Islamic-Social-Finance-Report-2020

ZAKĀH Recommendations • We propose some measures to activate the organization of zakāh, some of which may require a choice between alternatives, as follows: • Implement a national zakāh policy with relevant strategies. • Identify sectors to be exempted. • Study the components of the Algerian economy for better allocation of zakāh. • Incentivize payment of zakah. • Promote zakāh at important religious and national events. • B uild awareness about enhanced role of zakāh. • P romote scientific research in the field of zakāh. 41

Islamic Social Finance Report 2020 3.2 LIBYA and explained in the Prophetic Sunnah, according to the doctrine of Imam Malik, 3.2.1 OVERVIEW OF THE which are explained in the Libyan Zakāh SECTOR11 Law. The Zakāh Department in the General 3.2.2 REGULATORY & POLICY Authority of Awqāf and Islamic Affaires FRAMEWORK12 GAAIA did not have any significant activity prior to the establishment of the Libyan The Libyan government has been Zakāh Fund in 2012.The GAAIA aimed to interested in organizing the collection collect and distribute zakāh funds, but this and disbursement of zakāh funds since policy was not as effective as it should the early 1970s. The Law No. 89 of 1971 have been. There are no statistics or was issued to put in place the appropriate database for zakāh payers or beneficiaries. collecting and distributing policy of Zakāh. This is perhaps due to the widely held This work was not performed under an belief among policy makers that there is no independent financial and administrative acute poverty in the Libyan state, thanks organization, but through a department to the liberal grants, bonuses, salaries and of the GAAIA. In 1980, this law was other forms of support provided by the amended by the Law No. 13/1980. The state to all Libyans, including low-income most important amendments were the people, divorcees, widows, and people with establishment of a special Zakāh Authority disabilities. However, as the population known as the General Authority of Zakāh and commodity prices has continued to (GAZ) instead of being a department of increase, the cash flows have failed to keep the GAAIA. Despite of these amendments, pace and proved inadequate to cover the the GAZ was not very effective for several basic needs of people. reasons. The most notable is the lack of trust between the GAZ and Libyans; In 2012, the Libyan Zakāh Fund, indeed people were convinced that their was established as an independent money would not be spent in the right institution. Its management is concerned way. During this period, there were no with establishing a database for the statistics regarding zakāh payers or beneficiaries and zakāh payers. It beneficiaries. There is no database for manages zakāh funds and adopts modern this sector because the government technology in collecting and distributing was not concerned with this sector. zakāh. The Fund also tries to coordinate This institution became ineffective until and cooperate with other public institutions Decree No. 49 of 2012 for establishing such as the Social Security Fund, Solidarity the Libyan Zakāh Fund, with financial and Fund, and Wealth Distribution Fund to independent management, and adopted its unify efforts and prevent duplication of administrative, regulatory structure, and its distribution of funds. The mechanism regulations from the Council of Ministers. of zakāh distribution is based on eight categories specified in the Holy Qur’ān, 12 Hazem Zohdi, former director of Department of Zakāh distribution & former director of Libyan Zakāh 11 Adel Diab, former chairman of Libyan Zakāh Fund, Fund (Tripoli branch) Islamic and Social Finance for the an interview on 05/06/2017 Arab Maghreb Countries, working paper presented at the workshop, Tunis on 10/6/2017 42

ZAKĀH In 2014, the Zakāh Fund introduced a new collection includes a preparation project that addressed the administrative and supervision division as well as problems and obstacles to its work, a collection division. (3) Finally, the including an attempt to find a mechanism Department of Zakāh distribution, for investing Zakāh funds, and establishing includes a distribution division, and a a new mechanism for the disbursement social researchers division. and collection of Zakāh. However, this law has not yet been established because there These departments and divisions work in a is no political and legislative stability in the consistent manner to achieve the goals of country. the Zakāh Fund. Every branch of the Zakāh fund in each city has a similar structure 3.2.2.1 INSTITUTIONAL STRUCTURE13 to the main structure, so that each branch collects Zakāh and distributes it to the Zakāh Fund supervises 38 branches across beneficiaries in the same city. However, the country. It aims to raise awareness the relationship between the main branch about the obligation of Zakāh, and its (headquarter) and its branches is an importance. It also makes an extra effort organizational supervisory relationship, to establish a database for all the poor were these branches must submit the and needy people throughout Libya. In necessary information monthly and addition, the Zakāh Fund works to improve annually. the efficiency of institutional work by introducing the required technology to Regarding legal issues of the Zakāh provide a service for Zakāh beneficiaries, Fund, the former relies on three special and improving the relationship between the independent advisory committees Zakāh Fund and other public institutions from which the rules for collection and including civil organizations. distribution of Zakāh are derived. The First Committee in each of the Zakāh Chart 3 shows the organizational structure branches in Libya is a specialized of the Libyan Zakāh Fund, which includes: committee for studying applicants of Zakāh beneficiaries and determines the legal 1. Seven main departments: Department (sharia) application for each issue. The of Advisers (consultants), Department second committee is a special committee of Planning and Follow-up, Department pertaining to the department of advisors. of Fund Affairs, Department of Legal Its duties are mainly to find fatāwa Affairs, Department of Internal Audit, concerning all the legal issues raised to Department of Investment , and it by the branches or from the bureau. Department of media.14 Finally, the Bureau of Fatwa (Dar Al Ifta) “is the independent committee affiliated with 2. Three main administrative departments: the President of the Republic or its place” Department of Financial and may require to consult from time to time Administrative Affairs, which is depending on the need. concerned with staff’s and financial affairs. The Department of Zakāh The Zakāh Fund’s staff are qualified Libyan employees receiving their salaries 13 Hazem Zohdi, Islamic and Social Finance for the from the state budget and not from the Arab Maghreb Countries, working paper presented at the workshop, Tunis on 10/6/2017 has not effective yet. 14 Department of investment is still proposal, and it 43

Islamic Social Finance Report 2020 Fund’s funds. This staff tries to establish a necessary information from zakāh payers database in order to work according to the and its beneficiaries. It also tries to know principle of transparency and disclosure, as their views regarding the performance well as by publishing data and information of Zakāh Fund. Finally, specialists from in special reports that are easy for the the Audit Bureau are hired to evaluate the public to understand. In addition, it performance of Zakāh Fund, and to monitor relies on a special questionnaire to get any deviations. Chart (3): The organizational structure of the Libyan Zakāh Fund CHAIRMAN OF BOARD DIRECTORS DEPT OF FUND AFFAIRS DEPT OF ADVISORS DEPT OF LEGAL AFFAIRS DEPT OF INTERNAL AUDIT DEPT OF PLANNING & FOLLOW-UP DEPT OF MEDIA DEPT OF ZAKAH DEPT OF ZAKAH DEPT OF FINANCIAL DISBURSMENT COLLECTION AND ADMINISTRATIVE DISTRIBUTION UNIT COLLECTION UNIT STAFF AFFAIRS SECTION OF SOCIAL PREPARATION UNIT FINANCIAL AFFAIRS Source: Libyan Zakāh Fund 44

