I would like to apologize for the absence of a few weeks and would pick the thread back up from where I had left off.
In this concluding article on SDG 1, I will put across my thoughts on how to assist the reduction and subsequent removal of poverty, first within the OIC countries and then from around the world. My focus shall be to achieve this colossal task with the help of technology, or in other words, by creating a virtual Bait Al Maal.
In the earlier articles, I have proposed upscaling the existing database by every Islamic country to extract the lists of the ‘poor’ and ‘needy’ in their backyard for dual purposes.
Firstly, to gauge the magnitude of such people in the overall population which shall be helpful in the efforts to uplift them. Secondly, to contribute to the central database at the OIC which will assist in comprehending the overall size of the downtrodden people within the Islamic world.
There may be eyebrows raised on the sensitivity of citizens’ personal data shared across the border. This aspect can be looked at in two ways, positive and negative. Will the poor prefer to stick to privacy and continue to struggle, or would he/she like to be helped and would not mind that his/her perilous condition be made known to strangers?
There are also two stages of addressing poverty through virtual Bait Al Maal by an Islamic country. First is at the country level and the second at the OIC level.
As for the country level, public sector entities and financial sector entities (Islamic commercial and investment banks, Takaful companies and all other types of Islamic institutions) must be required to ascertain and take out Zakat and transfer the amount to the virtual Bait Al Maal of the country.
The command could be implemented through the parliamentary process or, for the sake of efficiency, a decree issued by the head of state, subsequently validated by parliament.
While all Islamic financial institutions are, by default, required to ascertain and pay Zakat on shareholders’ behalf, public sector entities should also be enforced to follow suit. Private sector entities and high-net-worth individuals cannot be forced but are encouraged to divert full or part of their annual Zakat amount to the virtual Bait Al Maal. I am convinced that with the magnitude and effectiveness of the project, they would actively take part.
All money transfers must be carried out electronically to provide a money trail in compliance with international anti-money laundering (AML) norms. Funds should then be distributed, again electronically, to the people classified as the poor and needy on the 1st of every month. It is highly recommended to adopt the monthly transfer mechanism rather than full disbursement in a lump sum to prevent excessive spending by the recipients.
Such financial discipline is necessary to enable the recipients to manage their basic needs on a sustainable basis. Scholars have opined that the staggered distribution of Zakat is allowed provided the entire money is consumed before the next one is due.
Although a majority of donors are expected to pay Zakat during the fasting month of Ramadan when good deeds are highly rewarded, not all of them pay at one time. However, while donating, they should let the authorities know as to the period the Zakat amount belongs to.
It is not necessary that the Zakat amount should be equally distributed to all registered households. There may be variations depending on the size of the family and the circumstances, which may include the need for regular mediacl treatment for a family member.
Hence, it is important that meticulous groundwork is carried out to collect and collate data on each eligible household in the country with yearly updates to verify if the family continues to deserve Zakat funds or has prospered to cross the threshold of Nisab where it is no longer eligible for Zakat funds.
A good tool to determine the monthly needs for a struggling household could be the latest consumer price index consisting of the cost of food, clothing, rent, healthcare and utilities based on whether the family lives in an urban or rural area. This will enable the authorities to arrive at a ballpark figure for an average household based on which the need for Zakat can be determined.
It is possible that the entire Zakat amount collected by a country in a lunar year is more than sufficient for the monthly disbursement to the registered poor population, or it could fall short. If the collected Zakat amount is exhausted earlier than the new amount is received, this is where the second option, ie the OIC, comes into play.
The second option being suggested by me for the first time through this space is for the OIC secretariat to be able to compile a global database of Zakat-recipient people by obtaining data from all 57 countries. The OIC shall rely on countries for the authenticity of data and its update from time to time.
The countries having surplus Zakat shall be required to physically transfer the excess funds to a dedicated OIC account in US dollars in a prime New York-based bank duly supervised by one of the top four audit firms to ward off any AML issues. Alternatively, the countries may hold the surplus funds within the country but at the OIC’s disposal.
Once the total surplus Zakat amount is known to the OIC, it shall directly transfer the funds to the recipients’ bank accounts in all countries on a monthly basis. This may sound cumbersome but can be achieved through technological advancement we are used to currently.
Colossal amounts are already transferred across the globe by migrant workers and as per a World Bank estimate, the official home remittances in 2022 amounted to the equivalent of a whopping US$794 billion. Alternatively, the OIC may transfer the country-wise amount to each government for onward distribution.
The OIC officials may not be able to know the exact circumstances of each household in the member countries; as such, they may simply divide the total surplus amount (whether transferred or held by country at the OIC’s disposal) by the number of eligible households to arrive at the figure for equal distribution.
It may be possible that while the OIC does the administrative work, the IsDB, which is well versed in managing international financial transactions and enjoys an ‘AAA’ rating, can handle the funds.
As for the cost of installing and running the huge virtual Bait Al Maal infrastructure and operation, this will come out from the Zakat fund as discussed by me earlier, provided the Shariah scholars approve of it. I personally believe there will not be any issue for obtaining their concurrence toward such a noble mission since Zakat administrators are counted as one of the eight categories to benefit from Zakat funds.
The IsDB may also provide Shariah compliant returns on the large funds held by it from time to time to leverage the availability of money for the deserving recipients. A yearly audit report on the Zakat funds collected and distributed in a transparent manner will go a long way to making the virtual Bait Al Maal highly successful in poverty removal efforts.
So, this is the blueprint readers I could laterally think of for reviving the Bait Al Maal by utilizing state-of-the-art technology for combating poverty from across the OIC countries, followed by from the world.
The Bait Al Maal concept proved its worth earlier by eliminating poverty completely from the Arabic peninsula and can still do so for the entire Muslim world through serious consideration and efforts. Therefore, there is a need in terms of the United Nations Development Programme for SDG 1 to be aligned with the great institution of Zakat to achieve the goal, at least by the 57 OIC countries before the arrival of 2030.
I will very much welcome readers’ questions, suggestions or comments to fine-tune the concept.
The purpose of this educative series and the article is not to hurt any religious or commercial sentiments either consciously or even unwittingly.
Sohail Zubairi is an Islamic finance specialist, AAOIFI-certified Shariah advisor and auditor as well as CIAE-certified Islamic arbitrator and expert. He can be contacted at [email protected].
Next: Discussion to commence on SDG 2 – Zero Hunger.