nasim shah shirazi islamic research & training institute member of
TRANSCRIPT
Nasim Shah ShiraziSenior Economist
Islamic Research & Training InstituteMember of the Islamic Development Bank Group
Enabling Environment for Zakah
Indonesia: Zakat Act 2011
Pakistan: Zakat Ordinance, 1980
India: No formal institutional or regulatory framework
Bangladesh: Zakat Fund Ordinance, 1982
Malaysia: Administration of the Religion of Islam (Federal Territories) Act 1993 and similar Acts for individual provinces
Singapore: Administration of Muslim Law Act, 1999
Brunei Darussalam: Laws of Brunei, 1/1984, Religious Council and Kadi Courts,
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Institutional Structure for Zakah Management
Indonesia: Dual system with state and private institutional actors
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
President
Minister of Religious Affairs
BAZNAS
UPZ UPZ
LAZ LAZ
Muzakki and Mustahiq
Institutional Structure for Zakah Management
India: Private actors (individual and institutional) with no role for state
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Muzakki and Mustahiq
Private Collectors (Individual & Institutions)
Institutional Structure for Zakah Management
Pakistan and Bangladesh: Dual system with state and private actors (individual and institutional)
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Minister of Religious Affairs
Department of Zakat
Individuals NGOs
Muzakki and Mustahiq
Institutional Structure for Zakah Management
Malaysia, Singapore & Brunei Darussalam: State agency as the sole entity responsible for zakah management
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Sultan/President
Minister of Religious Affairs
Islamic Religious Council/ Majlis
Zakat Office Agent
s
Agent
Muzakki and Mustahiq
Zakat Collection: What the Laws Say
Zakat payment is
Mandatory: Malaysia, Singapore
Partially Mandatory (for specific financial assets):PakistanReasons for weak enforcement: Absence of muzakki database, Unwillingness of zakat officer to list down those who fail to pay zakat, Shortage of staff and Inadequate authority to zakat officer to investigate any failure
Voluntary: Indonesia, Brunei Darussalam, India, Bangladesh
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Zakat Collection: What the Laws Say
Defining of Zakatable Assets: Indonesia, Pakistan
Defining Zakat Rates: Pakistan
Provides for exclusion of a Muslim from zakat liability based on declaration that he follows a different school of fiqh
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Zakat Distribution: What the Laws Say
Allocation of zakat among Asnaf:
Priority in Distribution: Indonesia (productive activities only after the basic needs of mustahiq are fulfilled)
Definition of mustahiq with emphasis on tamleek:Pakistan
A decision of Majlis: Malaysia, Singapore & Brunei
Absorption of operational expenditure:
Entirely by zakat mobilized without limit (Indonesia)
Partially by govt budget and by zakat mobilized (Brunei Darussalam & Pakistan)
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Accountability & Governance of ZIs: What the Laws Say
Collection and distribution by “authorized” amil: Indonesia, Malaysia, Singapore, Brunei Darussalam
Utilization of such funds is in conformity with Shariahas also with the intention of the donor(s): Indonesia
No Commingling of zakat funds with other charity funds: Indonesia
Mandatory reporting requirements to apex body: Indonesia
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Accountability & Governance of ZIs: What the Laws Say
Elaborate administrative sanctions, revocation of amillicense for violations of provisions: Indonesia
Financial & physical punishment for fraudulent practices: Malaysia, Brunei Darussalam, Indonesia
Penalty to be decided by Majlis: Singapore
Removal of erring member: Pakistan, Bangladesh
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Enabling Environment: Fiscal & Other Incentives
Tax Rebate: Zakat paid is a deduction from tax payable: Malaysia
Tax Relief: Zakat paid is a deduction from taxable income: Indonesia, Pakistan, India* (Tax is reduced by “zakat paid” times the tax rate.)
Assets for which zakat has been deducted at source shall be excluded from taxable wealth: Pakistan
No land revenue on land on the produce of which zakat has been charged: Pakistan
*zakat to Non-profits treated as donations and qualify for tax benefit
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Summary of Good Practices for Zakah Sector
Government may be responsible solely for regulation and leave mobilization to private bodies
Where state is sole collector with agency agreement with private corporate entities, there should be no competition between the two
Zakah regulations should be dynamic with scope for continuous reforms
Zakah payment should be made compulsory with effective deterrents against evasion
Zakah payment should be allowed as a deduction to income tax payable and not just to taxable income
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Summary of Good Practices for Zakah Sector
Corporatization is desirable as it enhances convenience for Muzakki; improves transparency
Accountability and good governance are key to sustainability and growth in zakah mobilization; require ensuring separation of zakah funds from other forms of charity; flow of zakah funds to designated beneficiaries by Shariah and by the Muzakki
Effective deterrents against misuse of zakah proceeds and violation of Shariah mandates relating to application of zakah funds must be in place
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Summary of Good Practices for Zakah Sector
Effectiveness in zakah management requires ensuring that zakah payment does not encourage dependence and leads to economic empowerment
Priority rules of distribution require fulfillment of basic needs (relief and rehabilitation) of ultra-poor first and avoidance of carrying or investing any surplus
Efficiency in zakah management requires ensuring that cost of zakah mobilization is pegged below one-eighth of funds mobilized.
