A message from London: Pay your “zakat” locally

Istanbul, Turkey - January 22, 2015: The mullas collect the sadaqat (donations) at the entrance to the New Mosque in the city center

By Greget Kalla Buana

Zakat (Islamic alms giving) is now consi-dered as an alternative resource to help achieve the SDGs. London, the capital of a developed Muslim-minority country, has a unique approach to encouraging Muslims to pay zakat, resulting in a significant amount of almost the same with that in Indonesia, the world’s most populous Muslim-majority country.

 

In the last few weeks before Ramadan, an advert from the National Zakat Foundations urging Muslims to pay their zakat locally in the UK was posted at the Hainault Street bus stop. This particular campaign caught the attention of and earned praise from UK Muslims. In 2016, number of UK Muslims surpassed three million of which one-third resides in London. More specifically, data from the 2011 census stated that one out of eight Londoners is Muslim making the city a home to large Muslim community.

Such phenomenon has portrayed UK Muslims’ undeniable power to play a major role in helping the society through a religious charitable fund called zakat. Zakat is a mandatory giving paid by eligible Muslim earning above certain threshold, which, when it has reached a specified amount, is commanded to be given to the deserving people (eight group of beneficiaries according to Quran). This social part of Islamic finance has an enormous potential and been considered as an alternative resource to help achieving the Sustainable Development Goals (SDGs).

An end to poverty and inequality is the biggest challenge now to be addressed through the SDGs. Given the principles of Islam in favour of socially inclusive development, funding from Islamic finance, such as zakat, has the chance to play an important role. Zakat and the SDGs overlap in terms of compatibility and embeddedness with the five foundational goals of Islam (Maqasid al Shariah).

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With the annual worldwide value of zakat alone estimated at U.S.$200 billion to U.S.$1 trillion, it has a tremendous potential to fill the $2.5 trillion financing shortfall to achieve the SDGs. Reported by the National Zakat Foundation, the annual value of zakat paid by UK Muslims alone could be as much as U.S.$353 million. However, over 98 percent is distributed abroad whilst less than the remaining two percent (U.S.$6.7 million) is for domestic causes.

Zakat is a mandatory giving paid by eligible Muslim earning above certain threshold, which, when it has reached a specified amount, is commanded to be given to the deserving people.

Following the global trend, particularly in a Muslim-majority country, a different perspective has been continuously happening around the mechanism of zakat collection – either it is supposed to be ruled by the government or private sector and between formal and informal giving. The UK has illustrated a new story. Instead of pushing people to pay their zakat by mentioning a specific institution, the National Zakat Foundation preferred having a jargon “locally” to evoke that it does not really matter where you would like to pay the zakat as long as it is through a local group. Noting that world-class zakat organisations are also based in London, namely Human Appeal, Islamic Relief, and Muslim Aid, they are not competing with each other. This reflects the spirit of brotherhood in Islam.    

Compared to Indonesia, as mentioned by the National Zakat Agency (Baznas), only three percent (U.S.$480 million) of the potential was realised within last year given that some people are continuing predilection toward short-term and interpersonally oriented. The lack of public trust to non-certified zakat institutions and such behaviours of the payer exacerbated the condition. Having said that zakat is only assigned to those who are capable, when there are more poor people, more needs to be spent for their welfare. In other words, the zakat collected is not sufficient for the poverty alleviation strategy. This is contrary to the UK situation where only small percentage of zakat is disbursed domestically.

Lesson learned from London is, instead of coping up too much into the debate between formal and informal mechanism, they prefer “local” as the most persuasive terminology.

In exploring the correlation between Muslim population and zakat collection, both UK and Indonesia can learn from each other. In addition, comparing these two countries reveals commonality among so many different characteristics of demography, political economy, and socio culture. According to the World Giving Index 2017 by Charities Aid Foundation, the average UK’s and Indonesia’s participation rates for donating money in the last five years were 71 and 70 percent, respectively. The amount of zakat paid by UK Muslims is nearly as much as that of Indonesian Muslims actually do. However, UK deploys the zakat mostly abroad while in Indonesia zakat cannot address the internal problem of extreme poverty.

The word “locally” in the billboard has delivered a strong message. For the case of Indonesia, the huge potential of zakat is largely untapped and overlooked, presumably because informal giving remains much larger than contributions made through formal organisation. Lesson learned from London is, instead of coping up too much into the debate between formal and informal mechanism, they prefer “local” as the most persuasive terminology. Put simply, “pay your zakat locally” reflects a more enforcing meaning than just “give” that is commonly used for charitable action. By paying zakat locally, the ad reassures the payers two points: (1) to put their zakat money in any nearby competent authority and (2) to watch where the money goes, meaning that they consciously understand how their money can give impact to surrounding or nearby society. Same approach could be implemented by Baznas and other zakat authority in other countries.

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About the Author

Greget Kalla Buana is an Islamic Finance Specialist at the United Nations Development Programme and graduated from Master of Islamic Finance and Management, Durham University, UK. His work experiences have always been in Islamic finance sector, such as Dompet Dhuafa (Indonesia Humanitarian NGO which is also a consultative member of ECOSOC, using Islamic finance instruments as fund resources), Islamic Banking Department of Indonesia Financial Services Authority, and UNDP where they established partnership with Islamic Research and Training Institute of Islamic Development Bank.