ZAKĀH 3.2.2.2 SUPPORTING INFRASTRUCTURE 15 3.3.3 ZAKĀH COLLECTION & There are no supporting institutions for DISTRIBUTION the Libyan Zakāh Fund, such as charities or training centers or other organizations. Table 1 refers to development of Zakāh However, the Zakāh Fund used media Fund during 2010-2016. It indicates that (initially) to broadcast workshops, there is a significant development in seminars and conferences to emphasize collected and disbursed zakāh. Funds the importance of paying Zakāh and its collected as zakāh increased from Libyan important role in the preservation of the Dinars 6.7 million in 2010 (0.007% of GDP) Libyan community, especially under the to 29.3 Million in 2016 (0.04% of GDP). current circumstances. In addition, the On the other hand, the amount of money Zakāh Fund uses social media to publish disbursed to beneficiaries rose from Libyan its reports and the results of its work. Dinars 4.3 million in 2009 to about 21 million in 2015 before falling to 19.6 million in 2016. Table 2. Zakāh funds and expenditures during the period 2010-2016 (Thousand Libyan Dinars) Year 2010 2011 2012 2013 2014 2015 2016 Collection 6,660 4,774 8,531 18,732 22,349 25,349 29,264 Disbursement 4,347 6,169 9,387 12,397 20,603 21,603 19,615 Source: Periodic reports of Libyan Zakāh Fund for the years 2010-2016. The average exchange rate of the Libyan Dinar is 1.301 $ Chart 1: Collected and Disbursed Zakāh during the period 2010-2016 3.2.2.2 SUPPORTING INFRASTRUCTURE 1 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 0 2016 2015 2014 2013 2012 2011 2010 Expenditure Collection 15 Hazem Zohdi, Islamic and Social Finance for the Arab Maghreb Countries, working paper presented at the workshop, Tunis on 10/6/2017 45

Islamic Social Finance Report 2020 Chart 1 shows the collection and It increased from 1,185,372 LYD (9.6%) disbursement of the zakāh funds during the in 2013 to 1,409,535 LYD (6.8%) in 2014. period 2010-2016. It indicates the success But despite the increase, it decreased of the Fund following the communication as a percentage of total by 0.1%. Zakāh campaigns regarding the collection of distributed for Ibn Al-Sabeel rose slightly zakāh and disbursement to the rightful from 300,147 LYD (2.4%) in 2013 to 310,807 beneficiaries. LYD (1.5%) in 2014, but as a percentage of total decreased by 0.9%. The share of the Libyan law prescribes the following staff working on collecting Zakāh fund, allocation rule for zakāh. Table 3: Distribution of Zakāh for the eight categories according to Libyan law Category Percentage Fuqara 55 Amilin Alayha 10 Muallafat Al-Qulub 10 Gharimun 10 Fi Sabilillah 10 Ibn Al-Sabil 5 Source: Libyan Zakāh Law No. 13/1980 increased from 1,113,639 LYD (9%) in 2013 to 1,130,162 LYD (5.5%)15 in 2014, but as Table 3 compares zakāh funds disbursed a percentage of total decreased by 3.5%. to the beneficiaries during 2013-2014. The The Fund did not spend any money for share of the poor and needy people was Muallafat Al-Qulub and for Fi Sabilillah in the largest proportion of the zakāh funds. It 2013, while in 2014 it disbursed 11,500 LYD increased by 4.5% in 2014, from 9,797,489 and 543,165 LYD for the two categories LYD (79%) of the total Zakāh funds to respectively. 17,233,514 LYD (83.5%). This is followed by the money spent on the Gharimun 15 The average exchange rate of the Libyan dinar is (Debtors), people that have debts because 1.301 $ of the rising cost of living, treatment expenses or purchase of basic needs. 46

ZAKĀH Table 3: Distribution of Zakāh for the eight categories according to Libyan law Categories 2013 % 2014 % Fuqara & Masakin 9,797,489 79.0 17,233,514 83.5 Gharimun 1,185,372 9.6 1,409,535 6.8 Ibn Al-Sabil 300,147 2.4 310,807 1.5 Amilin Alayha 1,113,639 9.0 1,130,162 5.5 Muallafat Al-Qulub 0 0.1 Fi Sabilillah 0 0 11,500 2.6 Total 0 100 543,165 100 12,396,647 20,638,684 Source: Periodic reports of Libyan Zakāh Fund for the years 2010-2016. Chart 2 supports the above table, and In summary, no zakāh funds have been shows zakāh funds disbursed during the spent on the following categories: year of 2014, indicating that most of these Muallafat Al-Qulub and Fi-Sabilillah. This funds were spent on the poor and needy is because issuing a fatwa by Sharī‘ah people, according to the regulations on the committees is quite complicated (i.e. the disbursement of zakāh funds in the Libyan process of issuing a fatwa regarding zakāh law. distributions is problematic), especially in the current situation in Libya. Chart 2. The distribution of zakāh funds for the years 2013-14 Poor & Needy 20,000,000 Debtors 18,000,000 Ben Sabeel 16,000,000 Staff 14,000,000 12,000,000 Maollafat Qulobhm 10,000,000 Sabeel Allah 8,000,000 2014 2013 6,000,000 4,000,000 2,000,000 0 47

Islamic Social Finance Report 2020 3.2.4 TRANSPARENCY, ACCOUNTABILITY & GOOD Zakāh branches throughout the GOVERNANCE Libyan cities collect all categories of Zakāh, including Zakāh al-Fitr, al- The Zakāh Fund publishes monthly and Kaffaaraat, charity, sheep, agricultural annually all necessary data and information, crop, and other types of Zakāh. The according to the principle of transparency Zakāh Fund collects directly from and disclosure. Zakāh Funds and Zakāh the people, businessmen, and firms. distribution will be published in an easy Zakāh is collected in three different way, so it can be understood by all people. ways, through the staff of Zakāh There are four official and non-official bodies Fund, bank accounts, and directly controlling and monitoring the Zakāh Fund. through branches. As shown in Table This mechanism contributes to public trust (1), Zakāh funds collected increased and to the increase of the number of Zakāh from less than 6.7 million LYD in payers. These bodies are: 2010 to 29.3 million LYD in 2016. This is due to people’s awareness of the • C hairman, Board of Directors: The obligation of paying Zakāh, and their chairman implements the main strategy trust in the Zakāh Fund. for Zakāh Fund and its branches. The chairman also supervises the However, distribution of zakāh funds implementation of a yearly plan and increased from 4.3 Million LYD in controls its work. 2010 to 21 Million LYD in 2015, and then decreased to 19.6 Million • A dministrative Authority: It is a public LYD in 2016. Zakāh collections are institution caring about supervision and distributed for the benefit of all control of all public entities. It appoints legal categories explained in Qur’ān employees, managers, and Chairman of and Sunnah. In 2014, the number Board. of Zakāh payers reached a peak of 33,356. Most of the beneficiaries • Libyan Audit Bureau: It monitors all are the needy and poor (31,830 the Fund transactions including Zakāh beneficiaries), followed by staff (595), collection and distribution. It also Ibn Al-Sabil (535), and Al-Gharimun controls the allocated money for Zakāh (363). However, the category of Fund from state budget, and ensures Sabeel Allah and Muallafat Al-Qulub that financial regulations are followed. are less than 20 beneficiaries each. The category of the needy and • P ublic: This category includes zakāh poor people is about 55% of total payers and charities in order to ensure beneficiaries. Payments were made that Zakāh Funds are directed to the in the form of monthly grants for right beneficiaries, by informing them divorced and widows, sick people about the periodic reports of Zakāh and disabilities, large families Fund and presenting their comments whose income is very low, home through the various complaints. maintenance, support to youth to get married, and help to find jobs to the poor and needy. 48

