Should Zakat Management be Centralized in India? (2)

After publishing the last post that was triggered by the release of zakat collection figures by the Saudi authorities a couple of days back, I had the opportunity to come across a few reports in the Indian media that display similar concerns. Permit me to share the key observations and information contained therein in italics (followed by my comments)

1. Mohammed Wajihuddin (Zakat is being Misused, Times of India, Aug 6, 2012 |
(http://timesofindia.indiatimes.com/city/mumbai/Zakat-is-beingmisused/articleshow/15367590.cms?referral=PM))
a. There is no transformation of mustahiq (zakat recipient) into muzakki (zakat payer) taking place. (Maulana Burhanuddin Qasmi).

This is very important point. Perhaps there is a need to study efficient models of transformation that are operational in other countries and adapt them to local conditions. (I hope to talk about a few such experiments in my posts later inshaAllah.)

b. (i) There is no system in place to assess the credentials of individual zakat collectors; (ii) Zakat money is not going to the deserving; and (iii) total zakat money collected in the country is around Rs 25,000 crores or USD 4.03 billion. (Maulana Shoet Koti)

These are very important observations. The zakat estimate is perhaps an overstatement as it is almost equal to the zakat collected in Saudi Arabia for 2014. But in the absence of hard data for India, we just don’t know. In any case the quantum of zakat is perhaps not a problem area. The efficiency in the collection (e.g. costs of collection) and distribution is.

c. Centralization of zakat collection and distribution is critical for enhancing efficiency (Zeenat Shaukat Ali), but attempts to create Baitul Maaals have faced resistence from ulema (Dr Rahmatullah, Dr M A Patankar). The zakat payers also display a marked reluctance towards institutional collection as it is impersonal in nature.

It is very important to understand the reasons underlying the resistance by certain sections among the ulema and to address them in any future action plan for creating the centralized management system. Zakat collections methods should also be designed scientifically, that take into account the behavioral attributes displayed by the zakat givers (e.g. in a manner that doesn’t preclude the joys of giving).

2. M H Ahssan (Investigation: India’s Multi-Crore ‘Zakat’ Scam Exposed, India News Network
(http://hydnews.blogspot.com/2013/07/investigation-indias-multi-crore-zakat.html))

a. Fatawa permit as high as 40 percent of zakat mobilized to be applied towards the cost of collection itself (remuneration of collectors under amilieen alaiha category). There is little transparency on what percentage of zakat may be used in advertising and promotional costs; no clear fatawa exist either. It appears that a very high proportion of zakat is spent on its collection in practice.

Islamic scholars in many countries permit a maximum of 12.5% of total zakat collected towards cost of collection. Further, the actual proportion is much less than what is permitted. For instance, as per our empirical studies, the cost is less than 10 percent in Malaysia, Indonesia, Singapore, Brunei and Pakistan. The high cost experienced in India appears to be more because of inefficiency and not due to “greed” factor. One may seek to build a case in favor of the high ratio of 40 percent on the ground that the zakat collected per amil is very small. In the aggregate however, there is undoubtedly a colossal loss of the economies of scale and scope because of the way the zakat collection system functions in India (by an army of private individuals). Centralization of zakat collection and distribution is a prerequisite for bringing in efficiency and cost reduction.

b. (i) There is little transparency about how the remaining zakat proceeds are applied. (ii) There are cases of investment of zakat in assets, at times in the name of family members. (iii) There are cases of bad practices even while intentions are not (e.g. incurring huge transportation costs for distribution of goods instead of cash transfers). (iv) There are cases of outright embezzlement of zakat funds. (v) There are cases of overstatement of achievements and impact of zakat utilization. 

Indeed the above can be better addressed in a self-regulated macro environment that must be created along with the centralized zakat management mechanism. There is a need to “collectively” create rules of self-regulation, resolve fiqhi issues, develop sound accounting systems and standard operating procedures and legal redress mechanisms against embezzlement, building institutional and human capacities (e.g. education and training of personnel) and undertaking necessary advocacy work with the government and other communities.

c. Estimated zakat in Hyderabad during 2013 is Rs1000 crores (USD 170million)

3. Shabana Ansari (Joy of giving: Rs1,500 cr zakat doled out in Mumbai, September 8, 2010, DNA (http://www.dnaindia.com/mumbai/report-joy-of-giving-rs1500-cr-zakat-doled-out-inmumbai-1435045)

a. Estimated zakat in Mumbai during 2010 is Rs1000 crores (USD 170million) and in India is Rs15000 crore (USD 2.5 billion) (Dr Rahmatullah)
b. Zakat collection and distribution is all about empowering economically backward Muslims by generating employment and ensuring a steady source of income (Shuaib Sayyed, Shadab Kazmi, Dr Rahmatullah)
c. Centralisation of zakat, though a great idea, is hard to pull off because of vested interests. Besides, there is great joy in personally seeking out and helping people in need.

Regarding the idea to nominate AIMPLB for creation and management of all-India zakat fund, I guess, this merits serious consideration. AIMPLB is certainly an institution that presents a somewhat unified platform for a multitude of sects and groups among the Indian Muslim community. There could be other options too that need to be thrown up and discussed and deliberated upon, perhaps by a dedicated group of intellectuals. It is never too late to make a beginning in this regard. There is a need to applaud earlier and existing initiatives in this regard, such as, the AICMEU. It goes without saying that zakat should be spent in the location where it is levied. This is the dominant view of our fuqaha. Localization is thus, a unique feature of zakat management that perhaps results in a “centrifugal” impact mechanism. (Scholars, permit the flow of zakat to other locations in emergencies and crises.) While this is true, it is ideal and efficient to create mechanisms at meso and macro levels that would address “collective and common” concerns in a cost-effective manner.

Mohammed Obaidullah | February 22, 2014