Lessons learned from UNHCR Zakat fund

UNHCR (United Nations High Commissioner for Refugees) issued two months ago a landmark report on the potential of Zakat funds to alleviate the suffering of forcibly displaced people in OIC countries. The report aims at establishing the importance of giving Zakat to displaced people and at raising awareness of UNHCR’s role and aspirations in directing Zakat to its populations of concern.

In 2017, there were 68.5 million forcibly displaced persons globally, of which an estimated 40.8 million are Muslim. Unfortunately, conflicts and resulting displacements have led to a surge in poverty levels (SDG1), to a spike in malnutrition (SDG 2) and to the deterioration in the health and well-being of displaced populations (SDG3). Moreover, displaced refugees face educational barriers (SDG4) and are confronted with a lack of job opportunities in hosting countries (SDG8).

The UN has estimated the current Zakat given worldwide at $76 billion, which is modest in context of $1.7 trillion in wealth held by high net worth individuals in the Middle East, and separately, $2.5 trillion in assets held globally by the Islamic finance Industry. According to the UN, the global Zakat potential is around $356 billion.

75% of Zakat donations are commonly transferred directly from donor to recipient without the involvement of any Zakat collecting organizations. Hence, Zakat is an important source of philanthropic funds and Zakat industry has tremendous potential in addressing the funding requirements needed to achieve SDGs and humanitarian assistance programs, especially that refugees fall under at least four of the eight stipulations required by recipients of Zakat funds.

There are many lessons learned from the UNHCR zakat fund:

• Adopting digital innovation: The UNHCR Zakat Fund recipients are registered and their iris scans are taken and used for cash distribution. Moreover, text messages are sent to beneficiary confirming that cash is available
• Broadening the scope of collaboration across stakeholders: The Zakat fund is providing an important avenue for stakeholders (financial institutions, individuals, philanthropic organizations…) to direct their funds to address acute humanitarian needs
• Improving the link between Zakat and humanitarian needs: The UNHCR zakat fund clarifies the link between Zakat and the most pressing humanitarian funding needs by relying on a transparent reporting and tracking system of Zakat funds destination
• Leveraging effective distribution channels: If Zakat industry is to reach its full potential, partnerships with trustworthy organizations are a necessity. The involvement of leading organizations such as UNHCR in distributing funds enhances the impact of contributions, minimizes overhead allocations and improves efficiency

UNHCR zakat fund experience can be leveraged in addressing other social issues like education, economic empowerment and healthcare through specific zakat funds. More importantly, such initiatives can build synergies with impact investing funds in order to make zakat funds more sustainable and more focused on income generating activities for beneficiaries rather than on simple cash transfers.

NB: This article was published on page 17 of IFN Volume 16 Issue 24 dated the 19^th June 2019.