Issues of child abuse, neglect, malnutrition and exploitation are the focus of renewed attention from governments, policymakers and multilateral institutions.
For instance, the United Nations Millennium Declaration 2005 and the Sustainable Development Goals (SDG) 2017 have listed children’s rights to survival, health, and education into their main agendas.
Research has shown that children are the most vulnerable segment of a society and are exposed to abuse and violence. Each year, an estimated 0.5 to 1.5 billion children are involved in physical violence, 150 million girls and 73 million boys are raped or subjected to sexual abuse, 115 million children engaged in dangerous work and 264 million children have no access to school.
In Malaysia, 17.7 per cent of children below the age of 5 are stunted (Health Ministry 2017 records), 22 per cent are underweight and 23 per cent are either overweight or obese (United Nations Children’s Fund [Unicef] 2018).
The Malaysian government and policymakers, therefore, have shifted their attention towards strengthening the social protection system. For example, the Bantuan Sara Hidup (BSH) programme launched in 2018 offers unconditional cash transfers to B40 households to assist with rising costs of living. However, the existing protection schemes are not specifically designed to address the welfare of children during their first 1,000 days — the most vulnerable phase in their life, in which nutrition and beneficial healthcare are paramount.
This article, therefore, proposes the utilisation of corporate zakat — an annual religious obligation paid by business entities under the purview of zakat on wealth — to develop a child grant that seeks to complement existing government programmes.
An ongoing study by the International Institute of Advanced Islamic Studies (IAIS) Malaysia, in collaboration with Unicef and Iman Research, discovered that corporate zakat has the potential to address the required needs of children in Malaysia in terms of survival, nutrition, healthcare and education.
There are 693 Syariah-compliant listed companies under the Securities Commission and 16 Islamic commercial banks in Malaysia that are supposed to pay zakat. However, as of October last year, only 21 companies and 12 Islamic banks disclosed their zakat payment with an average payment of RM4 million accumulating a total collection of RM130 million. This is a far cry from its true potential, which is estimated to reach RM2.9 billion in 2019 and more than RM3.4 billion by 2031. This projection, however, does not include non-public Syariah-compliant firms, sole-proprietorships, Islamic cooperatives and small, medium enterprises in Malaysia.
On the other hand, the total budget of the child grant only amounted to RM1.9 billion, to cater approximately for 832,940 children under the age of 2 in 2019, with each child to be allocated RM150.
In Islam, zakat can be used for various socio-economic purposes such as education, healthcare and humanitarian causes as long as they fulfil the criteria of zakat beneficiaries (asnaf).
The Quranic verse (9:60) listed eight categories deserving of zakat: the poor (al-fuqara’); the needy (al-masakin); zakat collectors; those whose hearts are being reconciled (with Islam); freeing war captives; persons in debt; those who are in the path of Allah; and the wayfarers.
In this regard, the overwhelming majority of jurists from four established schools (Hanafites, Malikites, Syafi’ites and Hambalites) are of the view that children are also eligible to receive zakat if their guardians fall among the above eight categories.
A hadith narrated by al-Daruquthni from Abu Juhaufah reported that the Prophet Muhammad (PBUH) once sent a zakat collector who collected zakat from the rich people and distributed the collection among the poor. At that time, Abu Juhaifah was a young orphan who did not possess any wealth, so the zakat collector gave him a middle-aged camel. Thus, according to the Hanafi school, children of wealthy parents could not receive zakat because they are considered rich if their parents are rich.
In a report attributed to Caliph Umar al-Khattab, it is stated that the first poor (fuqara’) refer to Muslims and the second needy (masakin) to non-Muslims. Difference of religion is thus not a bar to zakat.
In a nutshell, corporate zakat is a high potential source of funding for a child grant programme in Malaysia, particularly for children of households belonging to the B40 category. Other potential avenues such as corporate social responsibility (CSR), sadaqah and waqf, can also be explored as complementary funding sources for the proposed grant.
