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Journal of Philanthropy, Vol 1, Issue 1, July – December 2017

Journal of Philanthropy Vol 1, Issue 1, July – December 2017

ISLAMIC ECONOMICS STUDIES AND THOUGHTS CENTRE Edited by: Salman Ahmed Shaikh and Abdul Ghafar Ismail

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Journal of Philanthropy, Vol 1, Issue 1, July – December 2017

About Journal of Philanthropy The Journal of Philanthropy (JoPH) is published by Islamic Economics Studies and Thoughts Centre. JoPH is one of the few scholarly journals in the field of philanthropy. JoPH welcomes scholarly papers within the conceptual and applied framework from academic scholars, NGO practitioners and industry researchers. Editors Mr. Salman Ahmed Shaikh and Prof. Dr. Abdul Ghafar Ismail. Academic Advisory Board Members Prof. Dr. Murat Çizakça, INCEIF, Malaysia. Prof. Dr. Rodney Wilson, INCEIF, Malaysia. Prof. Dr. Tariqullah Khan, QFIS, Qatar. Prof. Dr. Toseef Azid, Qaseem University, Kingdom of Saudi Arabia. Prof. Dr. Fahim Khan, IMSciences, Pakistan. Prof. Dr. Magda Ismail, INCEIF, Malaysia. Prof. Dr. Salina Hj. Kassim, IIUM, Malaysia. Prof. Dr. A. U. Faruq Ahmad, Universiti Brunei Dar us Salam. Academic Reviewer Committee Members Assoc. Prof. Dr. Fuadah Johari, USIM, Malaysia. Assoc. Prof. Dr. Muhammad Khaleeq uz Zaman, IIUI, Pakistan. Assoc. Prof. Dr. Aun Raza Rizvi, LUMS, Pakistan. Assistant Prof. Dr. Hafiz Zahid Mahmood, COMSATS, Pakistan. Assistant Prof. Dr. Huma Ayub, Fatima Jinnah Women University, Pakistan. Dr. Atiq ur Rehman Atiq, PIDE, Pakistan. Dr. Rifki Ismal, University of Indonesia, Indonesia. Dr. Anwar Allah Pitchay, Universiti Sains Malaysia, Malaysia. Dr. Haslindar Ibrahim, Universiti Sains Malaysia, Malaysia.

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Journal of Philanthropy, Vol 1, Issue 1, July – December 2017

Table of Contents Editorial------------------------------------------------

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Papers

Economics and Philanthropy in Islamic Economic Framework----------

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Need for Effective Mobilization, Institutionalization and Utilization of Philanthropy and Humanitarian Aid in OIC Countries--------

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Sources of Inefficiency of the Waqf Institutions in Malaysia---------

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Overcoming Income Disparity amongst Bumiputera by Improving Zakāt and Waqf System: A Special Focus on Improving Assets Management and Accounting Transparency---------------------------------

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Alleviation of Poverty in Borno State: The Missing Link------------------

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Book Review

Capital in the Twenty First Century-------------------------------------------

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Viewpoint

Economics and Pro-Social Behaviour

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Editorial We are pleased to present the inaugural issue of Journal of Philanthropy. It is a bi-annual peer reviewed journal focusing on the theoretical and applied aspects of pro-social and philanthropic behaviour and how such behaviour can be effectively institutionalized for effective results. Journal of Philanthropy aspires to be the preferred reference material in the subject of philanthropy and pro-social behaviour among the industry practitioners, academicians, researchers and professional students. The journal will provide a platform for professionals and researchers to share their knowledge resources in the research area of pro-social behaviour and non-profit welfare institutions. The inaugural issue presents the contents in three sections. The papers section features 5 peer-reviewed papers. The book review section reviews Thomas Piketty’s ‘Capital in the Twenty First Century’. Finally, the viewpoint section discusses why and how pro-social behaviour needs to be incorporated in mainstream economics. The first paper is titled as “Economics and Philanthropy in Islamic Economic Framework”. The paper argues that while economics is conventionally concerned with economic activities in the market, a substantial amount of economic activities in every economy take place outside the market. The paper contends that beyond market activities are important in order to develop an economy where growth without Faqr and Maskanah (not, growth with full employment) is the key macroeconomic objective. The paper elaborates that market in Islamic economic system takes care of the growth and the so-called charity and philanthropy takes care of Faqr and Maskanah. The second paper is titled as “Need for Effective Mobilization, Institutionalization and Utilization of Philanthropy and Humanitarian Aid in OIC Countries”. The paper highlights that Muslim majority countries are by and large poorer than non-Muslim majority countries in general. Most of the Muslim majority countries have very low per capita incomes and national savings. This hampers the development of vibrant financial institutions and triggering economic growth. This paper discusses the need for human centred economic development, both in goal setting as well as in policy making. The paper highlights the Islamic injunctions on pure altruism and how Islamic worldview and institutions can help in contributing towards effective mobilization, institutionalization and utilization of social savings and philanthropy for humanitarian assistance.

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The third paper is titled as “Sources of Inefficiency of the Waqf Institutions in Malaysia”. The purpose of this study is to assess the efficiency of the Waqf institutions organized by the State Islamic Religious Councils (SIRCs) by applying the Data Envelopment Analysis (DEA). The data consists of 13 Waqf Institutions for the period of 2007 to 2013. The results of this study suggest that only 1 of the Waqf institutions is fully efficient and the other 12 institutions are inefficient when the analysis is done on a full sample of the 13 SIRCs. Further analysis on the technical efficiency components also reveals that the Waqf Institutions are inefficient, mostly due to the managerial inefficiency rather than the scale inefficiency. The fourth paper is titled as “Overcoming Income Disparity Amongst Bumiputera by Improving Zakāt and Waqf System: A Special Focus on Improving Assets Management and Accounting Transparency”. This paper aims to highlight the issues in Zakāt and Waqf in Malaysia and to provide a solution so that the income disparities amongst the Malay ethnic group can be minimized. It is found from the thorough study of literature that in the current SIRCs, some unresolved issues related to assets management and accounting transparency exist which makes the Zakāt and Waqf system more vulnerable. Hence, it is suggested that Shari’ah Council might outsource some of its responsibilities to Islamic Microfinance Institutions so that the issues of assets management and accounting transparency can be overcome. The conceptual model that is presented in the study would provide more structured and transparent Zakāt and Waqf collection and distribution process for the Shari’ah Council so that maximum benefits can be derived in the interest of the Muslim Malays. The fifth paper is titled as “Alleviation of Poverty in Borno State: The Missing Link”. The paper highlights the importance of proactively reducing poverty via Federal Government programs, creating an enabling environment, setting up local programs and schemes, the creation of a Ministry of Poverty Alleviation and voting in resources. The Islamic social redistributive instruments such as Zakāt, Sadaqah, Waqf and Qard-e-Hasan are considered appropriate tools which can be used in alleviating poverty in the state where around 98% of the population is Muslims. The study suggests that the state government should set up Zakāt organizations which will be independent and decentralized across the 27 LGA’s and be managed by a board that comprises religious leaders and individuals with proven integrity and experience.

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Economics and Philanthropy in Islamic Economic Framework M. Fahim Khan Visiting Professor at Quaid e Azam University and International Islamic University, Islamabad. Former Director Islamic Research and Training Institute of Islamic Development Jeddah Abstract Economics is conventionally concerned with economic activities in the market. Substantial economic activities in every economy take place outside the market. Conventional economics ignores them. They are considered as charities or philanthropy but not an economic activity. This paper takes the position that these activities, in Islamic economic system, are as much an economic activity as how exchange in the market is. The paper identifies these activities as beyond market activities, not charity or philanthropy, and considers them an integral part of the Economic System in Islam. This is because these activities are required to develop an economy where growth, free of Faqr and Maskanah (not, growth with full employment) is the macroeconomic objective. Faqr and Maskanah is the Islamic terminology to describe poverty. The market in Islamic Economic system takes care of the growth and the so-called charity and philanthropy take care of Faqr and Maskanah. The paper uses the term ‘beyond market exchange’ to give an economic meaning to what conventional economics has for philanthropy. Keywords Capitalism, Islamic Economics, Market Economy, Growth 1. Introduction Economics is conventionally concerned with economic activities in the market. That was the position that Adam Smith took in explaining the wealth of nations in his book that made him Father of Economics. The market enables economic activity to create wealth. It ensures efficiency in the economy and allows resources to go where they are more productive and hence it maximises national wealth. This has been the position of all schools of economics since then and it still is. Nonetheless, substantial economic activities in every economy take place outside the market. These are excluded from economics. This does not refer to so called black market activities which are basically illegal economic activities. Rather, this refers to legal economic activities which are not

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considered as economic activities in conventional economics just because these activities take place outside the market. The generic name for these activities is charity or philanthropy. These are excluded from economics because they are considered simply as transfers, not creating wealth. It is curious that economics does study taxes and subsidies and their effect on the creation of wealth despite these too being transfers unlike market transactions. But economic activities carried out by individuals in the form of charities or philanthropy are excluded from economics despite the fact that they affect the creation of wealth through enhancing the productive capacity of poor and less privileged members of society. 2. Economic Activities Beyond Market are also Economics in Islamic Framework Let the economic activities that society performs voluntarily outside the market, specifically to meet the needs of those less privileged members of the society who are unable or incapacitated to meet their needs from market, be referred to beyond market activities instead of philanthropy. It is because they are counter part of market which enables the economy to achieve certain objectives. This paper argues that these economic activities that conventional economics does not recognise as economic activities are part of ‘economics’ too. This segment which we are referring as Beyond Market segment of the economy in Islamic society is created by Islamic Law i.e. Shari’ah and by norms of the Islamic system of life. Islamic economics, therefore, would be different from conventional economics because of the formal recognition of the beyond market economics in the society. ‘Beyond market’ economic activities exist in all societies. It is an economic reality. Its size relative to the market economy though may vary from one society to another society and from one time to another. The market makes economic resources go where they are more productive. Those who are already wealthy are more likely to be more productive. Hence market has a built-in characteristic of helping rich to become richer. Markets ensure efficiency but this also creates a tendency of concentrating the wealth of a nation in few hands. On the other hand, every society has people who cannot enter the market to earn their living. Their needs are fulfilled by the society beyond the market, in one way or the other. In every society, people have the instinct to care for less privileged members of the society. Therefore, the exclusion of beyond market economic activities from economics means that economics excludes, by design, the concern about equity and shared prosperity and hence makes efficiency the only outcome of the economic

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system. Equity considerations are beyond economics. Equity, in Islamic framework however, is as important an economic objective as efficiency is. 3. Nature and Significance of ‘Beyond Market Economics’ in Islam ‘Beyond market economics’ in Islam should not be confused with the conventional concept of ‘non-market economics’. Non-market economics refers to those non-market elements that are introduced in the economy to bring order to the market and to other institutions in the economy that affect the order in the market. This is not the concept of beyond-market economics that is being discussed in this paper. In Islamic perspective, the concept of beyond market economics aims at creating economic activity outside the market for the benefit of needy. The beyond market segment in Islamic economic framework is not to bring order to the market, but to bring order in the economy and create sharing of prosperity between haves and have-nots. ‘Beyond market economics’ is totally different from ‘non-market economics’ discussed in the framework of conventional economics. Beyond market economics is a key element in Islamic economics that distinguishes Islamic macroeconomics from conventional macroeconomics. Islamic economic literature emerging from 1950s has been recognising these activities as part of Islamic economy and has been either labelling them as the third sector of the economy (besides private sector and public sector) or has been referring to them as ‘voluntary sector’, but has never been incorporated in macroeconomic or microeconomic analysis in Islamic perspective. The term beyond market is being used to identify it as a counterpart to the market segment of the economy in an Islamic framework. It is a set of economic activities carried out in an economy to take care of equity considerations outside the market, but side by side and hand in hand with efficiency considerations of the market economy. Islam emphasises equity along with efficiency. Islamic system of property rights and rules of exchange ensures efficiency and Islamic system of property rights and rules of exchange also simultaneously promote equity in the economy. The equity aspect of the economy is taken care of in Islamic system of life by legally creating a strong economic segment in the society that operates beyond the market. There is a large proportion of people on earth who do not have the capacity to survive in the market or to earn their living from the market. Their survival and living on earth and meeting their needs will be a part of which scientific discipline, if economics is not concerned with their survival? This is a

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question on which economics has been silent until recent times when the failure of their economics (latest being the crash of 2008) made them realise that “The question we face is that how can the nation’s wealth ultimately be shifted institutionally to benefit the vast majority of people?” Otto Scharmer wrote, “There is a blind spot in American economic theory. It is called consciousness-our refusal to have an economic theory that looks and sees that we are all integrated and we all really need each other.” Islamic system of life recognised this long time ago and gave an economic system where both efficiency and equity go side by side, hand in hand. The secular approach in economics ignores beyond market economic activities for an unknown reason. In Islamic perspective, the economics of less privileged is very much a part of economics and if conventional economics refuses to recognise this, then there is all the reason for developing our own economics and call it Islamic economics. Our argument is based on the following logic. Islam takes a broader view of the economy and goes beyond market to help man improve his economic well-being on earth. Exchange beyond market referred to as ‘Sadaqat’ has been formally and legally required to generate economic gains and hence promote shared economic well-being in a society. That this segment, despite being a charity, will generate economic gains has been decried in the Quran in following words. “So give the relative his right, as well as the needy and the traveller. That is best for those who desire the countenance of Allah, and it is they who will be successful. “And whatever you give for interest to increase the wealth of people will not increase with Allah. But what you give in Zakah, desiring the countenance of Allah - those are the multipliers.” (The Quran 30:38-39) The system of property rights in Islamic system of life, that generates exchange in the market, also generates exchange beyond the market. The beyond market exchange in an Islamic economy is the manifestation of the divine rule in the Islamic system of property rights that says “and in their property is right for those who ask and those who are deprived (The Quran 51:19)”. This is the resources side of beyond market segment of an Islamic economy and these resources will always exist in an Islamic economy. The recipients of these resources have also been specified by Islamic law. “The alms are only for the poor and the needy, and those who collect them, and those whose hearts are to be reconciled, and to free the captives and the debtors, and for the cause of Allah, and (for) the wayfarer; a duty imposed by

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Allah. Allah is Knower, Wise” The Quran 9:60). These are the people who cannot go to the market to meet their needs and have to depend on resources from beyond the market. And the command is that these recipients receive these resources as their right not as a privilege or favour (so they are free to use it the way they like it). “Those who spend their wealth in the way of Allah and then do not follow up what they have spent with reminders [of it] or [other] injury will have their reward with their Lord, and there will be no fear concerning them, nor will they grieve”. (The Quran 2:262). This restriction in the beyond the market segment of the economy is the counterpart of the restriction on the resources for the market segment which says “O you who have believed, do not consume one another's wealth unjustly but only [in lawful] business by mutual consent. And do not kill yourselves or one another”. (The Quran 4:29). There is no objective reason to exclude this beyond the market segment of an Islamic economy from the subject of Economics even within the conventional definition of economics. Adam Smith defined the subject of economics as wealth, (the collective name for economic goods that have utility, are scarce and can be possessed). According to Alfred Marshall (1890), the subject of economics is the attainment and the use of material requisites of well-being. According to Robbins, Economics relates to ends and scarce means which have alternative uses. No matter what conventional definition of economics we consider, its subject remains same which is wealth or economic resources. No definition excludes exchange of economic resources beyond market from the subject matter of economics. The subject matter of transactions beyond the market segment of the Islamic system of life is Maal which is same as wealth, i.e. the subject of a market segment of the economy in conventional economics. The resources that are generated beyond market by Islamic law are not deprived of economic gains. When the Quran says, “But what you give in Zakah, desiring the countenance of Allah - those are the multipliers” The Quran (30:39), the beyond market activity in Islamic economy, which is conventionally know as Philanthropy, becomes ‘economics’ because it creates wealth as well besides promoting equity in the society. In Islamic framework, beyond market economic activities is considered economics proper despite of the fact that resources are given away and shared outside the market to seek only divine pleasure. It is because this enables the “wealth of the nation” not to get concentrated only in the hands of wealthy people of the society (The Quran 59:7).

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The user side of resources in beyond market segment as well as in market segment is Maal or wealth. The only difference is that exchange in market segment of the economy is motivated by market gains; whereas, in case of exchange in the beyond market, the motivation is divine reward, “The example of those who spend their wealth in the way of Allah is like a seed [of grain] which grows seven spikes; in each spike is a hundred grains. And Allah multiplies [His reward] for whom He wills. And Allah is allEncompassing and Knowing (The Quran 2:261). 4. Comparative Features of Market Segment and Beyond Market Segment in Islamic Economy The following table compares the features of the two segments of an Islamic economy. Table 1: Market and Non-Market Segment in Islamic Economy Feature

Market Segment of Economy

Beyond Market Segment of Economy

What creates the segment

Law (System of Property Law (System of property Rights and rules of rights and rules of exchange). Exchange).

Who are the agents

Sellers and buyers.

What are the activities

Exchange between seller and Exchange between donor and buyer. recipient.

What is exchanged

Goods and services.

Objective of exchange

Promotes Efficiency in the Promotes equity Economy. economic.

Outcome

Creation of wealth.

Distribution of wealth.

Institutional requirement

Institutions to reduce information cost, transaction cost, liquidity constraints etc so that these costs and constraints may not overcome benefits of exchange.

Institutions to reduce information cost, transaction cost and liquidity constraints etc so that these costs do not thwart flow of resources to the needy.

Material Gains.

Material and spiritual gains.

Underlying exchange

motivation

of

Donors and recipients who are in fact sellers and buyers of divine reward.

Goods and services. in

the

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The similarities and complementarities of the two segments of the society leave no reason to exclude beyond market economics from the subject matter of economics. Beyond market segment of an Islamic economy, therefore, is as valid a component of economics as a market segment of Islamic economy is. It must be recognised in developing Islamic theory of economics at the micro level and it needs to be recognised in developing macroeconomic models for managing Islamic economy. It is this distinction for which the study of economics in Islam needs to be called Islamic economics to distinguish it from conventional economics. Islamic economics is a study of the human behaviour that relates to the creation of wealth and their uses in the market as well as in the beyond the market segment of an Islamic economy. Excluding the needy and less privileged members of society surviving beyond the market makes economics insensitive to the material well-being of those whom nature has made incapable of competing in the market. Economics should be about how human beings manage their living on earth, not merely how they behave in the market. How people earn their living and make their both ends meet should be the starting point of economics, not how the market functions. Everyone cannot depend on the market for the living. There are always people who are forced by circumstances to look for their subsistence beyond market because market fails to entertain their needs. The market is selfish, blind and merciless. Markets care for the needs and wants of those who have own material requisites to gain from the exchange in the market for their well-being. Meeting the needs of the people who do not have enough material requisites to compete in the market is the prime economic concern in Islam. This is what we learn from the verses 261-281 of AlBaqarah in Quran that relate to economics in an Islamic society. In these 21 verses, first 12 verses relate to taking care of those who lack material requisites to compete in the market for meeting their needs. There is only 1 verse to permit market exchange and 2 verses to prohibit interest and the rest of the 6 verses permit financial accommodation through borrowing/lending only to be beyond the market. Islamic economics by recognising and studying the beyond market segment as an integral part of the economy makes economics more relevant to humans and more comprehensive and universal. By ignoring beyond market segment of the economy from its scope, economics not merely excludes the study of economic behaviour of a large segment of the population in the world, but it also chooses to exclude some of the economic problems of global significance, such as poverty, environment and sustainable development, from the scope of economics.

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Poverty is excluded because beyond market segment is not the subject of economics and poverty exists beyond the market. Development is excluded because that is not the problem of the market and so is environment. The market is concerned with the growth of national wealth. Development is left to take care of itself whereas development and environment, not growth, is the problem of Islamic economy while growth is left to take care of itself. Market exchange in Islamic economy works on the principle of exclusion. The beyond market exchange for seeking divine pleasure works for the purpose of enhancing social inclusion. The beyond-market exchange aims at equity, ensuring that the benefits of resources in the economy get fairly shared with among the less privileged members of the society. By integrating beyond market segment with the market segment in the economy, Islamic economy takes care of efficiency and equity simultaneously to ensure a balanced growth in the economy. Development of economics on the economic principles of Islam will give the world an economic system that applies to everyone and where no one gets excluded. Islamic economics due to its comprehensive coverage is the Economics. The starting point for those who are interested in developing Islamic economics as a distinct scientific discipline, therefore, should be to give priority to the study of the economic behaviour and economic activities in the beyond the market segment of the economy which conventional economics consider as philanthropy, and hence not economics. 5. Islamic framework for an Economy Islamic economy is usually distinguished from contemporary market economies because of the prohibition of interest on loans. Prohibition of interest on loans is only a prohibition of one of the tools for financial accommodation. The real distinction of Islamic economy is the presence of strong ‘beyond market’ economics resulting from economic philosophy of Islamic system of life. The Quran identifies two basic components of the economic aspect of the Islamic system of life. a) Market component where people trade or exchange in the market what they own. The principles of this exchange are determined by Shari’ah rules of exchange which create a competitive market environment free of exploitation. There is elaborate guidance from Sunnah about the exchange in the market (explained in volumes of literature on Fiqh alBai’) aiming at eliminating exploitation in the market unjustly or by gaining market power. These principles, in the jargon of conventional

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economics, boil down to nothing but to say that Islamic law requires markets be ‘perfect’ and ‘competitive’. The only restriction on the market is that it will not have money market. The money will have to pass through the real economy to make more money. Self-interest is recognised in Islam and system of property rights elaborated in volumes of literature on Fiqh al-Maal explain the sanctity of property rights and the rules for the protection of this sanctity. The leading Islamic principle for market segment of the economy is “O you who have believed, do not consume one another's wealth unjustly but only [in lawful] business by mutual consent. And do not kill yourselves or one another”. (The Quran 4:29) b) Beyond market component where people exchange Sadaqat (Charities). It is an exchange of value for a counter value that does not come from the market but from beyond the market. This exchange is created by divine command. This exchange too yields gains promised divinely. The starting point to understand economics in Islam is to understand how beyond the market segment of an Islamic economy works and what is its economics rather than to understand how to conduct Islamic banking and finance within interest based financial system. Economies like Pakistan that made serious efforts in making its economy Islamic by introducing Islamic banking, would have gained considerable mileage if they had started the process by streamlining the beyond market segment as defined above and including it appropriately in its macroeconomic framework. Incorporating beyond the market segment of the economy in its macro economic framework could help Pakistan economy achieve its targets of growth and equity. The repeated failures of macroeconomic policies based on the conventional macroeconomic framework, has finally made conventional economics realise that the insensitivity of macroeconomics to the economics of those who cannot benefit from the market growth is counterproductive. 6. Macroeconomics in Islamic Perspective Full employment is one of the key macroeconomic objectives in conventional economics. An unemployment rate around 5 percent is considered full employment in the USA. The current unemployment rates in some major Muslim countries and in some developed countries of the world are mentioned below in Table 2.

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Journal of Philanthropy, Vol 1, Issue 1, July – December 2017 Table 2: Unemployment in Some Muslim & Developed Countries (%) Country Unemployment Rate (%) Malaysia 3 USA 5 Bangladesh 5 Germany 4 Pakistan 6 France 10.5 Saudi Arabia 6 European Union 8.5 Indonesia 6 Turkey 8

What makes these figures a key economic indicator of an economy? The unemployment rate is believed to indicate the health of an economy. Do the above figures really indicate health of the economy? Full employment is considered a solution to an economic problem but full employment does not mean the eradication of poverty. Instead, it often forces people to remain in poverty. We do not find any reference in the Quran and Sunnah about unemployment or ensuring full employment in an Islamic economy. What we find are the injunctions for feeding the Masakeen. See the Quran (69:34), (74:39-48), (76:5-9), (89:18) and (107: 1-3). We find no reference to unemployed labor or to create jobs for poor or any reference to achieving full employment in the economy. Conventional economics would consider such injunctions that require feeding poor as ‘free lunch’. They consider an act of creating beggars and free riders. Conventional economics would rather suggest creating jobs for poor in the economy. This is what Professor Yunus, Nobel Prize Laureate from Bangladesh and founder of Grameen Bank hinted at in a lecture delivered in Islamic Development Bank, while referring to Zakah and Sadaqat injunctions in Islam. According to conventional Economics, the focus of the economy at macro level is ‘output growth with full employment’. What would be the focus of Islamic economy at the macro level? “Growth with what, if not full employment?” 7. Macroeconomic Objective of Islamic Economy There is no direct reference in the Quran and Sunnah with respect to growth and full employment in the economy which are considered as two top-most macroeconomic goals in conventional economics. Growth did not need a reference because it goes without saying. The instinct of self-interest makes ‘growth’ to take care of itself. But, it is very much evident in the economic teachings of the Quran and Sunnah that instead of unemployment and full

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employment, the Quran and Sunnah refer to Maskanah (an Islamic term for poverty) and requires taking care of Masakeen (the Islamic term for poor). Masakeen are the people who are unable to meet their minimum living needs from the market and look towards help from beyond the market. Maskanah refers to the state when people are forced to seek help beyond the market to meet some of their minimum living needs (by borrowing, begging or even stealing) or are forced to let some of their survival needs go unmet. Islam makes it the responsibility of every individual in the society to take care of the Masakeen around beyond the market. Twenty-two verses (261282) towards the end of Chapter 2 and many other verses in the Quran emphasise giving away to needy, deprived and less privileged members of the society). Feeding the Masakeen is a top priority item in giving away as is evident from the Quranic references mentioned above. The macroeconomic objective in an Islamic economy, therefore, needs to be specified about poor and poverty (Faqr and Maskanah, in Islamic terminology) and not about full employment or unemployment. What target can we specify relating to Maskanah in Islamic economy at the macro level? Can we say that an Islamic economy will aim at achieving following objective at the macro level? 7.1

“Growth Free of Maskanah” Instead of “Growth with Full Employment”

No doubt, it may be hard to visualise that there would be zero Maskanah or there will be no Masakeen at any point of time in any society but we can objectively fix a natural rate of Maskanah in the society. We may assume that the incidence of up to 5 percent Maskanah may be considered as if there is no Maskanah in the society. This 5 percent of the incidence of Maskanah may be reflecting the number of people suffering from various permanent physical and mental disabilities, not allowing them to make their livelihood from the market. In view of this reality, we can therefore allow a natural rate of Maskanah in an Islamic economy. We can declare an economy as free of Maskanah if the incidence of Maskanah is below the natural rate of Maskanah1. The natural rate of Maskanah can be determined objectively, through household surveys, labor force surveys and censuses. The next question is, how an Islamic economy will achieve this objective “Growth, Free of Maskanah”. 1

This is like saying "An economy is at ‘Full Employment when the unemployment rate is below a certain level of natural unemployment rate".

