Institutionalising Zakat fund

As the holy month of Ramadan is fast approaching, financially solvent families in the country with its overwhelmingly Muslim population will be readjusting their family budgets for giving Zakat. Every year, millions give Zakat money either in cash to the poor or for buying clothes for distressed men, women and children. It is still not known whether the government or any private organisation has ever diverted such money to any specific project that could alleviate poverty on a sustainable basis.      

Distribution of Zakat fund has since long been in disarray. While the government's own initiative to this effect has come under criticism due to some alleged irregularities, the private sector is yet to come up with an effective institutional framework to collect such funds and use those in areas of poverty alleviation. Proper utilisation of such Zakat money could have saved spending of billions of Takas that the government does otherwise allocate every year for poverty reduction projects. The Finance Minister has, time and again, pointed to duplication and misuse of huge funds that are allocated every year under the social safety net programmes. Experts are of the view that a substantial amount of budgetary funds that are allocated for addressing poverty, could easily be diverted to many other important projects, with Zakat money taking its place.

Against this backdrop, the participants in a recent roundtable, organised jointly by the Centre for Zakat Management (CZM) and The Financial Express, made strong pleas to the government for exempting Zakat funds from income tax as such a waiver is given to projects that are taken up under corporate social responsibility (CSR). Zakat fund, if mobilised collectively both by the government and the private sector, could easily lift  about 6.0 million extreme poor families out of the poverty trap, according to a study.  On the other hand, around Tk 240 billion could be collected as Zakat.   

Economists and policy-makers here are yet to give a serious thought to treating Zakat as a financial mechanism for the purpose of alleviating poverty. It is otherwise estimated that billions of Taka are otherwise given by the affluent sections among the Muslim community as Zakat in Bangladesh every year. Had there been a proper system of collection and utilisation of this fund in place, this money could be effectively used for reducing poverty of a large section of its population. Zakat is one of the five basic pillars of Islam. It is considered to be neither an aid to the poor from the rich nor a voluntary donation. Zakat, according to the Islamic belief, is mandatory for the rich and the poor's right to the former's wealth. That the Zakat money is often not effectively used for what it is given, was apparent from an observation, made by one of the participants in the afore-mentioned roundtable, about not using more than 20 per cent of the Zakat fund as its management cost. In this context, an institution, set up for collecting Zakat and launching different well-thought-out sustainable poverty alleviation projects must have very honest and dedicated leadership. Its operation has to be transparent and accountable.