GIES 2016-Issues of transparency and asset management changing face of Islamic philanthropy

Photo: DUBAI, UAE - MAR 22, 2016: Ceremony launching Dubai’s Global Vision for Awqaf and Endowments spearheaded by the Mohammed bin Rashid Global Centre for Endowment Consultancy (MBRGCEC)

Twenty-first century principles of transparency and asset management are being discussed by a donor group traditionally rooted in privacy

As a faith group, Muslims are considered among the most generous donors worldwide. Islamic social finance, which comprises both mandatory and voluntary Islamic philanthropic institutions of zakat, sadaqat and waqf, is responsible for generating hundreds of billions of dollars across the Islamic world. 

While data is difficult to come by, a 2014 paper by the Islamic Development Bank (IDB) on the United Nation’s Sustainable Development knowledge platform says, “It is difficult to estimate [the] current size of awqaf assets. Current estimates range from $100 billion to $1 trillion.”

In Dubai, the Awqaf and Minors Affairs Foundation (AMAF) reported that the total assets under its management reached 2.5 billion Emirati dirhams ($0.68 billion) in 2014, compared to only 200 million Emirati dirhams when the foundation was established in 2004. In June 2016, AMAF reported that it implemented 29 endowment projects worth more than 1 billion Emirati dirhams between 2006 and 2014.

Such reporting is not the norm in Islamic social finance. However large-hearted, Islamic generosity continues to be rooted in the principles of individuality and privacy.

For the United Arab Emirates, Sheikh Mohammed bin Rashid Al Maktoum, UAE Vice President and Prime Minister, and Ruler of Dubai, took the first step to opening up discussion on bridging Islamic giving with modern principles of philanthropic accountability by announcing a global initiative for awqaf and endowments in March.

The Mohammed Bin Rashid Global Centre for Endowment Consultancy (MBRGCEC) is expected to not only position the UAE as the most supportive nation for “endowment for the service of humanity” but also to encourage individuals to come out of the shadows and “announce their endowments and lead by example”, as the Vice President said at the time. He started the ball rolling with a 5 billion ($1.36 billion) Emirati dirham endowment for knowledge, science and future research.

The spotlight is now firmly on the need for transparency and the modern principles of fund and asset management in the Islamic philanthropy space. Operating outside the glare of accountability has opened the doors to criticism of poor management of tens of billions of dollars held in awqaf in the form of fixed assets or in bank accounts, earning low to zero returns.

Abdulla Al Awar, CEO of the Dubai Islamic Economy Development Centre, put the purpose and function of awqaf in sharp relief against intention and implementation when he wrote in an article in October last year, “The first waqf were created centuries ago as a form of co-operative, or mutual, social fund, providing community support by building schools and hospitals, and extending a helping hand to those in need. Over time, most waqf have been absorbed into the Islamic affairs universe, shifting the focus from social welfare to religious projects, such as building mosques.”  

DEVELOPMENT NEEDS AND GOALS

In response to a growing international focus on the potential uses of Islamic giving to address developmental needs, the MBRGCEC says it will offer free “consultation on awqaf and endowments according to global best practices … to maximize social impact … and make results available to donors.”

This issue is also part of the discussion agenda at the two-day Global Islamic Economy Summit 2016 that opens October 11, which devotes two whole plenary sessions to “Philanthropy in the Muslim world: harnessing the abundance of underutilised capital for social development” and “Is blended finance the solution to the funding requirements of sustainable development goals?”

MEASURABLE SOCIAL IMPACT

Jonathan Benthall, who has studied the relationship between contemporary Islam and humanitarian aid since 1993, and has published widely on the topic, told Salaam Gateway, “The traditional Muslim culture of giving, which is certainly strong, has great advantages, especially in its spontaneity, embeddedness in local communities and lack of bureaucracy.”

Currently an Associate Fellow, Humanitarian and Conflict Response Institute, University of Manchester in the UK, Benthall adds, “I see no realistic alternative to the need for Islamic charities, local and international, to comply with the same kind of accountability, regulation and monitoring that are taken for granted in ‘western’ jurisdictions. The idea of regulation is fully compatible with Islamic culture: the tradition of the muhtasib who informally regulates fair trading in a market.”

Aid in developed markets works on models that rival the private sector in innovation, returns on investment and measureable strong social impact. It is possible for Islamic charity to conform to principles enshrined in its tenets and be effectively measurable.

Prof Masooda Bano, Principal Investigator CSIA & Associate Professor, Oxford Department of International Development, University of Oxford, an expert in how ideas and beliefs affect development processes studies told Salaam Gateway, “The traditional voluntary sector is trusted by many donors. However, these organisations end up only catering to specific populations such as the destitute or widows or orphans."

"They are good deeds but the money also needs to go into systematic programmes. The idea is to involve experts who can create technically sound programmes not just for immediate relief but for lifting the community out of poverty,” he added.

Bano believes that importing a Western-style model is not the answer. “Traditional NGOs, which are largely funded by zakat in many countries, are not technically sound. They are not drawing on the technical experts in the same way as, say, Save the Children [a U.S.-headquartered international NGO] has been doing for decades.”

Bano’s paper ‘Dangerous Correlations’ examines the impact of development aid channelled through NGOs in the global South, positing that “aid leads to material aspirations among leaders of NGOs”, and results in lower performance.

“Anyone who can write a good English report can get huge grants [from international aid agencies], but delivery on ground is raising a lot of questions,” she says.

EVIDENCE-BASED AND RESPONSIVE

On the one hand, international organisations are building cultural responsiveness into their system to tap into Islamic social finance that include awqaf and zakat to support poverty alleviation efforts more effectively in Muslim communities and improve wealth distribution to low-income people. On the other hand, Muslim societies need to create systems for locally relevant development. 

Arguing for a hybrid model, Benthall says, “The ‘Western’ aid establishment has tended to see the [Arabian] Gulf states as newcomers to the world of aid and humanitarianism, whereas in fact they have their own well-established traditions, which should be respected. On the other hand, ‘Western’ aid agencies have built up a solid weight of experience and professionalism.

“The Gulf countries in particular are very weak on social research in general, and on the sociology of poverty and humanitarianism in particular. Aid and development programmes need to be evidence-based and also responsive to candid and thorough evaluation.”

Benthall cites examples of philanthropy that combine the efforts of civil society, philanthropic organisations and government. “Islamic Relief Worldwide (IRW) in the UK, now over 20 years old, has already set a good standard for this, using the traditions of waqf and zakat as sophisticated fund-raising tools.”

“A great step forward was taken by its founder, Dr Hany El-Banna, when he decided that zakat funds could be used for the benefit of non-Muslims as well as Muslims. This facilitated cooperation with non-Muslim aid agencies (both Christian and secular) and also enabled IRW to secure funding from European governments. The constructive approach of the UK regulator (the Charity Commission) with regard to all ‘diaspora’ charities has helped,” said Benthall.

Alluding to the Waqf Future Fund set up by IRW, IDB’s Islamic Social Finance Report 2015 (pdf),“Islamic Relief Worldwide has set a modern example of an innovative waqf project. It is essentially a cash waqf that permits its donors to support numerous ongoing charitable projects” in the water, health care, sanitation and nutrition areas around the world.”

The MBRGCEC echoes this viewpoint in its mandate when it states that endowment is open and available to everyone without any religious, ethnic or geographic restrictions.

In the words of Sheikh Mohammed bin Rashid, “Expatriate businessmen and investors impressed me by their giving, commitment and appreciation of the importance of waqf. The UAE will always be the capital of humanity through its initiatives and efforts aimed at serving people and its humanitarian innovative projects.”

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