ZAKĀH 3.2.5 STRATEGIC ANALYSIS & Fund and other state institutions, RECOMMENDATIONS such as the Social Security Fund, Ministry of Social Affairs and the Strengths Wealth Distribution Fund, which results in double payment of • Libyan Zakāh Fund has a financial aid to beneficiaries. professional and educated staff. • The lack of a unified database • T here is always consistency between the Zakāh Fund and the between the main branch and other aforementioned institutions. branches throughout the Libyan cities. • The Libyan Zakāh Fund is surrounded by laws, regulations and • D uring the last five years, Zakāh fatāwa that restrict and complicate Fund has achieved several its work. objectives including the definition of Libyan Zakāh Fund, the importance • T he Zakāh Fund needs to introduce of Zakāh for Zakāh payers, and the technology and electronic for community through different programs used in establishing broadcasts, which led to an increase databases and tabulating and in Zakāh funds dramatically. preparing periodic reports that showcase the Fund’s work results. • Z akāh Fund seriously tries to establish a database containing • The Zakāh Fund’s lack of Zakāh payers and beneficiaries. full disclosure and complete transparency when it comes to the • Reviving the obligation of Zakāh amounts collected and disbursed for public, and accepting zakāh and the actual Fund’s contribution to and charity and spending them for improving the recipients conditions beneficiaries with confidence in accordance with the provisions of Opportunities Islamic law. • T he legislation of Zakāh funds Weaknesses investment is crucial for the Libyan Zakāh Fund. • Libyan Zakāh Fund records financial surplus at the end of the financial • Calling for replacing Zakāh with the year for several reasons, the most tax. important of which is that the rates of Zakāh distributions are defined in • There is a proposal to amend Law Libyan law, and cannot be violated. No. 49/2012 on the establishment This is not helpful to the economic of the Zakāh Fund by making it a and living conditions of the people. financially and legally independent entity, and not affiliated with the • Lack of coordination and GAAIA, and giving it broader powers communication between the Zakāh to carry out its duties and functions. In addition, the Zakāh Fund remains 49

Islamic Social Finance Report 2020 restricted by law and regulations. • P olitical, security and economic However, the amendment proposals instability negatively affects Zakāh will support the Zakāh Fund to payers and the citizenry in general. achieve its goals. The payers’ businesses/activities are affected by the instability on the Threats one hand, and on the other hand, instability leads to poverty rates • The attempt to merge the Zakāh increase, making it difficult for the Fund with the General Authority for Zakāh Fund to help all beneficiaries. Awqāf and Islamic Affairs GAAIA, which may frustrate its staff. 50

ZAKĀH Recommendations the burden on the fund due to the increase in the number of poor and Despite the development and progress of the needy, and shortage of Zakāh funds. Libyan Zakāh Fund, it suffers from difficulties Investment of Zakāh Funds in projects and obstacles that must be resolved. Below that generate income can support are highlights of the key issues and some Zakāh Fund to achieve its objectives. recommendations: • C oordination between Zakāh Fund and • M ore researches, discussions, and other state institutions, especially Tax studies are needed with Sharī‘ah Authority, Ministry of Social Affairs, Committee of the Fund and Dar Al- Social Security Fund and Wealth Fatwa, and more attention must Distribution Fund. be given to jurisprudence of the various Zakāh issues, with regard to • The material and moral support must the inclusion of some segments of be provided by the state to the Zakāh those entitled to Zakāh in the eight Fund so that the Fund can revive categories, for example, Sabeel Allah the obligation of zakāh, charity and and Ibn Sabeel. donation. • S ome of the departments of the • Amendments and modernization of Zakāh Fund and its branches depend the laws and regulations of the Zakāh on manual classification and manual Fund should be undertaken. registration, which affects the performance of the Zakāh Fund and its • It is recommended to establish a functions, the Zakāh Fund must rely on Maghreb regional zakāh organization computer automation as a key factor that brings together Arab Maghreb for development of Zakāh work. countries to supervise the coordination of business between the • I t can be said that the Zakāh Fund zakāh funds and the exchange of aid in Libya works alone in collecting and expertise. money and disbursing it to its beneficiaries, without cooperation of • T he different zakāh funds need more other institutions, so it is necessary communication with one another, and to find partnerships with charities, one of the most important things that non-governmental and governmental makes this communication strong and institutions to stimulate this sector. smooth is the presence of clear and highly efficient standards that evaluate • There is redundancy in the collection zakāh institution’s work. of funds in Libya, which appears in the tax authority in Libya and Libyan Zakāh • W e recommend finding accurate Fund. There are appeals to match standards to evaluate all zakāh them and unify their efforts. business (administration, Sharī‘ah, legal, financial, accounting, economic, • More attention must be given to technical, communication, charitable studies, researches and discussions projects, etc.) to find a Fatwa for the investment of zakāh funds, in order to try to reduce • This would bring the Zakāh Funds closer together and ensure a level- playing field for them all. 512

Islamic Social Finance Report 2020 3.3 MAURITANIA16 The Committee had to examine the following points: 3.3.1 OVERVIEW OF THE SECTOR • The permissibility of the state taking over zakāh matters. Historically, Mauritania did not benefit from a state-operated system of zakāh • The limits of the state’s intervention management after the Almoravid dynasty in zakāh matters. era, as the country did not know of a central state from that moment until the • W ays of zakāh collection. French colonization. The Mauritanian people were mainly living in tribes and • Experiences of other countries and in the countryside. A strong drought hit institutions. the country in the 1970s, which harmfully damaged the cattle that constituted the • R ole of zakāh in poverty alleviation. basic wealth of the population. This was the major factor that sparked the tribe’s The recommendations of the Zakāh urbanization and their migration to the Committee included the following. main cities in the country. 3.3.2.1 INSTITUTIONAL STRUCTURE18 It was only in the early 1980s that the state established a public institution for On the permissibility of the state taking zakāh and awqāf under Decree No. 119/82, over zakāh matters: providing with some degree of financial independence. • Z akāh is the third pillar of Islam and therefore the Committee considers 3.3.2 REGULATORY AND POLICY the importance of organizing it FRAMEWORK to ensure its performance in the required manner. In 2003, the Finance Law stipulated that zakāh would be deductible from the income • There is a sovereign factor in it and tax. However, this provision remained the role of the Governor in this field unapplied. In 2005, at the request of the is important. Minister in charge of the Islamic Affairs, a technical committee17 was formed to • Zakāh is a means to revive the consider the study of zakāh collection and civilizational dimension of the the means to do it. central state. 16 Paper “Overview on Zakāh & Awqaf Sectors in • It is a key factor in the reduction of Mauritania”, Abdallahi Ould Addoud, Deputy CEO of the poverty. Awqaf National Institution (Mauritania), presented during the Kick-off Workshop of the “Islamic Social Finance • A center for the attraction of foreign Report”, held in Tunis on 10 June 2017, and co-organized zakāh should be set up. by IRTI (IsDBG) and Zitouna Tamkeen MFI 17 Unsigned draft of the minutes of the Technical • I ssues relating to taxation, public Commission entrusted in 2005 by the Minister of Islamic expenditure, and transparency in Affairs to study the practical arrangements for the matters zakāh disbursement should be of the Zakāh in Mauritania. addressed. 52 18 Ibid