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Enabling Environment for Awqaf Sector
Indonesia: Act of Republic of Indonesia No.41 on Waqf, 2004
Pakistan: Provisional Waqf Ordinances 1979
India: Wakaf Act, 1995
Bangladesh: Waqf’s Ordinance 1962
Malaysia: Administration of the Religion of Islam (Federal Territories) Act 1993 and similar Acts for individual provinces
Singapore: Administration of Muslim Law Act, 1999
Brunei Darussalam: Laws of Brunei, 1/1984, Religious Council and Kadi Courts,
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Institutional Structure for Waqf
Indonesia
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
President
Ministry of Religious Affairs
BADAN WAKAF
Waqif (Endower) Mawquf Alaihi (Beneficiary) Nazir (Manager)
(Endower)
Ulema Council
Institutional Structure for Waqf
India
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Ministry of Minorities Affairs
State Waqf Board(s)
Waqif (Endower) Mawquf Alaihi (Beneficiary) Mutawalli (Manager)
(Endower)
Waqf Administration
Central Waqf Council
Institutional Structure for Waqf
Pakistan
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Minister of Religious Affairs
Chief Waqf Administrator (Province)
Waqif (Endower) Mawquf Alaihi (Beneficiary) Mutawalli (Manager)
(Endower)
Waqf Administration (Province)
Institutional Structure for Waqf
Bangladesh
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Ministry of Religious Affairs
Waqf Administrator
Waqif (Endower) Mawquf Alaihi (Beneficiary) Mutawalli (Manager)
(Endower)
Waqf Administration
Waqf Committee
Institutional Structure for Waqf
Malaysia and Brunei Darussalam
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Sultan
Minister of Religious Affairs
Islamic Religious Council(s)/ Majlis
Waqif (Endower) Mawquf Alaihi (Beneficiary)
Institutional Structure for Waqf
Singapore
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
President
Minister of Religious Affairs
Islamic Religious Council/ Majlis
Waqif (Endower) Mawquf Alaihi (Beneficiary)
Mutawalli (Manager)
Enabling Environment for Awqaf Sector
India, Pakistan and Bangladesh:
Shared history
Permit private management by mutawallis but concentration of authority in state agency (absolute in case of Pakistan)
Emphasize preservation
Neglect or rule out developmental possibility (e.g. cap on leasing period of 2 years in India; exclude cash waqf); Perceived as obsolete, inefficient and costly
Outcome: development of existing waqf rare; no new social waqf; philanthropic projects in secular domain
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Enabling Environment for Awqaf Sector
Malaysia, Singapore and Brunei Darussalam:
Shared history
State religious council as the sole entity responsible for waqf management
Static and obsolete laws with severe restrictions on new waqf
State control may not necessarily hamper creativity and innovation and awqaf development:
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Enabling Environment for Awqaf Sector
Indonesia:
Continuous reform in laws
State regulator with private mutawallis responsible for waqf management
Emphasize preservation as well as development
Explicitly encourage cash waqf
Remove uncertainties through comprehensive coverage of relevant issues
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Good Practices for Awqaf Sector (Macro)
Proactive regulations ensure continuous reforms
Individual as well as institutional role in making and managing waqf encourage new waqf creation
Private financing of waqf development should be permitted for finite and limited period ensuring the perpetual character of waqf, thus balancing the apparently conflicting concerns of preservation and development
Additional financial as well as non-financial costs with waqf (as compared to trusts and foundations) must be avoided to provide a level playing field
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Good Practices for Awqaf Sector (Macro)
Issues relating to remuneration and accountability of mutawallis should be explicitly addressed with effective deterrents against misuse of waqf assets
Expressed and documented Intention of waqif regarding intended application of waqf proceeds must be respected and complied with
Emphasis on cash waqf encourages new waqf creation; investment of waqf funds should be permitted in financial as well as real portfolios while avoiding highly speculative investments
Waqf was always meant to be in voluntary sector and should be allowed to remain so.
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
THANK YOU
Islamic Research and Training Institute
Member of the Islamic Development Bank Group