Using zakat, sadaqa and awqaf for sustainable development

I don't usually use the blog for long quotes with little commentary, but there was an article that I linked to from my twitter account (@sharingrisk) yesterday that that I think is very well written and raises a lot of interesting ideas, so I want to put up the first few paragraphs and suggest you read the rest:

Islam requires Muslims to give 2.5 percent of their wealth to the poor every year. This represents a big potential in aid funding, but much of the money is mismanaged. In search for sustainable forms of aid, some organizations are trying to promote a broader perspective in Muslim giving rather than narrow conceptions of charity.

Every year, somewhere between US$200 billion and $1 trillion are spent in "mandatory" alms and voluntary charity across the Muslim world, Islamic financial analysts estimate.

At the low end of the estimate, this is 15 times more than global humanitarian aid contributions* in 2011.

With aid from traditional Western donors decreasing in the wake of a global recession, and with about a quarter of the Muslim world living on less than $1.25 a day**, this represents a huge pool of potential in the world of aid funding.

But Islamic finance experts, researchers and development workers say much of the money spent in 'zakat' (mandatory alms) and 'sadaqa' (charity) is mismanaged, wasted or ineffective.

"Wealth is growing in the Muslim world. So is the poverty. Where have we gone wrong?" asks Tariq Cheema, president of the World Congress of Muslim Philanthropists (WCMP), an organization which advises Muslim donors - including some of the thousands of millionaires living in the Gulf - on how to increase sustainability and accountability in their donations.

Islam requires Muslims to give 2.5 percent of their wealth and assets to the poor every year. Much more is given in voluntary 'sadaqa'. But that money is usually donated in small amounts at local levels to feed the poor, help orphans, or build mosques. Muslims say many of them give, almost without thinking, to fulfil a religious obligation. "Our rituals are there, but often they lack the spirit," Cheema told IRIN. "We just give the money and forget."

Very little of the money goes towards sustainable development.

"Billions of dollars worth of giving in 'zakat' and 'sadaqa' are unfortunately ineffective by and large," he said. "Our giving shouldn't be driven by our desire to prove that we are good people... Our giving should be smart and effective."

"We are here to bring that shift in the culture: the paradigm shift from conventional and generous giving to strategic giving... There is a lot of money around that needs to be channelled towards development."