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7.2

Macroeconomic Strategy in an Islamic Economy

Anas ibn Malik reported: A man from the Ansar came to the Prophet, peace and blessings be upon him, and begged him. The Prophet said, “Have you nothing in your house?” The man said, “Yes, a piece of cloth, a part of which we wear and a part of which we spread on the ground, and a wooden bowl from which we drink water.” The Prophet said, “Bring them to me.” The man brought these articles to him and the Prophet took them in his hands and he said, “Who will buy these?” Someone said, “I will buy them for one Dirham.” The Prophet said twice or thrice, “Who will offer more than one coin?” Someone said, “I will buy them for two Dirhams.” He sold them for two Dirhams and the Prophet said, “Buy food with one of them and give it to your family. From the other, buy an axe and bring it to me.” The man brought it to him. The Prophet fixed a handle on it with his own hands and he said, “Go gather firewood and sell it, and do not let me see you for a fortnight.” The man went away and gathered firewood and sold it. When he had earned ten coins, he came and bought a garment and some food. The Prophet said, “This is better for you than begging which will come as a blemish on your face on the Day of Resurrection. Begging is appropriate only for three people: one in severe poverty, one in severe debt, and one who is in extreme distress.” [Source: Sunan Abu Dawud 1641. Grade: Hasan (fair) according to Ibn Hajar] Many economic lessons are worth noting in the background of this Hadith. First, it is essential to have zero tolerance for hunger in the economy. Quran and Sunnah have specific injunctions in this respect. One’s prayers become meaningless if he/she is not even encouraging each other to feed Masakeen. Everybody is responsible for giving food to the hungry in his/her neighbourhood. This is a religious obligation. In an Islamic economy, this is, in fact, an economic maxim for human behaviour. In a Muslim society, everyone is conscious of hunger around and everybody is concerned to do and contribute something, rather than letting someone sleep hungry in the neighbourhood. It is only a matter of institutionalising this element in the economic behaviour nation-wide so that the information cost and transaction cost and liquidity constraints in discharging this religious obligation are minimised. If one is not facing the risk of starvation, then this would allow one to look for an opportunity to have work of one’s own choice and even take risks to avail a better opportunity rather than to simply grab an available paid job simply to avoid starvation.

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Second, it is essential that access to start-up capital is available at grass root level so that anyone can avail an opportunity to have work of one’s own choice rather than wait for a paid job or avail whatever is available as paid job to avoid starvation in the family. Islamic financial paradigm has the elements that ensure an adequate supply of start-up capital. The key element of the Islamic financial paradigm is that the option of lending and borrowing on interest is not available in the society. Under this paradigm, those with a surplus in financial resources have only following options: 1) Keep holding the surplus and take the risk of getting it depleted by inflation and Zakah obligation (a 2.5 % tax per annum on holding financial resources). 2) Invest it in trade, production or business (in one’s own business or in someone else’s business) to make a profit on it, not only to cover inflation and Zakah but also to make it grow. To deserve profit on investment, the risk of bearing the possibility of loss of capital, however, will be inevitable. (Otherwise the profit will become interest which is not permitted by law). 3) Give it as a loan in the spirit of helping a needy and seek no compensation in return. A divine reward of 700 times (70,000 percent) or even more has been promised The Quran (2:261). If the economy adopts this paradigm (which is a religious obligation for an Islamic economy), the implications will be following: A. Those who have a surplus in financial resources and do not find an opportunity to invest in their own business, trade or productivity, they must find someone who can do the business with his money and share the profit. The finance surplus units will, thus, raise the demand for human resources at grass root level to be employed on wage/rent basis or as a business partner. B. Those who have surplus in financial resources but do not have their own business to invest it nor want to take risk of losing it by putting it in someone else’s business, they will likely give it on loan for a defined period to allow someone else to benefit from it and hence deserve the divine reward mentioned above. C. At low-income level, human resources are more productive in micro enterprises than working on paid jobs. The human resources at the micro

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Journal of Philanthropy, Vol 1, Issue 1, July – December 2017

level can make a profit for owners of small capital as well. The rate of return on capital in micro enterprises is higher than the return in larger business enterprises and corporate sector. Putting the above paradigm in practice in an economy would require the development of proper legal and financial infrastructure to allow the paradigm to work effectively for enhancing access to start-up capital at grass root level. The development of legal and financial infrastructure will be required to take care of the following: The information costs and transactions costs beyond market segment in the economy may thwart this paradigm to work effectively. Development of effective institutional infrastructure to reduce these costs will be key to the success of the paradigm in enhancing access to start-up capital at grass root level. The development of such infrastructure will need to be focused towards promoting micro enterprises. Access to start-up capital will require some assurances on the part of the seeker of start-up capital. The seeker will have to put something on stake from his side too, no matter how small. In the Hadith mentioned above, the person who came to seek help had to sacrifice his only asset, the piece of cloth and water bowl. The capital-seeker’s respect, honesty and integrity in the community can be his assets to seek capital. Seekers of start-up-capital will need to develop these assets to claim access to start-up capital. Institutions like mosques, schools and community centres need to play role in developing the moral human capital that can attract the physical capital. The role of the community to know and help the poor in the neighbourhood is key to provide access to start-up capital. In the Hadith above, the community made a favour to the poor man by buying his little assets at a favourable price just in the spirit of Ihsan (benevolence) and Prophet peace be upon him fixed the handle on the Axe himself, probably assuming that the poor man may not do it properly by himself. At low-income level, human resources are more productive in micro enterprises than working on paid jobs. The human resources at the micro level can earn for small owners of capital more rate of return in micro enterprises than what they will earn on a share in larger business enterprises and corporate sector. Summing up the strategy for macroeconomic objective in Islamic economy, we conclude this discussion by listing two main ideas:

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Journal of Philanthropy, Vol 1, Issue 1, July – December 2017

i) Zero tolerance for hunger in the economy. Quran and Sunnah have specific injunctions in this respect making individuals rather than state responsible to achieve this. ii) Making access to start-up capital easy and convenient at grass root level for everyone to have an option to have one’s own work if he/she does not have the chance of getting paid job of his/her own choice. The Islamic financial paradigm makes the access to start-up capital easier and flexible. 8. Significance of Eliminating Hunger (Faqr/Maskanah) Two points need to be noted about the above mentioned two elements of the economic strategy of an Islamic society. First, ‘eliminating Faqr and Maskanah’ not only has the priority but also the other element becomes ineffective if the Faqr and Maskanah have not been taken care of fully. This is clear from the economics approach implicit in the Quran and Sunnah. Some of the references have already been elaborated above. Second, “putting Islamic financial paradigm” in place and making it conducive to generate widespread access to start-up capital for creating businesses at grass roots level, is a matter of political decision in the perspective of current global realities and it is a matter of time to effectively introduce a paradigm shift. But ‘eliminating Faqr and Maskanah’ cannot wait for a paradigm shift in the economy. Faqr and Maskanah have to be eliminated right on the spot and when it occurs. It cannot be allowed to persist even for a couple of days. It is this approach that is totally at variance from the contemporary world’s approach that is seeking to eliminate hunger for the last 70 years and the target is to remove hunger partially in phases of decades, without realising that this approach is giving millions the permission to die. This is not the Islamic approach to hunger and miseries (Faqr and Maskanah). Islam does not make elimination of hunger and Maskanah a matter of policy at government or at the global level. Islam makes it an obligation for every individual to make sure that no one sleeps hungry around in the neighbourhood. We find, in the Islamic approach that it is people, not the government, that has obligation to see that no one is suffering from Faqr and Maskanah around. It is people who can eliminate hunger and miseries of poor from Pakistan and put the economy on the path of sustainable

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Journal of Philanthropy, Vol 1, Issue 1, July – December 2017

development. People have the key to open the poverty trap if it happens to exist in the economy. Once the hunger and miseries of people, caught in a poverty trap, has been taken care of, the poor then can think of enhancing their capacity to uplift their economic condition and earn their own living from the market by learning skills to enhance his/her capacity and/or taking risks to enter more productive ventures. Such options are closed for the poor when he is uncertain if he or his family will have enough food at the end of the day. This thought is now emerging even beyond Islamic approach. A recent TED talk focussed on the hypothesis that “poverty is not a lack of character, it is a lack of cash.”2. The concept of Zakah and Ushr introduced by Islam requires economic resources transferred to poor with property rights. And the obligation to feed the poor is a part of that philosophy as it relieves the poor to use cash and other resources to enhance his/her capacity to earn his/her own living. 9. Applying Theory to Economy of Pakistan The hypothesis developed above, that it is people and not government that can eliminate hunger and miseries of poor to enable them to become more productive, needs to be proved empirically. The history of Islam in its first one thousand years has shown remarkable socio economic progress but this progress and factors underlying this progress have not been properly recorded to provide empirical evidence to the above hypothesis. To prove the point in the contemporary Muslim world, Pakistan can be a good place to apply test the hypothesis that it is people who can break the poverty trap in an economy and make the country’s economic policies for growth and sustainable development succeed. The spirit of giving away in Pakistan is recognised worldwide. There are huge resources potentially available in the hands of people of Pakistan to be spent for good causes, basically fi sabeelillah. Shirazi (2006 and 2009) and Kahf (1989) estimated Zakah potential in Pakistan to be more than 4 percent of GDP. Various data limitations put this estimate on a lower side. The potential of giving away in charity is much more than 4 percent of GDP. Considering the estimates potential in other Muslim countries where statistics are better (like in Turkey), we can safely assume the potential willingness to 2

Ted Talk, Poverty isn’t a lack of character, it is lack of cash. https://www.ted.com/talks/rutger_bregman_poverty_isn_t_a_lack_of_character_it_s_a_lack_ of_cash

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spend fi sabeelillah to be around 7 percent of GDP. This means people are holding a minimum of $10 billion every year in Pakistan that can be potentially mobilised for meeting the needs of poor. With 30 percent population below poverty line and $1.25 per day per capita, the resources potentially available with the people for meeting the needs of poor is far above what is required to remove Faqr and Maskanah as implied in the teachings of the Quran and Sunnah. Therefore, it is curious to reflect on the fact that why people are holding back so many resources meant to be spent for divine reward and are not spending them to eliminate hunger and poverty in the country. Apparently, several types of information costs and the transaction costs (explicit or implicit) in accessing the poor and delivering the needs of the destitute, is keeping people away from getting directly involved voluntarily helping strangers. People would like to contribute the share if others do it. The fear of being the first drop that may perish if others did not follow is holding people away from doing their part of the task. The author with a team of volunteers from Ayub Medical College Abottabad, Quaid e Azam University Islamabad and International Islamic University Islamabad are launching projects at randomly selecting locations to test the hypothesis that the people would come forward to help poor if somebody else starts it. The volunteers with small seed money mobilized from their own circle of friends have set up places at different locations for feeding the hungry. The results were amazingly encouraging. Once the place came to the notice of the people in the community around, there was no shortage of supply of funds. The community came forward to provide the support. The facilities became self-sustaining within a week before the seed money was fully utilized. The experience is significantly proving the hypothesis that people are willing to play their part to eliminate hunger from their neighbourhood, provided someone takes the lead. Encouraged by this empirical evidence, the author and his team mentioned above are now launching a nationwide project with the theme. “People of Pakistan, (not Government), can eliminate extreme poverty, hunger and miseries of poor from Pakistan and put the economy on the path of the sustainable development.” The project aims at developing a nationwide community of volunteers that

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Journal of Philanthropy, Vol 1, Issue 1, July – December 2017

would establish facilities to mobilize communities in their respective locations to help poor in their neighbourhood meet their minimum living needs. These facilities were named as MoFiD (mobilizing First Drop) projects. They would simply develop and devote a certain place in the respective locality to initially just feed the hungry in the neighbourhood. The community then will be mobilized to develop these places as community centers carrying out various activities aiming at enhancing the capacity of the extreme poor in the neighbourhood to earn their own living from the market rather than continue to depend on free food. These MoFid centers are being developed under a parent project name Poverty Free Pakistan. The project is planned to be a completely online project seeking only part time or full time volunteers from all corners of the country. The volunteers are being invited in the following categories. a) Those who will be willing to devote time for managing MoFiD Centers in their respective communities. b) Those who will be willing to devote (or Waqf) some place for the sake of ALLAH, the Almighty, to establish a local MoFiD Centre to feed and help the poor in their locality. c) Those who will be willing to devote financial resources to sustain the activities of the local MoFiD Centre in their respective locality. These volunteers then will be guided to establish MoFid Centers in their respective locality to mobilize the community around to take care of the needs of the poor in their neighbourhood. The pilot MoFiD centers that have been launched are shown in Table 3. They are being managed by volunteers from within the community and they all are surviving from resources mobilized by the volunteers from within the community. Table 3: MoFid (Operational) Units QAU School of Economics I-8-2 Islamabad G-6-2 Islamabad Ayub Medical College Abottabad

[email protected] +92 3005553562 +923005553562 [email protected]

June 2016 June 2016 May 2017 June 2016

MoFid centers are growing under poverty free Pakistan project even though it has not yet been formally launched online.

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Journal of Philanthropy, Vol 1, Issue 1, July – December 2017

10. Conclusion The so-called charities or philanthropy, which is being referred in this paper as beyond market economic activity, is claimed to be an economic concept in contrast to conventional economics that considers only market activities as corpus of economics proper. The paper argues that beyond market economics, in Islamic system of life on earth is as much a part of economics as market economics is. Beyond-market economics reinforces and complements the market economics in achieving efficiency and equity in the economy at micro as well as macro level. The macroeconomic objective in an Islamic economy needs to be specified about poor and poverty (Faqr and Maskanah, in Islamic terminology) and not about full employment or unemployment. The macroeconomic target that we can specify for an Islamic economy at the macro level is proposed to be "Growth free of Maskanah" instead of “Growth with Full Employment”. The strategy for the achievement of this macroeconomic objective in Islamic economy has two basic elements: i) Zero tolerance for hunger in the economy. Quran and Sunnah have specific injunctions in this respect making individuals rather than the state responsible to achieve this. ii) Making access to start-up capital easy and convenient at grass root level for everyone to have an option to have one’s own work if he/she does not have the chance of getting wage paid job of his/her own choice. The Islamic financial paradigm makes the access to start-up capital easier and flexible. In this strategy, ‘Eliminating Faqr and Maskanah’ not only has the priority but also the other element in the strategy becomes ineffective if the Faqr and Maskanah have not been taken care of fully. This is clear from the economic approach implicit in the Quran and Sunnah. Pakistan provides a good ground to apply this theory. This paper briefly describes a project that the author with a team of student volunteers from academic institutions is undertaking. The project aims at proving that “In an Islamic economy, people (not Government), can eliminate extreme poverty, hunger and miseries of poor from Pakistan and put the economy on the path of the Sustainable Development.”

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References Khan,

M.F. (2016). Islamic Social Finance: Inclusive Financial Development. Paper presented in International Conference held in Makkah on 5-8 March 2016 under the auspices of Ummul Qura University, Makkah.

Shirazi, N.S., & Amin, M.F.B (2009). Poverty Elimination through Potential Zakāt Collection in the OIC-member Countries: Revisited. The Pakistan Development Review, 48(4), 739–754 Shirazi, N.S. (2006). Providing for Resource Shortfall for Poverty Elimination through the Institution of Zakah in Low Income Muslim Countries. IIUM Journal of Islamic Economics and Management. 14(1), 1–27.

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Need for Effective Mobilization, Institutionalization and Utilization of Philanthropy and Humanitarian Aid in OIC Countries Abdul Ghafar Ismail Faculty of Islamic Economics and Finance Universiti Islām Sultan Sharif Ali Negara Brunei Darussalam Email:[email protected] Salman Ahmed Shaikh School of Economics Universiti Kebangsaan Malaysia Email: [email protected]

Abstract Muslim majority countries are by and large poorer than non-Muslim majority countries in general. Muslim population constitutes a quarter of the global population, but its share in the total global poor population remains higher than one-third of the total global poor population. Most of the Muslim majority countries have very low per capita incomes and national savings. This hampers the development of vibrant financial institutions and to kickstart economic growth. High incidence of poverty leads to weak financial development and low capacity of government to mobilize tax revenues. Thus, the poor countries with weak financial and public sector are vulnerable to remain in poverty trap. In this scenario, it is important to have resources flowing into the poor countries on non-commercial basis and which can provide the basic funds required to ensure saving human lives and providing basic education and health to the poor population. In this paper, we discuss the need for human centred economic development, both in goal setting as well as in policy making. We highlight the Islamic injunctions on pure altruism and how Islamic worldview and institutions can help in contributing towards effective mobilization, institutionalization and utilization of social savings and philanthropy for humanitarian assistance. We also look at the state of development assistance, aid and concessional debts in selected OIC countries. Finally, we discuss the role of Islamic social and redistributive institutions to effectively mobilize, institutionalize and utilize the social savings. Keywords Philanthropy, Humanitarian Aid, Poverty, Zakāt, Waqf

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1. Introduction According to Global Humanitarian Assistance Report (2016), the total global humanitarian assistance has reached $28 billion in 2015. Out of this, 77.9% ($21.8 billion) came from government donors and only 22.1% ($6.2 billion) was contributed by private donors. A 45% shortfall was recorded which was the largest for the current decade. Due to the enormity of humanitarian crisis caused by conflicts, wars, terrorism and climate change, there is dire need to scale up efforts. Humanitarian aid is largely funded by governments; whereas, philanthropy largely emanates from private donors, i.e. individuals and organizations. If private philanthropists are also engaged in mobilizing funds for humanitarian aid, then the scale of resources can be enhanced more effectively. In comparison to the poverty gap, a lot still remains to be done. As per World Bank (2016), there are 767 million people living below the poverty line of $1.90 a day. It means that poverty gap is $531.9 billion (1.90 x 767,000,000 x 365) per year. Thus, the total humanitarian assistance is less than 10% of the total poverty gap funding requirement. Total humanitarian assistance accounted for 4.8% of the total resource flows for the 20 countries receiving the most humanitarian assistance in 2014. Much of the resource flows which helped the recipient countries were concentrated in the form of debts, foreign direct investment and remittances. To change matters, the policies need prioritization of values which elevate the status of human dignity in conception, discourse, policies and assessment. The concept of economic development has evolved consistently since the middle of the twentieth century. The early concept of development treated economic growth and economic development as synonymous. Economic growth was considered as both a necessary as well as a sufficient condition for realizing economic development. Nonetheless, later on, it was realized that economic growth does not necessarily lead to economic development. Institutions and economic structures matter a great deal in determining the long term effects of any growth strategy. Growth that raises income inequalities eventually become unsustainable and can undermine democracy and overall well-being of the society. Haq (1963) introduced the term ‘functional inequality’ in the 1960s. The term implies that income inequality has a useful economic function in patronizing a small industrial class which is allowed to grow and to reap the benefits of favourable policies. Higher profits to the industrial class stimulates growth

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and reinvestment of capital in the economy. When the benefits of that economic growth trickle down to the people at the bottom of the social hierarchy, then the masses also benefit. Thus, income inequality performs an important function of growth. Such policies are hoped to bring inclusive growth if the benefits of growth eventually do trickle down. However, the social utility of greed could not fulfil the promise of ‘trickle-down effect’ in most of the economic growth stories, especially in Asia. Consequently, Haq (1995) accepted that humans are ‘means’ as well as ‘ends’ of any development process or policy. He reasoned that ‘ends’ cannot be sacrificed for the future. If we ignore the ‘ends’, then it undermines the entire development process. Development process or policy shall serve human wellbeing as an end objective rather than treating humans as inputs to the production process and target market for conspicuous consumption. This paper highlights the Islamic injunctions on pure altruism and philanthropy and how Islamic worldview and institutions can help in contributing towards effective mobilization, institutionalization and utilization of social savings and philanthropy for humanitarian assistance.3 Section 2 discusses the Islamic injunctions of pure altruism which insists and reinforces the need for sharing and giving to the poor people and social causes. We also take note of the ground realities of poverty and underdevelopment in Muslim majority countries in Section 3. In Section 4, we look at the state of development assistance, aid and concessional debts in selected Organization of Islamic Cooperation (OIC) countries. In Section 5, we discuss the role of Islamic social and redistributive institutions to effectively mobilize, institutionalize and utilize social savings. 2. Islamic Worldview and Teachings on Philanthropy The theistic concepts of Tawheed, Khilafah and Akhirah provide the philosophical basis for the Islamic way of life. Belief in the single source of creation defies racial, ethnic or gender basis of discrimination. According to the Islamic worldview, all living and non-living things are created by Allah. As creatures of Allah, animals and plants are partners to humans in this world when it comes to sharing the planet and using the resources bestowed by Allah (Mian et al., 2013). 3

This paper is an extension of our earlier papers, Abdul Ghafar Ismail, Bayu Taufiq Possumah and Mohd Najib Abdul Kadir (2014) Inter-Generational Transfer under Islamic Perspective. Humanomics 30 (no. 2): 95-121 and Abdul Ghafar Ismail, Muhammad Hasbi Zaenal, Hakimi Shafiai (2013) Philanthropy in Islam: A promise to Welfare Economics System. IRTI Working Papers WP-1435-03. http://www.irti.org/English/Research/Documents/326.pdf

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Simultaneously, the concept of Khilafah raises the stature of humans as moral beings with an inbuilt and active conscience and which provides them the ability to differentiate moral from immoral acts. Quran explicates that moral conscience is inbuilt in humans. (Al-shams: 8). The Islamic principles inculcate the responsibility of custodianship, trusteeship and stewardship in human beings with regards to the use and ownership of physical property and environmental resources. The two worldly view of life in Islam extends the decision horizon of humans. While the concept of Tawheed creates an equal basis for humans to use what is bestowed in nature, the concept of Khilafah engenders stewardship towards the responsible use of natural and environmental resources without pushing planetary boundaries, causing precious loss of biodiversity and ignoring the plight of fellow human beings who are suffering from lack of basic necessities in life. The moral institutions in the Islamic framework govern all human economic activities ranging from the pursuit of earning incomes to spending these incomes. In the pursuit of earning a livelihood, the Islamic principles emphasize productive enterprise and to avoid extractive and immoral means of earning. In consumption and spending activities, the Islamic moral injunctions influence preferences through moral filtering of the consumption set. The moral philosophy imbued with socio-ethical spirit extends the decision horizon of consumers. It encourages the transformation of selfcentric self-interest into self-cum-social centric self-interest. The Islamic moral injunctions explicitly extol virtuous philanthropy. Finally, by flattening all other basis of distinction except on the basis of piety, the Islamic values garner contentment and modesty. Through this, the consumer is urged to shun envious and conspicuous consumption of luxuries. In neoclassical economics, Andreoni (1989 & 1990) explains that people engage in impure altruism when they contribute in charity or donate for public goods since these charitable acts also emanate from self-interest, i.e. to get fame, satisfy ego or change the living environment to improve one’s own social experience and relations. On the other hand, the Islamic economic principles have reformative content which lacks in neoclassical economics (Hassan, 2005). Islamic morality warms the cold economic calculus so that all human endeavours shall not just be seen in the light of pleasure-pain calculus (Naqvi, 1997). Islam does not recognize impure altruism to satisfy ego and to achieve fame and recognition (Al-Baqarah: 264; Al-Maoon: 6). Prophet Muhammad (pbuh) advised anonymity and secrecy in charitable

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giving such that the right hand does not know what the left hand is giving4. Allah says of the ideal believers in Quran: “And they give food, in spite of their love for it to Miskin (poor), the orphan, and the captive. (Saying): ‘We feed you seeking Allah’s countenance only. We wish for no reward, nor thanks from you’.” (Al-Insaan: 8-9). Quran urges believers to spend what they love in order to achieve righteousness (Al-Imran: 92), spend throughout their lives (Al-Munafiqun: 10) and the ideal is to spend whatever is beyond their needs (Al-Baqarah: 219). Prophet Muhammad (pbuh) declared that the best charity is to spend (in charity) while you are healthy, aspiring, hoping to survive, and fearing poverty, and not delaying until death comes to you”5. Allah wants the believers to avoid miserliness (Al-Nisa: 37). Instead of enjoining miserliness, Islam urges Muslims to help one another in good acts and endeavours (AlMaida: 2). Such concepts and values have important practical implications. Mutual cooperation and collective response is needed to tackle enormous development and humanitarian challenges. Since Islam only accepts pure altruism, it promises numerous incentives for it in its two-worldly view of life. Several verses in Quran promise due reward for pure altruism (Al-Tauba: 121; Fatir: 29; Al-Hadid: 7). In several other verses, spending in charitable ways for the sake of Allah is compared to a good loan which Allah will repay with a manifold increase (Al-Hadid: 11; Al-Hadid 18; Al-Taghabun: 17; Al-Muzammil: 20). In several Ahadith also, Muslims are encouraged to spend so that Allah also spends on them with His blessings.6 Thus, we see that the Islamic moral principles emphasize upon moral choices in socio-economic sphere of life and the Islamic view of life encourages empathy, commitment and responsibility in human behaviour. 3. The Humanitarian Crisis in the Muslim World A great number of Muslim majority countries face very high incidence of poverty. Muslim countries in the African continent in particular have a high incidence of poverty. In at least 5 Muslim majority countries in Africa, the 4

Al-Muslim, Book of Zakāt, Vol 3, Hadith No. 2380.

