APER P BRIEFING AN ACT OF FAITH Humanitarian financing and Zakat AUTHOR: DATE: Chloe Stirk March 2015 EXECUTIVE SUMMARY Contents EXECUTIVE SUMMARY Executive summary 3 All of the world’s major religions contain world, or how it is spent globally. Yet data we • IDEOLOGICAL – such as how best to Introduction 4 some element of almsgiving, and faith plays have collected for Indonesia, Malaysia, Qatar, manage conflicting opinions on whether a key role in the funding and delivery of Saudi Arabia and Yemen, which make up 17% non-Muslims can benefit from Zakat and humanitarian response across the world. of the world’s estimated Muslim population,2a where it can be used. Glossary of key terms 5 While we cannot say how much religiously indicates that in these countries alone at least motivated giving takes place globally each US$5.7 billion is currently collected in Zakat The question of whether non-Muslims can 1. Faith and humanitarian assistance 6 year, it is clear that faith-based organisations each year. benefit from Zakat is central to discussions mobilise and channel a significant proportion concerning the compatibility of Zakat with of global humanitarian assistance, and are We estimate that the global volume of the humanitarian principles and will have 2. Zakat 7 actively involved in its delivery. In 2013, Zakat collected each year through formal an impact on efforts to increase What is Zakat? 7 faith-based organisations received and mechanisms is, at the very least, in the tens international humanitarian assistance delivered between US$420 million and of billions of dollars. If we also consider provided through Zakat. How is it collected? 7 US$434 million (15–16%) of all international Zakat currently thought to be paid through humanitarian assistance channelled through informal mechanisms, then the actual amount To begin to address these barriers, and 3. Relevance of Zakat to humanitarian response 8 non-govermental organisations (NGOs).1 available is likely to be much higher, and could so maximise the potential volume and potentially be in the hundreds of billions of effectiveness of Zakat for humanitarian Islamic countries and those with large dollars. By way of comparison, international assistance, interested parties need to focus 4. What is Zakat worth? 11 Muslim populations are also becoming more humanitarian assistance from government and efforts in five areas: significant humanitarian actors, as both private donors in 2013 totalled US$22 billion,3 CASE STUDIES: Saudi Arabia, Islamic Relief Worldwide 12 donors and recipients. Between 2011 and while official development assistance (ODA) 1) Humanitarian donors and agencies Untapped and growing potential scale of Zakat 13 2013, international humanitarian assistance from member countries of the Organisation should engage in discussion with from governments within the Organization of for Economic Cooperation and Development academics, Islamic scholars, theologians 5. How is Zakat spent? 13 Islamic Cooperation (OIC) grew from (OECD)’s Development Assistance Committee and practitioners, and share learning US$599 million to over US$2.2 billion, (DAC) was US$134.8 billion in the same year.4 on the use of Zakat for humanitarian CASE STUDIES: Indonesia, representing a growth in the share of total assistance. The Zakat Foundation of America 14 international humanitarian assistance from Our research also shows that between 23% governments from 4% to 14%. At the same and 57% of Zakat currently collected is used 2) An independent and credible global body 6. The humanitarian potential of Zakat 16 time, an estimated 75% of people living in the for humanitarian assistance, depending on that has taken part in these discussions top ten recipient countries of humanitarian the context in which it is raised and used. needs to provide guidance on the Domestic response 16 assistance in 2013 were Muslim.2 It is therefore likely that Zakat is already a parameters of reasonable interpretations significant source of humanitarian financing in of Zakat. International response 16 Zakat, the mandatory Muslim practice of many places, and there are indications that it CASE STUDIES: Indonesia, Pakistan 17 giving 2.5% of one’s accumulated wealth for has the potential to provide considerably more 3) Actors at all levels – including small, charitable purposes every year, is one of the humanitarian assistance than is currently the local Zakat-receiving organisations, 7. Barriers to realising the humanitarian financing main tools of Islamic social financing. case. For example, evidence suggests that national and international NGOs, and the It is explicitly intended to reduce inequality and the amount of Zakat potentially available in UN should work together to improve potential of Zakat 18 is widely used in Muslim countries both Indonesia and Pakistan could meet all channels between Zakat funds given and to fund domestic development and current requirements to respond to domestic the international humanitarian response Logistical barriers 18 poverty-reduction efforts. There are clear humanitarian emergencies, with significant system. Ideological barriers 19 parallels to be drawn between the eight amounts remaining to cover other areas of individual categories of eligible recipients of Zakat spending. 