Posted on October 4, 2009

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First Islamic Charity Fund Plans Early 2010 Launch

The first fund dedicated to managing the charitable donations of Muslims plans to launch early next year and hopes to raise $750 million from high-net-worth donors during its first twelve months, Reuters reports.

Established as part of an initiative by the Malaysian government, the World Zakat Fund is scheduled to launch during the first quarter of 2010 and hopes to start making philanthropic investments within a year of its launch. To date, the fund has $50 million in soft commitments, according to Humayon Dar, CEO of BMB Islamic, the fund's sharia adviser. Dar predicts the value of the fund could grow to as much as $10 billion over ten years as it raises money from an estimated 40,000 high-net-worth individuals in the Middle East, including some of the four hundred billionaires in the Middle East/North Africa region.

Muslims around the world who are able to save are expected to pay zakat, typically 2.5 percent of any savings accumulated within a year. The amount of zakat distributed in the Muslim world each year ranges between $20 billion and $30 billion, said Dar. The payment of zakat usually is a matter of personal choice, though in some countries it is extracted from savings accounts by the government on a pre-determined day. The funds tend to be used to help those in poverty or debt, or refugees.

According to Dar, 65 percent of the money raised by the new fund will be invested, with a targeted return of 10 percent to 15 percent a year; the balance will be used to fund charitable causes and make philanthropic investments. The latter could include micro-private-equity investments in sharia-compliant business, microfinance activities in rural areas, and sharia-compliant liquid investments. The fund also plans to invest in social projects in the areas of health, clean water provision, education, and housing.

The concept behind the new fund divides Islamic scholars, some of whom argue that zakat should be used for immediate relief rather than invested. Islamic scholar Mohamad Akram Laldin, who serves on the HSBC Amanah Sharia advisory board, said the controversy will make it hard for the new fund to attract conservative Muslims. "The priority is to give, not grow zakat," said Laldin. "It is a matter of principle."

Valente, Cecilia. “First Islamic Charity Fund Plans Q1 Launch.” Reuters 10/29/09.

Primary Subject: Philanthropy and Voluntarism
Secondary Subject(s): International Affairs/Development, Arts and Culture, Human Services
Location(s): International, Middle East

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