5

Sunan Abu Daud, Book of Wills, Vol 3, Hadith No. 2865. Also Sunan An Nisai, Book of Zakāt, Vol 3, Hadith No. 2543. 6

Al-Bukhari, Book of Commentary, Vol 6, Hadith No. 4684. Also in Al-Muslim, Book of Zakah, Vol 3, Hadith No. 2308. Also in Sunan Ibn-e-Maja, Chapters on Expiation, Vol 3, Hadith No. 2123.

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poverty headcount ratio at national poverty lines exceeds half of the total population. These countries include Guinea Bissau (69.3), Togo (58.7), Guinea (55.2), Mozambique (54.7) and Sierra Leone (52.9) as can be seen in Table 1. Muslim countries in South Asia like Bangladesh and Pakistan also face a high incidence of poverty in excess of 22%. Muslim countries with lowest poverty headcount ratio include Malaysia (0.6) and Turkey (2.3). This state of affairs shows that at least 25 OIC countries have poverty headcount ratio in excess of 20%. Table 1: Poverty Head Count Ratio (PHCR) in Selected OIC Countries Country Name

PHCR-National (%)

Country Name

PHCR-National (%)

Guinea-Bissau

69.3

Tajikistan

32.0

Togo

58.7

Bangladesh

31.5

Guinea

55.2

Kyrgyzstan

30.6

Mozambique

54.7

Lebanon

28.6

Sierra Leone

52.9

Egypt

25.2

Niger

48.9

Pakistan

22.3

Gambia

48.4

Uganda

19.5

Burkina Faso

46.7

Iraq

18.9

Senegal

46.7

Bosnia

17.9

Chad

46.7

Uzbekistan

16.0

Sudan

46.5

Tunisia

15.5

Nigeria

46.0

Jordan

14.4

Mali

43.6

Albania

14.3

Cameroon

39.9

Indonesia

11.3

Benin

36.2

Morocco

8.9

Afghanistan

35.8

Kazakhstan

2.9

Syria

35.2

Turkey

2.3

Yemen

34.8

Malaysia

0.6

Gabon 32.7 Source: World Development Indicators 2015

Poverty results in worsening other areas of development. Poor people face greater vulnerability to malnutrition and remain uneducated due to nonaffordability. Their low levels of skills set and lack of funds to engage in entrepreneurship makes it difficult for them to achieve socio-economic mobility. In Table 2, we present the ranking of OIC countries on 2014 Human Development Index within the OIC and the World group. None of the

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OIC country features in top 30 countries with highest HDI value. The bottom 37 countries on HDI feature 20 OIC countries. This shows that high incidence of income poverty correlates with lower level of human development in the case of OIC countries. Table 2: Overall & Relative Ranking of Selected OIC Countries on HDI HDI World OIC HDI World Country Country Value Rank Rank Value Rank Brunei 0.8556 31 1 Guyana 0.6357 124 Qatar 0.8498 33 2 Morocco 0.6280 126 Saudi Arabia 0.8373 39 3 Tajikistan 0.6245 129 UAE 0.8355 41 4 Syria 0.5937 134 Kuwait 0.8163 48 5 Bangladesh 0.5701 142 Oman 0.7930 52 6 Pakistan 0.5384 147 Kazakhstan 0.7880 56 7 Nigeria 0.5140 152 Malaysia 0.7792 62 8 Cameroon 0.5118 153 Lebanon 0.7689 68 9 Comoros 0.5032 159 Iran 0.7656 70 10 Yemen 0.4981 160 Turkey 0.7611 72 11 Togo 0.4835 162 Azerbaijan 0.7511 78 12 Uganda 0.4827 165 Jordan 0.7483 80 13 Benin 0.4796 166 Algeria 0.7356 83 14 Sudan 0.4791 167 Albania 0.7328 85 15 Djibouti 0.4704 168 Bosnia 0.7325 87 16 Senegal 0.4659 170 Libya 0.7245 95 17 Afghanistan 0.4653 171 Tunisia 0.7212 96 18 Côte d'Ivoire 0.4622 172 Suriname 0.7143 103 19 Gambia 0.4406 175 Maldives 0.7064 104 20 Guinea-Bissau 0.4196 178 Egypt 0.6899 108 21 Mali 0.4193 179 Turkmenistan 0.6875 109 22 Mozambique 0.4164 180 Indonesia 0.6838 111 23 Sierra Leone 0.4128 181 Palestine 0.6775 113 24 Guinea 0.4113 182 Uzbekistan 0.6755 114 25 Burkina Faso 0.4023 183 Kyrgyzstan 0.6553 120 26 Chad 0.3919 185 Iraq 0.6539 121 27 Niger 0.3483 188 Source: World Development Indicators 2015

OIC Rank 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54

The recent geo-political conflicts and natural calamities have resulted in increased number of internally displaced persons. For instance, close to one million people are identified as internally displaced persons in Indonesia. For Pakistan, Bangladesh, Malaysia and Sudan, the internally displaced persons are estimated to be 770,000, 543,000, 256,000 and 194,000 respectively in the year 2014.

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High incidence of poverty, lower chances of socio-economic mobility and lack of jobs to unemployed people in poor Muslim majority countries has resulted in massive emigration. Europe and North America had been the most lucrative destination to seek work. The remittances of Muslim diaspora in Europe and North America constitute a major source of income to the families back home. However, with a gradual shift of economic and trade dominance from Europe and North America towards East Asia, migration within the OIC countries takes greater significance given the rising antiglobalization, protectionism and pro-nationalism trends. In Table 3, we show the net migration in selected OIC countries based on 5-year estimates. As per World Development Indicators, net migration is the net total of migrants during the period, that is, the total number of immigrants less the annual number of emigrants, including both citizens and noncitizens. The data reveals that people from densely populated poor countries like Bangladesh, Pakistan and Indonesia tend to migrate to other countries for searching better chances of work and greater chances of earning incomes which can help them sustain themselves and their families back home. Countries hit by conflicts such as Syria, Sudan and Libya have also seen significant negative net migration. Countries with positive net migration absorb more immigrants as compared to the number of domestic emigrants they send across borders. Most of the OIC countries with positive net migration are the rich Middle Eastern countries, such as Qatar, Kuwait, UAE and Saudi Arabia. Turkey and Malaysia have also been countries with significant positive net migration.

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Journal of Philanthropy, Vol 1, Issue 1, July – December 2017 Table 3: Net Migration in Selected OIC Countries Country

Net Migration

Country

Net Migration

Syria

-4,029,996

Sierra Leone

-21,000

Bangladesh

-2,226,481

Mauritania

-20,000

Pakistan

-1,081,918

Djibouti

-15,996

Sudan

-800,000

Gambia

-13,476

Indonesia

-700,000

Guinea-Bissau

-10,000

Libya

-501,692

Guinea

-10,000

Somalia

-400,000

Comoros

-10,000

Morocco

-310,624

Benin

-10,000

Mali

-302,449

Togo

-9,994

Iran

-300,001

Suriname

-5,000

Nigeria

-300,000

Bosnia

-2,506

Egypt

-215,681

Maldives

Uzbekistan

-195,001

Brunei

Uganda

-150,000

Gabon

5,000

Algeria

-143,268

Bahrain

29,915

Burkina Faso

-125,000

Cote d'Ivoire

50,000

Tajikistan

-117,382

Chad

100,000

Kyrgyz Republic

-113,963

Kazakhstan

159,807

Senegal

-99,996

Jordan

229,617

Albania

-91,750

Qatar

363,500

Cameroon

-60,000

UAE

405,000

Yemen, Rep.

-50,000

Malaysia

450,000

Gaza

-43,750

Afghanistan

473,007

Tunisia

-32,941

Kuwait

517,500

Niger

-28,497

Iraq

548,666

Guyana

-27,278

Saudi Arabia

850,000

Turkmenistan

-25,001

Lebanon

Mozambique -25,000 Turkey Source: World Development Indicators 2015

-53 2,102

1,250,000 2,000,003

4. Current State of Development Assistance in OIC Countries In this section, we look at current state of development assistance in selected OIC countries. In Table 4, we present the net Official Development Assistance (ODA) received by OIC countries as a percentage of Gross National Income (GNI) and Gross Capital Formation (GCF). It can be seen that for poor and conflict-hit areas like Afghanistan, Sierra Leone and

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Somalia, the net ODA received as a percent of total GNI is greater than 20%. In the case of Yemen, Sierra Leone and Afghanistan, the net ODA exceeds total gross capital formation. Nonetheless, the OIC countries with the greatest number of poor people like Bangladesh, Nigeria, Pakistan and Indonesia only receive 1.24%, 0.52%, 1.32% and -0.01% net ODA as a percent of GNI. Table 4: Official Development Assistance (ODA) Received in Selected OIC Countries Country Net ODA Net ODA Country Net ODA Net ODA Name (% of GNI) (% of Name (% of GNI) (% of GCF) GCF) Afghanistan 21.73 110.88 Lebanon 2.10 7.51 Albania

2.98

10.70

Malaysia

0.00

0.00

Algeria

0.05

0.10

Maldives

0.87

N/A

Bangladesh

1.24

4.56

Mali

9.72

52.64

Benin

5.21

19.98

Mauritania

5.02

8.43

Bosnia

2.18

18.50

Morocco

1.39

4.50

Burkina Faso

9.56

29.37

Mozambique

12.45

29.01

Cameroon

2.37

11.36

Niger

12.23

31.22

Chad

5.74

19.47

Nigeria

0.52

3.22

Comoros

11.55

42.30

Pakistan

1.32

9.03

Cote d'Ivoire

2.22

9.90

Senegal

6.57

27.23

Egypt

0.77

5.23

Sierra Leone

22.58

145.36

Gabon

0.74

2.35

Somalia

22.97

N/A

Gambia

12.38

54.87

Sudan

1.02

5.59

Guinea

8.65

60.86

Suriname

0.30

0.45

GuineaBissau Guyana

9.03

75.96

Tajikistan

4.44

24.04

0.97

3.88

Togo

5.38

23.55

Indonesia

-0.01

-0.01

Tunisia

1.14

5.10

Iran

0.02

0.06

Turkey

0.30

1.65

Iraq

0.83

3.39

Turkmenistan

0.07

0.23

Jordan

5.80

24.27

Uganda

6.01

24.31

Kazakhstan

0.05

0.16

Uzbekistan

0.66

2.82

Kosovo

6.75

24.87

Gaza

N/A

69.65

Kyrgyzstan

12.15

33.69

Yemen

4.21

234.74

Source: World Development Indicators 2015

In Table 5, we present net ODA and official aid received in selected OIC countries. In terms of absolute figures, Afghanistan, Syria, Pakistan, Egypt and Turkey received the highest assistance in absolute numbers. However,

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Journal of Philanthropy, Vol 1, Issue 1, July – December 2017

when we look at the assistance received on per capita basis, we find that OIC countries with the greatest number of the poor population receive very low assistance on per capita basis. Table 5: Net ODA and Official Aid in Selected OIC Countries Net ODA + Aid (mln $)

ODA + Aid Per Capita

Niger

914

45.96

352.43

Guinea

561

44.51

576

319.53

Turkey

3,410

43.34

4,330

234.04

Yemen

1,150

42.87

Guyana

165

214.84

Tajikistan

356

41.99

Djibouti

164

184.44

Uganda

1,622

41.56

Bosnia

631

165.69

Cote d'Ivoire

917

40.41

4,801

147.60

Egypt

3,510

38.35

Lebanon

816

139.46

Iraq

1,389

38.13

Sierra Leone

882

136.68

Cameroon

842

36.09

Kyrgyz Rep.

651

109.29

Libya

207

33.03

Somalia

1,106

102.52

Togo

207

28.37

Albania

280

96.94

Chad

386

27.53

Comoros

74

93.55

Suriname

13

23.15

Tunisia

930

82.68

Sudan

867

21.54

Mozambique

2,096

74.92

Pakistan

3,584

18.97

Senegal

1,104

72.98

Bangladesh

2,412

14.98

Mali

1,233

70.05

Nigeria

2,437

13.37

Morocco

2,228

64.81

Uzbekistan

324

10.36

Gabon

111

64.27

Turkmenistan

35

6.44

Mauritania

257

63.25

Kazakhstan

88

4.99

Maldives

25

62.00

Algeria

156

3.92

Burkina Faso

1,115

61.57

Iran

77

0.98

Guinea-Bissau

109

58.92

Malaysia

10

0.33

Benin

596

54.79

Indonesia

-442

-1.71

Net ODA + Aid (mln $)

ODA + Aid Per Capita

Gaza

2,481

560.98

Jordan

2,677

Kosovo

Country

Syria

Afghanistan

Country

Gambia

49.35 98 Source: World Development Indicators 2015

In Table 6, we present percent of external debt that is sanctioned on concessional terms for selected OIC countries. We observe that countries

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Journal of Philanthropy, Vol 1, Issue 1, July – December 2017

with a greater number of poor people like Indonesia and Nigeria get much less proportion of external debt on concessional terms. The percent of external debt sanctioned on concessional terms for Indonesia and Nigeria stands at 9% and 31% respectively. Bangladesh and Pakistan, the two other populous Muslim majority countries with the greatest number of poor people are able to get 65% and 51% external debt on concessional terms. Table 6: Concessional Debt (% of External Debt in Selected OIC Countries) Concessional Debt (% of Concessional Debt Country Country External Debt) (% of External Debt) Djibouti 94.5 Pakistan 51.9 Mali

88.8

Egypt

51.7

Burkina Faso

87.9

Kyrgyzstan

44.6

Yemen

87.6

Sudan

40.5

Niger

85.4

Tajikistan

36.5

Uganda

83.1

Turkmenistan

33.4

Benin

82.2

Nigeria

31.6

Gambia

79.9

Uzbekistan

29.7

Comoros

77.2

Albania

24.9

Afghanistan

74.3

Morocco

20.8

Mauritania

73.3

Tunisia

20.8

Chad

71.1

Gabon

20.6

Senegal

69.4

Cote d'Ivoire

20.6

Mozambique

66.7

Azerbaijan

15.5

Syria

66.4

Bosnia

15.2

Togo

66.3

Algeria

14.9

Guinea-Bissau

65.6

Jordan

14.0

Bangladesh

65.5

Indonesia

8.9

Cameroon

63.5

Lebanon

2.8

Maldives

60.5

Turkey

2.8

Guinea

57.2

Iran

2.5

Guyana

54.7

Kosovo

2.0

Sierra Leone

54.6

Malaysia

0.9

Somalia

52.7

Kazakhstan

0.7

Source: World Development Indicators 2015

In Table 7, we show the debt service burden on OIC countries in terms of how much of their GNI is paid as interest payments on external debt. We notice that countries with high incidence of poverty like Gabon and Mozambique pay as much as 1.5% and 1.4% of their GNI in interest

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Journal of Philanthropy, Vol 1, Issue 1, July – December 2017

payments alone on their external debt. Out of 46 countries listed in Table 7, there are 16 OIC countries whose interest payments alone exceed 1% of GNI. If these countries receive interest-free loans or loans at concessional terms, their debt service burden can be significantly reduced and the savings can be used for funding development projects. On the other hand, we notice from Table 5 that there are at least 15 OIC countries which receive net ODA lower than 1% of their GNI. This suggests that in some OIC countries, the net outflow of resources in the form of interest payments would be greater than the inflows received in the form of development assistance. Table 7: Interest Payment on External Debt (% of GNI) for Selected OIC Countries Interest on Interest on Country External Debt (% Country External Debt (% of GNI) of GNI) Lebanon

3.580

Maldives

0.431

Kazakhstan

2.132

Pakistan

0.428

Bosnia

1.657

Azerbaijan

0.363

Tunisia

1.556

Benin

0.288

Gabon

1.448

Niger

0.286

Turkey

1.408

Egypt

0.272

Mozambique

1.366

Mali

0.262

Tajikistan

1.343

Yemen

0.219

Jordan

1.333

Burkina Faso

0.202

Indonesia

1.266

Guinea

0.186

Mauritania

1.224

Sierra Leone

0.186

Kyrgyz Republic

1.217

Bangladesh

0.162

Senegal

1.108

Uganda

0.161

Morocco

1.107

Sudan

0.124

Guyana

1.107

Guinea-Bissau

0.103

Malaysia

1.032

Chad

0.087

Cote d'Ivoire

0.989

Nigeria

0.079

Kosovo

0.981

Algeria

0.067

Albania

0.673

Afghanistan

0.050

Gambia

0.647

Comoros

0.021

Cameroon

0.555

Iran

0.020

Togo

0.537

Turkmenistan

0.017

Uzbekistan 0.456 Somalia Source: World Development Indicators 2015

0.001

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Journal of Philanthropy, Vol 1, Issue 1, July – December 2017

Specifically, we discover that in at least 9 countries, the interest payments as a percent of GNI exceed net ODA received as a percent of GNI. These 9 countries include Kazakhstan (-2.08), Lebanon (-1.48), Indonesia (-1.27), Turkey (-1.11), Malaysia (-1.0), Gabon (-0.71), Tunisia (-0.42), Guyana (0.13) and Algeria (-0.01). The numbers in parentheses indicate the difference between the net ODA received as a percent of GNI and the interest payments on the external debt as a percent of GNI. 5. Role of Islamic Social Finance in Sustainable Development Since the gap to fill in under development is huge in the case of most of the Muslim majority countries, it is important that all-encompassing efforts are undertaken involving diverse set of institutions to make the largest leap forward. Religious institutions which have a socio-economic character can also be employed in creating synergistic efforts towards achieving the development objectives, especially in Muslim majority countries. Governments in developing countries have much more distance to travel in achieving the development targets and yet they generally have weak tax base to work with. Because of the transformative and sustainable nature of the new development agenda, all possible resources must be mobilized if the world is to succeed in meeting its development targets (Ahmed et al., 2005). The financial crisis of 2007-09 and subsequent contagion effects have not helped in improving on the commitment to provide 0.7% of GNI as Official ODA by the developed countries to the underdeveloped ones. With resources allocated to development by donor countries remaining insufficient coupled with the headwinds of financial and economic crises affecting many countries worldwide, it is important to explore alternative and complementary innovative financing mechanisms, such as Islamic social finance and redistributive institutions. Islamic social finance package includes institutions like Zakāt, Waqf and Microfinance which can cater to the financially excluded households who are missed by the commercial banks. Wilson (2007) also contends that Microfinance is best provided by non-banking institutions. Sadiq and Mushtaq (2015) suggest that Zakāt and Waqf based Microfinance institutions can be used to serve the social sector. Real estate-based Waqf can generate proceeds through the rental of properties, which then can be used to finance social development needs. Cash and commodity based Waqf can provide interest-free loans (Qard-e-Hassan) to the needy in sectors like education, health and agriculture. Lastly, Takaful is an insurance concept based on the principles of shared responsibility, solidarity and cooperation.

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Journal of Philanthropy, Vol 1, Issue 1, July – December 2017

5.1

Role of Zakāt in Humanitarian Assistance

If we look at the institution of Zakāt, we find that the payer of Zakāt and the receiver of Zakāt belong to two different income classes. The payer of Zakāt is non-poor with surplus wealth above Nisāb. On the other hand, the receiver of Zakāt is usually a poor person with no surplus wealth above Nisāb. Thus, the threshold wealth of Nisāb makes a distinction between the payer and receiver and helps to achieve targeted income and wealth transfer to the people who are usually the poor people. Since this redistribution is based on wealth rather than income, it can achieve the redistribution objectives more effectively and consistently since wealth fluctuates much less than income over the business cycles. Metwally (1983) argues that Zakāt has a wider base and it is applicable on both the incomes and the wealth. He emphasizes that the Zakāt system has an inbuilt mechanism to reach the right targets in terms of Zakāt collection and disbursement. This ensures increasing the propensity to consume more emphatically and quickly. Furthermore, the accumulated wealth can be much more than the single period income, especially in the high net worth individuals of the society. That is why, in the absence of broad-based wealth taxes and loopholes in taxing off-shore wealth, the progressive income taxes alone have been unable to reduce income inequality and wealth redistribution. Hartman (2002) cites the case of US economy and argues that the progressive taxes were designed to reduce income inequality. But during the last four decades, while the share of income taxes levied on the upper tenth of incomes rose 15%, the after-tax income share of the remainder of incomes declined by 13%. Oxfam (2017) reports that 8 individual persons have as much wealth as bottom 50% of the entire global population. Their combined wealth is $426.2 billion as of end-2016. As per World Bank, there are 767 million people below the poverty line of $1.90/day. It means that poverty gap is $531.9 billion (1.90 x 767,000,000 x 365) per year. Comparing the wealth owned by only the richest 8 persons ($426.2 billion) and the total global poverty gap funding requirement ($531.9 billion), one can see how redistribution of wealth can help in pooling poverty alleviation funds. Oxfam (2017) reports that global wealth has reached $255 trillion. It is enough to give $1 a day to 767 million poor people for 910 years. A single year 2.5% Zakāt on it will give $1 a day to 767 million poor for 23 years.

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Journal of Philanthropy, Vol 1, Issue 1, July – December 2017

According to Food and Agricultural Organization (FAO), there are approximately 800 million people who suffer from hunger and are food insecure in their routine lives. Most of the poor countries lack basic resources to kick start growth and to invest in health and education. Thus, the redistribution of resources is vital to enhance income as well as the capacity to earn sustainable incomes, which requires income support programs, basic health and education as well as microfinance to build small enterprises. Nearly 50 percent of the people living in extreme poverty are 18 years old or younger. This goes shows that a significant portion of our global population would not have a fair start to achieve socio-economic mobility. Thus, proper nourishment, basic medicines and vaccinations are necessary to avoid illhealth, stunting and loss of capacities for independent productive living in adulthood. Some life-saving medicines cost less than a dollar, but they are under-provided due to commercial reasons. Unless effective redistribution happens, the purchasing power cannot be enhanced which is vital to afford even the basic necessities today, such as food, water and medicines. Providing quality education is vital for achieving permanent poverty exit, enhancement of skills and capacities, and to ensure upward social mobility. The financial institutions can come to the rescue once the people are able to hold enough assets and skills for the enterprise. But, much before that, people require survival and human capital development in the early stage of life. There are mosque based schools in the Muslim majority countries which effectively channelize Zakāt funds to ensure basic religious and secular education. Effective administration and management of the Zakāt funds can help in scaling up the benefits in terms of strengthening institutions to create synergistic effects. Decent work and economic growth are necessary to realize a sustainable reduction in poverty and in ensuring upward socio-economic mobility. On one hand, Zakāt from endowment surplus households (those having higher wealth than Nisāb) to the endowment deficient households can help in providing income support and affordability for skills enhancement programs. Zakāt could also be used to provide funding for education and health institutions, thereby contributing to human capital development which can provide decent work. On the other hand, the institution of Zakāt would ensure circulation of wealth in the productive enterprise, thereby directing capital to go in the real sector of the economy rather than sitting idle in the hands of the wealthy individuals.

