Trends in Zakat Mobilization in Sudan

The zakat system in Sudan has evolved over time. The system has been fine-tuned over the years with proactive changes in the legal and regulatory framework. The formal organization of zakat in Sudan began in the 1980s with private foundations collecting zakat in accordance with Shariah law. This formed the basis of successive laws of zakat in Sudan. Observers find the following stages in the evolution of the Sudanese zakat system. The first phase relates to creation of zakat law in the year 1980 (1400H) that established the Zakat Fund. The law at this stage targeted a voluntary revival of the institution of zakat without any element of coercion. The beginning of phase two is marked by introduction of the law of zakat and taxes in the year 1984 (1404H). The law made zakat payment compulsory and placed zakat and taxes under a single authority. Further reform in zakat law was undertaken two years later. In the year 1986 zakat was separated from taxes and the new law established an independent chamber or the Diwan Zakat (phase 3). Phase 4 began in 1990 with further reforms in the zakat law that essentially sought to fill gaps. Finally, in 2001, the current zakat law was put in place that firmly established zakat as a socio-economic institution that could play a major role in economic uplift of the masses. Zakat as a national institution now has the following major policy goals:

• To provide safety net against drought, desertification, disasters and epidemics
• To mitigate poverty by providing cash and in-kind support
• To directly establish and participate in various projects for the poor and needy
• To tackle unemployment via making training compulsory for grantsfor small projects

In Sudan, the Diwan Zakat is the apex zakat body. It is an independent corporate body with the right to undertake all necessary measures to assess zakat liability and collect the same. It is also solely responsible for distribution of zakat among eligible beneficiaries in compliance with Shariah and with a view to realizing the social objectives of zakat. It is also responsible for creating public awareness about the institution of zakat. The Diwan carries out its functions under the supervision of the High Zakat Board of Trustees, which is the supreme authority in the matter. The structure at the central level is repeated at the state level and the state apparatus is linked to the Diwan Zakat. Complete decentralization is attempted by extending the infrastructure right up to the village level.

Zakat Collection

Creation of a country-wide decentralized infrastructure backed by a good system of accountability and governance has ensured that zakat collected has steadily been growing. The timer-series behavior of zakat collection in Sudan over the last 10 years is presented in Table 3.1. Indeed, it increased from SDG (Sudanese Pounds) 119.1 million in 2000 to about SDG 1299.7 million in 2013 at an annual average growth rate of 19 percent. In US dollar terms, the growth has been less spectacular, at about 7.2 percent per year, thanks to devaluation of Sudanese pound against dollar over these years. The conversion rate for Sudanese pound against US dollar was 2:1 on July 01, 2007 (when it replaced the Sudanese Dinar that was ruling at 200:1). It then depreciated to 2.5:1 on 31 Dec 2010, 2.67:1 on end-2011, 4.4:1 on end-2012 and end-2013 and further to 5.85:1 on end-2014. The effective growth rate in zakat in USD is plateaued due to such extreme adverse currency movement. The growth was particularly impressive during 2011 and 2012 at 36 percent and 48 percent respectively. It however, moderated to 8 percent in 2013, due primarily to a decline in zakat from crops due to crop failure.

Growth in Zakat Collection (2004-13)

While the realized growth in zakat collections in the past appear to be quite impressive, there is a long way to go. In a 2013 study the Institute of Zakat Sciences Sudan, estimated that in view of the current economic growth of Sudan and the developments in the economic front, the zakat base has widened to SDG 193 billion on which the zakat is estimated at about SDG 5.8 billion. Given that the actual zakat collected in 2013 stood at about SDG 1.2 billion, four in every five pounds of zakat due remains uncollected.

In order to identify the reasons and major challenges to zakat collection, we disaggregate total zakat into its components based on the sources or the nature of zakat base. The composition of zakat in Sudan has its uniqueness. A large chunk of zakat comes in the form of crops from the agriculture sector. This is so because of the agrarian nature of the country. Table 3.2 disaggregates the annual zakat collected in terms of the sectors that contributed to zakat collection.

Sources of Zakat Collected (Time-Series Behavior)

* Figures in ‘000 Sudanese Pounds

The time series behavior of different sources of zakat shows that zakat collected from all sources except the crops have steadily increased over time. Zakat from the crops in the year 2006 and more recently in 2013 actually declined from their previous years, primarily due to lower crop yields. Total zakat collected experienced a slower growth due to this.

In terms of contribution to total zakat, crops and trade inventory have been equally significant. Table below presents the percentage contribution of zakat from different sources to total zakat. While crops have contributed more if we consider recent data, trade inventory has contributed more if we consider data over the last decade. Together, they constitute over 80 percent of zakat collected on average. This indicates a possibility that the potential of zakat from other sources, e.g. salaries, fees, minerals remain largely untapped.

In the next blog, I will discuss the key challenges facing zakat collection in Sudan.

Mohammed Obaidullah | March 18, 2015