4) Resource-mobilisation efforts should Other barriers 19 Zakat listed in the Qur’an and people in need of focus on increasing Zakat revenues and humanitarian assistance. However, there are a number of possible channelling new funds to humanitarian 8. Conclusions and recommendations 20 barriers that will need to be overcome if Zakat assistance, rather than redirecting Zakat can be paid in a variety of different ways is to fully realise its humanitarian potential. existing funds. Engage and share learning 21 to a variety of different institutions, either These fall into two main categories: Provide guidance 21 governmental or non-governmental, often 5) Efforts to increase the use of Zakat depending on the country a Muslim lives in • LOGISTICAL – such as streamlining and for humanitarian assistance should Improve channels between Zakat and the or on their sect of Islam. There is no reliable formalising how Zakat is collected, by be combined with those of the wider international humanitarian system 22 data currently available to show precisely how whom, and how it is channelled to the development community to ensure a much Zakat is paid by Muslims around the humanitarian response community. complementary approach. Combine efforts with the wider development community 23 Increase Zakat revenues and channel new funds to humanitarian assistance 23 Methodology 25 Acknowledgements 25 Notes 26 3 AN ACT OF FAITH INTRODUCTION INTRODUCTION GLOSSARY OF KEY TERMS The gap between humanitarian need and witnessed in both the United Kingdom (UK)7 Awqaf or waqf: A type of endowment and a Zakat: A form of Islamic social financing humanitarian funding is growing. The total and the United States (US), where this type form of Islamic social finance. through which all Muslims whose wealth funding requested from international donors of giving is well monitored.8 One potentially falls above a certain threshold are required within the United Nations (UN)-coordinated significant area of charitable giving that has Islamic: Of or pertaining to the principles of by the Qur’an to give 2.5% of their assets humanitarian appeals system trebled in the received less attention in discussions around Islam; following Shari’a law. each year to help people in need. Note that, ten years between 2005 and 2014, more than the current humanitarian financing crisis is while the proportion a person is required doubling between 2011 and 2014.5 While faith-based giving, and Islamic social finance Islamic social financing: A range of to pay remains the same, there is some international humanitarian funding has in particular. financial mechanisms employed by the variation between Sunni and Shia Islam increased to record levels in response, the Muslim community that are designed to concerning the payment and use of Zakat. financing gap appears to be getting bigger: Previous estimates suggest that anywhere promote social protection of the poor, This report discusses Zakat as practised the proportion of appeal requirements met in between US$200 billion and US$1 trillion is reduce vulnerability and increase economic by Sunni Muslims (around 87–90% of the 2014 was the lowest since 2001 (58%), and spent in the form of Zakat across the Muslim equality. world’s Muslim population).10 the volume of unmet requirements was the world each year,9 and our evidence suggests For the purpose of this report: highest on record (US$7.5 billion). According to a significant proportion of the money Muslim: A person who follows Islam (n.); of Valerie Amos, UN Under-Secretary-General for collected is directed towards humanitarian or pertaining to the Muslim faith (adj.). Islamic country refers to a country that is Humanitarian Affairs, “Needs are growing so assistance. However, Zakat is a resource that governed in accordance with Shari’a law or fast, the funding cannot keep pace.”6 is not well understood by many organisations Mustahiq: Person receiving Zakat; following explicitly Islamic principles. and actors involved in the international beneficiary of charitable giving. Muslim-majority country refers to The urgent question of how to fill this humanitarian response. a country in which the majority of the growing gap is being considered across the Muzakki: Person paying Zakat. population