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Journal of Philanthropy, Vol 1, Issue 1, July – December 2017

5.2

Role of Waqf in Mobilizing and Institutionalizing Philanthropy

Waqf is an important social institution in the Islamic framework. In the institution of Waqf, an owner donates and dedicates a movable or immovable asset for the perpetual societal benefit. The beneficiaries enjoy its usufruct and/or income perpetually. Waqf can be established either by dedicating real estate, furniture or fixtures, other movable assets and liquid forms of money and wealth like cash and shares. The cash Waqf can pool liquid donations in order to build institutions, such as schools, hospitals, and orphanages (Sadeq 2002). Cash Waqf can pool more resources and ensure wider participation of individual donors (Aziz et al., 2013). Waqf provides flexibility in fund utilisation as compared to Zakāt since Zakāt funds must be utilized for specific categories of recipients. The institution of Waqf can be used to provide a wide range of welfare services, such as educational institutions, health institutions, environmental preservation programs and financial institutions like Waqf based micro finance (Habib, 2007)) and socially driven banks (Mohammad, 2011). Along with income support and cash transfers, poor people also require skills and productivity enhancement in order to get out of poverty and achieve social mobility. Haneef et al. (2014) argue that lack of finance and business training requires institutional support to unleash the potentials of microentrepreneurs and to establish viable micro-enterprises. Obaidullah (2008) explains that growth-oriented micro-finance programmes also need to provide training, insurance, and skills enhancement facilities. In this regard, the institution of Waqf can improve the chances of socio-economic mobility by providing a rather permanent, effective and efficient funding source for the health and education infrastructure. The increased and improved provision of education and health infrastructure funded through Waqf can enhance the income-earning potential of beneficiaries. 6. Conclusion This paper highlighted the Islamic injunctions on pure altruism and philanthropy and how Islamic worldview and institutions can help in contributing towards effective mobilization, institutionalization and utilization of social savings and philanthropic and humanitarian assistance. We discussed Islamic teachings of pure altruism which insist and reinforce the need for sharing and giving to poor people and social causes. We looked at the state of development assistance, aid and concessional debt in selected OIC countries. We noticed that OIC countries with high incidence of poverty

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Journal of Philanthropy, Vol 1, Issue 1, July – December 2017

receive much less aid per capita than some of the other countries. Thus, there is need of effective planning and organizing trans-national humanitarian aid. We also discovered that in at least 9 countries, the interest payments on external debt exceed the net official development assistance. Thus, it is pertinent that with aid, the rich donors must provide concessional debt and forgo the outstanding interest payment from countries that are very poor. This could provide some relief to the highly indebted poor countries (HIPCs) and make them get out of poverty and debt trap. References Ahmed, H. (2007). Waqf-based Microfinance: Realizing the Social Role of Islamic Finance. Paper presented at the International Seminar on Integrating Awqaf in the Islamic Financial Sector, Singapore, 6–7 March. Andreoni, J. (1989). Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence, Journal of Political Economy, 97(6), 1447–1458. Andreoni, J. (1990). Impure Altruism and Donations to Public Goods: A Theory of Warm-Glow Giving, Economic Journal, 100(401), 464– 477. Aziz, M.R.A., Johari, F. & Yusof, M.A. (2013). Cash Waqf Models for Financing in Education, Proceedings of the 5th Islamic Economic System Conference (iECONS2013). Food and Agriculture Organization of the United Nations (2013). “Part 3: Feeding the World” in FAO Statistical Yearbook 2013, pp. 173–181. FAO, Rome. Global Humanitarian Assistance (2016). Global Humanitarian Assistance Report. Development Initiatives. Haneef, M.A., Muhammad, A.D., Pramanik, A.H. & Mohammed, M.O. (2014). Integrated Waqf based Islamic Microfinance Model (IWIMM) for Poverty Alleviation in OIC Member Countries, Middle-East Journal of Scientific Research, 19(2), 286–298. Hartman, D.A. (2002). Does Progressive Taxation Redistribute Income, The Road Map to Tax Reform Series, Policy Report 162.

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Haq, M. (1995). Reflections on Human Development. Oxford University Press: New York. Haq, M. (1963). The Strategy of Economic Planning: A Case Study of Pakistan. Oxford University Press: Karachi. Ismail, A.G., Possumah, B.T. & Kadir, M.N.A. (2014). Inter-Generational Transfer under Islamic Perspective, Humanomics 30(2), 95–121. Ismail, A.G, Zaenal, M.H. & Shafiai, M.H.M. (2013). “Philanthropy in Islam: A promise to Welfare Economics System”. IRTI Working Papers WP-1435-03. http://www.irti.org/English/Research/Documents/326.pdf Metwally, M.M. (1983). Fiscal Policy & Resource Allocation in Islām, Islamabad: Institute of Policy Studies. Mian, H.S, Khan, J. & Rahman, A. (2013). Environmental Ethics of Islam. Journal of Culture, Society and Development, 1: 69–74. Mohammad, M.T.S.H. (2011). Towards an Islamic Social (Waqf) Bank. International Journal of Trade, Economics and Finance, 2(5), 381 – 386. Naqvi, S.N.H., & Qadir, A. (1997). The Dimensions of an Islamic Economic Model, Islamic Economic Studies, 4(2), 1–24. Oxfam (2017). Oxfam Briefing Paper: An Economy for the 99%. Oxfam GB, Oxford. Sadeq, A.M. (2002). Waqf, Perpetual Charity and Poverty Alleviation. International Journal of Social Economics, 29(1/2), 135–151. Sadiq, S. & Mushtaq, A. (2015). The Role of Islamic Finance in Sustainable Development. Journal of Islamic Thought and Civilization, 5(1), 46– 65. Wilson, R. (2007). Making Development Assistance Sustainable through Islamic Microfinance. International Journal of Economics, Management and Accounting, 15(2), 197–217.

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World Bank (2016). Poverty and Shared Prosperity: Taking on Inequality. The World Bank Group, Washington.

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Sources of Inefficiency of the Waqf Institutions in Malaysia Dahlia Binti Ibrahim Universiti Teknologi MARA, Malaysia [email protected] Haslindar Ibrahim Universiti Sains Malaysia, Malaysia Email: [email protected] Wong Wai Peng Universiti Sains Malaysia, Malaysia Email: [email protected] Abstract The purpose of this study is to assess the efficiency of the Waqf institutions organized by the State Islamic Religious Councils (SIRCs) by applying the Data Envelopment Analysis (DEA). In Malaysia, the SIRCs are responsible to manage Waqf assets entrusted to them. As of recent, there are quite a number of studies looking into the performance of the SIRCs in managing the Waqf. Therefore, there are three types of DEA model applied in this study; technical efficiency (TE), pure technical efficiency (PTE) and scale efficiency (SE). The data consists of 13 Waqf Institutions for the period of 2007 to 2013. The results of this study suggest that only 1 of the Waqf institutions is fully efficient and the other 12 institutions are inefficient when the analysis is done on a full sample of the 13 SIRCs. Further analysis on the technical efficiency components also reveals that inefficiency of the Waqf Institutions is mainly caused by managerial inefficiency rather than scale inefficiency. Keywords: Efficiency, Data Envelopment Analysis (DEA), Waqf Institutions 1. Introduction Waqf is an instrument used to improve the living standard of the Ummah. It provides for the improvement of the religious aspects, eliminating poverty, education and health, just to name a few. The concept of Waqf is not a new terminology. In general, the Waqf is similar to the endowment concept of the western world as proven by the existence of universities such as Harvard University, Oxford University and Cambridge University which were established under the endowment program. Nevertheless, unlike endowment, Waqf has a strong link to the Shari’ah principle. Most often, Waqf involves

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Journal of Philanthropy, Vol 1, Issue 1, July – December 2017

the donation of properties such as land and building. Nowadays, though, movable properties such as cash, shares and other tangible items are allowed to be proclaimed as Waqf albeit ongoing debates in permitting such contribution. As mentioned earlier, the objective of Waqf is to improve the well-being of the Ummah. Hence, the focal point of this paper is to highlight the importance of efficiency to achieve a proper management of the Waqf. Zahid (2012) indicated that efficiency is a production process where there is a combination of inputs and outputs in producing a product. Due to this, it is important to evaluate the efficiency of an institution to divulge its degree of performance. In so doing, the management is able to make a needed improvement to their production process. The novelty of this study is to contribute to the body of knowledge in relation to Waqf studies as there is shortage of empirical studies on Waqf. Thus, it is expected that the result of this study will motivate the Waqf practitioners and other relevant parties to improve the Waqf institutions’ efficiency in Malaysia. Herewith, this paper is structured as follows. The next section puts forward some literature on Waqf and efficiency. After that, another section will discuss the methodology along with the inputs and outputs specification. Then, the findings and conclusion will be presented in the last two sections of this paper. 2. Literature Review In Malaysia, the SIRC of each state carries the responsibility as trustees to register, regulate, monitor and manage the Waqf so as to promote the socioeconomic justice of the Waqf institution. The data from 13 Waqf Institutions is used in this study. It is important to note that the Sultan of each state has full authority on the SIRC in his state. For those states without the sultanate system, the Governor of each state holds the power on the SIRC. Although the SIRCs hold the same function, there is no standard or centralized regulation governing the management of Waqf by these SIRCs. As such, they are free to practice their own individual enactment. Interestingly though, these SIRCs share the same issues to manage and develop the Waqf under their jurisdictions. Some of the well-known issues are the size of land and its location; distance of the Waqf from the population and nearby infrastructure; insufficient manpower to manage all of the Waqf; insufficient funds to develop the Waqf; unlawful occupation of the Waqf land; incompetence of managing the Waqf and poor record keeping of the proclaimed Waqf (Mohd Salleh & Muhammad, 2008). As such, it is important to look at the SIRCs performance so as to detect which area of concern can be looked upon for improve them comprehensively.

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There are a number of studies of Waqf in Malaysia which include accounting of Waqf (Sulaiman, Adnan and Megat Mohd Nor, 2009), administration of Waqf (Chowdhury, Chowdhury, Muhammad and Yasoa, 2012; Osman, 2012), legality of Waqf (Mahamood, 2006; Alias, 2012), creation of Waqf (Hasim, 2007; Ismail, 2012) and productive Waqf (Al-Hadi, 2009). Nonetheless, there are very few studies that examined the performance of Waqf institutions in Malaysia. In so far, there is one study done by Hasan and Ahmad (2014) which studied the efficiency of Waqf institutions in Malaysia and it is considered the closest to this study. Hasan and Ahmad (2014) looked at the collection and distribution of Waqf fund whereas this study looks at how efficiently the Waqf institutions manage their resources in generating their income. At the global front, the performance measurement has become an important agenda in many not-for-profit organization and public sectors regardless of field and size (Macpherson, 2001). Some of the performance studies of these sectors include Athanassopoulos and Shale (1997), Modell (2001), Carter (2005) and Ho, Dey and Hiqson (2006). These studies mostly dwell on the performance measures as part of the management control. One of the performance measures is the assessment of organization’s efficiency. Witte and Geys (2011) stipulated that efficiency is widely applied in measuring the performance of various sectors. According to Abd Wahab and Abdul Rahman (2011), economic theory defines economic efficiency as a mean to describe how a production process is undertaken to achieve maximum output for a given inputs with the availability of technology. In a similar manner, the Waqf institutions are subjected to the economic theory of the production process. Although they are not involved in the mass production of physical products, the institutions still need to utilize their resources consisted of inputs and outputs in order to sustain their operation and existence. Nonetheless, there are very limited studies of efficiency in the third sector, such as the Waqf institution. Studies on the efficiency of the public sector include Butler and Johnson (1997), Husain, Abdullah and Kuman (2000), Mante and O’Brien (2002), Balaguer-Coll. Prior and Tortusa. (2007), Fandel (2007) and Dash, Vaishnavi and Muraleedharan (2010). Husain, Abdullah, and Kuman (2000) used DEA to present how combination and utilization of inputs and outputs are measured as to achieve the most optimized set of results. In their analysis of the 1998 data collected from the Road Transport Department (RTD) in Malaysia, the researchers came up with the efficiency scores for 46 service units in the month of January where only service units with a score of 100

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percent were efficient. The rest of the service units viewed as inefficient with scores ranging from 0.08 percent to 96.37 percent. Another study by Mante and O’Brien (2002) studied public sector schools in Victoria, Australia. They calculated relative efficiency of each school and rated 1.0 for schools that were DEA efficient where any scores more than 1 are specified as sources of inefficiencies. The main result of their study implicated that the state secondary schools operated at a justly high level of TE relative to each other. 3. The Relationship between Technical Efficiency, Pure Technical Efficiency and Scale Efficiency Pure technical efficiency (PTE) is linked to the managerial aspect of an organization and helps the management to impose any decision as appropriate. Meanwhile, the scale efficiency (SE) is associated with the size of operation of an organization. Studies by Annim (2012), Kipesha (2012) and Maamor and Ismail (2010) discovered that the efficiency scores are different when calculated under the different scale of returns. The PTE scores under the VRS and CRS assumptions were greater than the SE scores. Relatedly, Abd Wahab and Abdul Rahman (2011; 2012; 2013) revealed that the SE scores are higher than the PTE scores suggesting that the technical inefficiency of Zakāt institutions may be due to technical aspects rather than the size of the institutions. Even Rosman, Abd Wahab and Zainol (2013) agreed that the scale efficiency overshadowed the pure technical efficiency. Thus, the following hypothesis is established: H1: Pure technical efficiency (PTE) highly contributes to the inefficiency of the Waqf Institutions from the year 2007 to 2013.

4. Research Methodology 4.1

Data Envelopment Analysis (DEA)

Charnes, Cooper and Rhodes (1978) introduced the Charnes, Cooper and Rhodes (CCR) model to measure the technical efficiency of an institution with the assumption that constant returns to scale exist. However, in reality, the production function is not constant throughout any operation process. As such, the technical efficiency measurement needs to be broken down into the pure technical efficiency and scale efficiency in order to count for the variable return to scale in production as well as to dig into the source of technical inefficiency of an institution. In view of this, Banker, Charnes and Cooper (1984) brought in the Banker, Charnes and Cooper (BCC) model to

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allow for the calculation of pure technical efficiency. In brief, pure technical efficiency is a measure of technical efficiency without accounting for the size of the operation. It denotes how an institution manages the resources in the production process. The calculation of pure technical efficiency makes an assumption of variable returns to scale in production. On the other hand, the scale efficiency is the ratio between technical efficiency and pure technical efficiency which indicates the connection between the size of production and production level. To clarify, the scale efficiency will detect if the wrong choice of production of scale causes the inefficiency of an institution. There are two orientations involved in estimating efficiency using DEA; input orientation and output orientation. Input orientation refers to the fullest minimization of the inputs which can be utilized while maintaining the same output level while output orientation signifies the maximization of the output by making an alteration to the inputs. Both orientations of the DEA model with CRS is represented by the following equations. Input Orientation Model s

MaxE d   u r y rd

Equation (1)

r 1

Subject to: m

v p 1

p

x pd  1

s

u y r 1

r

m

rq

  v p x pq  0 p 1

q=1,…n and ur, vp≥ 0 ( u and v are small but holds positive quantity) Output Orientation Model m

MinFd   v p x pq p 1

Subject to: s

u y r 1 s

r

rq

1 m

 ur yrq   v p x pq  0 r 1

p 1

Equation (2)

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q=1,…n and ur, vp≥ 0 ( u and v are small but holds positive quantity) For the above linear programming problems, the duality of the objective function can be conveyed in Equation 3: m

Minz d   zd x pd

Equation (3)

p 1

Subject to: N

 y q 1

q

rq

 yrd , r  1,.....s N

zd x pd  q x pq  0, p  1,.....m;q  0; 0


q

1

Equation (4)

By adding the convexity constraint to 1, this new model is called BCC model as it is introduced by Bankers, Charnes and Cooper in 1984. The efficiency scores obtained from BCC is now known as pure technical efficiency (PTE) where VRS is permitted while discarding the scale part in the analysis. As with CCR model, assessment of efficiency using the BCC model also can be done under input orientation or output orientation as shown in Equation 5 and 6.

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Input Orientation Model s

MaxEd   ur yrd  wd

Equation (5)

r 1

Subject to: m

v p 1

p

x pd  1

s

m

r 1

p 1

 vr xrd   v p x pq  wd  0 q=1,…n and ur, vp≥ 0 ( u and v are small but holds positive quantity) Output Orientation Model m

MinFd   v p x pq  wd

Equation (6)

p 1

Subject to: s

u y r 1

r

rq

1

s

m

r 1

p 1

 ur yrq   v p x pq  wd  0 q=1,…n and ur, vp≥ 0 ( u and v are small but holds positive quantity). The wd is the unrestricted parameter that specifies various possibility of returns to scale which comprises of increasing returns to scale ( wd>0), constant return to scale (wd= 0) and decreasing return to scale (wd< 0). Due to the joining of the level surface formed by the hull convex, the data points in this model are more tightly enclosed compared to the CCR model. This will grant the efficiency scores obtained from BCC model higher than efficiency scores from the CCR model. The dual function for the BCC model is formulated as in Equation 7. m

MinZ d   zd x pd p 1

Subject to N

 y q 1

q

rq

 yrd , r  1,....s

Equation (7)

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Journal of Philanthropy, Vol 1, Issue 1, July – December 2017

N

zd x pd  q x pq  0, p  1,....m;q  0; 0


q

 1, q  1,....q  1,....N

Where, ø is n x 1 vector of constant and N refers to the number of times the linear programming be repeated on other DMU in the sample. Taking a quick look, Equation 7 is similar to Equation 2 except for the presence of Σ øq = 1 as the convexity constraint. With this convexity constraint, the scale optimization in CCR model is slackened. Noticeably, the BCC model allows only the technical efficiency devoid of scale is measured hence the name pure technical efficiency corresponds to it. Conceptually, the big difference between the CCR model and BCC model lies in the interpretation of the efficiency measurement. The former suggested that a DMU is deemed efficient when it achieves scale and technical efficiency. On the other hand, the latter presumes that a DMU is viewed as efficient by just looking at its technical efficiency devoid of its scale efficiency. If a DMU’s efficiency score obtained from both the CCR and BCC model is equal to 1, it is considered to be fully efficient and assumed to be operating at the optimal scale. However, if its efficiency scores from CCR model are low compared to scores from BCC model, it is considered technically efficient but not purely technically efficient due to the presence of scale size of the DMU. It is therefore justifiable to distinguish the scale efficiency of a DMU by dividing the CCR score to the BCC score (Cooper, Seiford & Tone, 2000). The ratio is shown in Equation 8: SE 

TE PTE

Equation (8)

The relationship between TE, PTE and SE can be established into Equation 9. TE 

PTE SE

Equation (9)

The sources of inefficiency can be identified through the decomposition of TE into PTE and SE. PTE corresponds to operating efficiency while SE relates to scale size of the DMU under assessment.

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4.2

Inputs and Outputs Specification

The fundamental purpose of Waqf institution is to manage the Waqf entrusted to them. A study by Hasan and Ahmad (2014) looked at the collection and distribution of funds of the SIRCs in reaching out to the beneficiaries. In their two stage analysis, they utilized the number of officers employed, the number of collection agents and expenses as inputs whereas the outputs are the collection and distribution of Waqf funds. Similarly, Maamor and Ismail (2010) studying Ar-Rahnu specified that the institution collects funds and offers it as loan whereas Abd Wahab and Abdul Rahman (2011; 2012; 2013) studying Zakāt indicated that Zakāt institution collects Zakāt funds and distribute them to the needy. As such, they chose the production approach in choosing their inputs and outputs for the study of Ar-Rahnu and Zakāt. In this case, the production approach considers institutions as service providers to the public. Under this approach, the inputs include physical variables such as labor and capital while the outputs are best measured by the number and type of transactions, or specific service. Nevertheless, the focus of this study is different from Maamor and Ismail (2010), Abd Wahab and Abdul Rahman (2011; 2012; 2013) and Hasan and Ahmad (2014). Instead of looking at how efficient the SIRCs use their resources in collecting the Waqf fund from the public, this study will look at how efficient the SIRCs utilize their inputs in generating the revenues (proceeds from the investing and renting of the Waqf properties) and use it to reach out to the beneficiaries and sustain their operation. Hence, the intermediation approach is more appropriate since the SIRCs act as the intermediaries between the Waqf donor and intended beneficiaries. Past studies may have used other input and output variables for their studies which are relevant to the operation of the DMUs. In this study, the specification of inputs is adapted from Husain, Abdullah and Kuman (2000), Sufian (2007b) Maamor and Ismail (2010), Abd Wahab and Abdul Rahman (2011; 2012; 2013), Noor and Ahmad (2012) and Ahmad and Abdul Rahman (2012). As such, the researcher will use labor, operating expenses and physical capital (fixed asset) as the input. As for the outputs, the researcher chooses income as the output following the studies done by Husain, Abdullah and Kuman (2000), Noor and Ahmad (2012), and Ahmad and Abdul Rahman (2012). However, the researcher will modify the output into rental income and investment income since the outputs are more relevant to investigate the

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competency of the SIRCs in using their inputs (salary expenses, operating expenses and fixed asset) in generating the outputs (rental income and investment income) to meet the purpose of the Waqf. As justification for this, Maamor and Ismail (2010) and Abd Wahab and Abdul Rahman (2011; 2012; 2013) agreed that the specification of outputs depends on the nature of operation for an organization. Therefore, the inputs and outputs selected for this study are appropriate to the function of the SIRCs. Other relevant inputs and outputs are not included due to the unavailability of data. It is worthwhile to point that the choices of variables are in tandem with the management objectives of reducing costs in achieving maximum income from the Waqf. As such, the study uses the input orientation for both of the DEA models. There is no clear rule on how many inputs and outputs to include in measuring efficiency using DEA. To include too many or too few input and output variables can highly influence the result positively or negatively. As such, the number of elements must be kept objectively reasonable which points to the DEA’s rule of thumb where Golany and Roll (1989) stated that the number of DMUs must at least equal to twice the combined number of inputs and outputs. 5. Results and Discussion 5.1

Descriptive Statistics

Table 1 displays the descriptive statistics for the inputs and outputs used in this study. Specifically, it gives details of the average, the minimum and maximum amount of the inputs and outputs used by the 13 SIRCs and how diverse are the amount of inputs and outputs among the 13 SIRCs. Table 1: Descriptive Statistics of Inputs and Outputs of Waqf Institutions (2007-2013) Mean Min Max Standard Deviation Input Salary Expenses 115,348 7,083 472,763 91,654 Other operating 126,357 692 553,686 130,589 Expenses Fixed Assets 5,765,101 24,931 7,810,0200 1,025,7493 Output Investment Income 132,985 1,558 643,928 143,906 Rental Income 328,615 2,089 2,148,702 394,661

On the average, there is a wide range between the minimum and maximum amount of inputs used and outputs produced by all 13 Waqf Institutions as

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shown in Table 1. In this particular case, the different demographic characteristics justify the vast gap in the minimum and the maximum value of the inputs and outputs used in this study. Specifically, Perlis is the smallest state among the 13 states under this study. Department of Statistic Malaysia (2010) recorded the population of Perlis standing at 203,476 people. On the other hand, Selangor recorded the highest population which is at 3,161,194 people. Nevertheless, Perlis documented the second highest Muslim population of 87.90 percent whereas Selangor registered 30 percent short (57.90 percent) of Perlis in terms of the Muslim population. Ironically, Kelantan and Terengganu reported a lower amount of population (1,465,388 and 1,004,152, respectively), but have a higher percentage of Muslim population (95.2 percent and 96.90 percent, respectively) than Selangor. They display a big chunk of values of inputs used and outputs produced among the 13 Waqf Institutions with an average of total inputs and outputs at RM2,439,336 and RM4,897,629, correspondingly. Logically, the biggest population state will account for a lot of inputs used and output produced. However, the percentage of Muslim population in all 13 states influence the amount of inputs and outputs utilized by each of the states. 5.2

Empirical Results

The results of the technical efficiency (TE) and its decomposition into the pure technical efficiency (PTE) and scale efficiency (SE) components are presented. Using the PIMDEA 3.2 version, the TE, PTE and SE are directly computed by the CCR (CRS), BCR (VRS) and SE models respectively. From the calculation of the efficiency scores by states as depicted in Table 2, the Waqf Institution of Sabah displays technical efficiency (TE) score of 100 percent for all the seven years; the Waqf Institution of Penang is not fully efficient (89 percent) only in the year 2012; the Waqf Institution of Negeri Sembilan experiences a less efficient level of TE at 82 percent in 2010; and the Waqf Institution of Perlis has two years of not achieving the fully efficient level for the year 2008 (78.2 percent) and 2010 (98.8 percent). The Waqf Institution of Sarawak demonstrates the lowest TE score of 8 percent in 2009 while Johor has the lowest TE scores of 13.8 percent in 2008. As for the pure technical efficiency (PTE) scores, the PTE scores for the seven years ranges from the lowest 11 to 100 percent. The SIRCs of Johor attain PTE scores of less than 18 percent in between 2007 and 2013. The Waqf Institutions of Johor and Sarawak are still the lowest in their PTE scores but the scores are higher than the TE scores. On the contrary, the scale efficiency (SE) scores exhibit a better result for the Waqf Institutions of Johor and Sarawak with SE scores of 76.4 percent and 50.6 percent for the year 2012

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and 2009, respectively. Surprisingly, the Waqf Institution of Malacca displays the lowest SE score of 28.3 percent in 2011. Table 3 summarizes the statistics for TE, PTE and SE scores of the Waqf Institutions for the year 2007 to 2013. Table 2: Summary of Efficiency Scores by States (2007-2013) SIRC 2007 2008 2009 2010 2011 Panel A: Technical Efficiency (TE) 1.000 0.853 0.204 1.000 0.198 0.304 1.000 0.175 0.782 1.000 .988 1.000 1.000 1.000 1.000 1.000 0.200 0.415 0.241 0.622 0.405 0.395 0.315 0.249 1.000 1.000 0.820 1.000 0.138 0.317 0.350 0.564 0.046 0.209 0.265 0.485 0.351 0.577 0.317 0.376 0.465 0.461 0.397 0.694 1.000 1.000 1.000 1.000 0.221 0.080 0.106 0.358 4 4 3 5 (30.8%) (30.8%) (23.1%) (38.5%)

2012

2013

1.000 1.000 1.000 0.890 1.000 0.161 1.000 0.139 0.822 0.220 0.672 1.000 0.122 6 (46.2%)

1.000 0.749 1.000 1.000 0.361 0.308 1.000 0.159 1.000 0.138 0.714 1.000 0.163 6 (46.2 %) 7 (53.8 %)

Kedah Perak Perlis Penang Selangor Melaka N. Sembilan Johor Kelantan Pahang Terengganu Sabah Sarawak Efficient SIRC

0.571 0.169 1.000 1.000 0.206 0.418 1.000 0.180 0.041 0.237 0.606 1.000 0.577 4 (30.8%)