ZAKĀH • There is a need to improve the The Committee also noted the need to payment of zakāh among many high facilitate overcoming all obstacles that may net-worth individuals. prevent the collection of zakāh. Among these obstacles: On the limits of the state’s intervention in zakāh matters: • A civilizational barrier, related to the absence of the concept of an Islamic The method of the intervention of the state state should take the form of supervision, thus providing flexible methods of collection • A psychological and social barrier, and disbursement to the expected zakāh related to the non-responsiveness of authority and opening the way for Muzakkis the muzakkis to the method of zakāh to be aware of the way their zakāh is spent. collection. The Committee concluded that the The Committee also recommended a gradual following institutional actions are increase in zakāh collection as follows: necessary: • T he zakāh authority should initially • T he enactment of a law regulating limit the collection to 50%, leaving the the collection and disbursement of rest to the muzakki to distribute by zakāh. himself. • The establishment of an • S tarting with the registered independent institution to deal with institutions. the collection and disbursement of zakāh. The Committee also recommended to: • T o provide the institution with • B enefit from existing institutions and the necessary means to carry structures (Awqāf National Institution, out its mission, which requires Association of Mauritanian Scholars independence and protection, League, Committee of Mosques and through: Madrasas19 ). * G iving it the appropriate legal • T he state shall bear the costs of the form establishment and management of the authority during the first two * Providing it with the appropriate years. human capital through • T he work of the authority shall be ◊ Establishment of a legislative concentrated during the first two council comprising of all years in the city of Nouakchott and types of stakeholders other major cities, if possible, after which a simplified regional office will ◊ Establishment of an executive be opened at the level of the internal body with the necessary regions. executives to manage it (different specialties) However, these recommendations, which were accompanied by the preparation of a * Providing it with the necessary draft law that specifies the methods of zakāh equipment and means 19 Traditional Islamic Schools 53

Islamic Social Finance Report 2020 collection and disbursement, are yet to be • There are no studies that deal with implemented. the economic and financial aspects of zakāh. Therefore, until today, there are no official structures responsible for the collection Opportunities and distribution of zakāh in the country and the zakāh is still practiced in an • T he existence of an Islamic financial informal manner. There is no systematic system in Mauritania (Islamic data available on zakāh collection and banks, insurance companies). distribution. • Requests from a large part of civil 3.3.3.2 SUPPORTING INFRASTRUCTURE society to develop the sector. In Mauritania, we do not find an entity that • W orsening social inequality and the is fully dedicated to zakāh knowledge, Government’s need for additional researches, training, etc. However, the financial resources. zakāh rules are taught in the Islamic universities and schools and mentioned in • M obilizing financial resources from the Juma’ah (Friday) sermons. local communities. 3.3.4 TRANSPARENCY, Threats ACCOUNTABILITY & GOOD GOVERNANCE • T he process faces roadblocks created by officials trained in Although the zakāh collection and Western countries and vested distribution are not institutionally organized, interests. Mauritanian people usually give importance to disbursing it to one of the deserving • G overnment seems to be under fear categories. Therefore, they may disburse it of creating additional tax burden on by themselves or give it to a reliable person citizens. with proven honesty to do it on their behalf. Recommendations 3.3.5 STRATEGIC ANALYSIS & RECOMMENDATIONS • T he speedy enactment of a law regulating the collection and Strengths disbursement of zakāh • The existence of a draft law that • T he establishment of an specifies the methods of collecting independent institution to deal with and disbursing zakāh, the collection and disbursement of zakāh Weaknesses • T here is no special law that encourages the payment of zakāh in Mauritania. 54

ZAKĀH 3.4 MOROCCO At present, Morocco is one of the Muslim countries that does not yet benefit 3.4.1 OVERVIEW OF THE SECTOR systematically from the zakāh funds. However, since 1979, Morocco began to Since the Islamic conquest, Morocco think about the integration of zakāh into became one of the Islamic countries the economic and social fabric at the where most of the successive states and initiative of the late King �asan II. And as dynasties looked after organizing the from then, a private account for zakāh was collection and disbursement of zakāh as added in the Finance Act of 1980 called a third pillar of Islam and as a financial “Zakāh Fund”. This account includes a obligation taken from the rich and given credit balance for zakāh collections and to the poor. This situation continued until a debit balance for the disbursement of the colonialism period in the beginning of zakāh funds, but no provisions have been the last Century, when the state stopped recorded to date. Eighteen years later, the collection of zakāh and it was replaced zakāh was again under focus at another by the so-called system of arrangement initiative of the late King �asan II in 1998. “Attartib system”20 . Since then, the The Ministry of Awqāf and Islamic Affairs, Moroccans have been giving out their in collaboration with the Ministry of zakāh individually in an informal manner. Economy and Finance, prepared a draft law to organize zakāh and prepare guidelines The first phase was from the Islamic for zakāh in collaboration with some conquest until the establishment of Moroccan Sharī‘ah Scholars. However, the the Almoravids dynasty (1056-1147) death of King �asan II in 1999 halted the when zakāh was collected and spent project. in a decentralized manner by the local authorities, and the surplus was given to In 2003, the King Mohammed VI Bait al-Mal. The second phase was after reintroduced the idea of organizing zakāh. the Almoravids until the beginning of the But there has been no implementation to 20th Century. During this period, the system date, although the Minister of Awqāf and shifted in favor of centralized management, Islamic Affairs mentioned in 2009 the with exceptions sometimes in favor of expected issuance of a royal decree for the decentralized local spending, especially establishment of the Zakāh Fund. for zakāh al-fitr. And the third phase was the era of colonialism when the state It should be noted that the estimates abandoned its role in zakāh management. of zakāh collections in Morocco for the period 2015-2017 range between 2.7 and 20 The era of Hassan I (1873-1894), “the system 3 billion USD, or about 2,77% of GDP; the of arrangement of charity” was arranged next to Zakāh, estimates are from 0.8 to 0.9 billion USD in which Zakāh was collected beside some taxes. This for agriculture GDP and from 1.9 to 2 billion tax was one of the most important direct taxes before USD for non-agriculture activities. the French protectorate in Morocco. The arrangement or “Attartib” includes three taxes: the tax on annual In case of zakāh institutionalization, the agricultural crops, the tax on fruit trees, and the tax potential of zakāh collection is between on livestock. See: http://abdelghafour19.blogspot. 0.9% and 2.15 of GDP, and ranges from 0.9 com/2015/03/blog-post_7.html 55

