A Welcome Initiative for Zakat Management in Bangladesh

The development of zakat management system in Bangladesh is long overdue. While commercial microfinance as a tool of poverty alleviation has been under considerable limelight, the same is not true for the zakat. Bangladesh is one of the world’s most densely populated countries with 150 million people, 26 percent of whom live below the national poverty line of US $2 per day. Microfinance, often aided by international donors, is credited with bringing the number of the poor down from about 63 million in 2000 to 47 million in 2010, despite the steady growth in total population. Indeed, Bangladesh will reach its first United Nations-established Millennium Development Goal, that of poverty reduction, two years ahead of the 2015 deadline. However, Bangladesh still remains a poor, overpopulated, and inefficiently-governed nation with about 45% of the Bangladeshis being employed in the agriculture sector. The population in Bangladesh is predominantly rural, with almost 80 percent of the population living in rural areas without access to education, health and other essential services. There is also significant urban poverty in Bangladesh.

Zakat as a tool of poverty alleviation is yet to receive much attention of economists, regulators and policy makers in Bangladesh. Indeed the zakat management system is the country is crude with near-total lack of institutional involvement in the process.

Bangladesh has a dual system of zakat management. Unlike Pakistan, there is no element of compulsion in zakat. Payment of zakat is voluntary and may be made to the Zakat Board of Islamic Foundation, a government agency under the Ministry of Religious Affairs or to several other private institutional collects or even to private individuals. Matters pertaining to zakat are governed by the Zakat Fund Ordinance, 1982.

According to Bureau of Islamic Economics, zakat collection in 2010 was about Tk. 110 billion or 1.4 billion USD, which was equivalent to 1.4 percent of GDP[1]. Out of two key agencies that are working in the zakah sector – Zakah Board of the Islamic Foundation Bangladesh (a government agency) and the Islami Bank Bangladesh (a private agency) – the former collected Tk 14.20 during 1432H and expects to collect Tk 20 million during the current lunar year 1433 H. In Bangladesh, the majority of people pay zakat individually, mostly as token charity. Distribution of clothing (sarees and lungis) is a traditional method of zakat distribution. Institutional distribution of zakat is more diversified and takes the form of scholarship programs for poor students, rehabilitation and training for poor women, rehabilitation of widows, housing for the poor, and distribution of rickshaws for the unemployed young people in villages.

An institution that has taken rapid strides in positioning itself both as a micro-level zakat collecting and distributing body as well as a meso-level player with a significant role in education and advocacy is the Dhaka-based Center for Zakat Management (CZM). The first phase of the initiative was launched in 1993 with the generous support of the Rahimafrooz Bangladesh Ltd., one of the leading conglomerates of Bangladesh. Under the name Zakat Forum (ZF), the initiative started collecting Zakat from a small group of zakat payers and disbursing zakat in an organized manner. A pilot project near Dhaka in poverty alleviation was a major success that witnessed the transformation of 3 percent of zakat receivers into zakat payers in just three years. This led to the establishment of CZM in 2008 after an intensive series of deliberations among zakat experts, scholars, professionals, social enterprises and consultants.

CZM has identified the following areas of intervention for distribution and utilization of zakat fund: (a) Jeebika: zakat-based livelihood and human development program; (b) Mudareeb: micro enterprise development program; (c) Naipunna Bikash: technical training and employment for unemployed youths; (d) Genius: scholarship program for the undergraduate students; (e) Gulbagicha: education & nutrition program for the distressed children; (f) Ferdousi: women and children’s welfare program; (g) Insaniat: humanitarian assistance program; and (h) Dawah: awareness building and motivational program. It has a small 14-member staff under the leadership of Dr Mohammad Ayub Miah as its CEO.

In continuation of its role in advocacy, CZM recently organized a roundtable on institutional management of zakat in Bangladesh. Some of the observations made by economists, scholars and academicians who participated in the roundtable are as under:

• Zakat is one of the five basic principles of Islam and it is neither an aid to the poor from rich people nor a voluntary donation. It is mandatory for the rich and is the poor’s right on the wealth of the rich.
• Zakat is part of an economic system, the oldest state-sponsored social welfare system.
• The zakat system was in vogue in Bangladesh and disappeared during the British colonial period, but must be restored now.
• Zakat can immensely contribute to poverty alleviation and take the place of foreign aid if properly collected and disbursed through state machinery or agencies.
• The poor needs money to be owners of assets. Bangladesh has about 6.0 million extreme poor families. Around US$ 3.0 billion can be mobilized just through zakat and thus, be used to make a dent on poverty.
• In many Muslim countries zakat payers get tax exemption, and Bangladesh can follow the path to encourage zakat payment.
• If the zakat funds are properly mobilised, these could replace foreign aid and be utilised on poverty alleviation programs.
• CZM should not use more than 20 per cent of zakat money for their management cost as the cost will come from zakat collection.
• Many people pay zakat but it needs an institutionalised approach to manage zakat for poverty alleviation that could be supportive to government efforts and be an economic tool for social development.
• Most of the well-off Muslims pay zakat on their own ways. But it does not make any sustainable difference to the lives of the poor. The zakat money is not used for sustainable development.
• Zakat payers must get tax exemption on their spending on zakat similar to CSR activities. The country’s Islami banks pay a large sum of zakat money each year, but they do not get any tax privilege on the spending despite making repeated requests to the policymakers.
• CZM should explore to play the role of a facilitator to take up giant development projects, instead of doing all itself. One or two such successful development projects will encourage others to participate with the CZM.
• The activities of CZM should not be limited to a few people. It must enhance its outreach and engagement with the government.
• CZM should reach out to people at the grassroots level and share with them all relevant information on collection and distribution of zakat in a transparent manner in order to earn their trust and enhance credibility, which is the only way to grow.
• Many people do not know how to pay zakat. CZM should organize programs to make the people aware of it.
• Notwithstanding the political ideologies of parties in power, state structure must provide for efficient zakat administration.
• Bangladesh must learn from experiences of other Muslim countries like Malaysia, Kuwait and the Maldives etc which use zakat in a very sustainable way.
• There have not been enough research and studies on zakat in Bangladesh to identify details of zakat collection and its use.
• While the basic responsibility of institutional zakat management lies with the government, a Muslim government may assign it to corporate organizations. In the absence of state initiatives, private sector organizations should take initiative for mobilization and distribution of zakat in a collective manner.

[1] Asif Ibrahim, at Seminar on “Utilization of Zakat for Sustainable Poverty Alleviation”, jointly organized by DCCI Foundation and Center for Zakat Management (CZM) on August 2, 2012

 Mohammed Obaidullah | June 10, 2014