Inefficient SIRC

9 (69.2%)

8 (61.5%)

7 (53.8%)

Kedah Perak Perlis Penang Selangor Melaka N. Sembilan Johor Kelantan Pahang Terengganu Sabah Sarawak Efficient SIRC

Panel B: Pure Technical Efficiency (PTE) 0.580 1.000 1.000 0.270 1.000 0.482 0.403 0.448 1.000 0.236 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 0.242 0.201 0.575 0.372 0.633 0.429 0.411 0.420 0.333 0.881 1.000 1.000 1.000 1.000 1.000 0.184 0.155 0.322 0.350 0.646 0.110 0.173 0.224 0.275 0.580 1.000 1.000 1.000 0.793 0.688 0.607 0.465 0.505 0.463 0.961 1.000 1.000 1.000 1.000 1.000 0.593 0.261 0.159 0.154 0.665 5 6 6 5 5 (38.5%) (46.2%) (46.2%) (38.5%) (38.5%)

1.000 1.000 1.000 1.000 1.000 0.344 1.000 0.206 0.919 0.626 0.813 1.000 0.136 6 (46.2%)

Inefficient SIRC

8 (61.50%)

7 (53.8%)

9 (69.2%)

7 (53.8%)

9 (69.2%)

7 (53.8%)

10 (76.9%)

8 (61.50%)

8 (61.5%)

1.000 1.000 1.000 1.000 0.420 0.932 1.000 0.177 1.000 0.309 0.802 1.000 0.180 7 (53.8 %) 6 (46.2 %)

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Kedah Perak Perlis Penang Selangor Melaka N. Sembilan Johor Kelantan Pahang Terengganu Sabah Sarawak Efficient SIRC

0.988 0.351 1.000 1.000 0.848 0.974 1.000 0.976 0.375 0.237 1.000 1.000 0.974 5 (38.5%)

Panel C: Scale Efficiency (SE) 1.000 0.853 0.754 1.000 0.490 0.679 1.000 0.739 0.782 1.000 0.988 1.000 1.000 1.000 1.000 1.000 0.991 0.721 0.648 0.983 0.985 0.941 0.948 .283 1.000 1.000 0.820 1.000 0.891 0.986 1.000 0.873 0.266 0.930 0.965 0.836 0.351 0.577 0.400 0.546 0.999 0.913 0.858 0.723 1.000 1.000 1.000 1.000 0.867 0.506 0.687 0.588 4 4 4 5 (30.8%) (30.8%) (30.8%) (38.5%)

1.000 1.000 1.000 0.890 1.000 0.469 1.000 0.676 0.894 0.351 0.827 1.000 0.897 6 (46.2%)

Inefficient SIRC

8 (61.5%)

9 (69.2%)

7 (53.8%)

9 (69.2%)

9 (69.2%)

8 (61.5%)

1.000 0.749 1.000 1.000 0.860 0.330 1.000 0.900 1.000 0.447 0.891 1.000 0.909 6 (46.2 %) 7 (53.8 %)

The divergence of the TE, PTE and SE scores of all the Waqf Institutions under study shows that each of the Waqf Institution utilizes the different amount of salary expenses, other operating expenses and fixed asset in generating the investment revenue and rental revenue. Judging from the raw data collected from all of the Waqf Institutions, the Waqf Institutions of Penang, Terengganu, Selangor and Johor have a big chunk of fixed assets in comparison to Negeri Sembilan and Perlis. As such, one expects to observe a DMU with a large fixed asset to be fully efficient. However, the results of the efficiency scores point to Sabah, Negeri Sembilan and Perlis as the more efficient DMUs although their fixed assets are much lower as compared to the four Waqf Institutions mentioned earlier. The reason for this unexpected outcome could be contributed by the lower utilization of inputs by these three states in comparison to the other Waqf Institutions. Most importantly, the discussion of the different efficiency level of the Waqf Institutions shall include the technical and size aspect of the Waqf Institutions. Therefore, it is crucial to dig further into the analysis by looking into the decomposition of the TE into the PTE and SE. Under the constant return to scale (CRS) assumption, the production frontier is a straight line while the variable return to scale (VRS) assumption is concave. Expectantly, the VRS assumption will be more accommodating to the DMUs efficiency. The efficiency score under the CRS model is generally lower than under the VRS model. If the difference between the efficiency scores under the CRS model and VRS model is vast, there is evidence of scale efficiency in the

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production line. If the PTE is greater than the SE, the inefficiency is contributed by the scale inefficiency. In most cases, the PTE scores are always higher than TE scores due to variable returns to scale allowance of increasing and decreasing returns to scale which is not available under the CRS assumption. In reference to Table 3, the TE score of the Waqf Institutions is found to be the highest in 2012 (69.4 percent), while the lowest TE score is in the year 2008 (52.4 percent). On the other hand, the PTE score is the lowest in 2010 (61.6 percent) while the highest PTE score is in the year 2011 (79.2 percent). Nonetheless, the efficiency scores of the Waqf Institutions in Malaysia show a slight change over the seven years. In respect to this, the results of the minimum and maximum efficiency scores of the Waqf Institutions should be the focal point. Interestingly, the SE scores are higher than the PTE scores. This suggests that the efficiency of Waqf Institutions in Malaysia may be caused by the managerial inefficiency as the main source of inefficiency of the Waqf Institutions. Abd Wahab and Abdul Rahman (2011) concluded that the lower PTE indicates that size does not play a major role in the efficiency of the Zakāt institutions in Malaysia. This justification of the finding is in tandem with the findings by Gulati (2011) and Noor and Ahmad (2012) who found that the lower PTE scores may point to the inefficiency of the managerial aspects. They concluded that size does not contribute to the overall efficiency of the Waqf Institutions. Table 3: Summary of Efficiency Scores Statistics (2007-2013) SIRC Mean Min Max Panel A: All SIRCs 2007 Technical Efficiency 0.539 0.041 1.000 Pure Technical Efficiency 0.633 0.110 1.000 Scale Efficiency 0.825 0.237 1.000

Standard Deviation 0.364 0.338 0.292

Technical Efficiency Pure Technical Efficiency Scale Efficiency

Panel A: All SIRCs 2008 0.524 0.046 1.000 0.621 0.155 1.000 0.817 0.266 1.000

0.376 0.377 0.268

Technical Efficiency Pure Technical Efficiency Scale Efficiency

Panel A: All SIRCs 2009 0.586 0.0803 1.000 0.666 0.159 1.000 0.854 0.50 1.000

0.340 0.339 0.175

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Technical Efficiency Pure Technical Efficiency Scale Efficiency

Panel A: All SIRCs 2010 0.539 0.106 1.000 0.616 0.154 1.000 0.851 0.400 1.000

0.358 0.348 0.185

Technical Efficiency Pure Technical Efficiency Scale Efficiency

Panel A: All Waqf Institutions 2011 0.656 0.175 1.000 0.792 0.236 1.000 0.809 0.283 1.000

0.316 0.238 0.233

Technical Efficiency Pure Technical Efficiency Scale Efficiency

Panel A: All Waqf Institutions 2012 0.694 0.122 1.000 0.773 0.136 1.000 0.847 0.351 1.000

0.383 0.331 0.217

Technical Efficiency Pure Technical Efficiency Scale Efficiency

Panel A: All Waqf Institutions 2013 0.661 0.138 1.000 0.755 0.177 1.000 0.853 0.330 1.000

0.375 0.345 0.221

To further support the above finding, the mean efficiency scores of 13 Waqf Institutions for the seven years along with their corresponding inefficiency percentage is presented in Table 4. Additionally, there exist significant variations in the technical inefficiency (TIE) at the level of individual Waqf Institution as indicated by Table 4. Table 4: Technical Inefficiency (TIE), Pure Technical Inefficiency (PTIE) and Scale Inefficiency (SIE) Waqf Institution TE TIE PTE PTIE SE SIE Score (%) Score (%) Score (%) Kedah 0.804 19.6 0.836 16.4 0.942 5.8 Perak 0.514 48.6 0.653 34.7 0.715 28.5 Perlis 0.967 3.3 1.000 0 0.967 3.3 Penang 0.984 1.6 1.000 0 0.984 1.6 Selangor 0.435 56.5 0.492 50.8 0.864 13.6 Malacca 0.322 67.8 0.536 46.4 0.704 19.6 N. Sembilan 0.974 2.6 1.000 0 0.974 2.6 Johor 0.264 73.6 0.291 70.9 0.900 10.0 Kelantan 0.410 59.0 0.469 53.1 0.752 24.8 Pahang 0.317 68.3 0.774 22.6 0.416 58.4 Terengganu 0.573 42.7 0.659 34.1 0.887 11.3 Sabah 1.000 0 1.000 0 1.000 0 Sarawak 0.232 76.8 0.307 69.3 0.775 22.5

The highest TIE of 76.8 percent goes to the Waqf Institution of Sarawak which is the most inefficient with the lowest mean TE score of 23.2 percent.

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Not surprisingly, the Waqf Institution of Sabah has 0 percent TIE which means it is fully efficient among the 13 Waqf Institutions under the study. The comparison between the pure technical inefficiency (PTIE) and scale inefficiency (SIE) further reveals that the inefficiency of the Waqf Institutions is caused by the technical aspect rather than the scale of the Waqf Institutions as evidenced by the higher percentage of the PTIE as compared to the percentage of the SIE. Thus, it can be said that the inefficiency of the Waqf Institutions falls more on managerial aspects of the Waqf Institutions rather than their scale of operation. 6. Conclusion This paper looks into how efficient the SIRCs are in managing the Waqf in Malaysia for the period of 2007-2013. The application of the nonparametric data envelopment analysis (DEA) helped the researchers to detect the source of inefficiency of the SIRCs by using the three models of DEA; TE, PTE and SE models. The results of the study showed that the SIRCs have mean TE of 60 percent. It is evidenced from the results that pure technical inefficiency is more dominant over the scale inefficiency in determining the technical inefficiency of the SIRCs in Malaysia. In other words, the inefficiency of the SIRCs is not due to the scale size of the organization. The scale efficiency attains higher scores over the pure technical efficiency. Literally, the higher scores of scale efficiency indicate that size has nothing to do with the inefficiency of the SIRCs. On the other hand, the lower pure technical efficiency of the SIRCs demonstrates that the inefficiency of the SIRCs is leaning towards the technical aspects of the SIRCs. In true meaning, the SIRCs have problems in managing their resources. As such, any efficiency improvement should start with efficient management of inputs utilization of the SIRCs. References Abd Wahab, N., & Abdul Rahman, A.R.A. (2011). A Framework to Analyse the Efficiency and Governance of Zakāt Institutions. Journal of Islamic Accounting and Business Research, 2(1), 43–62. Abd Wahab, N., & Abdul Rahman, A. R. (2012). Efficiency of Zakāt Institutions in Malaysia: An Application of Data Envelopment Analysis. Journal of Economic Cooperation and Development, 33(1), 95–112.

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Abd Wahab, N., & Abdul Rahman, A.R. (2013). Determinants of Efficiency of Zakāt Institutions in Malaysia: A Non-parametric Approach. Asian Journal of Business and Accounting, 6(2), 33–64. Ahmad, S. & Abdul Rahman, A.R. (2012). The Efficiency of Islamic and Conventional Commercial Banks in Malaysia. International Journal of Islamic and Middle Eastern Finance and Management, 5(3), 241–263. Alias, T.A. (2012).Venture Capital Strategies in Waqf Fund Investment and Spending. ISRA International Journal of Islamic Finance, 4(1), 99–126. Annim, S.K. (2012). Microfinance Efficiency: Trade-Offs and Complementarities between the Objectives of Microfinance Institutions and Their Performance Perspectives. European Journal of Development Research, 24(5), 788–807. Al-Hadi, A.A. (2009). Upaya Pemberdayaan Tanah Wakaf Produktif bagi Kesejahteraan Ummat. Islamica, 4(1), 95–107. Athanassopoulos, A. & Shale, E. (1997). Assessing the Comparative Efficiency of Higher Education Institutions in the UK by Means of Data Envelopment Analysis. Education Economics, 5, 117–133. Balaguer-Coll, M., Prior, D., & Tortosa-Ausina, E. (2007). On the Determinants of Local Government Performance: A Two-stage Nonparametric Approach. European Economic Review, 51, 425–451. Banker, R., Charnes, A., & Cooper, W.W. (1984). Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis. Management Science, 30(9), 1078–1092. Butler, T.W., & Johnson, W.W. (1997). Efficiency Evaluation of Michigan Prisons Using Data Envelopment Analysis. Criminal Justice Review, 22 (1), 1–15. Carter, N. (1988). Measuring Government Performance. The Political Quarterly, 59(3), 369-375. Charnes, A., Cooper, W.W. & Rhodes, E. (1978). Measuring Efficiency of Decision Making Units. European Journal of Operational Research, 2, 429–444.

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Chowdhury, M.S.R., Chowdhury, I.A., Muhammad, M.Z. & Yasoa, M.R. (2012). Problems of Waqf Administration and Proposals for Improvement: A Study in Malaysia. Journal of Internet Banking and Commerce, 17(1), 1–8. Dash, U., Vaishnavi, S.D. & Muraleedharan, V.R. (2010). Technical Efficiency and Scale Efficiency of District Hospitals: A Case Study. Journal of Health Management, 12(3), 231–248. Department of Statistic Malaysia (2010).Retrieved on 13th August, 2015 from http://www.statistics.gov.my. Fandel, G. (2007). On the Performance of Universities in North RhineWestphalia, Germany: Government’s Redistribution of Funds Judged using DEA Efficiency Measures. European Journal of Operational Research, 176(1), 521–533. Golany, B., & Roll, Y. (1989). An Application Procedure for DEA. Omega, 17 (3), 237–250. Gulati, R. (2011). Evaluation of Technical, Pure Technical and Scale Efficiencies of Indian banks : An Analysis from Cross-sectional Perspective Estimation of Technical, Pure Technical and Scale Efficiencies of Indian Banks : An Analysis from Cross-sectional Perspective. In The 13th Annual Conference on Money and Finance in the Indian Economy. Mumbai, India. Hasan, H. & Ahmad, I. (2014). The Efficiency of Waqf Collection and Distribution of Malaysia State of Islamic Religion Councils (SIRCs): A Two -Stage Analysis. Recent Development Analysis and its Applications. Proceedings of the 12th International Conference of DEA. Kuala Lumpur, Malaysia. Hasim, A. B. M (2007). The Collection of Waqf through Insurance Companies: A Critical Analysis of the Malaysian Experience. Review of Islamic Economics, 11(1): 63–74. Ho, W., Dey, P. K., & Hiqson, H.E (2006). Multiple Criteria Decision Making Techniques in Higher Education. International Journal of Educational Management, 20(5), 319–337.

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Husain, N., Abdullah, M., & Kuman, S. (2000). Evaluating Public Sector Efficiency with Data Envelopment Analysis (DEA): A Case Study in Road Transport Department, Selangor, Malaysia. Total Quality Management, 11(4-6), 830–836. Ismail, M. (2012). Case-study Waqf-shares: Financing through Movable Waqf. Business Islamica. Retrieved on 11th November, 2012 from http://americanhalalassociation.org/index.php/2012/01/12/case-studyWaqf-shares-financing-through-movable-Waqf/ Kipesha, E.F. (2012). Efficiency of Microfinance Institutions in East Africa : A Data Envelopment Analysis. European Journal of Business and Management, 4(17), 77–88. Maamor, S., & Ismail, A. (2010). The Ar-Rahnu Efficiency and Its Determinants. Journal of Islamic Economics, Banking and Finance, 6 (1), 105–125. Mahamood, S.M. (2006). Waqf in Malaysia : Legal and Administrative Perspective. Waqf in Malaysia: Legal and Administrative Perspective. Kuala Lumpur: University of Malaysia Press. Mante, B., & O’Brien, G. (2002). Efficiency Measurement of Australian Public Sector Organisations. Journal of Educational Administration, 40(3), 274–296. Macpherson, M. (2001). Performance Measurement in Not-for-profit and Public Sector Organisations. Measuring Business Excellence, 5(2), 13– 17. Modell, S. (2001). Performance Measurement and Institutional Processes: A Study of Managerial Responses to Public Sector Reform. Management Accounting Research, 12, 437–464. Mohd Salleh, S., & Muhammad, S. (2008). Waqf Development In Malaysia : Issues and challenges. Jurnal Pengurusan JAWHAR, 2(1), 13–35. Noor, M.A.N.M., & Ahmad, N.H.B. (2012). The Determinants of Islamic Banks’ Efficiency Changes: Empirical Evidence from the World Banking Sectors. Global Business Review, 13(2), 179–200.

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Osman, A.Z. (2012). Accountability in Managing Waqf Properties: The Case of Two State Religious Councils in Malaysia. PHD Thesis, Royal Holloway University of London. Sufian, F. (2007). The Efficiency of Islamic Banking Industry in Malaysia. Humanomics, 23(3), 174–192. Sulaiman, M., Adnan, M. A. & Megat Mohd Nor, P.N. (2009). Trust Me! A Case Study of the International Islamic University Malaysia’s Waqf Fund. Review of Islamic Economics, 13(1), 69–88. Witte, K.D, & Geys, B. (2011). Evaluating Efficient Public Good Provision: Theory and Evidence from a Generalised Conditional Efficiency Model for Public Libraries. Journal of Urban Economics, 69(3), 319–327. Zahid, Z. (2012). Modelling Relative Efficiency and Productivity Change using the Data Envelopment Analysis and Regression Model. PHD Thesis. Universiti Teknologi Mara, Shah Alam.

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Overcoming Income Disparity amongst Bumiputera by Improving Zakāt and Waqf System: A Special Focus on Improving Assets Management and Accounting Transparency Abidullah* Institute Islam Hadhari, Universiti Kebangsaan Malaysia Email: [email protected] Hand phone No. +6011-35620579 Muhammad Hakimi Mohd Shafiai Senior Lecturer, School of Economics, Faculty of Economics and Management, Universiti Kebangsaan Malaysia & Institute Islam Hadhari University Kebangsaan Malaysia Email: [email protected] Hand phone No. +6013-5297984 Abstract This paper aims to highlight the issues in Zakāt and Waqf in Malaysia and to provide a solution so that the income disparities amongst the Malay ethnic group can be minimized. Through library reach methods, we explored the literature in order to come up with the concrete conceptual model. It is found from the thorough study of literature that in the current SIRC, the issues of assets management and accounting transparency exist that make the Zakāt and Waqf system more vulnerable. Hence, it is suggested that Shari’ah Council might outsource some of its responsibilities to Islamic Microfinance Institutions so that the issues of assets management and accounting transparency can be overcome. The conceptual model that is presented in the study would provide more structured and transparent Zakāt and Waqf collection and distribution process for the Shari’ah Council so that maximum benefits can be derived in the interest of the Muslim Malays. Keywords: Income disparity, Islamic Wealth Redistribution, Shari’ah Islamic Religious Council, Zakāt, Waqf, Accounting Transparency, Cash Management, Islamic Microfinance

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1. Introduction Today the world is seeing poverty in most of the regions. It is estimated that about 14.5 percent of the world’s population is living in poverty with the majority residing in Asia (Vorbeek, 2015). The recent research has shown that one of the main reasons of this poverty is an unequal distribution of wealth and income among the communities (Keister & Moller, 2000; Landes, 1998; Zimmer, 2008). Socrates has warned about this inequality around 2000 years ago followed by his student Aristotle and more recently by the father of capitalism Adam Smith. The concentration of wealth in few hands to control those who don’t possess it causes severe social inequality among the class. It is shown in the recent studies that inequality affects the developing nations more as compared to developed (Alesina & Rodrik, 1994; Birdsall, 2005, 2012; Bourguignon, 2004). As most of the nations of the world fall under this category, thus it has alarmed a situation which might affect the world’s great economies. An empirical evidence has been shown by Ortiz & Cummins (2011) who collected the data for 131 countries of the world. Based on Gini Index from 1900 till 2008, they came to the conclusion that the countries with high level of inequalities experienced low per capita GDP growth during that time. They further expressed that extreme inequalities in wealth distribution globally and concentration of wealth in few hands results in low economic growth. In Malaysia, there are three major ethnic groups that reside in Malaysia such as Bumiputera; the real natives of the country, the Chinese and the Indians who have migrated in the past and take an active part in the economy of Malaysia. Malaysia being a multi-racial country do experience the same problem where the wealth and income is concentrated amongst the specific classes. To overcome income inequality problems, there should be redistribution tools that can redistribute the wealth and income from the top to the bottom of the pyramid. In a capitalist economy, the prominent tool that is used of channelling the income from top to bottom is tax. However, this system has failed as it can be seen that it favours the rich more than the poor. Contrary to it, Islam has given us a system, by means of which, income and wealth can be efficiently tapped from the rich to the poor. The failure of the tax system has given rise to the concept of Zakāt and Waqf which were once used for the income and wealth redistribution but today, the effect of Zakāt and Waqf on the overall economy cannot be seen. In

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Malaysia, however, both Zakāt and Waqf systems exist but the problems on the management do not permit its effect to minimize economic inequality. Hence in this study, we have focused on tapping the income from the top income bracket Bumiputera to the bottom 40 percent income bracket through Islamic Wealth Redistribution tools such as Zakāt and Waqf. Moreover, through library research method, Zakāt and Waqf would be discussed with the specific focus on collection, distribution, management and accounting transparency issues in Malaysia. In the end, a model would be presented that would provide a solution to the mentioned issues as well as its role in minimizing income disparities among the Malays. 2. Income Inequality Many studies have been conducted in Malaysia about the economic inequality amongst the Chinese, Indians and Bumiputera (Anand 1983; Khalid 2011a; Khalid 2011b; Ragayah 2008b). These studies have mostly focused on the inter-group inequality but according to Shireen (1998), it is intra-group inequality that is hurting Bumiputera more as compared to intergroup inequality. To elaborate wealth and income disparity in Malaysia is caused less by the ethnic group differences and more within the group. By compiling the data for the year 2004 in Malaysia, the total inequality as measured by Gini coefficient was 0.418, and of this, about 93.71 percent was caused by inequalities within the group differences and only 6.29 percent was caused by ethnic differences (Ragayah, 2008a). In Malaysia, it has been estimated that among the Bumiputera, 48 percent of the income is accumulated at the top 20 percent of the income group, 37 percent amongst the middle 40 percent and only 15 percent amongst the bottom 40 percent (DOS, 2011). In addition, the wealth inequality is recorded as 0.88 on the Gini Index which is higher than the other two groups (Khalid, 2014). In order to channel down the income from top income level group to lower income group, the tax system is implemented under the capitalist economic system. However, from this system, the only benefit is taken by the rich in the form of tax benefits rather than poor. The failure of this system led the people to find an alternative that can help in lowering inequality. Contrary to conventional income distribution system, Islam has provided us with Zakāt and Waqf system which can provide a better alternative for minimizing income inequality.

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3. The Concept of Wealth Redistribution in Islam In reality, the capitalist economy teaches an individual that his money and assets will always remain his own. The only thing he has to do is to pay tax on it, which will be then allocated by the government to different channels. The individual responsibility ends here. But Islam put more emphasis on responsibility towards community and redistribution at the very start of the Islamic wealth management chain. In a capitalist system, the responsibility of the poor falls on the government, but in Islam it is the responsibility of every individual to help them in one way or other. In this capitalist economy where everyone is trying to increase their wealth, no one would give their money to anyone else in order for them to prosper economically. But in Islam, the concept of Qard-e-Hasan allows the rich to provide loans to the needy without any interest charged on it. On the other hand, with the help of Zakāt, wealth and income are channelled from the rich to the poor by means of which the poor can fulfil their needs. Zakāt is obligatory on every wealthy Muslim to pay it once a year so that the income circulates in the economy from top to bottom. Moreover, the concept of endowing (Waqf) cash and assets for the benefit of the society is a common practice where Muslims perform this act for seeking blessing on the Day of Judgment. Hence, it is a good way that helps in tapping the wealth from wealthier to benefit those who do not possess it. The major tools that are used under Islamic wealth management are Zakāt, Sadaqah, Qard-e-Hasan and Waqf (Wouters, 2013). The focus of this study would be on Zakāt and Waqf system of Malaysia. For this purpose, first we will discuss Zakāt and Waqf so that an idea can be drawn about its purpose. Secondly, the issues in Zakāt and Waqf would be investigated in the context of Malaysia in order to understand the conceptual model. 3.1.

