Ideas: Zakat as a social financial instrument in the time of Covid-19

Although not as prominent as the national economic stimulus plan, zakat institutions were among the first to provide aid and support to the needy, especially within the Muslim community, during the pandemic.

The expansion of social assistance is among the main public policy responses to the enormous economic disruption caused by Covid-19. In this regard, we have examined how the institutions of zakat have helped to mitigate the impact of the pandemic. Our study shows that zakat institutions are a promising means for financing social objectives and therefore deserve more attention. In addition, as stated in the 12th Malaysian Plan, zakat and waqf also need to be mobilized more as a source of public funding. A national waqf master plan will be formulated to further improve the governance of waqf resources to finance socio-economic development programs.

The implementation of the Movement Control Ordinance has severely affected economic activities, especially for those who depend on daily wages and income. The negative impact on the economy has directly affected the quality of life of the people, leading to an increase in poverty. Zakat institutions quickly stepped in as an alternative source of assistance in addition to government support to mitigate the negative effects of Covid-19 on the public through zakat and waqf.

As of May 4, 2020, during the pandemic, zakat institutions had distributed RM171.92 million through the 14 independent state zakat institutions in Malaysia. The aid and the amount granted vary by state. This aid is separate from the national Covid-19 relief fund known as Bantuan Khas Covid-19 (BKC), which allocated RM 4.6 billion to be phased out to the hardened poor, B40 (lower income group than 40%) and affected. individuals in the M40 categories (40% in the middle). Although the contribution of zakat appears small compared to the National Covid-19 Fund, several thousand people have benefited from the aid nationwide.

Zakat is an important form of compulsory charity under Islam, while waqf is a form of endowment given on a voluntary basis to fund services for the community. The wealth collected through these donations is redistributed to the community, in particular to the “poor and needy” (asnaf). Both zakat and waqf funds are centrally managed by their respective zakat institutions. Zakat is managed directly by the State Islamic Religious Councils (SIRC) or the Majlis, while the waqf is managed by the BaitulMal, which is under the administration of the Majlis.

To mitigate the impact of the pandemic, zakat institutions across the country have launched various initiatives and programs. They have also provided financial and material assistance to groups outside the growing number of asnaf to include a larger target group. The five main points of interest of zakat institutions during the pandemic are asnafs, people who have lost their income, frontline people and hospital staff, Covid-19 students and working groups as well as mosques and prayer rooms.

In addition to the usual monthly zakat payments to registered asnaf, the Majlis Agama Islam Wilayah Persekutuan (MAIWP) and the Majlis Agama Islam dan Adat Melayu (MAIDAM) of Terengganu have also advanced zakat payments to affected individuals. Zakat institutions also work in cooperation with state governments and private groups to provide aid through sponsorship of essential medical devices, equipment, and commodities for hospitals and the public. In addition, MAIDAM Terengganu had formed a zakat guard team to immediately respond to the problems encountered by the asnaf. It should be noted that the institutions of zakat at the national level have gone beyond discourse to take action in the face of the difficult health and economic climate resulting from the pandemic.

Although most zakat institutions have made commendable efforts to provide assistance, some have gone the extra mile. Majlis Agama Islam Perak (MAIPk) has provided assistance that includes the five target groups mentioned above, making it one of the most comprehensive assistance programs among zakat institutions. MAIPk’s initiatives extend not only to asnaf, but include grants for medical equipment and treatment of Covid-19, support for frontline people and volunteers, and an allowance to support small traders . Drawing on a population of around 2.5 million, MAIPk ensured that funds and assistance were available for a variety of affected groups, providing a total contribution of 14.35 million ringgit.

As of May 2020, MAIWP’s zakat distribution was highest among zakat institutions – nearly RM 35 million of zakat funds were used to help the Ministry of Health break the chain of Covid- 19 and lighten the burden on the public. This was revealed in a case study on “The role of Zakat institutions in the face of Covid-19” at the International Zakat Conference held in October 2020. MAIWP provided special assistance to homeless centers and used mosques and prayer rooms as distribution points in neighborhoods. . This ensures that aid is distributed effectively throughout the affected community. Compared to other public zakat institutions, MAIWP and MAIPk have developed holistic social programs that are effective in providing a safety net for those affected.

However, people often do not recognize zakat as a potential source of financial assistance and neglect their role in society. The discussion of zakat generally centers on the failure of zakat institutions to manage zakat funds. Zakat institutions have moved away from the traditional practice of providing assistance to become more inclusive and easily accessible. Some of the well-known zakat institutions such as MAIWP, Lembaga Zakat Selangor and MAIPk have even incorporated their function of zakat to improve its efficiency and increase its reach.

Zakat institutions have many reserves which have not been fully utilized despite an increase in zakat collections, due to problems in the distribution of zakat funds. One of the problems is that zakat fundraising is concentrated in certain states, such as MAIWP in Kuala Lumpur and Lembaga Zakat Selangor. Since you must be a resident to be eligible for state zakat, residents of states with smaller zakat collections may not be able to receive sufficient assistance. In addition, national zakat and safety net programs (for example, those under the Department of Social Welfare) operate independently, with separate databases and distribution channels. Lack of coordination between zakat institutions and national safety net programs results in fewer benefits available to people living in states with low zakat collections.

Improving the governance of zakat institutions can create a strong social protection system that fills existing gaps in the social safety net. Identifying these gaps and expanding the institution’s facilities will improve the efficiency and effectiveness of fund distribution within Malaysia’s large Muslim community. Optimizing the governance of zakat is essential to realize the potential role of zakat. Millions of zakat payers pay their zakat through zakat institutions. Obtaining their trust is very important in the governance of zakat funds.

Adopting good practices and revising current practices will enable zakat institutions to become reliable institutions offering strong social protection to Muslims. Zakat institutions that adopt good governance will build the confidence of zakat payers and non-zakat payers. This will improve the economic situation and the well-being of the asnaf, which would have a beneficial effect on the country’s economy. In addition, the presence of strong zakat institutions in each state would help create a resilient economy. This is where the future of zakat and the institutions of zakat lies.

A large number of people affected by the pandemic have benefited from the assistance provided by zakat institutions. While these initiatives are seen only as short-term solutions, there is no denying that they go a long way in easing the burden on those affected and providing support to the front lines, who are tirelessly fighting the Covid epidemic. 19. People whose incomes have been affected by the pandemic have been supported through the distribution of aid. It can be said that in some ways zakat institutions can provide some relief which has improved the quality of life of people and can become an important national source of public funding.

Iman Qistina and Ivy Sim are research interns at the Institute for Democracy and Economic Affairs (IDEAS)

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