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A Call To Regulate The Muslim Charitable Sector

Sohair Omar puts out a call to regulate the Muslim charitable sector, emphasizing the importance of financial transparency and ethics.

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Editorial Note: The following reflects the opinions of the author alone, and does not represent the opinion of the MuslimMatters’ board of directors, staff, or platform as a whole.

According to the United Nations (UN), Zakat (and Sadaqah) is one of the largest forms of wealth transfer to the poor in the world. Yet, Muslim-led charities (as well as governments) and philanthropists largely operate in silos. For the benefit of the poor, Muslim community leaders should consider implementing the following recommendations, based on Islam and best practices for nonprofits, in order to improve coordination and planning, encourage collaboration, reduce inefficiencies, and increase transparency in the charitable sector of the Muslim community. The Muslim charitable sector is in dire need of regulation, for maximum benefit of the intended recipients of that charity. These observations are based on my experience as a volunteer board member at several nonprofits.

“Verily, We give life to the dead, and We record that which they send before (them), and their traces and all things We have recorded with numbers (as a record) in a Clear Book.” [Surah Yā-Sīn (36:12)]

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Annual Conference on Zakat and Sadaqah. To minimize inefficiencies, including the duplication of efforts, and to maximize the social impact of donations, leading charitable organizations must (i) establish an annual conference on Zakat and Sadaqah for the purposes of communication, coordination, and collaboration, and (ii) create and maintain a charity coordination web/mobile application, including the collection (via forms) and analysis of data on the needs of the poor and aid/relief and development projects and programs. Currently , Zakat and Sadaqah allocation is mainly driven by the media/news as opposed to needs data/assessments. Currently, UN agencies are the only source of needs data/assessments.

Minimum Global Standards. For consistent project and program delivery, leading charitable organizations must establish minimum global standards for orphan support, food assistance, winterization, clean water, shelter, and housing projects and programs. Public safety, waste management and recycling, and environmental sustainability (e.g., renewable energy) must be incorporated into these minimum global standards. Currently, there are no standards or guides, especially for new charitable organizations and philanthropists.

Systems & Design Thinking. For long-term, perpetual social impact, charitable organizations must take a systems approach, rooted in principles (e.g., fairness), when planning projects and designing programs, instead of implementing one-off projects.

Financial Management

The 90/10 Spending Rule. Charitable organizations must spend less than ten percent (10%) of their total annual expenditures -excluding the pass-through of in-kind donations,- on management and general expenses; including salaries, and fundraising expenses (including marketing, advertising, and promotion). At minimum, ninety percent (90%) of their total annual expenditures should be spent on the direct costs of aid/relief and development projects and programs. Many, if not most, Muslim charitable organizations do not follow this standard, as noted by Ahmed Shaikh. (Note: One hundred percent (100%) of donations restricted for Zakat must be transferred to the poor.)

Time to Disbursement. Charitable organizations must spend down Zakat and Sadaqah within 3 months of receiving it; they must not hold on to Zakat and Sadaqah in their bank accounts for longer than 6 months. Zakat is the right of the poor and it should be given to them by those who collect Zakat in a timely manner.

Accountability & Transparency. Charitable organizations must record and account for every dollar collected and spent. Charitable organizations must allow the public to inspect their financial records (e.g., open source accounting). Specifically, charitable organizations must post (i) their financial records -including project expense reports and images of invoices and receipts-, immediately after project implementation, and (ii) their annual financial statements shortly after the close of their accounting year. Masajid also collect and distribute Zakat and Sadaqah; therefore, masajid should make their annual financial statements available for public inspection as well.

Ethical Marketing and Fundraising

Holidays. Limits must be set to prevent the commercialization (specifically, the intent of charitable organizations to maximize donations) of Ramaḍān, Eid ul-Fitr, and Eid ul-Adha. For example, spending upwards of fifty thousand dollars ($50,000.00) of Sadaqah on marketing, advertising, and promotion during Ramaḍān should not bode well with donors.

Professional Fundraising Fees. Limits must be set on the amount of money paid, using donations, to Shuyūkh/A’immah (Shaykhs/Imams) and other influencers for the purposes of marketing and fundraising (e.g., the lessor of ten percent (10%) of the total funds raised from a fundraising activity or one thousand dollars ($1,000.00)).

Governance

Shura. Muslim community leaders or scholars must develop procedures for Shura, i.e., decision-making by consultation or consensus (e.g., Robert’s Rules of Order). At minimum, decisions, including any objections, must be documented. Also, these procedures must consider dominating personality, intimidation, and conflict of interest. Currently, a shared definition of Shura and how to implement it does not exist.