From an Islamic viewpoint, the use of corporate zakat and other Islamic social finance instruments for a child protection system correspond to the higher objectives of Syariah (maqasid) on the protection of life and mind, and is supportive of the government’s new motto to promote Islam as rahmatan lil ‘alamin (a mercy to all creation).
To achieve corporate zakat’s fullest collection potential, this article proposes that relevant authorities, such as the Securities Commission (SC), Bank Negara Malaysia (BNM), and the Companies Commission of Malaysia (SSM), increase the promotion of zakat among Malaysian companies.
The corporate zakat payment needs to be emphasised as a tax obligation. This is particularly so since the National Fatwa Council of Malaysia (2001) and Selangor Fatwa Council (2003) have resolved that Islamic banks and Syariah-compliant firms are obligated to pay zakat.
It is also recommended that zakat payment becomes one of the determining criteria in achieving Syariah-compliant status for public-listed securities under the SC.
The writer is a research fellow at the International Institute of Advanced Islamic Studies (IAIS) Malaysia
Published in: New Straits Times, Thursday 18 April 2019
Financial inclusion or access to finance at an affordable cost has, since the early 2000s, been a focus of renewed concern for many governments and central banks.
The World Bank’s 2017 Global Findex Database discovered that about 1.7 billion people worldwide remain unbanked — without an account at a financial institution or a mobile money provider. The United Nations Development Programme’s Sustainable Development Goals (SDGs), therefore, seeks to improve financial access into its main development agenda.
A plethora of academic evidence confirms that financial inclusion can support the achievement of broader sustainable development goals.
As a business established within the ambit of Syariah principles, values and goals, Islamic finance aims to promote economic wellbeing and creates socio-economic justice; and serve as a catalyst for development, in line with the spirit of the UN sustainable development agenda.
The International Monetary Fund, in its press release on May 9, also acknowledged that “the growth of Islamic finance presents important opportunities to strengthen financial inclusion, deepen financial markets, and mobilise funding for development by offering new modes of finance and attracting unbanked populations that have not participated in the financial system.”
Islamic finance could contribute to the financial inclusion agenda through two main mechanisms: profit and loss sharing (PLS) or risk-sharing instruments, like musharakah and mudharabah, as an alternative to conventional debt-based financing and risk transfer; and Islamic social finance instruments, such as zakat, waqf (endowment fund), shadaqah, and qard hasan (benevolent loan), which complement PLS instruments.
PLS promotes the financial inclusion agenda because the concept can offer access to finance to low-income segments at an affordable and fair rate: the imposition of cost and the distribution of profit are based on the actual performance of the business.
As a result, the optimum application of PLS will create an equitable distribution of income and wealth among partners or between wealth owners and entrepreneurs, presenting the concept of justice and fairness in financial dealings.
Risk transfer underlying the conventional financial system, on the other hand, implies asymmetric exposures to economic risk, and does not, therefore, promote economic justice and financial inclusion.
Furthermore, social finance, mandated or otherwise, is an integral part of the Islamic financial system to offer equal opportunity to financial access to the low-income segments, that is, the underserved and poor, “so that it may not (merely) make a circuit between the wealthy among you” (QS 59:7).
Islamic social finance instruments help improve financial access via various initiatives, such as microfinance empowerment and poverty alleviation programmes.
Financial technology (fintech) is a perfect device to reinforce the role of Islamic finance in promoting the financial inclusion agenda. The use of digital finance, such as blockchain and crowdfunding, can lower transactional costs and minimise asymmetric information.
Santander FinTech issued a report in 2015 estimating that blockchain could reduce transactional costs attributable to cross-border payment, securities trading and regulatory compliance between US$15 billion (RM62 billion) and US$20 billion per annum by 2022.
Furthermore, the ability of blockchain to transmit and to record the ownership of the digital assets and immutably store information — where all blockchain participants have access to the same information — might significantly reduce information asymmetries.
Fintech can also open financial access to unbanked individuals. According to World Bank estimate, there are approximately 240 million to 334 million people in developing economies that could participate in crowdfunding.
It is also a powerful tool to widen access and outreach of Islamic social finance instruments such as zakah, waqf and sadaqah.
