In this world which is full of wars, conflicts, civil unrests, natural disasters more people suffer poverty. According to the latest reports the world today spends around US$ 25 billion to provide life-saving assistance to 125 million people devastated by wars and natural disasters. However these funds still insufficient. In fact there is about US$ 15 billion funding gap. Since half of global poverty reside in Muslim world, that invites us to think how to narrow the gap through Islamic instruments.
Potentials of Islamic social finance
Islamic social finance including Zakat, Zakat al Fitr, Waqf, Qurbani and others in Islam will be fruitful in this regard. Actually the potentials of Islamic social finance are great, but it is important to channel them efficiently to meet the humanitarian needs.
Zakat al Mal
Zakat is the compulsory giving 2.5% of one’s wealth to charity. It is paid on accumulated wealth over a year, if it reached the nisaab. Given that Zakat payment is voluntary in most countries, there is no precise and complete estimation of zakat collection around the world. Previous estimates have varied enormously – from US$200 billion to US$1 trillion per year. Given this absence of definitive global data, at least US$5.7 billion is known to be currently collected each year.
The minimum amount due is the equivalent of about 3 kg of flour, wheat, barley or rice from each person in the household. It is about the price of one meal estimated between $7- 10 in 2017 per person.
Let’s assumes that all the Muslims of Europe and America, who are around 50 million, are eligible to pay Zakat al Fitr, this means about $350 million will be paid every year. However we must consider the Sharia disagreement about the form of zakat al Fitr either in cash or other forms.
If we adopt the opinion of the majority of Muslim jurists who state that zakat al Fitr to be paid as food products, about 150 million kg of the staple food should be produced every year. If we go beyond this point to the required infrastructure to secure that, That means we need farms for growing foods, manpower, equipment. While we are doing that we actually add economic value to the society, reduce poverty and starvation, and generate employment. Beside the direct impact of the charity and humanitarian side of this work. However this great goals need sufficient funds and efficient mechanism to channel monies to the appropriate direction. Actually cash Waqf sukuk could provide the solution, especially if we address the variable abilities of donors with different sukuk tranches.
Qurbani refers to the sacrifice of an animal to Allah (swt) and distributing the meat to the needy and destitute during the period of Eid ul Adha.
Entities, interested in managing and developing this area, estimate that there are 50 million Muslims in the western world with an estimated 5 million sacrifices every year.
Supplying this sufficient livestock every year need a well-organized farms to meet the global demand. Again cash waqf sukuk could play a vital role in addressing the logistic challenges that face this sector. Awqaf NZ sukuk is a great innovative project that aims to best utilization of qurbani by turning the unused parts of qurbani (bones, blood, wool and skin) into waqf revenues by establishment of large farms for this purposes.
Waqf is a voluntary permanent irrevocable dedication of a portion of one’s wealth – in cash or kind – to Allah. Despite the great importance of waqf institution in developing societies, we cannot neglect the decline in that role. Cash waqf with its flexibility and simplicity can take the lead in maintaining the waqf assets and funds, fulfilling the needs and demands of the beneficiaries and serving social purposes efficiently.
Why waqf sukuk
Waqf sukuk as a flexible instrument accommodates the different sharia’h opinions; so both permanent and temporary waqf sukuk can be applied. As well while some Islamic social finance aspect such as zakat is almost specialized for Muslims benefits, waqf benefits are eligible for larger beneficiaries, both Muslims and non-Muslims.
On the other hand waqf sukuk address the variable donors’ preferences and abilities, they could subscribe either permanent sukuk or temporary ones if they need their monies to return back. Trading sukuk in financial markets also is an additional option if they want to liquidate them before maturity date. Waqf sukuk from different point could be issued in multiple tranches, to target all donors’ levels from micro individuals to huge institutional donors.
These salient features of sukuk waqf make it a suitable instrument that meets different financial social needs, achieves sustainable development goals and enhances the expected role of Islamic social finance. However these expectations will not be realized unless we create a public awareness and sufficient legal infrastructure that pave the way and enable societies to utilize these potentials.