Islamic Social Finance Report 2020 to 2.3 billion USD. The potential of zakāh collect and distribute zakāh in accordance distribution is between 0.81 and 1.94 of with the Supreme Committee’s program. GDP, and ranges from 0.8 to 2.1 billion USD. It is noteworthy that besides the official 3.4.2 REGULATORY & POLICY efforts to organize zakāh, there were other FRAMEWORK Moroccan efforts to institutionalize zakāh, especially the efforts of the “Moroccan Several questions have been raised in Association for Studies and Research Morocco about the reasons for the non- in Zakāh”, which was established in activation of the Zakāh Fund since 1980, 1994. The association has undertaken despite its inclusion in the Finance Law, several initiatives to urge and encourage and especially after the speech of King decision makers to institutionalize zakāh �asan II in 1998 when he announced in Morocco, like the letter that was sent the state’s supervision on reviving and to the Moroccan Government (1998- organizing zakāh. In the same year, a 2002), in which the association called committee composed of representatives of for activating the Zakāh Fund, which was the legislative and executive bodies, some initially included in the Financial Law Sharī‘ah scholars of the Kingdom, as well since 1980. A proposal21 was submitted as some experts in public finance, prepared reflecting its perception about how to a project about how to organize zakāh in implement and organize zakāh in Morocco. Morocco. However, there was no further The cornerstones of this proposal are: (A) action in this regard. Organizing the collection and distribution of zakāh by establishing independent regional This project includes the initial conception funds with public interest status, and a of the structure of the zakāh institution, central fund for planning and coordinating which will supervise the collection and without any direct interference of the state; distribution of zakāh. The main elements (B) Adopting the principle of the optional adopted in determining the institutional payment of zakāh and the encouragement framework for zakāh are to make this of this option; (c) Establishing a Sharī‘ah institution under the direct supervision of Supervisory Board. This proposal also the King, emphasizing the role of zakāh as includes the launch of a comprehensive the third pillar of Islam and its importance awareness program in the country about in achieving solidarity and compassion zakāh, its provisions and purposes, and among the people, and ensuring the the creation of a database of zakāh flexibility in structuring the institution to beneficiaries. enhance citizens’ confidence. The Moroccan Association for Studies The project proposed the establishment of and Research in Zakāh also seized the a “Supreme National Committee for Zakāh” opportunity of the National Taxation headed by the King, which shall work on a Conference in 2013 about Tax Reform to program that includes specific objectives present a memorandum to the Ministry within the strategy presented to the King. of Economy and Finance summarizing It also proposed the establishment of regional committees for zakāh that will 21 The proposal was published in 7th and 8th edition of the Journal of Zakāh Issues in 2002. 56

ZAKĀH its vision of how to combine zakāh and integrate, in the list of deductible taxes in Morocco and its proposal for a charges from the taxable base, the new outlook to give zakāh a privileged zakāh paid to other categories of position within the public finance and tax beneficiaries other than the Zakāh system in Morocco. In this memorandum, Special Fund, the Association clearly adopted the idea of revising the tax system in a new model that • Revise and complete the article 10 is different from the models that call for to indicate the categories of zakāh the application of new taxes, such as the beneficiaries eligible for this tax tax on wealth, capital tax, inheritance tax deduction. and social solidarity tax, that completely disregard the zakāh obligation, which is • E nsuring the tax neutrality to avoid a pillar of Islam and an important part of any additional tax pressure. the authentic Moroccan civilization and the cornerstone of Islamic economy. In • Opening the door to donations to this context, the Association presented ensure the collection of charity several proposals that would achieve a funds. smooth integration of zakāh in the tax system in Morocco. The last memorandum On the other hand, it should be noted that was presented to the National Taxation Morocco has a legal framework since Conference about Tax Reform that was 1958 for the associations of public and held in Rabat in May 2019. The proposals charitable interest status, which operate include the following recommendations: in the social and humanitarian sectors, and thus can benefit from the zakāh • The introduction of an optional funds besides donations. This framework zakāh system by adding some items provides a broad potential for associations concerning the integration of Zakāh to fund their programs and projects. regulations within the framework of General Tax Code. In this regard, public funds originating from the public sector can be distinguished from • Adopt the necessary regulations for other funds, whether they are from self- the activation of the “Zakāh Special financing, contributions from individuals, Fund” provided for by the finance from private sector, from foreign or public act since 1980. charity petitions that was regulated by a law act in 1971. The purpose of the Act • The coexistence between the tax is to facilitate the associations’ access and zakāh systems. to funds and property through various campaigns aimed and addressed to the • The right to benefit from the public. deduction from the tax for the amount paid to the “Zakāh Special The Prime Minister’s publication on the Fund”. partnership between the government and Associations, issued in 2003, is also • R evise and complete the article 10 considered one of the most important of the General Tax Code in order to references of the institutional framework 57

Islamic Social Finance Report 2020 of the association which constitutes an the collection and distribution of zakāh. important turning point in the history of the relationship between the Government The proposal of the Moroccan Association and associations. The framework of for Studies and Research in Zakāh includes partnership and contracting is based on the creation of a central fund for zakāh results and performance, the optimal under the supervision of a national council, targeting of priority categories and areas and regional funds for zakāh under the of intervention, good governance and supervision of regional councils. The simplification of the provision of public Association also advises the creation of support, and improvement of coordination links between the various branches in the and control. country, in which a group of persons meet to collect their zakāh in one fund and use Following the adoption of the Kingdom’s it in social projects for the benefit of those new constitution in 2011, it became who are entitled to zakāh. Therefore, this necessary to develop the organizational bilateral cooperation, within civil society, legal framework for the association. contributes in human development by Support and inclusion in the democratic means of the basic legitimacy of zakāh. transformation process is envisioned by the constitutional document, in On the actual level, the public interest and which civil society and associations charity association may be considered as should help to protect human rights, an important institutional structure in the development and awareness. As a result zakāh sector. This status entitles them with of interactive meetings and seminars many privileges and rights more than the with civil actors organized in 2015, a other institutions because they can appeal code for the associations was prepared for public charity. The total number of taking into account the new constitutional associations recognized as public interest requirements. The code limits the state was up to 217 in 2016 out of 130,000, a of fragmentation of laws related to quarter of them engaged in social work.22 associations, especially with respect to the principles of incorporation and dissolution, Practically, the Moroccan Association for public interest status and controlling Studies and Research in Zakāh and the the public charity petitions as well as “Journal of Zakāh Issues” which is issued institutional and financial support. by the Association, is one of the main supporting infrastructures for zakāh sector 3.4.2.1 INSTITUTIONAL STRUCTURE & in Morocco. SUPPORTING INFRASTRUCTURE Thus, in order to increase awareness of the The project prepared by the Ministries of importance of zakāh and re-activate its role Awqāf and Islamic Affairs, and Economy in sustainable development, the Moroccan and Finance includes the main structures Association for Studies and Research in for the organization of zakāh in Morocco Zakāh was established in 1994 by a group which are the establishment of a Supreme Committee for Zakāh for planning and 22 from the report published on the website of the coordination, and regional committees for General Secretariat of the Government on 27 June 2016: http://www.sgg.gov.ma/Portals/1/association_pdf/liste_ Associations_RUP.pdf?ver=2016-01-15-145828-610 58

