Accountability and Governance in Zakat Institutions – I

Accountability implies the duty of an entity to use (and prevent misuse of) the resources entrusted to it in an efficient and effective manner. This however, needs to be done within the boundaries of the moral and legal framework of the society. Further, the entity must provide an account of its actions to various stakeholders – beyond the capital providers – to groups (e.g. customers, employees, suppliers) within society and to society at large.

Governance is essentially the operationalization of the concept of accountability. Organizations are accountable to their stakeholders. They are responsible for meeting the rights and expectations of their stakeholders. Who are these stakeholders in the context of a zakat institution? Stakeholders in a zakat institution (ZI) include the community of zakat-payers, zakat recipients, employees, Islamic scholars, volunteers, local community and the government. Rights of these stakeholders translate into clear-cut obligations on the part of the ZI. In a broader sense, ZIs must strive to meet the expectations of the stakeholders.

It may be noted that accountability is a central theme in Islam since the accountability to Allah (swt) and the community is paramount to a Muslim’s faith. The word hisab which is interrelated with account and accountable is repeated frequently in different verses in the Qur’an. In contrast to the conventional conception of accountability that focuses on certain material benefits for the individual and the community, accountability in Islam (taklif) is much broader in its conception. It refers to the ultimate accountability of every individual for his/her actions on the Day of Judgment. Indeed, Islamic accountability is based on a dual responsibility concept which implies that man is responsible and will be accounted for those responsibilities before the Creator and His creation as well. This dual-accountability concept similarly applies to a ZI. The management of the ZI is accountable to Allah (swt) for managing zakat funds in compliance with the Shariah. It is also accountable to the stakeholders for managing zakat funds in a manner that meets their expectations. The dual-accountability concept obligates the ZI management to comprehend the expectations of stakeholders well and ensure that these are met[1]. Some examples of such expectations are as follows:

• muzakki expect the ZI as their agent to able to discharge the Shariah-mandated zakat obligations properly
• muzakki expect the ZI to have a strong impact in terms of poverty alleviation, provision of basic needs to deserving and other causes dear to their heart
• muzakki expect the ZI to avoid resource-waste
• mustahiq expect to receive timely assistance from the ZI
• staff of ZI expect that they are recruited based on their competencies, receive market-based remuneration and not discriminated against based on spurious considerations
• society expects to witnesses increasing awareness about zakat and decreasing income inequality, and
• society in general and muzakki in particular expect the ZI to employ sound financial accounting mechanisms and share periodic financial reports with them

Golden Principles for Good Governance

The first principle is amanah or trust to fulfill. The Qur’an has reminded the believers not to betray the amanah delegated to them (8:27). The concept amānah will determine the individual’s relationship with the society. A proper understanding and operationalization of the concept of amanah will result in an individual or organization rising to fulfill the rights and meet the expectations of various stakeholders and the society.

Adalah (justice and fairness) is the second principle of good governance. The importance of adalah in governance has been revealed in verse 4:58 of the Qur’an. Adalah is very crucial in a society riddled with potential conflicts of interests. Islam encourages those who are entrusted amanah to deal with people within justice or adalah. Any kind of discrimination based on considerations other than required competencies stands in the way of adalah or fairness. As the Qur’an states:

“Truly the best of men for you to employ is the best man who is strong and trustworthy” (28:26)

Further, the prophet (pbuh) is reported to have said: “He whoever hires a person and knows that there is still one who is more qualified than him, has betrayed Allah and His Prophet and the Muslims.” Islam rules out any form of discrimination based on race, color, sex, nationality. In another hadith the prophet (pbuh) is reported to have said: “The only basis for preference between an Arab and a non-Arab, a white and black, and a male and female is piety.” (Ibn Ishaq)

It is said that nepotism stands in the way of good governance. Nepotism essentially implies the practice among those with power or influence of favouring relatives or friends, especially by giving them jobs. It may be noted that being a relative or a friend, by itself, should not be a disqualification. This is amply evident in the context of a waqf where a family member is often chosen as the mutawalli or trustee-manager by the waqif or endower.[2] Such a decision is often based on factors other than “blood-relation”, such as, “trust” that is backed by more information about the individual to be employed and “piety”. Nevertheless, the mere fact of “being a relative” should call for additional scrutiny and vigilance regarding the decision making process.

Sometimes it is difficult to achieve a just system due to the element of subjectivity in decision-making. Therefore the Qur’an (42:38) suggests decision making i.e. through shura or mutual consultation as the basis for consensus-building.

“Those who listen to their Lord and establish regular prayer; who (conduct) their affairs by mutual consultation; who spend out of what We bestow on them for sustenance” (42:38)

Shura is aimed at building a consensus around a given decision or solution to the problem at hand. In case no consensus is reached, voting is resorted to. The prophet (pbuh) is reported to have said “My nation cannot agree upon an error and if a conflict persists, be with the majority” (Ibn Majah)

Finally, avoiding waste or cost efficiency is also a major dimension of good governance. Stakeholders in any organization place a lot of emphasis on this aspect of governance. As the Qur’an warns: “Verily, extravagant are brothers of the devil and devil to his Lord ungrateful.” (17:27). In a well-known hadith, the prophet (pbuh) is reported to have said “Do no be extravagant in (using) water, even if you were taking ablution on the bank of a flowing river.” (Ibn Majah)

In the next part, we move from the general principles of governance to more specific operational procedures and delineate the requirements that must be met by ZIs in the interest of accountability and good governance.

[1] It is not hard to find zakat institutions where decision-making is concentrated in a single leader (who is also a religious scholar) who feels and acts in a way that he is answerable only to Allah swt and none else. Consequently, such institutions do not feel the need to go for external audit or periodic and timely reporting of financials to the public.

[2] Indeed, this was the case with the well-known waqf by Umar bin Khattab (ra), which subsequently became the basis of the institution of family waqf.