Zakāt

Zakāt is the third of the five pillars of Islam. The importance of Zakāt can be judged by its preference among the five pillars of Islam. It is compulsory for every Muslim to pay Zakāt who are capable of it. It is compulsory for all Muslims not to hoard wealth but to distribute it. It has been mentioned in the Qur’an that:

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“O you who have believed, indeed many of the scholars and the monks devour the wealth of people unjustly and avert [them] from the way of Allah. And those who hoard gold and silver and spend it not in the way of Allah give them tidings of a painful punishment The Day when it will be heated in the fire of Hell and seared therewith will be their foreheads, their flanks, and their backs, [it will be said], "This is what you hoarded for yourselves, so taste what you used to hoard””. (Tawbah 9:34-35) According to the narration of Abu Said al-Khudri, the Messenger of Allah stated that Zakāt is not required for silver less than 5 uqiyya’s (200 dirhams = 595 grams). During the Caliphate of Umar Farooq R.A., Anas Bin Malik, the collector of Zakāt asserted that he was instructed to take half of a dinar from every twenty dinars. This practice was later followed by Caliph Ali R.A. during his time. From the Hadith and the practices followed by his Companions, the scholars came to conclude the Nisāb for Zakāt should be 85 grams of gold or 585 gram of silver (Senturk, 2007). Those who possess the stated amount of Gold or silver or equivalent wealth should pay Zakāt with the overall proportion of 2.5 percent (Raimi, Bello, & Mobolaji, 2010). The recipients of Zakāt are derived from the following verse of Qur’an, “Alms are only for the poor and the needy, and those who collect them and for those whose hearts are to be reconciled, and for the ransom of captives and debtors and for the way of God and for wayfarers” (Tawbah 9:60). Hence the beneficiaries of Zakāt include the poor who are deprived of basic necessities such as food clothing, shelter, the destitute who do earn but that their earning is not enough to fulfil their basic needs, the Zakāt collectors who devoted themselves to collect and distribute Zakāt and have no other way of earnings, the Muallifa Al-Qulub (those whose hearts are to be reconciled with Islam), freeing the slave, the debtors who are under heavy debt, Fi Sabilillah (giving in the way of Allah) and wayfarers who become needy during travel in order to serve Allah’s Way, even though they are rich back home (Senturk, 2007). From the discussion and the above-mentioned verse from the Qur’an, it can be clearly observed that with the help of Zakāt, the wealth would be redistributed from the wealthy to those who do not possess it. In Zakāt system, those who possess less wealth will pay less and those with more wealth will pay more according to the mentioned proportion. In Malaysia, the Zakāt system does exist but it is unable to minimize the gap between the rich and the poor. Hence it would be worth knowing about the

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issues in Zakāt and Waqf system so that income disparity can be minimized by providing a solution for it. 3.2.

Issues in Zakāt Collection and Distribution in Malaysia

In Malaysia, Zakāt in pre-colonial time was collected through formal framework where the religious leader was elected by the people. The people deliver the goods or Zakāt amount to him and then it was the responsibility of the leader to distribute it among the needy based on Shari’ah principles. During the British rule, the traditional custom was changed and all Islamic and Malay customs related matters were handled by a special body that was known as Majlis Agama Islam Negeri (MAIN) or State Islamic Religious Council (SIRC). On the other hand, Kelantan was the first state at that time which developed a body that became a model for the other states. According to that model, the Imam (spiritual leader) was elected to handle all the issues regarding Zakāt and a portion of the Zakāt amount collected would be given to the state government for handling the Islamic affairs (Ab Rahman, Alias, & Syed Omar, 2012). A formal system of Zakāt in Malaysia was first initialized in the 1990s when the system of Zakāt was corporatized (Owolabi Yusuf & Mat Derus, 2013). Today, Zakāt comes under the state jurisdiction of the patronage of His Royal Highness for Federal Territories and Sultan or Raja for other states in Malaysia. The responsibility of Zakāt is taken by State Islamic Religious Council for every state except Kedah where a special institution for Zakāt namely Jabatan Zakāt Kedah works under Sultan and is independent of SIRC. In the states other than Kedah, SIRC is assisted by another department known as Department of Islamic Affairs or Jabatan Agama Islam Negeri (JAIN) in performing its activities (Ab Rahman et al., 2012). The era of privatization has brought another dimension to the philosophy of Zakāt collection and distribution. Many states in Malaysia have privatized their Zakāt system via a body that acts under SIRC to perform all the duties of Zakāt. Such as Federal Territory privatized its Zakāt system in 1991, Selangor in 1994, Pahang in 1995, Negeri Sembilan in 1998 and Melaka in 2001 (Ab Rahman et al., 2012; Lubis, Yaacob, Omar, & Dahlan, 2011; Othman & Mohd Noor, 2012). Although in these states, the privatization has been done but is only limited to the collection of Zakāt. There are several issues that have been mentioned in the literature regarding the assets management of Zakāt.

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On the collection end of Zakāt management, the focus of Zakāt organizations is on the current Zakāt payers neglecting the prospective Zakāt payers. For example in 2010, the number of Muslims in Selangor were about 2 million, whereas the number of Zakāt payers were limited to only 160,000 (Ab Rahman et al., 2012). It means either the respective authorities have either failed to calculate the right amount of Zakāt payers or there is Zakāt leakage. The second issue is regarding Zakāt distribution, where it has been reported that some of the asnaf have been neglected during Zakāt distribution (Ab Rahman et al., 2012; Lubis et al., 2011; Othman & Mohd Noor, 2012). Such problem would give rise to the issue where the Muslims will turn to take help from other un-Islamic religious institutes (Othman & Mohd Noor, 2012). The beneficiaries of Zakāt have to fill a form and then wait in a long queue and wait for their turn to get the Zakāt amount which makes most of the beneficiaries to avoid taking Zakāt. It shows that there is need of a body that can regulate the system not only on distribution end but also on collection end so that the beneficiaries can be identified and the amount reaches to the right beneficiaries. The third issue is mentioned by Ab Rahman et al. (2012) in their study. They put the focus on the capacity building of the asnaf. According to them, providing financial assistance will make them dependent and they would not be able to improve their living standard and will always remain in the same situation. Hence, the authority should change their way of giving financial assistance in the form of providing education to their children or sending them to the training centers, and assisting the capable and skilful poor in starting their own business. It means that providing cash would only give them a short term economic benefit, but in long run, they would still remain the poor and the income disparities would get wider. It can be drawn from the issues that have been discussed above that the problems which exist on collection and distribution end are mostly because of the management that failed to deal with the Zakāt process. Thus, there is need of proper steps to be taken in order to take maximum benefit from Zakāt. 3.3.

Waqf

Waqf is an inalienable trust in which the founder of the Waqf (waqif) makes the guidelines or principles for the property’s revenue and allocates the profit, usufruct or yields of the property to specific person or institutions. Such property is then given in the possession of fiduciary (wali or mutawalli) who

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oversees the trust for the benefit of a third party (Hennigan, 2004). The literal meaning of Waqf is ‘to stop or to prevent’. It can be defined as the confinement of the assets or property by the founder and the dedication of its usufruct in perpetuity to the family or public (Ihsan & Hameed Hj. Mohamed Ibrahim, 2011; Layish, 1997). The condition for the asset to be Waqf should be an immovable asset but later such requirement was relaxed to legitimize immovable assets which were then known as Cash Waqf (Kuran, 2001). Although there is no strong evidence from the Qur’an and hadith regarding establishing Waqf but it is called as piety activity because when people Waqf their assets in the name of Allah SWT, it is their faith that it will be the support for them on the Day of Resurrection. The role of Waqf cannot be neglected during Othman Caliphate when 20,000 Awqaf produced almost one-third of the total revenue of Othman’s State. This revenue was then spent in providing food for the needy as it is estimated that about 30,000 in the population of 700,000 people in Istanbul were fed by charity complexes with the revenue generated from the Waqf system (Cizakca, 2004; Saduman & Aysun, 2009). Another category of Awqaf helped hospitals, orphanages and shelter (Kuran, 2001). Although, Waqf system in past has provided a lot of benefits for the society as a whole, today the same benefits from Waqf system in Malaysia cannot be observed. Thus, it needs to be investigated that what are the underlying factors that sabotage the benefits of Waqf for Malay society. 3.4.

Waqf in Malaysia

The Waqf property is also under the jurisdiction of State Islamic Religious Council of each state. In post-colonial times, Waqf was administered by community leaders, same as what we discussed earlier regarding Zakāt. These community leaders were either Imams, or Kadis (Qazi or Judge). During the post-colonial era, under the law, special trustees were appointed, either by the British administration or the local religious councils to administer and govern Waqf (Owolabi Yusuf & Mat Derus, 2013; Syed Abdul Kader & Md. Dahlan, 2006). Today, Waqf is also administered under SIRC similarly as Zakāt. There is thousands of hectors of land that is Waqf by the people for the benefit of the society but unfortunately the Waqf management failed to take advantage of it. It has been reported that the Waqf land is estimated to be over 32,000 acres (Md Saad, Kassim, & Hamid, 2013) whereas, the unused land is estimated to be around 24,555 acres (Isa, Ali, & Harun, 2011). Hence, there is a need for

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an efficient and systematic approach to take benefit of such unused land in order to benefit the Muslims Malay. The problem of unused land was explored by Mohammad (2008) and pointed that Malaysian law follows three principles in Waqf land that includes irrevocability, perpetuity, and inalienability. Due to these factors, Waqf land is not valid collateral for the Malaysian banks. As a result, no loan can be taken in order to develop Waqf land. He suggested that cash Waqf is an optimal option in order to take advantage of Waqf. Cash Waqf money can be used for several development purposes as compared to the Waqf assets. Practically, a scheme such as corporate Waqf scheme that is started by Johor Corporation Berhad is first in its nature that has been implemented by Waqf Annur Corporation Berhad (WANCorp). Jcorp, entrusted WANCorp to manage all Jcorp group’s assets that are donated as a Waqf (Binti Ibrahim & Haslindar, 2013). The dividend that is obtained from the shares is then divided on 70:25:5 ratio. Where 70 percent of the benefits go to Jcorp for the purpose of human capital development and reinvestment, 25 percent goes to WANCorp as Fisabillilah and 5 percent is distributed to Islamic Religious Council of Johor. WANCorp then invests that 25% to overcome operational costs, investing in their Waqf clinic chain for dialyses and as micro credit to small businesses as Qard-e-Hasan. (Md Saad et al., 2013). However, there are discrepancies that exist in the current Waqf system which almost invalidate its overall efficiency. Recent studies have pointed out severe issues in accounting and administration practices and level of disclosure amongst State Islamic Religious Councils (SIRCs) in Malaysia (Masruki & Shafii 2013; Hisham, Y. 2006; Zain, 2005; Abdul-Rahman & Goddard 1998). On the other hand, there was no comprehensive information about Waqf assets. Moreover, the studies found that there were disorganized management and lack of proper accounting system for Waqf assets with now written procedure for recording Waqf transaction. On the other hand, Zain (2005) reported that majority of SIRCs had outdated financial reports with the low-level of disclosure. In addition, the council did not separate the Waqf accounts. Thus, no information regarding general assets and specific assets could be found. The author suggested having a proper procedure manual for maintaining Waqf account. Moreover, the author recommended the employment of experienced accounts, who can help SIRC in managing the Waqf accounts and reporting.

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According to Chowdhury et al. 2011, people that are involved in managing Waqf assets such as mutawalli are found unqualified to be appointed for such duty. He further pointed out that in some cases, the mutawalli are nonMuslims who are not competent enough to handle religious issues. Hence, it can be drawn from the previous studies that the problems exist in the transparency and managing of the Waqf assets which makes its overall effect almost insignificant on the society. Thus, a proper mechanism should be derived in order to get maximum advantage of Waqf. 4. Proposed Model for the Zakāt and Waqf Management of SIRC and its Role in Minimizing Income Disparity It is well-known from the discussion that the problem in Zakāt collection and distribution is because of incompetent management. One of the options might be the hiring of professionals that can manage the system efficiently but it would be costly for the SIRC. The other option can be outsourcing its liquid assets management to another body that has sufficient experience in managing cash and other liquid assets, for instance Islamic Microfinance Institution. This would decrease the responsibilities on SIRC as they will focus on fewer duties. In Figure 1, it is mentioned that these SIRCs would maintain the duties of training the skilful beneficiaries. Giving cash to the beneficiaries is not a right solution to minimize income disparity while focusing on short-term economic benefits. The disbursement of Zakāt and Waqf amount to the beneficiaries can only benefit them in the short run, but in the long run, they will again need monetary assistance. Moreover, it will make them financially dependent on Zakāt and Waqf institutions while avoiding earning by themselves. In order to overcome this issue, SIRC should provide skill building training to the poor so that they become capable of earning rather than depending on the Zakāt and Waqf. SIRC

Training

Provision of land for agriculture purposes

Managing commercial Waqf land

Figure 1: The Given Responsibilities of the Waqf and Zakāt Institutions under SIRC

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On the other hand, the SIRC would also manage the agriculture land that is Waqf by the founder for the benefit of the society. This land would be provided to those beneficiaries who got skills in farming but are not wealthy enough to rent the land for agriculture purposes. The benefits that are derived from the agriculture activity would be then divided according to pre-specified ratio. Furthermore, the Waqf Institute would keep a track record of the land that is un-utilized and, commercial land that is Waqf and perpetual monetary benefits are derived from it. From the current literature as discussed in the context of Malaysia, it is shown that there are problems in managing Zakāt and Waqf and also lack of transparency in disclosure of the assets (Ab Rahman et al., 2012; Chowdhury, Ghazali, & Ibrahim, 2011; Zain, 2005). In order to overcome these issues, the role of the third-party becomes vital so that they can maintain and manage the financial transactions for SIRC as well as to provide them with procedures in dealing their day-to-day activities. For this purpose, a specialized Islamic Microfinance Institution would be a feasible option to manage the liquid assets of SIRC. In Figure 2, we have suggested that the liquid assets derived from the Waqf activities in the form of profits from the Waqf land, cash Waqf and Zakāt fund would be managed under Islamic Microfinance Institution. As Islamic MFI is a specialized financial institution, hence it is obvious it would have a transparent accounting system. Secondly, by outsourcing the financial activities to Islamic MFI would assist SIRC in identifying the right beneficiaries of Zakāt and Waqf incomes. Waqf Account  Cash Waqf  Profit from Waqf Assets

Zakāt Income

Islamic Microfinance Institution

Figure 2: Inflow and Outflow of Waqf and Zakāt Funds under Islamic MFI.

The collection process would become easier because of the computerized systems, with the help of which it is easy to transfer Zakāt and Waqf amount

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to Islamic MFI in just a single click. On the distribution side, the institution can maintain a databank of the beneficiaries which would make it easy for the beneficiaries to take the Zakāt and Waqf amount without filling the forms and waiting in a long queue every time. It would also help the Islamic MFI to differentiate between the current and potential beneficiaries in order to avoid any redundancy in payment. In Figure 3, we proposed that Zakāt and Waqf funds should only be provided in the form of loans to the beneficiaries that are trained by SIRC so that they can start their own business and pay back the loaned amount in instalments. The long term economic benefits can only be achieved in this way because businesses mostly produce perpetual profits over the long period of time which makes not only the businessman, but also the economy to flourish. It will also decrease the economic disparities amongst the top and bottom income groups. The loans will also be provided to those farmers who needs financing for cultivating either their own land or the Waqf land provided by SIRC. The loans can be provided using different Islamic contracts, such as Mudharaba, Musharaka, Murabaha, Ijarah, and Qard-e-Hasan (Riwajanti, 2013). Profit generated from the loan using Islamic contracts would support the Islamic MFI in achieving financial stability. On the other hand, cash amount would only be provided to incapable beneficiaries (handicap, elderly people, orphans etc.) Waqf Account  Cash Waqf  Profit from Waqf Assets

Zakāt Income

Approvals

SIRC

Training

Provision of land for agriculture

Accounting Procedures

Managing commercial Waqf land

Islamic Microfinance Institution

Provision of Loan to Beneficiaries

Disbursement of Cash to the needy

Figure 3: A Proposed Model for Overcoming the Issues in Managing Zakāt and Waqf

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Moreover, the problem of accounting transparency can be solved as most of the transactions would be managed by the Islamic MFI and would be reported to SIRC. It would also provide ease to the SIRC in managing the assets because of outsourcing some of its responsibilities to Islamic MFI and hence focus on the fewer responsibilities. Although the influence of SIRC in the case of Shari’ah matters would still be on the Islamic MFI in a situation when cash amount is disbursed to the beneficiaries or loan is given to the borrower, its approval should be taken from SIRC. The annual report would be produced with the collaboration of SIRC and Islamic MFI which will give a more vivid picture of the financial activities happened during the year. Redistribution of income in this way would help in minimizing income inequality as it would help the poor to start their own business rather than being dependent on the government throughout their lives. It is well known that business produces perpetual profits hence it would help the poor to expand their businesses later on. Profits generated from agriculture sector would enable the farmers to generate their income and it would also help them to be less dependent on the government for providing them with loans for the agriculture activities. In a broader sense, the loans provided by Islamic Microfinance Institutions would help them to raise the living standard and eventually decreasing the income gap between top 20 percent and bottom 40 percent. 5. Conclusion Malaysia as a multiracial country is facing a situation where the Malays; the native of the country are experiencing wealth and income disparity more than Chinese and Indian nationals of the country. The concentration of income at the top income level is three times more than the concentration at the bottom of the pyramid. A tax system that is considered as the transparent system for tapping the income from top to bottom of the pyramid is not answering the issue. The redistribution in the form of Zakāt is obligatory on every wealthy Muslim so that the income concentration at the top can be minimized. On the other hand, Waqf is another Islamic concept through which the wealth can be tapped for the benefit of the society. In this paper, through library research methods, we examined the problems that exist in the current system of Zakāt and Waqf in Malaysia that makes its role almost insignificant in flourishing the Malay economy. Furthermore, with the help of the conceptual model, we examined that how the problems in Zakāt and Waqf system can be overcome so that the low-income Malay can benefit economically. It is found that the management of Zakāt and Waqf is unable to manage the financial assets and also not able to provide transparent accounting system and hence affecting

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the whole collection and distribution process. It is suggested in the model that State Islamic Religious Council, who deals with Zakāt and Waqf issues may outsource its management of liquid assets to Islamic Microfinance Institution so that it can be managed more efficiently. Moreover, SIRC should keep the duties of training the beneficiaries, and the control of Waqf assets with itself. In this way, the problem of collection, distribution and accounting transparency can be solved. It is also argued that in order to flourish Malay economy, instead of providing cash to the beneficiaries, disbursing loans for the purpose of starting small businesses would be more feasible. As a result, Zakāt and Waqf system would not only provide short-term economic benefits but also long-term benefits and hence, would help in minimizing the wealth and income disparities between the top and bottom income and wealth groups. References Ab Rahman, A., Alias, M.H., & Syed Omar, S.M.N. (2012). Zakāt Institution in Malaysia : Problems and Issues. Global Journal Al-Thaqafah, 2(1), 35–42. Abdul-Rahman, A.R., & Goddard, A. (1998). An Interpretive Inquiry of Accounting Practices in Religious Organisations. Financial Accountability and Management, 14(3), 183–201. doi:10.1111/14680408.00060 Alesina, A., & Rodrik, D. (1994). Distributive Politics and Economic Growth. The Quarterly Journal of Economics, 109(2), 465–490. Anand, S. (1983). Inequality and Poverty in Malaysia : Measurement and Decomposition. New York: Oxford University Press. Binti Ibrahim, D., & Haslindar, B.I. (2013). Revitalization of Islamic Trust Institutions through Corporate Waqf. In International Conference on Business and Economic Research (pp. 192–202). Bandung. Birdsall, N. (2005). Why Inequality Matters in a Globalizing World. Helsinki: Center for Global Development. Birdsall, N. (2012). Why Inequality Matters: Some Economic Issues. Ethics & International Affairs, 15(02), 3–28. doi:10.1111/j.17477093.2001.tb00356.x

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Bourguignon, F. (2004). The Poverty-Growth-Inequality Triangle. In Indian Council for Research on International Economic Relations. New Dehli. Chowdhury, M.S.R., Ghazali, M. F. Bin, & Ibrahim, M. F. (2011). Economics of Cash WAQF management in Malaysia: A Proposed Cash WAQF Model for Practitioners and Future Researchers. African Journal of Business Management, 5(30), 12155–12163. doi:10.5897/AJBM11.1810 Cizakca, M. (2004). Ottoman Cash Waqfs Revisited : The Case of Bursa 1555- 1823. Manchester. DOS. (2011). Population Distribution and Basic Demographic Characteristics 2010. Putrajaya: Department of Statistics. Hisham, Y. (2006), “Waqf accounting in Malaysian state Islamic religious institutions: the case of Federal territory SIRC”, unpublished Master's dissertation, International Islamic University Malaysia, Kuala Lumpur. Hennigan, P. C. (2004). The Birth of Legal Institution: The Formation of Waqf in Third-Century A.H. Hanafi Legal Discourse. Boston: Brill Publishers. Ihsan, H., & Hameed Hj. Mohamed Ibrahim, S. (2011). WAQF Accounting and Management in Indonesian WAQF institutions. Humanomics, 27(4), 252–269. doi:10.1108/08288661111181305 Isa, Z.M., Ali, N., & Harun, R. (2011). A Comparative Study of Waqf Management in Malaysia, 10, 561–565. Keister, L.A., & Moller, S. (2000). Wealth Inequality in the United States. Annual Reviews, 26, 63–81. Khalid, M.A. (2011a). Household Wealth in Malaysia : Composition and Inequality among Ethnic Groups, 45(Jurnal Ekonomi Malaysia), 71–80. Khalid, M.A. (2011b). NEP to NEM : Who Cares ? Wealth Distribution in Malaysia, 1, 400–409. Khalid, M.A. (2014). The Colour of Inequality. Petaling Jaya: MPH Group Publishing Sdn Bhd.

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Kuran, T. (2001). The Provision of Public Goods under Islamic Law : Origins, Impact, and Limitations of the Waqf System. Journal of the Law and Society Association, 35(4), 841–898. Landes, D. (1998). The Wealth and Poverty of Nations : Why Some are So Rich and Some So Poor. New York: W.W. Norton. Layish, A. (1997). The Family Waqf and the Sharʿī Law of Succession in Modern Times. Islamic Law and Society, 4(3), 352–388. Lubis, M., Yaacob, N.I., Omar, Y., & Dahlan, A.A. (2011). Enhancement of Zakāt Distribution Management System : Case Study in Malaysia. International Islamic University, Malaysia. Masruki, R., & Shafii, Z. (2013). The Development of Waqf Accounting in Enhancing Accountability. Middle-East Journal of Scientific Research, 13, 1–6. doi:10.5829/idosi.mejsr.2013.13.1873 Md Saad, N., Kassim, S., & Hamid, Z. (2013). Involvement of Corporate Entities in Waqaf Management: Experiences of Malaysia and Singapore. Asian Economic Financial Review, 3(6), 736–748. Mohammad, M.T.S. (2008). Sustaining the Means of Sustainability: The Need for Accepting Wakaf (Waqf) Assets in Malaysian Property Market. In The 14th Annual Conference of the Pacific Rim Real Estate Society. Kuala Lumpur. Retrieved from http://eprints.utm.my/5715/1/Tahir_Sabit_Sustaining_The_Means_Of_S ustainability.pdf Ortiz, I., & Cummins, M. (2011). Global Inequality: Beyond the Bottom Billion. Social and Economic Policy. New York. Othman, A.B., & Mohd Noor, A.H. (2012). Role of Zakāt in Minimizing Economic Inequalities among Muslim: A Preliminary Study on Non Recipients of Zakāt Fund ( NRZF ). In 3rd International Conference of Business and Economic Research (pp. 1209–1222). Bandung. Owolabi Yusuf, M., & Mat Derus, A. (2013). Measurement Model of Corporate Zakāt Collection in Malaysia. Humanomics, 29(1), 61–74. doi:10.1108/08288661311299321

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Ragayah, H.M.Z. (2008a). Explaining the Trends in Malaysian Income Distribution. Kuala Lumpur: Universiti Kebangsaan Malaysia. Ragayah, H.M.Z. (2008b). Income Inequality in Malaysia. Asian Economic Policy Review, 3(1), 114–132. doi:10.1111/j.1748-3131.2008.00096.x Raimi, L., Bello, M.A., & Mobolaji, H. (2010). Faith‐based Model as a Policy Response to the Actualisation of the Millennium Development Goals in Nigeria. Humanomics, 26(2), 124–138. doi:10.1108/08288661011074927 Riwajanti, N.I. (2013). Islamic Microfinance as an Alternative for Poverty Alleviation : A Survey. Afro Eurasian Studies, 2(1&2), 254–271. Saduman, S., & Aysun, E.E. (2009). the Socio-Economic Role of Waqf System in the Muslim- Ottoman Cities ’ Formation and Evolution. Trakia Journal of Sciences, 7, 272–275. Senturk, O. (2007). Charity in Islam : A Comprehensive Guide to Zakāt. Somerset N.J.: Light Inc. Shireen, M.H. (1998). Income Inequalities and Poverty in Malaysia (Vol. 24). Kuala Lumpur: Lanham Md Rowman & Littlefield Publishers. doi:10.1080/10511253.2012.730617 Syed Abdul Kader, S.Z., & Md. Dahlan, N.H. (2006). Current Legal Issues Concerning AWQAF in Malaysia. University Utara Malaysia Repository, 27–38. Vorbeek, J. (2015). Global Monitoring Report 2014 2015: Ending Poverty and Sharing Prosperity. Washington DC. Wouters, P. (2013). Elements of Islamic Wealth Management. In K. HuntAhmad (Ed.), Contemporary Islamic Finance: Innovation, Applications and Best Practices (pp. 147–164). New Jersey: John Wiley & Sons, Inc. Zain, S.R.M. (2005). Determinants of Financial Reporting Practices on Waqf by Malaysian State Islamic Religious Council in Malaysia. Unpublished Masters Dissertation. International Islamic University Malaysia, Kuala Lumpur.

