The Role Of Islamic Social Finance In Cushioning The Impact Of COVID-19: The Case Of Zakat

 


28 May, 2020   795 views   Safiudin Ahmad Fuad
Social Finance   Zakat, Social Finance

Governments around the world are doing its best in dealing with the coronavirus disease (COVID-19) outbreak with most countries implementing partial or full lockdown as a mitigative step to control the spread of the disease. In Malaysia for example, the Government of Malaysia (GOM) initiated the Movement Control Order (MCO) on 18 March 2020 and has since opened up the economy sector gradually through conditional MCO from 4th to 18th May. The COVID-19 pandemic has had a huge impact on the country’s economy and the Governor of Bank Negara Malaysia (BNM), Datuk Nor Shamsiah (2020) contends that amid the extended MCO, the unemployment rate will likely surpass the bank’s earlier forecast of 4%.

Almost all sectors of the economy have been affected by the pandemic. Businesses have been disrupted at a global scale, and this has especially taken a huge toll on small businesses and the people these businesses employ. Among the most vulnerable workers are refugees and displaced people who rely on day labour. The Food Security Information Network (2020) estimates that there is a huge risk of hunger pandemic as COVID-19 is projected to almost double the levels of acute hunger from the current 135 million people to 265 million people by end 2020 mainly in low and middle-income countries. The World Food Programme (WFP) Chief Economist, Arif Husain (2020) points out that the pandemic may also cause urban populations, particularly daily wage earners in the informal economies and service sector, to become vulnerable to poverty and hunger,  a result of price fluctuations in the market due to limited stocks.

The third sector of the economy of which zakat is an example can play a crucial role amid these economic challenges. As more people lose their jobs with no means of income, charitable funds are sought out even more now than ever. The next part highlights the key roles played by multiple zakat authorities around the world in combatting the impact of COVID-19 on people’s livelihood.

The Role of Zakat during the COVID-19 Pandemic

Indonesia’s National Zakat Agency (BAZNAS) in its March 2020 Policy Brief advocated the role of zakat in the economic, education, social, medical and also da’wah sector, especially in a time of pandemic. For such time as this, zakat distribution must be done in a timely manner. The urgency is such that the United Nations High Commissioner for Refugees (UNHCR) Refugee Zakat Fund at the onset of the global pandemic in April appealed for USD255 million to curb the risk and lessen the impact of the COVID-19 outbreaks on the vulnerable refugee communities. To expedite the collection of zakat for distribution, scholars such as Sheikh Ali al-Qaradaghi (2020) stated that paying zakat to those affected by the coronavirus at the immediate time is better than waiting for Ramadhan. The Wizārah al-Shuʾūn al-Dīniyyah wa al-Awqāf of Algeria (2020) also said that it is permissible for the payment of zakat on wealth to be made even before the completion of its hawl for the immediate need of people affected by COVID-19. Meanwhile, Dār al-Iftāʾ al-Miṣriyyah (2020) stated that it is permissible for zakat to be distributed to daily-waged workers and other workers whose income have been disrupted by the COVID-19.

In Malaysia, zakat authorities are administered at the state level, and the authorities are responsible for the collection and distribution within its borders. In total, the zakat institutions in Malaysia have collectively distributed RM153.24 million throughout the MCO as at mid-April 2020, and this figure is increasing daily. The recipient varies within the asnaf categories and includes people who were just made destitute from loss of income. Figure 1 illustrates the amount of zakat allocation incentives for COVID-19 by states:

Figure 1: Special Zakat Allocation Incentives for COVID-19 by States

Source: Berita Harian (2020)

By providing monetary and health assistance to the largely low-income families, zakat has enabled them to sustain their lives during these challenging times. As many small businesses are not able to operate and many workers are laid off as companies struggle to stay afloat, zakat distributions to these affected workers ensure that they can stay at home and abide by the MCO. As most of the B40 community has limited to no savings, without financial assistance, they would have to risk not only their lives but the overall population by going out to find any means of obtaining an income.

Global initiatives have also seen a highly applaudable trend with zakat funds being distributed to assist people who were affected by COVID-19. BAZNAS has distributed a total of Rp16.085 billion (RM4.72 million), of which almost half of the amount came from zakat contribution. The contribution was distributed with 72 per cent channelled to health-related programs while 25 per cent and 1 per cent were for social economy and existing programmes respectively. In the UK, the National Zakat Foundation played an important role in providing quick-access for hardship relief grants to destitute Britons in this pressuring times (Nasim 2020). Qatar, through the Zakat Fund of the Ministry of Endowments and Islamic Affairs (Awqaf), distributed a total of QR29.26 million (RM34.69 million) in March 2020 alone which includes monthly support, on-time aid, medical expenses, tuition fees and other assistance. These are few of the many examples where zakat played a huge role in mitigating the economic impact of the COVID-19 pandemic.

Conclusion

Zakat has been proven as a formidable tool in the social finance sphere as a source of relief for individuals who experience economic distress. The inclusive and expanding nature of asnaf definition made it possible for zakat institutions to identify and channel the funds to parties impacted according to the current crisis faced by each era. Zakat can potentially expand its role in preventing poverty, given future economic challenges as presented by the COVID-19 pandemic. It is also imagined that zakat will play a pertinent role in assisting a possible post-COVID-19 Great Depression (Kidwai 2020) by providing liquidity and purchasing power to the affected people. As the world progresses in social development, the traditional modes of giving that are embedded in Islamic teachings offer a way forward (Ahmed 2019).

References

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