ZAKĀH of scholars in various fields of knowledge, at the same time on the subject specialists in the Islamic economy, of zakāh. At the end of 2016, Dar businessmen and many economic and Al-Hadith Al-Hasaniyah School, in social actors. Since its establishment, it a well attended event, discussed a has been working to spread awareness PhD thesis prepared by a member among the citizens of the necessity of of the Constitutional Council of the zakāh, the promotion of studies and Kingdom on the topic of the “Theory scientific research and seminars on zakāh. of Integration between Zakāh and One of the most important achievements Tax”. in this section is the participation in many international conferences, regional and • H igher Institute of Commerce and national seminars on zakāh, organizing Business Administration, at the workshops on zakāh and issuance the beginning of 2017, also received “Journal of Zakāh Issues”. This journal a high attendance during the has been publishing reports on research discussion of the graduation thesis and studies on zakāh since 2000, and 38 to obtain the national diploma of editions were issued by the end of 2016. accounting (CPA) in the subject of The journal deals with the issues related zakāh accounting, with the presence to zakāh and its jurisprudence in the past of the Prime Minister. and present, and spreading the awareness of the importance of this pillar of Islam, • Three editions of research seminars highlighting its economic, social, political about “Zakāh, Waqf and Charitable and educational role and effectiveness, and Work” were organized in April defending the importance of institutional 2017, May 2018 and June 2019 at application of zakāh and proposing Mohamed V University on the theme solutions to integrate it into the financial “Contemporary Islamic Thought and economic issues of Morocco. and Issues of Society and the Environment in the Mediterranean The scientific research in Moroccan World”, in cooperation with the universities is one of the supporting Moroccan Association for Studies infrastructures in the field of zakāh. This and Research in Zakāh. subject receives increasing attention among postgraduate researchers. This was 3.4.3 ZAKĀH COLLECTION & facilitated by the supervision of students DISBURSEMENT who are the members of the Association. In recent years, several PhDs have discussed In an optimistic scenario, the estimation about zakāh institutionalization in Morocco of zakāh funds can range from 2.5% to and many master’s theses have been 3% of GDP, representing about USD 2.5 to completed in different aspects of zakāh. 3 billion, in addition to zakāh al fitr, which Here are some examples: ranges from $20 to $30 million annually. However, the expected amounts of zakāh • The Faculty of Literature and Human remain relatively low, thereby affecting the Sciences in 2014, for the first time in impact of zakāh on development. its history, discussed seven theses 59

Islamic Social Finance Report 2020 Moroccan Association for Studies and The Association also believes that the Research in Zakāh, in one of its previous social investment approach should be proposals on the priorities of distribution of adopted for zakāh beneficiaries based on zakāh, advised for the allocation of 3/8 of the economic empowerment of the poor zakāh collected for the poor and needy, 3/8 which is considered as an essential source to help the unemployed and encourage self- of wealth. This is in addition to zakāh employment, 1/8 for zakāh workers and support for Islamic microfinance activities 1/8 for literacy promotion. These priorities by providing zakāh resources to the may be modified or other priorities may institutions offering Islamic microfinance be added due to a greater effort in zakāh activities and services, and zakāh funds distribution to enhance the production in the form of poor portfolios, as well as and to increase the national wealth and the distribution of zakāh in the operational development. fields in order to give this duty the proper developmental character. In November 2014, a memorandum to the Economic, Social and Environmental 3.4.4 TRANSPARENCY, Council about the contribution of zakāh ACCOUNTABILITY & on the distribution of wealth in Morocco, GOVERNANCE advised that the support of the poor should be reconsidered by allocating direct The criteria for accountability and support from zakāh funds in a manner that transparency can be derived from the reduces the gap between the community contents of the aforementioned proposals. classes. Accordingly, financial allocations It emphasizes separation between should be allocated through the zakāh the general and zakāh budget, so that mechanism, which is specific and direct to the zakāh institution is financially and these categories. administratively independent, subject to financial and Shari’a supervision, Regarding the proposed projects for the annual monitoring, good governance, distribution of zakāh, the association accountability mechanisms and reports on has a clear vision of the use of the zakāh financial and administrative achievements. mechanism based on two main axes: direct support for the poor and the destitute, In this context, it is proposed that and on the other hand, the integration of the institution must be subject to the the unemployed who are able to work in supervision of the Supreme Council of income generating projects and programs, Accounts and the General Inspectorate of in human and social development. Finance, and the publication inspection report to establish the trust in zakāh The Association considers that it is institution. necessary to identify the needs of all the participants in accordance with the 3.4.5 STRATEGIC ANALYSIS & criteria of priority and regional, social and RECOMMENDATIONS economic environment, rural or urban, and to determine them as per the program In this segment, we outline some of the achievement and the extent of social strengths, weaknesses, opportunities and disability. 60

ZAKĀH threats posed by the organization of zakāh the organization of zakāh. in Morocco: • A bsence of a national policy on Strengths zakāh system. • T he announcement on several • A bsence of privilege in the existing occasions the intention of the state tax system, such as deduction of to organize zakāh. the amount of zakāh from the tax base. • R eference to the Zakāh Fund in the Finance Law. • T he weakness of economic and social impact of voluntary and • H igh level of community awareness individual payment of zakāh. on the importance of zakāh. • Zakāh is not institutionalized in Weaknesses covering the needs of the poor that the state is also unable to cover • Absence of formal or systematic especially in the main social sectors organization of zakāh. such as health and social welfare. • The fluctuation of political views • L ack of national campaigns to about whether to proceed or delay collect donations from zakāh funds 61

