Waqf and poverty eradication

Zakah or Zakat ul Maal Alms can be defined as compulsory contribution payable at once in a year from the wealth which has reached prescribed level Nisaab. This is a command of Allah which must be fulfilled by every Muslim, male and female.

Waqf and poverty eradication

However, additional funds sourced from voluntary donations and the profit share from recipients, as well as investment from community Enhancing human capabilities and expertise Not mentioned Skills training provided using zakat funds Skills training provided by large corporations as part of their CSR commitment Participation from community and social impact Only among the self-help groups providing mutual guarantee Only among the self-help groups providing mutual guarantee Involves more members of the community to employing the poor as personnel, investments from public and CSR training from large corporations Expansion of business Repayment of the 1st tier funding assistance becomes a qualifying criteria for the 2nd tier financing Recipient may seek additional funding based on repayment of previous funding The 2nd tier Mudharabah financing is eligible provided the business has shown potential and viability.

Default risks and dealing with defaults Potentially less motivation to repay and put continuous effort by recipient as failure to Waqf and poverty eradication will automatically send back the recipient to 1st tier Default of first financing may pose constraints for recipients to seek additional financing in the future Default risk is limited as there is no repayment requirement during the 1st tier.

Meanwhile, the 2nd tier is based on profit and loss sharing. The business and financial risks are mitigated through stringent selection of business financed and extended to trustworthy recipients.

One of the primary considerations for the proposed model is the sustainability of the structure, particularly the establishment and development of a trusted microfinance institution to spearhead the initiative. Although financial institutions have been recognized as a financial intermediary, the societal expectation of the function of a bank, primarily as a source to borrow funds rather than a business partner and depositors expect to gain returns and shield losses on their deposits.

While there has been an increasing demand for halal financial dealings, there was no commensurate increase in the desire to share in profits and losses, particularly with losses Abdul Rahman, Additionally, there are hindrances for financial institutions to engage in such activity due to higher capital and solvency requirements by Waqf and poverty eradication bodies.

Thus, there would need to be a specific not-for-profit microfinance institution mandated and supported by government to undertake this role. In addition, there must be a constant supervision and oversight by a higher independent body to ensure no mismanagement by the Islamic microfinance institution.

Another main concern is the financial sustainability for the Islamic microfinance institutions to carry on its operations as well as the source of funding to be channelled to the entrepreneurs.

As Abbas and Shirazi pointed out, one of the main constraints to Islamic microfinance is lack of adequate loanable funds based on profit and loss sharing.

Colonial Era WAKF Commissioners’ Act to be Amended, – State Law Office and Department of Justice

The proposed model aims to gather funds from Zakat, Sadaqah and Waqf investment proceeds to be channelled as capital to the entrepreneurs. This model will need to focus on establishing strategic alliance with Zakat organizations as well as other local organizations to source the funds.

The Zakat funds may be channelled to develop projects for educational or health care services as long as the beneficiaries of such projects fulfil the criteria to be recipients of Zakat. Furthermore, additional source of funding for the Mudharabah financing arrangement could be sourced from community investors who wish to partake in developing the ummah and earning profits on halal investments.

According to Hassansuch collective efforts to promote economic activities and regional development will affect both production and consumption of a community. However, as Haneef et al. Unlike interest-based microfinancing, where borrowers need to pay pre-determined interest rate regardless of the outcome of the business undertaking, both borrower and lenders in Mudharabah microfinance model share the potential risk of making financial losses.

In this regard, there is a need for robust screening, strict monitoring and supervision on the entrepreneur by selected larger organisations to minimise asymmetric information problems and transaction costs Haneef et al. Islamic bankers and supporting staff also need to be equipped with knowledge of Islamic finance and risk management in order for them to properly and responsibly manage the allocation of funds and distribution of profits to be shared accordingly Abbas and Shirazi, The proposed Mudharabah microfinance model provides a platform for more people to be involved in community and development programmes, in addition to stimulate effective accumulation and distribution of funds to finance productive real economic sectors.

An effective implementation of this structure would address issues of lack of financial and human resources, and also inadequate infrastructure and support for the poor to effectively participate and become economically active and independent.

Conclusion In conclusion, the enhanced Mudarabah microfinance model sugggested is capable to adopt microfinance best practices within the context of Islamic law.

The conventional microfinancing schemes targeted for the poor are acknowledged to contribute towards alleviating poverty; however, the debt finance grounded on the basis of interest riba is prohibited in Islam. The proposed Mudharabah microfinance model, which is enhanced from the initial proposed microfinance model by Obaidullah and Kabir and Salim has the potential to provide the necessary funding to develop more productive economic activities as well as encourage more economically active individuals.

It promotes financial inclusion while upholding Islamic values of brotherhood, amanah trusteeship and shura mutual consultation to alleviate poverty, raise standards of living. In order for the Mudharabah microfinance model to be effective and sustainable, there must be a trusted Islamic microfinance institution specifically mandated and supported by the government to undertake this role.

Islamic finance institutions should consider to channelling their funds and also equip their staffs with knowledge of Islamic finance. Additionally, the Islamic banks should make some initiatives to promote microfinance and create awareness among the poor communities.

And lastly, the would-be entrepreneurs should be given business supports and training opportunities to enhance their business acumens. This study draws attention to the challenges to the Islamic microfinance sector and the authors proposed a conceptual framework -- Mudharabah microfinance model -- highlighting the role of islamic finance institutes to serve the interest of the poor with commitment towards Islamic values.

Further work and discourse on the operational aspects and legal requirements in different jurisdictions on service delivery to the poor is required. Flinders University, Adelaide, South Australia: The Economic Society of Australia.

International Institute of Islamic Business and Finance. International Islamic University Malaysia.6 measures for poverty eradication through different institutions like zakah, waqf, sadaqah and hibah is one of the foremost obligation of Islamic state.

WAKF Commission Submits Report to AG – State Law Office and Department of Justice

Zakat, External Debt and Poverty Reduction Strategy in Bangladesh 3 institution for the purpose of poverty eradication. Poverty can be tackled through other means such as infaq, nafaqat-e-wajiba, waqf, etc. Zakat, External Debt and Poverty Reduction Strategy in Bangladesh.

Poverty eradication, acknowledged since WWII as a global responsibility, received increasing attention during s and s, culminating in UN’s adoption of the Millennium Development Goals in To complement these presentations, an interactive panel session featuring subject matter experts will provide a deeper understanding of waqf, identify opportunities and solutions for corporate waqf through Corporate Social Responsibility initiatives and its potential contribution to causes such as community development, poverty eradication and.

Islamic Programmes. The Al-Imdaad Foundation’s Islamic projects are dedicated to the upliftment of underprivileged and needy Muslims. Donations in the form of fidya, lillah, sadaqa and waqf are conscientiously used to fund and establish projects related to education, orphans’ care, water wells, the building of masaajids, etc.

Waqf and poverty eradication

Waqf endowment is considered as a process of anticipating and managing the future: a hereafter future for the person making the Waqf endowment, and a worldly future for the person benefiting from it. It is a source for the purification of the soul "Of their wealth take alms to purify and sanctify them.".

Waqf And Poverty Eradication ~ DirectCurrentMusi