctions. The administrative and personnel cost should not exceed 1/8th or 12.5% of gross amount collected.

Trained personnel
The Board should approve, actively direct and oversee the implementation of the prescribed policy and rules and maintenance of Islamic culture and values through the prescribed code of conduct. The quality of officers needs to be ensured by insisting on proper certification and should be improved through in-service training. They should study the prevailing price index and should accordingly announce the non-zakatable exemption limit (nisab) depending upon the sources of income or the extent of property accumulation in the light of the shari’ah. It should have appropriate policy and process for regularly evaluating the various types of zakatable assets and their classification. It should make the collection proactively. And should advise regarding the period of normal Zakat donation as well as in times of disaster. It should identify the Zakat liability from new forms of wealth not known in the early days of Islam, e.g. the joint-stock company or corporation.

Consumptive & Productive Programs
The organization should formulate policies and processes for utilizing the Zakat, Sadaqah, Fitra, Infaq for the prescribed beneficiaries. It should have proper financial planning, recording and management to prevent mismatch of fund allocation. The donated amount should be utilized for both consumptive and productive programs. Consumptive programs aim to fulfill short term basic needs of mustahiks (deserving persons) while productive programs aim to empower the mustahiks to cultivate long term socio-economic resilience. The inter se proportion of consumptive and productive programs should be periodically decided on the basis of socio-economic and environmental analysis of the area of operation. The organization should aim at targeted higher reading of the social benefit indicators that must be achieved in the planned timeframe.

Priority scale & Hadd-al-Kifayah
The Zakat organization should devise a suitable procedure to decide a priority scale of the eight prescribed heads of expenditure. The poor (fuqara) and the needy (miskeen) are the most needy groups that must be given the first priority and large amount in the distribution of zakat.

Taking into account the macroeconomic conditions of the area of operation the Zakat organization should prepare a priority scale of recipients through poverty level or the calamity impact, as the case may be. It may review the range of activities by identifying a clear definition and assessment of the eight heads of expenditure. It should have adequate socialization and education programs to enhance the public awareness about Zakat. It should adopt a standard 'hadd-al-kifayah' representing adequacy to meet the individual requirements and may, for this purpose, collaborate with other similar facilities such as Islamic banking and Awqaf. The Zakat organization should have an appropriate internal process for preempting and dealing with potential fraud, technical failure of the IT system, and any other factors that are likely to vitiate the normal organizational operations.

Consensus & adoption
These core principles will also be shown to well known Islamic international bodies like the Islamic Development Bank seeking their concurrence and will then be passed on to all Islamic countries and societies to be considered for adoption and adherence.