Islamic charity funds are underused anti-poverty tool -study

March 25 Tue Mar 25, 2014 6:26am EDT

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March 25 (Reuters) - Lack of professional management and poor book-keeping are keeping idle billions of dollars worth of assets held by Muslim charitable organisations which could support efforts to reduce poverty, a study released on Tuesday found.

Islamic alms-giving (zakat) and endowments (awqaf) have been in existence for centuries, but have yet to develop efficient use of their assets, a report by the Islamic Research and Training Institute (IRTI) and Thomson Reuters said.

These asset pools include vast real estate portfolios that are often poorly managed, which could otherwise help reduce poverty across Muslim communities, the study said.

"At a micro level, institutions in this sector need to address the issue of sustainability in the supply of funds," said Azmi Omar, director general of the IRTI, a unit of the Jeddah-based Islamic Development Bank.

This would involve professionals who are adequately trained not just in sharia-compliance but also in modern financial management techniques for charity-based and not-for-profit institutions, he added.

The study estimates that zakat donations could contribute significantly to poverty alleviation in countries with sizeable Muslim populations such as Indonesia, India, Pakistan, Bangladesh, Malaysia, Singapore and Brunei.

Muslim minorities in India and Singapore, for instance, could collect zakat in the range of about 0.26 percent to 0.65 percent of their gross domestic product.

Growth of zakat contributions in these countries has often been in the double digits: Indonesia collected $231.6 million in 2012, up 27.3 percent from a year earlier; Pakistan collected $105 million in 2011, up 34.5 percent from a year earlier.

Malaysia had one of the largest donation pools with 1.6 billion ringgit ($497 million) collected in 2011, a 20.3 percent increase from a year earlier.

While there is no official data for India, the report estimated total annual zakat collections stood at a whopping $1.5 billion.

But it is hard to mobilise these resources because of a lack of standard and globally accepted definitions of what assets are eligible for zakat and how to estimate zakat donations, the study said.

AWQAF

The study also shed light on assets held by Islamic endowments, where India again holds the most untapped potential.

There are about 490,000 registered awqaf in India with a total area of about 600,000 acres and a book value of about 60 billion rupees ($987 million).

Most of these properties are located in city centres and their current market value is many times more than their book value, the study said.

The current annual income from these properties is about 1.63 billion rupees, equivalent to a 2.7 percent return on their book value. Properly managed, the properties could generate returns many times bigger, the study said.

In Bangladesh, a government survey identified 150,593 awqaf properties in the country, although only 15,300 were registered with the government awqaf administrator.

In Indonesia, registered land from awqaf reached 1,400 square kilometres but most of them were idle, while the market value was estimated at 590 trillion rupiah ($52 billion). (Editing by Andrew Torchia)

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Comments (1)
OnDaRoad wrote:
Interesting study, however, I think if you did a study of Christian or any other npo you would find that management and bookkeeping are also challenges that hinder effectiveness & reach. I think it is more a sector issue than anything else. IMHO

Mar 27, 2014 9:33pm EDT  --  Report as abuse
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