(MENAFN - Arab News) Zakat can play a significant role in Muslim socio-economic development if it is used properly. Zakat is mentioned in 82 places in the Holy Qur'an, but millions of Muslims around the world do not realize its importance. Hence they do not pay it and as a result, the number of poor and needy in the Muslim world increases every day. The World Zakat Fund (WZF) being set up by The BMB Group is an attempt to collect and distribute Zakat in an organized manner making use of modern management techniques.
"This is an initiative of the Malaysian government which has set up an International Zakat Organization (IZO)," said Humayon Dar, CEO of BMB Islamic, a London-based Shariah advisory and structuring firm.
"The World Zakat Fund initiative follows a resolution from Malaysia to set up an organization for alleviating poverty with Zakat," he told Arab News.
He said the fund would eventually be under the OIC (Organization of the Islamic Conference). "We have been given a mandate by the Malaysian government to set up the WZF, raise money for it and manage it," he said. "The WZF will have a regional fund based in Bahrain. We selected Bahrain because the real Zakat money is in this part of the world," he said. "We hope the project will contribute significantly to poverty-alleviation in OIC countries," Dar said. "We are attempting to take Zakat from the national to the global scene. By doing so, we hope that Zakat will play a major role in the redistribution of income and alleviation of poverty."
The first phase depends on OIC governments' support but bureaucratic procedures may make government funds difficult to access. "We have support from a number of OIC governments but in other countries, if we request a share of Zakat money, it may take five years because of bureaucratic hurdles," he said. "There are about 400,000 high net worth individuals in the Middle East and North Africa, including non-Muslims," he said quoting well-researched figures. High net worth individuals have a minimum of 1 million in liquidity.
"If we have 200,000 high net worth Muslim individuals and get 2.5 percent of their wealth (200 billion) as Zakat, we can raise 5 billion," he said. "This is from only one source," he said. Among these high net worth individuals are 400 billionaires who represent another major source of Zakat funds. Dar believes that a global Zakat collection and distribution platform would have a great impact. "If 200 million of 1.5-1.7 billion Muslims around the world have Zakat money and if they pay an average of 10 annually to WZF, we could have a fund of 2 billion," he said.
Dar said 35 percent of the fund raised would be used for immediate consumption, emergency and relief and would be partly managed and disbursed by IZO. The remaining 65 percent would be managed by BMB. The target size of the fund for the first year is 750 million, which is expected to grow to 10 billion in 10 years. "The distinguishing feature of WZF is that it manages Zakat, for the first time, in a sustainable way ensuring growth and continuity," the CEO said.
A part of the Zakat is used for its beneficiaries while the rest is invested for their future benefit. "According to conservative views, Zakat money collected in one year should be disbursed immediately. Our view is that Zakat money should be used in a sustainable way." He said leading Shariah scholars had endorsed WZF's investment strategy. "We don't want to deviate entirely from the classical view. We have decided to allocate 35 percent of money collected for projects that are ready for immediate consumption and relief. He said the Zakat money would be invested in profitable ventures. About 20 percent of available funds would be invested in liquid assets and Shariah-compliant global equities while the rest would be set aside for Shariah-compliant microfinance and micro-private equity. "Most Shariah scholars we have talked to feel comfortable with our plan." Dar said the WZF would also accept funds other than Zakat. "We'll be very happy to receive money from the solidarity fund of the Islamic Development Bank (IDB) or any other funds."
He said the WZF would focus on OIC countries and he believes that poor African countries should get the lion's share. Dar emphasized the importance of managing Zakat by an expert group on behalf of its beneficiaries. "If we give the money to the poor, they will spend it quickly but systematic management of their funds would make them rich and payers of Zakat one day. When people see examples of our work, they will trust us. When Imran Khan began collecting money for his cancer hospital, many thought he would not be successful and were reluctant to give. After he set up the hospital, however, people started pouring money in, knowing that he was doing a fine job. People will give but you have to prove that you are capable and trustworthy. This is a big challenge and we are ready to accept it." He said the WZF and IZO would work in a regulatory environment.
The BMB Zakat Management will be regulated by financial regulators in Malaysia while WZF will be regulated by each country's regulators. It will be monitored by a council of trustees, comprising representatives of the heads of state of OIC countries, the board of directors and the International Advisory Board as well as internal and external auditors. "Thus, we have a multi-layer monitoring system to ensure that everything is in order and in compliance with Shariah and other regulations," he explained.
By P.K. Abdul Ghafour