Islamic Social Finance Report 2020 in the context of seeking public budget. The zakāh budget, in the charity for the benefit of the groups case of the regulation of zakāh, can entitled to zakāh. more efficiently cover the targeted portion of zakāh categories. • Lack of integration between zakāh and other forms of Islamic • A dvanced technological means finance such as waqf and Islamic available in Morocco to raise the microfinance. funds. • Absence of university programs for • Possibility of supplying the zakāh the preparation of highly-qualified institutions with a preferential tax specialists in the field of zakāh. framework through tax exemptions for all its actions and operations Opportunities nationally or locally, like waqf. • T he existence of formal and civil • G reat interest in research and perceptions to organize zakāh. seminars in the field of zakāh • T he existence of many community • E xistence of great interest among needs that the state budget is a wide range of economic actors unable to meet, and zakāh can to perform their zakāh duties contribute to cover them. institutionally. • Launching the activity of Threats participatory banks and Islamic finance in Morocco • F ear of using zakāh funds in other means than its legitimate use. • The possibility of expanding the competencies of the Sharī‘ah • F ear of creating an additional Committee for participatory finance tax burden on citizens in case of to cover the field of zakāh mandatory application of zakāh. • T he possibility of expanding the • F ear of using the information powers of the Supreme Council authorized in zakāh as a basis for of Accounts and/or the Supreme tax audits. Council for Financial Control of general Waqf to include also the • Fear of applying zakāh to groups of financial control of zakāh. society without others or applying them to other activities and • T he possibility of collecting exemptions. donations from zakāh funds in the context of seeking public charity. • A bsence of university programs for the preparation and rehabilitation • The existence of allocation of of highly competent frameworks important financial resources to the specialized in the field of zakāh. social sectors within the general 62

ZAKĀH Recommendations • Motivate zakāh payment in the form “zakāh links” among In this report, we propose some measures individuals in the framework of to activate the organization of zakāh, institutionalizing zakāh. some of which may require a choice between different proposals: • S tart to collect zakāh from institutions and companies. • The enactment of a national zakāh policy that affirms the status given • S haring of information regarding by the state to the application the top payers and the lists of of this pillar to the benefit of the beneficiaries of the distribution of country and its citizens. zakāh to increase the confidence of the citizens. • Exemption of some sectors at the beginning of the application of • Focusing on the distribution zakāh in the framework of gradual of zakāh on the operational application. areas that will spread the spirit of initiative and work for the • Starting the application with beneficiaries. categories that will give impetus to the success of the zakāh • Allocation of consumption zakāh institutions such as participatory to the poor who are unable to banks, telephone companies, high work. value-added productive sectors and institutions that benefit from • Choose the most important great privileges by the force of law religious and national events and or the nature of the market. the best methods to promote the collection of zakāh. • A pply the 80/20 rule on the issue of the mandatory rule and the • I ntensification of awareness issue of priority sectors in the activities to make zakāh a performance of zakāh and thus distinguished community affair. apply the 20% premium. • P romotion of the scientific • Starting with the obligatory research in the field of zakāh. application of zakāh on a person who has a zakāh “Nisab” of more • F ollow up on the progress by the than ten times the zakāh, and the Supreme Scientific Council in rest is applied gradually thereafter. Morocco, and give more attention to the various zakāh issues. • Study the components of the Moroccan economic system to allow accurate estimation of the zakāh. 63

Islamic Social Finance Report 2020 3.5 TUNISIA French protection), took only 36 Tunisian riyals a year from all the inhabitants of 3.5.1 OVERVIEW OF THE SECTOR cities and tribes. Until Sadiq Bey doubled the tax amount from 36 Tunisian riyals The importance of studying the historical to 72 Tunisian riyals and this led to the foundations of the zakāh Institution in revolution. Ibn Abi al-Diyaf also mentions Tunisia stems from the fact that it provides that another institution in Tunisia was us with a civilization-based benchmark, a existent, the Waqf Administration, that sensible point of reference through which the Bey resorted to its funds to pay the one can evaluate Tunisia’s experiences in budget deficit. However, we do not find any this sector before the independence from mention of the zakāh institution, even by the French and beyond. And by this, one reference to other sources. can help inspire the drawing of the future directions for this sector. After the independence in 1988, an attempt was made by civil society in the city of Despite the scarcity of information related Sfax (capital of the south of Tunisia), to to this sector, compared to the awqāf form the founding body of an association sector, some historical sources have for the collection and distribution of talked about the role of governors and zakāh. It was founded by Ahmad al- princes in Africa during periods of power Aswad26 . One of its members, Al-Bashir and stability, in collecting and distributing bin Jedidia27 , informed us that the first zakāh, whether within the office of year, the association collected 300,000 Kharaj or independently. These sources Tunisian dinars and one million Tunisian also spoke in the era of Al-Bayaat about dinars during the second year. However, their role in establishing Takayas23 and this experience ran into strong political Bimirmarstanaat24 , and how to employ and administrative opposition and ended zakāh funds and distinguish them from in failure. Subsequently, a Zakāh Fund other funds collected in addition to was established at the request of the waqf and donations, to finance projects government. Al-Tuhami was elected as benefiting the poor and people of different Chairman of the Higher Islamic Council needs. and Director of Al-Zaytouna University. This Fund will be discussed in detail later. It is certain to us, through some sources and references, that the zakāh 3.5.2 REGULATORY & POLICY institution did not exist in Tunisia before FRAMEWORK independence. In his book “The defiance of the people of the time with the News of The collection and distribution of zakāh the Kings of Tunisia and the Era of Safety”25 requires a license to be obtained from the , Ahmad bin Abi Diyaf mentions especially Presidency of the Government pursuant in the section devoted to the revolution of to the higher order of 1922 revised on 21 Ali bin Ghathem, that the ruling authority December 1944. However, there is no legal at that time (i.e 20 years before the text that prevents charities from accepting zakāh money in cash or in kind. This is 23 Free of charge motels 24 Free of charge hospitals 26 No additional information about the person 25 P5-6 27 Retired Professor of Islamic Education 64

ZAKĀH done by many of these associations, and It was asked for its chapters to be shortened, donors are assured to have their money and some amendments were made to it spent in legitimate ways. so that the Constituent Assembly could discuss and ratify it. It was condensed into 3 As part of the institutionalization of this chapters (the first in the creation, the second sector and other sectors of Islamic finance, in the resources of zakāh funds, the third in a National Committee for the Development the Sharī‘ah Supervision Committee). For the of the Legislative Framework for Islamic same purpose, an order for administrative Finance was established by the Ministry of and financial management was prepared, Finance in 2012. It was tasked with forming including 30 chapters in 2 sections. And seven subcommittees (Islamic Contracts to this date, this is still on the National Committee, Standards Committee, Islamic Assembly’s agenda. Banking Committee, Islamic Funds Committee, Awqāf Committee, Zakāh • A second Ministerial council was Committee) in order to prepare projects of conducted for the same purpose interest in Islamic finance. The Ministry of on 2 May 2014, after which the Religious Affairs has the task of preparing government spokesman called upon the Awqāf and Zakāh projects. the National Constituent Assembly to speed up the discussions regarding A first committee was formed for the the creation and ratification of the purpose of issuing a draft law that would Tunisian Zakāh House law. create a new institution for collecting and distributing Zakāh. The Ministry then 3.5.2.1 INSTITUTIONAL STRUCTURE28 decided to change its composition, since it did not show any signs of progress and In 1989, the state issued a fund for zakāh form a new committee to submit a draft pertaining to the Tunisian Social Solidarity law to create a “Zakāh House” after 8 Union29. In its second chapter, the Principal sessions. Law describes the main function of this fund, which is to “collect zakāh resources • The first Ministerial council was in a special fund, to be disbursed according conducted on 1 March 2013 to to religious teachings.” It also states that its consider this project (32 points in budget is independent and that its accounts 4 sections and a memorandum of are separate from income and disbursement reasons): from social solidarity accounts. It is also to be administered by a national body The establishment of a public composed of 11 members and by the institution supervised by the Ministry of President of the Supreme Islamic Council. Religious Affairs of a non-administrative Its management will be done in accordance nature with a legal status and financially with Islamic teachings and in consultation independent. with the Supreme Islamic Council regarding matters of religious character. * Administrative organization. 28 “Zakāh Guid , Republic of Tunisia, Prime Ministry, * Financial Management. The Higher Islamic Council. 29 A consortium of charities under the supervision of * Sharī‘ah Supervisory Board. the Ministry of Social Affairs 65