Bank Negara Malaysia Assistant Governor, Datuk Ahmad Hizzad Baharuddin, at the Association of Shariah Advisers’ Shariah Fintech Forum 2017, affirmed that fintech promises to revolutionise finance and bring a broader range of benefits to financial institutions and the public.
The writer is a research fellow at the International Institute of Advanced Islamic Studies Malaysia
Published in: New Straits Times, Friday 19 October 2018
Although still in its infancy, there are already six crowdfunding companies operating in Malaysia. One of them was co-founded by Elain Lockman, an actuarial science graduate with a Masters in operational research who was one of the early employees at MDEC. She also had stints at iPerintis [now called Petronas ICT) and Malaysia Debt Ventures before venturing on her own as a consultant for tech clients such as DiGi Telecommunications, Packet One Networks, Green Science and MSC Management Services. Last year, she helped found Ata Plus with two other business partners. Elain talks to SAVVY about what crowd-funding is all about and its prospects in Malaysia..............................Download the full article in pdf attachment (below)
THE International Monetary Fund (IMF), especially under its current managing director, Christine Lagarde, has been a proactive supporter of Islamic banking, and, together with the World Bank, has declared it a priority for its operations in countries with Islamic banking. In a recent report titled “Ensuring Financial Stability in Countries with Islamic Banking”, IMF economists have thrown down the gauntlet to its board with a plan of action that, if approved, would have game-changing implications for the regulation and development of the industry, thus further promoting its stability and soundness............................Download the full article in pdf attachment (below)
When first conceptualised in the 1950s and 1960s, it was envisioned that Islamic banks would take the form of a publically-owned social service, similar to that of education and health. Islamic banks would offer current accounts that would not earn interest and saving accounts that paid dividends on the basis of partnership. The capital made available from the saving accounts is considered as investment, thus, would be used by businessmen through partnership agreements where profits and losses would be shared......................Download the full article in pdf attachment (below)
Strong views were recently expressed by the Muslim Consumers Association of Malaysia that the Islamic banking and finance industry follows the letter but not the spirit of Islam. “Perbankan Islam tiad ‘roh Islam, zalim” (Utusan, Oct 23, 2015) raises some serious concerns of society. This is despite the fact that “Islamic banking assets grew at an annual rate of 17.6 per cent between 2009 and 2013, and will grow by an average of 19.7 per cent a year in 2018 (The Economist, Sept 13, 2014); Khalid Howladar of Moody’s rating agency, calls this “a landmark year” for Islamic finance, in that it is moving from “a very esoteric asset class to one that’s more… global”......................Download the full article in pdf attachment (below)
Question: How do you see the capital market for the rest of the year and next year for Malaysia and the region?
Answer: For Malaysia and the region it is similar. In Indonesia and Singapore we have had a few capital market exercises. We have seen IPOs postponed. I think the market is not conducive until the end of the year (or) first quarter next year. We don’t think it is conducive to raise funds in equity and debt markets because the pricing will be affected. For companies that are very strong, it’s still a good time to raise bonds, because people will take good credit. Good credit is no issue. We are still number one in terms of sukuk and the bond market. ................Download the full article in pdf attachment (below)
The recent development of Islamic banking and finance (IBF) in its practice as well as its discourse has been dominated by technical/operational issues; i.e., how to produce financial products or contracts that are compliant with Islamic law (usually known as Shari‘ah compliant). Many view this stage as a seamless continuation of the early three decades (1960’s-1980’s) of IBF’s development, in which the scholars and practitioners laid its philosophical and conceptual foundations. Some, however, do not view the impressive development in a relatively short period as a natural progression from the pioneering stage. Thus many questions have been raised about the Islamicity of IBF and the nature of its progress..................Download the full article in pdf attachment (below)
This article offers answers to some of the frequently asked questions (FAQs) on Education, Islamic Banking and Finance, and Economics, such as; What vision of education does IAIS espouse? What are the conditions for meeting the IAIS vision of education? What challenges need to be overcome?.................Download the full article in pdf attachment (below)