Board Meetings. The governing board of charitable organizations must meet on a quarterly basis, at minimum, to ensure the proper management of Zakat and Sadaqah.

Hijrī. Charitable organizations must use the Hijrī calendar; at minimum, they must use the Hijrī calendar alongside the Gregorian calendar (e.g., February 10, 2022 (Rajab 8, 1443 AH)).

External Communication. To display professionalism, charitable organizations must reply to external communication within 48  hours; at minimum, they must set-up an auto-reply message in their e-mail accounts.

Beneficiaries

• Privacy Protection & Consent. Charitable organizations must protect the privacy and the dignity of their beneficiaries. Specifically, charitable organizations must obtain the consent of their beneficiaries (via a photo/video release form) before taking pictures and/or making videos of them for the purposes of marketing and fundraising . Extra caution must be taken to protect the identities of children of beneficiaries.

• Global Zakat/Charity ID. Beneficiaries must be assigned a global Zakat/charity ID to track goods and services received across multiple projects, programs, and charitable organizations over time. (This goes back to the need to collect and analyze data for the purpose of decision-making/resource allocation.)

Self-Sufficiency & Problem-Solving Skills. Except in cases of emergencies, disasters, and/or armed conflicts/wars, donations must be spent on development projects and programs that educate, train, equip, and empower (e.g., a motivational beneficiary pledge) beneficiaries to provide for themselves and their families (i.e., self-sufficiency), and to solve their personal, community, and regional problems.

Conclusion

All in all, many Muslim-led charitable organizations and Muslim philanthropists have been and are doing amazing work, but they could have a greater social impact in our Ummah and beyond if they regularly communicate, coordinate, and collaborate by establishing high professional standards and well-designed systems for the effective management of Zakat and Sadaqah. The recommendations above are just a starting point for current and future Muslim community leaders to regulate the charitable sector of the Muslim community for the benefit of the poor.

 

Related reading:

 – Zakat, Poverty and the Kitchen Sink

Zakat, Poverty and the Kitchen Sink

 – The Zakat Conversation: Giving Zakat To Islamic Organizations

The Zakat Conversation: Giving Zakat To Islamic Organizations

Keep supporting MuslimMatters for the sake of Allah

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Sohair Omar is Co-Founder of Afghanistan-Pakistan Women's Economic Empowerment. She is also Former Deputy Director at the Illinois Finance Authority and Former Policy Analyst at State of Illinois Office of the Governor. She previously served as Board of Director at Yemen Aid, Co-Chair of Governor Quinn's Muslim American Advisory Council, Board of Director at Somali Women Association of Illinois and Member of the Iraqi Mutual Aid Society's Advisory Council. She holds a Master of Public Policy from the University of Chicago.

3 Comments

3 Comments

  1. Truth

    June 23, 2022 at 4:44 AM

    I am so surprised that Muslims do not even know the basics of giving zakat.

    https://youtu.be/rgGXxkKR2ts

  2. Spirituality

    June 23, 2022 at 9:58 AM

    As Salamu Alaikum,

    Jazaki Allahu Khayran for all the recommendations listed above. The thought I have, however, is that some of these ideas may not all be implementable as stated, as they may ‘contradict’ (for lack of a better word).

    90/10 rule is fantastic. However, one then would ask, how would the organization fund its current admin expenses (staffing, building, other office expenses) but also its participation in the annual conference on zakat and sadaqah, ensure global minimal standards (which is defined as ‘public safety, waste management and recycling, and environmental sustainability (e.g., renewable energy’)), conduct extensive financial and data analyses, establish the tracking, purchasing and issuing Global Zakat/Charity ID, establish training and self-sufficiency skills, set up staffing and mechanisms to respond to queries within 48 hours, etc?

    Regarding training and skills establishment, its clear most funds or goods are not actually transferred to the poor (except perhaps for transport to venues, and meals) but instead go towards payment of trainers, vendors, etc. How does this situation square with the 90/10 rule?

    I am also a bit concerned that Global Zakat and Charity ID, if not implemented correctly, could result in vast privacy violations.

    All in all, very valuable advice. I would love see an example of how all this suggestions can work together in practice.

  3. Anon

    June 25, 2022 at 10:17 PM

    Having founded a few charities and worked with many charities muslims and not. This is at best a theory that can’t be practiced. Financially speaking, besides zakat and sadaqah, there are revenues from investment and grants from corporations and governments those are not considered sadaqah. 90/10 rule is a dream most orgs wish for but unfair to grassroots that work in urban settings and rental alone is more expensive there and largest overhead. Also, IRS does require a detailed report and it is open to the public. اAllahu Alim

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