Nasim Shah Shirazi Senior Economist. Islamic Research & Training Institute Member of the Islamic Development Bank Group

Transcription

1 Nasim Shah Shirazi Senior Economist Islamic Research & Training Institute

2 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,

3 Institutional Structure for Zakah Management Indonesia: Dual system with state and private institutional actors President Minister of Religious Affairs BAZNAS LAZ LAZ UPZ UPZ Muzakki and Mustahiq

4 Institutional Structure for Zakah Management India: Private actors (individual and institutional) with no role for state Private Collectors (Individual & Institutions) Muzakki and Mustahiq

5 Institutional Structure for Zakah Management Pakistan and Bangladesh: Dual system with state and private actors (individual and institutional) Minister of Religious Affairs Department of Zakat NGOs Individuals Muzakki and Mustahiq

6 Institutional Structure for Zakah Management Malaysia, Singapore & Brunei Darussalam: State agency as the sole entity responsible for zakah management Sultan/President Minister of Religious Affairs Islamic Religious Council/ Majlis Zakat Office Agent Agent s Muzakki and Mustahiq

7 Zakat Collection: What the Laws Say Zakat payment is Mandatory: Malaysia, Singapore Partially Mandatory (for specific financial assets): Pakistan Reasons 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

8 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

9 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)

10 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 Shariah as 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

11 Accountability & Governance of ZIs: What the Laws Say Elaborate administrative sanctions, revocation of amil license 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

12 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

13 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

14 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

15 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 oneeighth of funds mobilized.

16 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,

17 Institutional Structure for Waqf Indonesia President Ministry of Religious Affairs Ulema Council BADAN WAKAF Waqif (Endower) Nazir (Manager) (Endower) Mawquf Alaihi (Beneficiary)

18 India Institutional Structure for Waqf Ministry of Minorities Affairs Central Waqf Council State Waqf Board(s) Waqf Administration Waqif (Endower) Mutawalli (Manager) (Endower) Mawquf Alaihi (Beneficiary)

19 Pakistan Institutional Structure for Waqf Minister of Religious Affairs Chief Waqf Administrator (Province) Waqf Administration (Province) Waqif (Endower) Mutawalli (Manager) (Endower) Mawquf Alaihi (Beneficiary)

20 Institutional Structure for Waqf Bangladesh Ministry of Religious Affairs Waqf Administrator Waqf Committee Waqf Administration Waqif (Endower) Mutawalli (Manager) (Endower) Mawquf Alaihi (Beneficiary)

21 Institutional Structure for Waqf Malaysia and Brunei Darussalam Sultan Minister of Religious Affairs Islamic Religious Council(s)/ Majlis Waqif (Endower) Mawquf Alaihi (Beneficiary)

22 Institutional Structure for Waqf Singapore President Minister of Religious Affairs Islamic Religious Council/ Majlis Mutawalli (Manager) Waqif (Endower) Mawquf Alaihi (Beneficiary)

23 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

24 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:

25 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

26 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

27 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.

28 THANK YOU