At the low end of the estimate, this is 15 times more than global humanitarian aid contributions* in 2011.
With aid from traditional Western donors decreasing in the wake of a global recession, and with about a quarter of the Muslim world living on less than $1.25 a day**, this represents a huge pool of potential in the world of aid funding.
But Islamic finance experts, researchers and development workers say much of the money spent in `zakat’ (mandatory alms) and `sadaqa’ (charity) is mismanaged, wasted or ineffective.
“Wealth is growing in the Muslim world. So is the poverty. Where have we gone wrong?” asks Tariq Cheema, president of the World Congress of Muslim Philanthropists (WCMP), an organization which advises Muslim donors – including some of the thousands of millionaires living in the Gulf – on how to increase sustainability and accountability in their donations.
Islam requires Muslims to give 2.5 percent of their wealth and assets to the poor every year. Much more is given in voluntary `sadaqa’. But that money is usually donated in small amounts at local levels to feed the poor, help orphans, or build mosques. Muslims say many of them give, almost without thinking, to fulfil a religious obligation. “Our rituals are there, but often they lack the spirit,” Cheema told IRIN. “We just give the money and forget.”
Very little of the money goes towards sustainable development.
“Billions of dollars worth of giving in `zakat’ and `sadaqa’ are unfortunately ineffective by and large,” he said. “Our giving shouldn’t be driven by our desire to prove that we are good people… Our giving should be smart and effective.”
“We are here to bring that shift in the culture: the paradigm shift from conventional and generous giving to strategic giving… There is a lot of money around that needs to be channelled towards development.”
In the early years of Islam, `zakat’, `sadaqa’ and `awqaf’( religious endowments) played a large role in society – not only in poverty alleviation, but in the building of infrastructure and provision of social services. In Ottoman times, some Turkish towns were almost entirely based on religious endowments – the real estate donated, with the rent going towards charitable or social ends: educational and health facilities, research institutes, even the lighting of streets. The endowments are credited as one of the reasons for the “Golden Age” of Islamic civilization from the eighth to the 13th centuries.
But due to colonization, the stagnation of Muslim institutions, mismanagement of `awqaf’ and the inability of their laws to adapt to changing times, these charitable traditions lost their central place in the organization of society.
Cheema said many Muslims today do not know how to calculate the amount of `zakat’ they should pay and do not have the channels through which to pay it. Governments collect a very small percentage of what they could.
In 2004, economist Habib Ahmed calculatedthat if all potential `zakat’ were collected in Muslim countries, between a third and half of them could move their poor out of poverty.***
“The potential is tremendous,” Ahmed, now chair in Islamic Law and Finance at the Institute of Middle Eastern and Islamic Studies at Durham University, told IRIN. “But in most countries, it is not being used to the potential.”
Among the reasons, he said, are that people do not trust governments, who have a history of mismanagement, and prefer to give their money to people they know are in need.
Syed Wafa is a former professor who headed a research group that advised the Malaysian government on distributing `zakat’ funds. He said even Malaysia – one of the most advanced countries in `zakat’ collection – is not strategic in its disbursement of funds.
“The `zakat’ authority does not have a long-term investment plan,” he told IRIN. “They depend on the yearly collection… Their mindset is: We get the funds; we try to disburse them as fast as possible.