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Zimmer, Z. (2008). Poverty, Wealth Inequality and Health among Older Adults in Rural Cambodia. Social Science & Medicine (1982), 66(1), 57–71. doi:10.1016/j.socscimed.2007.08.032

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Alleviation of Poverty in Borno State: The Missing Link Ibrahim Mohammed Lawal Heritage Bank plc, 6, Sir Kashim Ibrahim way, Maiduguri. Borno State [email protected]; [email protected] +234 (0)7031325328, 08025599503 Umar Babagana Imam Dept of Economics, University of Maiduguri. Borno State [email protected]; [email protected] +234 (0)07038216111 08086932919 Babagana Bukar College of Business and Management Studies, Konduga [email protected] +234(0)8066516668 Nur Baba Shettima Kashim Ibrahim College of Education, Maiduguri [email protected] +234(0)8066929761 Abstract Poverty alleviation has become a top agenda of government and NonGovernmental organizations (NGO). Taking into cognizance its alarming rate, the Borno State Government cannot be an exception. Borno State government has been going round the clock in order to reduce this menace via its Federal Government programs, creating enabling environment, setting up local programs and schemes, creation of a Ministry of Poverty Alleviation and voting in resources. But, these measures have not been successful as the poverty level is still high. This creates a missing link. In this context, the Islamic social redistributive instruments such as Zakāt, Sadaqah, Waqf and Qard-e-Hasan loan are considered as the appropriate tools that can be used in alleviating poverty in the state. This is a state where about 98% of its population is Muslims. Some of these tools are considered as an act of ibadah and Allah (SWT) and His Messenger has enjoined his Ummah to practice it. This tool was also adopted by past prophets. Therefore, the study concludes that these are considered as the right peg in the right hole in alleviating poverty and it should be pursued alongside the existing and new government programs of alleviating poverty. The study suggests that the state government should set up Zakāt organization so as to incorporate other tools

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that will be independent and decentralized across the 27 LGA’s. These should be managed by the board that has participation of religious leaders and individuals with proven integrity and experience. Finally, it is also necessary to intensify efforts on advertisements. Keywords

Zakāt, Poverty, Waqf, Qard-e-Hasan Loan, Sadaqah

1. Introduction Poverty is a phenomenon that is everywhere around the world. It is considered as the oldest and yet unresolved social problem7. It is much more than the low income. It also reflects poor health and education, deprivation in knowledge and communication, inability to exercise human and political right and absence of dignity, confidence and self- respect8. Available reports indicate that more than 800 million people around the world still live on less than $1.25 a day9 and Nigeria also has a significant share in global poor population. In Nigeria, poverty is considered as a “time bomb waiting to explode” if holistic measures are not put in place as its spillovers could be disastrous to the nation. The incidence of poverty has been high. In 1980, little less than 30% of Nigerians were living below the poverty line, but this has increased over time. The BBC report10 asserts that Nigerians living in poverty has risen to nearly 61%. It is against this background that the World Bank includes Nigeria in the list of the top 15 poorest of nations with the highest incidence of poverty. It is said that in our population of 162 million, 90 million live below the poverty level of $2 a day despite billions of dollars in oil revenue.11 7

Malumfashi, S. L. (2008). The concept of poverty and its various dimensions. In Duze, M. C. et al (eds) Poverty in Nigeria: causes manifestation and alleviation strategies (First Edition) London: Adonis and Abbey Publishers Ltd. 8

Ajakaiye, D. O. (2002). Overview of current poverty eradication programme in Nigeria. In Jega, M. A. and Wakili, H. (2002). The poverty eradication programmes in Nigeria problems and prospects. Kano: Membayya House Publishers. 9

United Nations Development Program (2015). Getting Started with the Sustainable Development Goals. A Guide to stakeholders. Pp. 6-11. 10

BBC Report (2012)” Nigerians living in poverty rise to nearly 61%. Available at:www.bbc.com/new/world-africa-17015873. 11 Umar, L.Y and Sulieman, K (2014).An Evaluation of Poverty Reduction Programme in Maiduguri Metropolitan Area, Borno State, 2008-2012. Research on Humanities and Social Sciences. 4(8). P 117-124.

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However, across the various regions of the country, the poverty rates are as thus; South West 19.3%, South 25.2%, South East 27.36%, North Central 45.7%, North East 76.8% and North West 80.9%12. The susceptibility to poverty is high in Nigeria, implying that any minimal shock can easily pull back those living little above the poverty line back to poverty. The North East region is considered amongst the regions with the highest poverty rate. Borno state is part of that region. Perhaps unsurprisingly, those extremist groups, such as Boko Haram, continue to have an appeal in the northern parts of the country, where poverty and underdevelopment are at their most severe13. According to the Oxford Poverty and Human Development Initiative (2016), the poverty rate of Borno state is 70.1%. This figure is alarming and calls for urgent attention. 1.1

Research Problem and Objectives

Several schemes or programmes have been implemented by all the tiers of government (Federal, State and Local Government) including the international community so as to reduce poverty to the barest minimum. Such programs include the National Poverty Eradication Programme (NAPEP), National Economic Empowerment and Development Strategies (NEEDS). Also, the SEEDs and LEEDs at the state and Local Level, Millennium Development Goals (MDGs) and Sustainable Development Goals (SDG’s), for instance. In Borno state, despite benefiting from such programmes of alleviating poverty, the state government created a ministry in 2004 called “Ministry of Poverty Alleviation and Youth Empowerment” primarily charged with varied responsibility of tackling the menace of poverty among the people of the state by empowering the youth and poor through the provision of poverty alleviation materials and micro credit loans which expected to improve their socio-economic status (BOSEEDS, 2005).

12

Oxford Poverty and Human Development Initiative (2016).”Nigeria Country Briefing”, Multidimensional Poverty Index Data Bank. OPHI, University of Oxford. Available at:www.ophi.org.uk/multidimensional-poverty-poverty-index/. Retrieved on 20/05/2017. 5:40am. 13

Richard, H (2016). In BBC Report (2012)” Nigerians living in poverty rise to nearly 61%”. Available at:www.bbc.com/new/world-africa-17015873

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The ministry is also saddled with the responsibility of training and retraining the youth in various trades with a view to empowering them to be economically self-reliant (Umar & Sulieman, 2014). Huge amounts of funds were budgeted by the Borno state government in favour of the ministry. For instance from 2008-2012, the total sum of N14.2b was budgeted (Ministry of Poverty Alleviation & youth Empowerment, 2012) and also N11.5b and N5.4b was budgeted for 2016 and 2017 respectively14. Despite all these commitments by the state government and Non-Governmental Organizations (NGO’s), the poverty in the state seems to persist, thus creates a missing link which needs to be filled. However, the objectives of this study are as follows:i. To identify the causes of poverty in Borno state. ii. To review the journey so far in terms of alleviating poverty in the state. iii. To identify the missing link as well as the appropriate tools that will assist in poverty alleviation in Borno state. iv. To proffer recommendations for successfully implementing this tools. 2. Concept of Poverty There is no concise and universally acceptable definition of the concept of poverty. This is attributed to the fact that it affects different aspects of the human conditions, including physical, moral and psychological. Different yardsticks have been used to conceptualize poverty. Some view it as a result of insufficient income for securing basic goods and services (Anyanwu,1997) where as others view poverty, in part, as a function of education, health, life expectancy and child mortality. Hornby (2006) defines poverty as “the state of being poor”. The poor have been conceptualized as that portion of the population that is unable to meet basic nutritional needs (Ojha, 1970; Reutlinger and Selowsky, 1976). Poverty has also been conceptualized in both the “relative” and “absolute” sense. The World Bank (1977) defines relative poverty as existing where household has a per-capital income less than one third (1/3) of the average per-capita 14

Theeagleonline(2015). Borno Budgets N155B for 2016. Available at: http://theeagleonline.com/ Borno- Budgets-n155B- for- 2016/ and NTA news (2016). “Borno State Declares Stomach Infrastructure in 2017. Available at: http://www.nta.ng/new/20161221. Retrieved on 11/05/2017. 11:30am.

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income of the country, while absolute poverty is defined in terms of household command over resources which are sufficient to obtain a basket of good and service required to guarantee a minimum decent living standard. It is therefore a condition of life degraded by diseases, illiteracy, malnutrition and squalor. Ravallion and Bidani (1994) refer to poverty as a lack of command over basic needs of consumers, meaning a state of insufficient consumption level, giving rise to insufficient food, clothing and shelter. Furthermore, poverty can be conceptualized in four ways: Lack of access to assets, lack of access to control resources, lack of access in modern technology and exclusive mechanisms and sense of powerlessness. 2.1

Types of Poverty

The various types of poverty are explained briefly as follows:i. Chronic or (Generational) Poverty Chronic poverty is a type of poverty where an individual is in a state of poverty over a long period of time. Families living in this type of poverty are not equipped with the tools to move out of their situations. The chronically poor also tend to be severely poor, living on less than $0.70. ii.

Situational (Transitory) Poverty

Poverty is said to be situational when unexpected events that occurred within a time period caused an individual to fall below the poverty line. Events such as the death of the family head, divorce, loss of job, war and natural disaster, for instance can trigger poverty. iii.

Absolute poverty

United Nations (1995) defined poverty as a condition characterized by severe deprivation of basic human needs, including food, safe drinking water, sanitation facilities, health, shelter, education and information. It depends not only on income but also on access to services.15

15

United Nation (1995).”Report of the world summit for Social Development, March 612,1995. In Wikipedia (2017)” Extreme Poverty or Absolute Poverty”. Available at :https://en.m.wikipedia.org/wiki/Extreme_poverty/ Retrieved on 24/05/2017. 07:18am

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iv.

Subjective Poverty

Poverty is categorized as subjective when an individual or group of persons see and feel as poor or very poor. v.

Relative Poverty

An individual or a group of person is said to be in a state of relative poverty when he or they have inadequate income required to maintain the society’s average standard of living in which they live. vi.

Urban Poverty

Urban Poverty is usually defined in two ways: as an absolute standard based on the minimum amount of income needed to sustain a healthy and minimally comfortable life, and as a relative standard that is set based on average standard of living in a nation (McDonald & McMillan, 2008)16 vii.

Rural Poverty

This is a type of poverty that is associated with rural areas. This is against the backdrop that most of the world’s poor lives in rural areas. Hunger and food insecurity above all are an expression of rural poverty17. viii.

Monetary Poverty

The monetary approach has its origins in the work of Booth and Rowntree in the late 19th and early 20th Centuries. The monetary approach sees poverty as gap or shortfall in consumption or income. Under such type of a poverty, a line is usually set (usually $1 per day as per World Bank standard) and any income below such standard, it is considered as being poor.

16

McDonald, J.F & McMillen, D.P(1998). Urban Economics and Real Estate. Oxford: Blackwell Publishing. In Gini Li (2013). Urban Poverty and Geographically Concentrated Low-Income Communities. Available at: https//sites.duke.edu/urbaneconomics/?p=719. Retrieved 24/05/2017. 23:04am 17 Food and Agricultural Organisation” Reduce Rural Poverty” Available at:www.fao.org/about/what-we-do/so3/en/ Retrieved on 24/05/2017. 08:41pm.

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ix.

Non-Monetary Poverty

Non-monetary poverty approach has its origins in the work of Townsend (1979). The approach rests on the idea that if people are so deprived as to lack the resources to participate in the customary activities in society and thus in some sense are excluded from society, then they may be regarded as being in poverty. This can be water poverty or poverty in healthcare. 2.2

Multi-Dimensions of Poverty

The multi-dimensionality of poverty has been explicitly expressed in the Copenhagen Declaration on Social Development in the following manners. Poverty has various manifestations including:i. ii. iii. iv. v. vi. vii. viii. ix.

2.3

Lack of income and productive resources sufficient to ensure sustainable livelihoods. Hunger and malnutrition. Ill health. Limited or lack of access to education and other basic services. Increased morbidity and mortality from illness. Homelessness and inadequate housing. Unsafe environment and social discrimination and exclusion. Lack of participation and exclusion. Lack of participation in decision making and in civil, social and cultural life (World Summit for Social Development, Copenhagen, 1995). Causes of Poverty in Borno State

There is no one cause or determinants of poverty in Borno state. On the contrary, a combination of several complex factors contributes to poverty. i.

Low Economic Growth Performance

Economic growth is a key ingredient for poverty reduction. This growth has been measured in terms of Gross Domestic Product (GDP). Consequently, the Borno state economy has been witnessing a low economic growth taking into consideration factors like insurgency, low level of industrialization, low level of agricultural production, unemployment and underemployment etc. All this have an effect on the state output, hence, could trigger poverty. For

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instance, with a GDP of $5.18B, population of 5,925,668 and a per capita income (PCI) of $1,214, it is very low compared to other states18. ii.

Insurgency, Crime and Violence

The activities of the insurgency since 2009 have also contributed to poverty in the state because it has resulted in the death of over 10,000 people and over a million individuals have been displaced in the state. This has succeeded in crippling the economic activities of these affected areas of the state as well as the assets or source of livelihood for the people, thus creating food insecurity. With the convergence of these IDPs in the metropolis, it has overstretched the existing facilities while income is lacking since they are not engaged in any productive activities. This invariably affected the standard of living of these various households. Thus, those above the poverty line could also fall back while those below the poverty line will be deeply shocked. In addition to that, insurgency, crime and violence have a serious economic cost attached to them. For instance, an increasing proportion of public resources, which are already limited, is required to strengthen police, military enforcement in terms of recruitment and purchase of arms and ammunition, support the growing prison population, finance the demands placed on the judicial system, and provide health care for persons injured by violence. Other costs include expensive security systems and guards now required by businesses and homes, the loss in potential revenues from foreign investors and tourists who have sought other destinations as a result of the threat of insurgency, crime, and the migration of the middle and upper class. These resources expended in curbing these issues would have been used to provide infrastructural facilities for the teeming population of the state such as health and schooling. iii.

Rural-Urban Migration

Farming activities constitute one of the major activities of the people of Borno state. But with the massive exodus of active youths to urban centers in search of greener pasture, it has succeeded in causing poverty in the affected areas. Thus, it has created the threat of food insecurity. In other words, migration drains people with skills. It reduces the pace of economic growth and thus slows the process of overall job creation and affects the long-run development potential in the state. This situation became worse when the 18

Wikipedia (2017). “Borno State”. Available at: https://en.m.wikipedia.org/wiki/Borno_state. Retrieved on 23/05/2017. 08:53pm.

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activities of the insurgency became unbearable in these rural areas as people run for their dear lives. iv.

Low Level of Income

Income is considered as one of the key parameters to measure or define poverty. However, without income, one cannot have access to the basic necessities of life: food shelter and clothing. Though, Borno state is a civil service state as the major source of income of its household is salary but the issue is that this income they earned is very low to sustain their individual household. The situation is now worsening due to the economic recession and the exchange rate issue. Taking into consideration that we are import dependent, the price of food stuff has increased and thus causing inflation. Consequently, with the increased price of food stuff without a corresponding increase in salary, there will be a negative impact on the standard of living. Hence poverty is created and triggered further. v.

Poor Governance and Corruption

The persistence and pervasiveness of poverty in the state are linked to the lack of popular participation in governance and decision-making as well as the weak institutional base. This has led among other things to poor accountability, transparency in resource allocation, weak programme implementation and monitoring. All this constitute part and parcel of corruption and the people of the state are at the receiving end. Corruption is an abuse of power, office and resources by those in the position of influence for personal gain19. It is a phenomenon that has emerged as one of the factors sustaining inequality and poverty in the state. Corruption undermines sustainable strides either sectorally or institutionally and creates a strong disincentive to foreign investment drive20. In fact according to a survey, it was revealed that “corruption is worse than terrorism”21. This

19

Umar, T (2014). Developing a Comprehensive Strategy for rating Nigeria HDI based on UNDP Human Development Report 2008-2009” Journal of Economics and Sustainable Development. 5(26). P.53-54. 20

National Bureau of Statistics (2016). Social Status Report 2016. Chapter 2 “Anticorruption. P.4 21

Adeola, T (2013). TNS/RMS. Pulse of the Nation Survey.” Corruption worse than corruption”. Available at:http://app.businessdayonline.com/survey-indicates-corruptioncrime-as-nigeria-major-challenges/ 21/05/2017:9:10am

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shows how disastrous corruption could be as resources meant to provide the basic amenities for the people are diverted for personal use. vi.

Debt Burden

Debt burden is also considered as a factor that causes poverty in the state because currently the state has a debt profile of N30.9B22 compared to its GDP of about of USD5,154M23. The amount required to service this debt annually is enough to impede government expenditure for the provision of social and physical infrastructure for the poor. In other words servicing of the debt has encroached on the volume of resources needed for socio-economic development because productive sector such as agriculture and manufacturing are equally constrained leading to low productivity, low capacity utilization, under employment and low purchasing power thereby subjecting the masses of the people to abject poverty. vii.

Human Capital Development

This is a veritable tool that can be used to escape from poverty. Investing in people can boost the living standards of households by expanding opportunities, raising productivity, attracting capital investment, and increasing earning power. In addition to that, providing educational opportunities for adolescents may prevent some youths from becoming involved with gangs, drugs and violence, given the evidence linking the perpetrators of crime with school dropouts. This is measured via the human development Index (HDI) which measures three basic dimensions of human development; long and healthy life, knowledge and a decent standard of living24. The human capital development in Borno state is poor taking into cognizance the literacy rate of about 14.5%25 which implies that about 85.5% are illiterate, infant mortality rate and under-five mortality rate stood at

22

Debt Management Office (2016). Total Domestic Debt of the 36 states and the FCT as at December 31,2016. Available at: www.dmo.gov.ng/debt-profile/sub-national-debt. 17/05/2017. 2:59pm. 23

http://en.m.wikipedia.org/wiki/list_of_ nigeria_states by gdp/ 12/05/2017. 3:26pm.

24

www.theglobaleconomy.com/Nigeria/human_development_index/ Retrieved on 16/05/2017. 11:00am. 25

UNESCO (2012). High Level International round table on Literacy. National Literacy Action Plan 2012-2015. Paris 6-7 Sept, 2012. Available at:www.unesco.org>multimedia>pdf. Retrieved on 16/05/2017. 8:00pm.

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19.56% and 24.27%26 respectively. With such a situation, it will have effect on the HDI which further implies that poverty will be the order of the day. viii.

Unemployment

This is considered as a situation whereby those who are willing and able to work could not find a job. This phenomenon is considered as a factor that causes poverty in Borno state because the majority youths, women etc are not gainfully employed so as to earn income to feed their households. In fact, the unemployment rate of Borno state is about 29.1% in 2011 up from 12.5% in 200727 which depicts 16.6% increment. This ugly trend is due to loweconomic growth, low level of industrialization, activities of the insurgency, low level of HDI and poor governance. This situation is now worse as the youth are now been used as political thugs, they roam from one office to the other soliciting for money to survive and on the whole, they end up engaging in one form of social evils. Thus, supporting the notion that “an idle mind is the devil's workshop”. Invariably, if these young people are fully engaged in economy, it will have the effect on their standard of living thereby pulling them above the poverty line and it will increase output which will also affect the state’s economic growth. ix.

Health

Good health is basic to human welfare and a fundamental objective of social and economic development. Poor health shackles human capital, reduce returns to learning, impedes entrepreneurial activities and holds back growth and economic development. Diseases cause poverty and vice versa. Borno state belongs to a zone with one of the worst mortality indices in the country. Infant mortality stands at 109/1000LB while under five mortality is 222/1000LB28. Mortality ratio is taken as 545/100000LB29. The state is also prone to epidemic attacks of bacterial and viral origin such as meningitis, 26

Nigeria open data (2017). “Borno”. Available at:nigeria.opendataforafrica.org/app/atlas/borno. Retrieved on 16/05/2017. 9:13pm. 27

National Bureau of Statistics (2011). Report on NBS Harmonized Nigeria Standard Survey-HNLSS. In Eme, O.I (2014).” Unemployment rate in Nigeria: Agenda for Govt. Academic Journal of Interdisciplinary Studies. 3(4). 28

Borno State Government (2015). Strategic Health Development Plan (2010-2015). Borno State Ministry of Health. “Executive Summary” P.9. 29

Borno State Government (2015). Strategic Health Development Plan (2010-2015). Borno State Ministry of Health. “Executive Summary” P.9.

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cholera and measles30 and also it contributes to the 2-6% North East range of HIV/AIDS prevalence rate31. With all these poor health indices, this will affect HDI of the state and coupled with the popular adage “Health is Wealth”, this makes the state vulnerable to the poverty. x.

Environmental Degradation

This has to do with the deterioration of the environment through depletion of resources such as air, water and soil; the destruction of the ecosystem; habitat destruction; extinction of wildlife and pollution32. Environmental degradation is a cause of accentuated poverty in the Borno state and vice versa taking into cognizance that they rely heavily on agriculture and fishery. This reverse causality stems from the fact that for poor people in the state, a number of environmental resources are complementary in production and consumption to other goods and services while a number of environmental resources supplement income, especially in a time of acute economic stress. This can be a source of cumulative causations, where poverty, high fertility rates and environmental degradation feed upon one another. 3. Poverty Alleviation in Borno State: The Journey So Far Poverty alleviation or reduction can be seen as a set of measures, both economic and humanitarian, that are intended to permanently lift people out of poverty33. Though, one can discuss the poverty alleviation programs or schemes in Borno state without making reference to some of the poverty alleviation programmes or schemes instituted by the Federal Government of Nigeria. Some of the past approaches taken were the establishment of some programmes and schemes, such as the Agricultural Development Projects (ADP) in 1975, Operation Feed the Nation (OFN) in 1976, Agricultural 30

Borno State Government (2015). Strategic Health Development Plan (2010-2015). Borno State Ministry of Health. “Health Status of the Population”, pp.17-18. 31

Borno State Government (2015). Strategic Health Development Plan (2010-2015). Borno State Ministry of Health. “Health Status of the Population” pp.17-18. 32

Wikipedia (2017). “Environmental Degradation”. Available at: https://en.m.wikipedia.org/wiki/Enivironmental_degradation. Retrieved on 21/05/2017/ 12:50pm. 33

Wikipedia (2017). “Poverty Alleviation”. Available at: https://en.m.wikipedia.org/wiki/poverty_reduction. Retrieved on 21/05/2017/ 12:55pm.

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Credit Guarantee Scheme (ACGS) in 1977, Directorate for Food, Roads and Rural Infrastructure (DFRRI), the National Directorate of Employment (NDE), Mass Mobilization for Social Justice and Economic Reconstruction (MAMSER), Better Life for Rural Women, People Bank, National Primary Health Care Agency (NPHCA) in 1989, Family Economic Advancement Programme (FEAP) in 1997 and Family Support Programme (FSP) in 1997. Various programmes were also introduced after the transition from military to civilian rule, such as the Universal Basic Education in 2000, National Poverty Eradication Programme (NAPEP) in 2001, the Nigeria Agricultural Development Fund in 2002, National Economic Empowerment Development Strategy in 2003, Commodity Marketing and Development Company in 2003 and the Presidential initiatives on some selected products like cassava, rice etc. The Borno State Government focuses on these programmes, especially when the prototype of NEEDS was to be established at the state and local levels like BOSEEDS and LEEDS. Also, there are international intervention programmes such as the Millennium Development Goals and now Sustainable Development Goals (SDGs). However, in relating to poverty alleviation programmes in Borno State, more emphasis will be placed from 2012-to date. Despite the scope of the study, the major step taken by the Borno State Government towards alleviating poverty in the state was to establish the Borno State Ministry of Poverty Alleviation and Youth Empowerment in 2004 charged with the key responsibility of tackling poverty at all levels in the state. The ministry is accorded priority by the State Government as funds have been voted for it just like other ministries. The ministry has set up block moulding industry, skills acquisition programmes, Entrepreneur Development, public works which is undertaken in collaborations with other government agencies such as Ministry of Local Government and Chieftancy Affairs, Ministry of Agriculture and Education. This agency also collaborates with the Industrial Training Funds (ITF) to embark on 3 months training in welding, garment making, furniture works etc. Some of the achievements were the distribution of micro-credit loans to over 6,000 beneficiaries, training of over 9,000 unemployed youths on various skills acquisitions and take-off grants have been given to them to start their own businesses and finally, the distribution of over 6,800 motorcycles and tricycles (Ministry of Poverty Alleviation, 2012). In addition to that, over 5,000 sewing, milling, grading water pumping machines etc were also

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distributed to youths and women across the state. Furthermore, buses were also distributed amongst trade unions. To ensure food security, the government has purchased about 1,000,000 seedlings of cashew, 500 seedlings of Date Palm and 7,500 seedlings of improving variety of citrus as well as 21,000 mango seedlings. This is in addition to the cultivation of 35 hectares of the ginger crop at Kidang, Biu Zone as a pilot farm and the establishment of 200 hectare plantations each at Tamsu Kawu, Mainta Kururi, Mainok and Auno with the procured seedlings while 10 boreholes were drilled in those villages to provide water for the plantation farms. In addition, assorted seeds of the arable crops were procured and distributed to farmers at no cost while NPK fertilizer was sold at highly subsidized rates to farmers in the Southern part of the State. In the area of fisheries development, 42 units of 7,000 liters and 2 units of 3000 liters capacity of fiberglass ponds and lifab glass fish pond were all purchased while cattle marketers and butchers were empowered through Micro Finance loans of One Hundred Million Naira (N100,000,000.00). Furthermore, over 1,000 youth have been trained in the area of agriculture in Thailand, Egypt, Togo, China and Israel, also over 100 females have been sponsored by the state government to study medicines in Sudan, engaging into partnership programme between NIMASA and Borno State Government in sponsoring 21 Borno State indigenes to undergo one year sea Acclimatization course. To ensure access to potable drinking water, about 28,000 cubic meters per day of potable drinking water for MMC and Jere through the Maiduguri Water Treatment Plant was constructed. Similarly, drilling of boreholes at Umarari and Dubai, and rehabilitation of boreholes at Ngala, Magumeri, Gubio, Jetete, Benisheikh as well as Bama. In order to further boost HDI of the state, the Government has constructed 250 bed-capacity maternal and child specialist Hospital, renovation and expansion of the three (3) Health Training Institutions and equipped 18 secondary health facilities across the State. This is in addition to the establishment of IDP Camp clinics with free medical care to all IDPs and the signing of a Tripartite Agreement with Bill and Melinda Gate/Dangote Foundation to improve Routine Immunization coverage in the State. Similarly, the government was able to repair and integrate over 58 patients living with Vascular Virginal Fistula (VVF) and engaging Non-Government Organizations to enlightened and educate women on Polio, Maternal Health and other diseases.

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Skills acquisition centres have been empowered in Biu, Gubio, Gwoza, MMC, Lassa and Damboa with the aim of training youths and women in various skills. Also, fish ponds are to be established in 312 wards of the state to empower women via cooperative societies. Free books, uniform and sandals have been distributed amongst the students in public schools. Despite the situation in the state, 202 internally displaced persons have also been trained from the Small Scale Entrepreneurship program at Borno state mass Literacy Assembly34. Currently in 2017, the state government has voted a whopping sum of N5.4billion in its 2017 budget in favour of Ministry of Poverty Alleviation and Youth Empowerment which will have different intervention programmes coined “Stomach Infrastructure”. Under this arrangement, the government will distribute rice and other staple food freely to its citizens across the 27 Local Government Areas of the State. 4. The Missing Link Poverty alleviation in Borno state should be considered as a clarion call or collective responsibilities of all individuals in the state taking into cognizance that it is a phenomenon that has no boundaries whether Muslims or Christians, Kanuri or Babur (tribes). It should not be left for the government alone. However, the role of Muslims most especially the wealthy ones cannot be relegated to the background. Borno state has a population of about 4,151,193 out of which 2% constitute Christians35 and the remaining 98% are Muslims. The Muslims in the state have not lived up to their responsibilities as prescribed by Allah (SWT) and this has created a wide vacuum in income distribution in the state which is considered as amongst the key factor that triggers the poverty rate in the state. Consequently, all measures have been put in place by successive administration towards poverty alleviation and even the current 34

Njadvara, M. (2015).” Borno to Partner OPS, others in poverty, unemployment reduction. The Guardian. Available at: https://guardian.ng/news/ Borno –to- Partner- OPS- others- in – poverty- unemployment -reduction. Retrieved 11/05/2017. 11:16am. 35

Wikipedia (2017).” Christianity in Nigeria”. Available at:https://en.m.wikipedia.org/wiki/christainity-inNigeria#christain-population-by-state. Retrieved on 08/05/2017. 6:57am.

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administration have been doing her possible best but it is yet to yield a meaningful result considering the level of the poverty rate in the state. However, the missing link towards curbing these ugly phenomena is the nonapplication of Islamic instruments such as Zakāt, Sadaqah, Waqf and Qard-eHasan Loan which are considered as social redistributive instruments and even where it has been applied, it is very informal. 4.1

Zakah

Zakah or alms tax can be defined as that portion of a man’s wealth which is designated for the poor. The word is derived from the Arabic verbal root meaning “to increase”, “to purify” and to bless36. Zakāt is considered as the fourth pillar of Islam. It is a word that is associated with Salat in eighty (82) Quranic verses. Allah (SWT) and his Messenger (PBUH) has enjoined upon us to give Zakah. Zakāt seems to have a very specific purpose and remains obligatory to the community and any avoidance attracts a very strong penalty37. However, it is pertinent to note that Zakah has always been payable during the period of past prophets. For instance Q19:31-By Prophet Jesus; Q19:55-Prophet Ishmael ordained on his people; Q2:83-Children of Israel; Q21:73-Prophet Abraham etc. Allah (SWT) has mandated his Ummah to pay Zakah in the following verses Q2:43 “And establish the prayer; give Zakah………so also in Q9:71,103, 104, Q22:41 etc. Also there are different hadith by the prophets enjoining his Ummah to pay Zakāt and its importance. For instance “Abu Hurairah narrated that the prophet said “when you pay the Zakāt you have fulfilled what is required of you.38 Different narrations on the same subject can also be found in Sahih Al Bukhari Vol 2, Book 2 (Obligatory Charity Tax-Zakāt, No. 702-765 and also At- Tirmidhi Vol 2, Book 2, No.617-681 etc. Zakāt rate enjoined upon Muslims to pay is 2.5%, 1/40 (though the rich can be charged extra if what is realized is not enough to reduce poverty) which is usually paid once a year (Islamic year) and it should be paid on any amount 36

Al-Sayid, S. (1985). Fiqh Us-Sunnah. Book of Alms tax and Fasting. .Vol. III American Trust Publications, p.1. 37

Joseph, A. (2011). The Quran and its message.” What is the Concept of Zakāt from the Quran” Available at: www.quransmessage.com. 38

At-Tirmidhi Vol2, Book 2, No618.

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of money remaining after meeting the expenses39 for necessities, such as food, clothes, housing, vehicles and craft machines. The recipient of Zakāt is clearly stated in the holy Quran (9:60). “The alms are only for the poor and the needy, for those who collect them, for whose heart are to be reconciled, for the freedom of those who are captives and in debt, for the cause of Allah (SWT) and for the wayfarers. In addition, those people that are forbidden to receive Zakah are the non-believers, Banu Hashim, Father and Sons, the Wife. Today in Borno state, payment of Zakah is at its lowest ebb because wealthy individuals and businessmen do not pay the appropriate Zakāt. Some underpay while some avoid or evade payment of Zakāt. The worst of all, they give such Zakāt to friends and relatives who do not really need such. Thus, it still results in continuation of the circulation of same wealth amongst same family and relatives, rather than those who actually need this wealth. This scenario if permits will further widen the income gap. But, now the government is exploring the option of Zakāt by setting up a proper decentralized Zakāt system (Bait al-mal) via setting up a board that is well structured, independent at the state and local levels. It is necessary to have a board that constitutes individuals with proven integrity, religious background and solid experience. This will assist largely in collecting this form of tax as all anomalies in Zakāt distribution will be addressed. If such funds are used judiciously to trasnfer the funds to the stipulated recipients via various schemes and programmes, it will assist to redistribute income and this will further complement the efforts of the government in poverty alleviation. 4.2

Sadaqah or Infaq Fi Sabilillah

Sadaqah linguistically is derived from the root verb sadq or sidq which means to speak the truth and to be sincere. Sadaqah is a term applied to the concept of ‘gift’ offered to someone from one’s rightfully owned holding without remorse or regret or without any ulterior motives in secret for the pleasure of Allah40. Thus, it involves the following ingredients; the legitimacy of one’s holdings, the sincerity of intention, altruism motives and the condition that it is for Allah. Allah (SWT) has enjoined his entire Ummah 39

Al-Sayid, S. (1985). Fiqh Us-Sunnah. Book of Alms tax and Fasting. .Vol. III American Trust Publications, p. 59. 40

Al-Sayid, S. (1985). Fiqh Us-Sunnah. Book of Alms tax and Fasting. .Vol. III American Trust Publications, p. xiii.

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to perform Sadaqah in Q58:13, Q2:271, 262, 263. Sadaqah is not limited to monetary aspect alone, non-monetary aspect is also welcome. However, the Holy Quran has stipulated for whom Sadaqah is meant for, especially in Q9:69, Q2:273 etc just as the case of Zakāt. Sadaqah is considered as a means of purification, cleansing, redemption, atonement for sin as stipulated in the following verses Q9:103, Q2:196, Q2:271, Q2:280, Q5:5:45,Q2:72, Q2:267, Q30:39, Q12:88, Q64:16, Q663:10, Q57:18 and Q4:114 etc. Despite all these verses, the question is that do we really adhere towards giving Sadaqah? Or we only give when we have ‘change’ (smaller denominations of currency in hand). However, as we have earlier pointed out that the alleviation of poverty is a collective responsibility of all individuals most especially the well to do in the state but the reverse is the case in Borno state. Notwithstanding, Sadaqah is still a vital divine tool in alleviating poverty. It is just that it is still yet to be harnessed properly in the state. Hence, the need for government to assist and incorporate the Sadaqah system into the existing structure of the Zakāt system (Bait al-mal). With such Bait al-mal in place, they will charge with the responsibilities to identify the actual recipients according to the Quran, their needs and implementing programs and scheme so as to solve their needs based on the funds (resources) received from Sadaqah. 4.3

Qard-e-Hasan Loan

This is also called Good Loan or benevolent loan. It is considered as a type of loan whereby the lender does not charge any interest or additional amount over the money lent. Most of the existing micro credit (loan) provided to beneficiaries by the government via its micro finance banks are interest based. Despite a reduction in its interest element to single digit in as far as it is not zero; it is still call for concern. Borno state is also considered as an Islamic state taking into cognizance its large population of Muslims. Thus, they should be offered Shari’ah compliant solutions. Interest on loans as clearly spelt out in the Quran is prohibited as stated in 12 different verses of the Quran, for instance Q2:275 and Q2:278. Also, there are different hadiths that prohibit interest in all its forms. Therefore noncompliance to all these injunctions even if funds are disbursed, it lacks the blessings of Allah (SWT) because it contravenes His commands. Also, it has the following effects. It is a repression of the needy, it further widens the

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distribution of wealth, it creates inflationary tendencies, it is an unjust income, it marks down the future, and it causes economic volatility. Consequently, it is imperative on the State Government via its microfinance institutions in all the 27 LGA’s to introduce products that are Shari’ah compliant, such as Qard-e-Hasan loan so as to avoid displeasing Allah. 4.4

Waqf

Waqf is an Arabic word derived from a root verb waqafa. Its plural is Awqaf. It refers to an Islamic endowment of property to be held in trust and used for a charitable or religious purpose41. Waqf is made up of different kinds42. a.

Religious Waqf

This form of Waqf serves as an addition to the social welfare of any society as it assists to satisfy the religious needs of the people and thus reduce the direct cost of providing religious services for future generation. For instance, if a real estate or mosque is limited for providing revenue to spend on mosque maintenance and running expenses. b.

Philanthropic Waqf

This form of Waqf is targeted at supporting the poor in the society such as providing public utilities for the needy or poor such as libraries, education and health services. c.

Posterity or Family Waqf:

In this form of Waqf, the revenue must be given to the Waqf founder and his or her descendants and only the surplus if any should be given to the poor. However, a new form of Waqf has been the order of the day, cash Waqf and Waqf of intellectual property. Cash Waqf:- In this form, cash serves as Waqf 41

Merriam Webster (2017). “Waqf” Available at: https://www.merriamwebster.com/dictionary/Waqf. Retrieved. 22/05/2017. 08:57pm. 42

Kahf, M. (2007). Role of Zakah and Awqaf in Reducing Poverty: A case for Zakah-AwqafBased Institutional Setting of Micro Finance. Paper presented at the “International Seminar on “Islamic Alternative to Poverty Alleviation: Zakāt, Awqaf and Micro Finance” April 2123, 2007, Bangladesh. In Faysal, K, “Waqf: An Islamic Instrument of Poverty AlleviationBangladesh Perspective. Thought on Economics. 22(3).

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resources instead of building or land. It is very flexible and thus allows distribution to the poor anywhere. This was first introduced in Othman era in Egypt. On other hand, the Waqf of intellectual property consists of copyrights of books43. In addition, Waqf has certain distinct features such as:a. Perpetuity:- This implies that once a property is dedicated as Waqf so shall it be. b. The condition specified by the Waqf founder must be followed in as far as it does not violate Shari’ah. Furthermore, Waqf (Philanthropic endowments) has two beneficiaries-family members and the general society. The latter is very relevant towards poverty alleviation. Though, Waqf via schools and hospitals where students attend schools at little or no cost and likewise enjoy health services. This will aid the development of human capital which invariably creates a productive workforce, thus assist in poverty alleviation. With a productive workforce, GDP will increase, unemployment will decrease and income inequality gap will be bridged. Therefore, there is need for the state government to liaise with the well to do individuals in the state to that they can create Waqf funds with little or no cost so as to set up schools and provide health services in the local areas of the state since they are the worst hit in terms of poverty. 5. Conclusion There is no gain saying that the Borno State government has not taken giant steps in alleviating poverty in the state. The rate at which poverty has permeated the fabric of the state is alarming. Thus, government’s efforts are seen as a “tip of an iceberg” and coupled with the insurgency which has further compounded the situation as it has succeeded in grounding the economic activities in the state, especially in the local government areas. However, poverty alleviation should be taken as collective responsibility of all the people in the state and it should not be left in the hands of the government alone. Though, the government in its fight towards curbing this 43

Khan, F. (2001). Waqf: an Islamic instrument of poverty alleviation-Bangladesh perspective. In International Conference-The Tawhidi Epistemology: Zakāt and Waqf Economy. Bangi (pp. 65-96).

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phenomenon omitted certain relevant tools which this paper term as “Missing Link”. This is based on the fact on non-application of Islamic social instrument like Zakāt, Sadaqah, Waqf and Qard-e-Hasan taking into cognizance of the nature of the state in which 98% of the people are Muslims. These instruments have been used by past Prophets as a source of the treasury in steering their affairs as evidenced in the Quran mentioned earlier and it has further been enjoined by Allah (SWT) and his Messenger (PBUH) on this present Ummah to practice it as a form of ibadah. Consequently, adopting this instrument which is considered as a divine tool will go a long way towards redistributing income between the rich and the poor and thus assisting in alleviating poverty. 5.1.

Recommendations

From the foregoing, below are some of the recommendations to ensure successful implementation of these tools so as to achieve the desired results. i. There is need to set up an independent Zakāt Foundation organization in which government should also have a stake (Controllable stake should be discouraged) alongside with other stakeholders that will have a network across the 27 Local Government areas of the state. ii. Constitute a board to stir the affairs of the organization across the LGAs. This should comprise of religious leaders and individuals with proven integrity and experience. iii. Non-interference by the government both at the state and local levels in the activities of the organization. iv. The Zakāt system of collection should be computerized (e-Zakāt) in such a way that there are no boundaries as a donor can donate in any part of the world. v. Intensify efforts on advertisements via local media such as TV and radio. Also need to have daily advertisements on the need for Zakāt and Sadaqah and a penalty applied for non-payment. vi. Donor’s secrecy and confidentiality should be maintained at all times. vii. The Government needs to liaise with wealthy individuals in the state so as to establish a Waqf fund to enable them to establish infrastructural facilities such as schools, health center etc at little or no cost. viii. Need to ensure proper monitoring of the loan disbursed may be on a monthly or quarterly basis so as to ensure that funds are not diverted for a different purpose.

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ix. The Zakāt organization should be empowered to partner with corporate organizations so as to raise additional funds within and outside the state or country if possible in pursuance of its activities. x. There should be a rendition of the report either monthly or quarterly from the organization to the head of the board on the utilization of the funds generated and the expenditure incurred. xi. The Zakāt organization should set up entrepreneur academy in all the 27 LGA’s of the state where youths and women can be trained in areas of business, agriculture and they will be empowered upon graduation by the organization or the organization engaging in a partnership with banks. Business progress should be adequately monitored and defaulter should be sanctioned by inspectors from the board. xii. Biometrics of the recipients of Zakāt should be captured in all the 27 LGA’s and those that have benefited also should be captured so as to avoid duplication and fictitious beneficiaries. xiii. Zakāt collectors should be trustworthy individuals of proven integrity and their remuneration should be reasonable enough so that they might not be tempted to divert the funds collected. xiv. There should be an exchange of information or data between the Zakāt organization and the ministry of poverty alleviation and youth empowerments. xv. Establishing a Waqf based Islamic microfinance institution in all the 27 LGA’s of the state. xvi. Motivating the wealthy rich people. This drive should be done by scholars and government through recognizing their effort by giving awards etc. References Anyanwu, J.C. (1997). Poverty: Concepts, Measurement and Determinants. Proceeding of NES Conference on Poverty Alleviation in Nigeria, Dept of Economics, University of Ibadan, Ibadan. Bello, S. (2016). “Hon. Kashim Shettima Presents Appropriation Bill to the Borno State House of Assembly for 2017 Fiscal Year” Dandal Kura Radio International. Available at: https://www.dandalkura.com/news/. Kashim- Shettima- Presents Appropriation -Bill -to –the- Borno- State- House- of Assembly – for- 2017- Fiscal- Year/ Retrieved on 26/05/2017. 04:45pm. BOSEEDS (2005). A Social Contract of Development. By Department Budget and Planning (Governor’s Office) Vol. I, October, pp. 5 – 6.

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Hornby, A.S. (2006). Oxford Advanced Learners Dictionary. Oxford University Press. USA 7th Edition, 2006: pp. 1135. Ndahi M. (2012). Borno Spends Over N1b on Poverty Alleviation. Vanguard News. Available at: http://www.vanguardngr.com/2012/06/bornospends-over-n1b-on-poverty-alleviation/ Retrieved on 26/05/2017. 03:45pm. Ojha, P.O. (1970). A Configuration of Indian Poverty. Reserve Bank of India Bulletin, January. Reutlinger, S. & Selowsky, M. (1976), Malnutrition and Poverty. Baltimore; John Hopkins University Press. Ravallion, M., & Bidani, B. (1994). How Robust is a Poverty Profile? World Bank Economic Review, 8(1): 75-102. Umar, L.Y, & Sulieman, K (2014). An Evaluation of Poverty Reduction Programme in Maiduguri Metropolitan Area, Borno State, 20082012. Research on Humanities and Social Sciences. 4(8), 117-124. World Summit for Social Development (1995). Reports of the World Summit for Social Development, A/CONF.169/9 held on 6-12 March, 1995, Copenhagen. Denmark. Available at: https://www.un.org/development/desa/dspd/ world-summit-forsocial-development-1995/wssd-1995-agreements.html. Retrieved on 22/05/2015. 12:17am.

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Book Review Title: Capital in the Twenty First Century Author: Thomas Piketty Publisher: Belknap Press Reviewed by: Editor “Capital in the Twenty-First Century” is a famous 2014 book by French economist, Thomas Piketty. The book has been widely read since the publishing of its English version. It has stirred a lot of debate in economics circles as well as achieved remarkable reception from other disciplines of social sciences. One of the main theses of the book is that over a long run period, the rate of return to capital ‘r’ is greater than the rate of economic growth. The hypothesis seems to be consistent with the empirical evidence in post-WWII developed economies of the world which the book has attempted to analyse. It is striking to note that 60% of the increase in US national income in the 30 years after 1977 went to just the top 1% of earners. The only section of the U.S population that has done better than the top 1% is the top 10th of that 1%. The other revealing statistic cited in the book is that the top 0.1% of Americans claims 9% of income which is up from 2% at the middle of the twentieth century. The top 0.1% holds a near-record 22% of the wealth while the top 0.01% claims a bigger income share than at any other time in the history. The book argues that the world today is returning towards ‘patrimonial capitalism’, in which much of the economy is dominated by inherited wealth. While the top 10% have amassed more wealth in the last 50 years, America’s bottom 90% is falling deeper and deeper into debt. The author argues that Capitalism does not self-correct to achieve greater equality. It is quite striking that only natural catastrophes, conflicts and wars have made the societies more equal. The author recommends that governments should adopt a global tax on wealth to prevent soaring inequality. This will foster wealth mobility and keep wealth concentration under control. Taxing off-shore wealth in tax-haven regions is also an important challenge to overcome.

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Another very interesting analysis in the book is that lower growth might worsen inequality. It goes contrary to the famous Kuznet’s hypothesis which attributed high income inequality to high economic growth. The author is also critical of supply side economics and suggests punitive income taxes and wealth taxes to curb concentration of wealth. Karl Marx’s critique of Capitalism focused attention on the relative importance of labour vis-à-vis capital in the production process. However, the evidence presented in the book suggests that inequality is not just restricted to the capital-labor relation; rather the wage inequality has also increased significantly. Some sportsters and film artists earn as much as entire development budget spending in some of the poorest countries in the world. It is also astonishing that corporate profits have swelled in post WWII period and the average CEO earns as much as earnings of 331 workers, up from a 24 to 1 ratio in the 1960s. European Union constitutes 8% of the global population, but shares 21% of the global GDP. USA and Canada constitute 5% of the global population, but share 20% of the global GDP. Conversely, Asia comprises 61% of the global population, but shares only 42% of the global GDP. Even more strikingly, Africa constitutes 15% of the global population, but shares only 4% of the global GDP. It shows that people in USA and Canada have an opportunity to earn 15 times as much as people in Africa on average. The book is an excellent attempt to focus attention on the issue of rising income inequality. What the economics profession needs is a new premise to combat social problems of poverty and inequity. The new premise according to Nobel Laureate Amartya Sen’s empirical evidence is that rather than scarcity, it is the inequitable distribution of resources which is the main cause of economic miseries. Strikingly, the world produces enough food to feed everyone even on per capita terms. Hence, the problem is not with absolute scarcity. The problem lies in the inequitable distribution of resources.

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Viewpoint Economics and Pro-Social Behaviour A great number of empirical studies now challenge the position of conceptualising human behaviour only in the framework of a rational, utilitymaximizing homo-economicus. Yet, this framework is used for the purpose of simplicity and tractability in situations where abstraction does not result in major loss of focus and information at hand. Nonetheless, it is appropriate to acknowledge selflessness resulting in sacrifices, pro-social behaviour and pure altruism. Excluding China, the Asian economies with rich cultural and religious values feature prominently in the World Giving Index 2016 despite having low per capita incomes. As per World Giving Index 2016, Iraq leads with the highest percentage of people helping strangers, and Turkmenistan, the highest percentage of people volunteering time. Indeed, if preferences are amenable and social behaviour is learned like other behaviours, then we ought to acknowledge this. This could help in cooperative pro-social campaigns; lasting and fruitful social partnerships; and strengthening of social capital that could potentially relax pressure from the public sector. In weakly governed countries, social networks assume roles typically provided by market-based financial intermediaries or the public sector. In economics education, acknowledging these differences, experiences, success stories and alternate visions of policy, broadens the perspective and enriches the solutions toolbox to meet sustainable development challenges which require strong mutual understanding and efforts of diverse cultures towards a common vision of future. The causal mechanisms through which culture and institutions mould and constrain human agents remain unexplored in neoclassical economics. It is worthwhile to be cognizant of the role of cultural factors, social norms and spiritual stimuli in analysing and theorizing economic behaviour. For instance, Confucian beliefs affect one’s outlook about work and consumption habits in East Asia, where individuals tend to work harder and longer, with greater labor force participation rates. As per the Lifecycle Consumption Hypothesis, higher propensity to save depends on the proportion of working age people in a society. From growth theory, we know that savings is the most crucial variable affecting growth, along with other macro and institutional variables. Thus, remaining cognizant of the effects of values, cultures and norms will help avoid missing positive phenomenon.

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Values and norms can be positively utilized in achieving development goals where commercial interests are not good stimulators. According to The Hunger Project, 2.4 billion people do not have adequate sanitation, and every day, nearly 1,000 children die due to preventable water and sanitation-related diarrheal diseases. This is partly because sanitation is not good business as compared to cellular services and life’s other comforts and luxuries. Interestingly, according to the 2015 report of Food and Agriculture Organization, globally, per capita food supply increased from about 2,200 kcal per day in the early 1960s to more than 2,903 kcal per day by 2014. Thus, redistribution of resources is vital to enhance income as well as the capacity to earn sustainable incomes. This requires income support programs, basic health and education as well as microfinance to build small enterprises. Overreliance on Pareto efficiency paralyses equity and ethical concerns of development policy change. According to Pareto efficiency, it is inefficient to help make millions of poor better off, if a single rich person becomes worse off. Sustainable development goals have assumed poverty, hunger and inequality as important goals. However, economics education by and large outsources the realization of these goals to development agencies and governments. If aid is inefficient as argued by Nobel Laureate Angus Deaton, then the neoclassical toolbox is virtually empty. In a society where people regard ending hunger as the ultimate value to prioritize, then we can end hunger when the aggregate sum of endowments equals what is needed to feed everyone. Else, if we regard consumer sovereignty as the ultimate value to prioritize, like we do today, then no wonder we are setting goals for ending hunger by 2030 despite a global food surplus. In economics education and discourse, our results suggest that expenditure can be on self-consumption as well as on consumption of others including dependents, family, neighbours, social circle and society in general. If an individual prioritizes certain ethical goals, e.g., contributing money and time in social causes over self-aggrandizement, then theorizing should not assume it away. Furthermore, leisure should not necessarily imply ‘non-work’. People can choose to donate more time in response to increase in wages since they may have a desire and inclination to help others. Situations often enable people to transform these traits into pro-social actions. Thus, leisure is better understood as non-market saving of labor hours which can be spent on selfentertainment as well as on volunteering. Likewise, philanthropy should not be envisioned in the framework of reciprocity alone. It is not necessary that people dis-save lifetime endowments on self-consumption; they can leave philanthropic bequests and

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endowments, and are not necessarily following reciprocity in such actions. Rather, they may have a strong desire and willingness to help others even when not reciprocated. There are countless examples of people like Mother Teresa and Abdul Sattar Edhi who lived their whole lives serving humanity. Externalities between utility functions can create envy as well as compassion. Humans have the potential to be envious as well as compassionate. Even as neutral observers of the positive phenomenon, we should acknowledge supporting evidence that people help strangers, pay anonymously in charities, and sacrifice their wealth and even their lives in the pursuit of being a good person.