Islamic Social Finance Report 2020 This national body is represented by imams, preachers or religious regional bodies and some local bodies, guides, and fill the role of vice- each of which has a special fund which president; uses the material resources available to the Tunisian Union for Social Solidarity in the • M ember of the governing body of center or in the regions. The first national social solidarity and to be a general symposium on zakāh funds was held on secretary; 22 June 1992. It was the first and last, thus making the status of the zakāh funds • Treasurer of the Regional classified as follows: Committee for Social Solidarity and to be the assistant treasurer; and • Funds operating and seeking • 5 other members, including to carry out what is entrusted representatives of the people according to the decree and Sfax is reputable for righteousness and at the head of these bodies, good behavior. • I nactive funds, and The observer for the activity of this Fund notes: • F unds that don’t exist at all. • The activity of the Fund began in Chapter 15 of the Zakāh Fund’s Bylaws 1989 (the year in which a campaign stipulates that the regional organization was launched against some political of the Zakāh Fund is composed of 11 opponents who could benefit from members: these funds at the discretion of the political and security authorities), • A representative of the organization and completed its activities in 2006. known by his religious reputation as a member of the governing body of • T he income position of this Fund the regional committee for social was weak, given that the supervisor solidarity and chairman of the of this institution is the Government. regional committee to facilitate the Zakāh Fund; • T he expenses of this Fund were almost equal to its income, with no • A representative of the Supreme knowledge of the citizens of the Islamic Council, or one of the disbursements. Zakāh Fund Banks & CCP Old Balance Income of the Expense of the Extra Balance month Month BEST BANK 75,724,453 75,724,453 CCP 3050-00 28507,7 28,507,7 CASH 0 0 Total 104232,15 104232,153 66

ZAKĀH As of 14 January 2011, the Fund had no • The Tunisian Association of activity. The value of the Fund’s resources Islamic Economics, established in as of March 2014 was 104,232,153 accordance with the provisions of Tunisian Dinars (USD 37.01 million), Decree No. 88 of 2011 (the official according to the latest report submitted by Journal 18/1 October 2011). The the Tunisian Social Security Union. aim of this association is to: 3.5.2.1 SUPPORTING INFRASTRUCTURE * S upport scientific research in Islamic economics. • The Tunisian Association of Islamic Finance, established in * o Conduct studies aimed at accordance with the provisions of achieving balanced, sustainable Decree No. 88 of 2011, a scientific and stable development by association concerned with benefiting from the institutions deepening scientific research in of the Islamic economic system. the field of Islamic finance. The Association of Religious Affairs * Provide advice to government submitted a draft law for a Tunisian bodies and public and private Zakāh house supported by a economic institutions that wish preliminary study, with a caption to apply the principles of Islamic explaining the reasons and an economics and finance. explanatory appendix to some terms prepared by Dr. Abdul Sattar • The Tunisian Association of Zakāh al-Khuwaildi, Secretary General of Sciences, which was called the the International Islamic Center for Tunisian Association for Zakāh, Reconciliation and Arbitration based was established in accordance with in Dubai. the provisions of Decree No. 88 of 2011 (Official Leader 74/2012). 67

Islamic Social Finance Report 2020 It cooperates with all relevant and the Ministry of Religious Affairs structures and organizations commissioned a consulting firm to prepare nationally and internationally in a study to diagnose the reality of religious the area of zakāh. It organizes space in Tunisia and to prepare a vision for annual international seminars and its rehabilitation, during which a survey was awareness seminars for preachers conducted during September and October and imams, in cooperation with 2014. The survey consisted of 1,200 the Ministry of Religious Affairs. interviewees representing citizens over It is also a member of the Board the age of 18, with respect to the following of Directors of the Global Union criteria: for Zakāh Rite. It is linked to several international partnership • Distribution between men and agreements, interested in the women. jurisprudence side of the studies, seeks to deepen scientific • D istribution by educational level. research and dissemination, and is a scientific reference in the • D istribution between urban and rural jurisprudence of zakāh companies areas. and accounting. It also issued a guide to zakāh accounting for • Geographical distribution by commercial activities. Governorate. In December 2016, the Association, in The results, at the individual level, showed cooperation with Zaytouna University, that about 20% of all respondents paid presented to the Prime Minister the draft zakāh. And that the initial estimate of law “Establishment of the Tunisian Zakāh collection of zakāh funds ranges widely Foundation”. This project, before it was between 400 and 1,100 million Tunisian sent, received the approval of Dar Al-Iftaa dinars annually (without accounting for the after some amendments. This draft is not zakāh of companies, which represent the very different from what was stated in the bulk of zakāh funds). It may be noted that first draft prepared in the first version of the such numbers are estimates only, and, as Sub-Committee tasked on the behalf the mentioned earlier, there is no systematic Ministry of Religious Affairs. data available on the actual zakāh mobilized in Tunisia. 3.5.3 ZAKĀH COLLECTION & DISBURSEMENT30 Based on the studies provided by experts and researchers in the Islamic economy, There are no official statistics that gives the rate of 5% of the national product can real figures on the amount of zakāh in be considered a reasonable proportion to Tunisia, but some of the figures presented estimate the zakāh proceeds. Tunisia’s in some studies prepared by consulting gross national product for 2012 is firms mandated by official institutions can estimated at 71 billion dinars; it therefore be used to indicate the amounts that can means that the state can collect about 3.5 be collected. The Tunisian government billion dinars, or about 13% of the projected budget for 2013 and more than half of the 30 Archive of the Ministry of Religious Affairs annual borrowing amount31. 68 31 These figures were presented in the dissertation of Professor Hassan Kaneish, Chartered Accountant on the 9th page

ZAKĀH Some other figures32 also indicate that the • TND 370 per month / family zakāh funds in Tunisia account for about (coming from Banks deposits) 12% of Tunisia’s budget and 5% of the gross national product per year to reach • 5 4,000 line of finance for each US$1,500 million annually. Zakāh funds are unemployed to establish a micro- also relevant to the money invested in the project valued at TND 10,000 each Tunisian stock exchange, reaching about (coming from the listed actions in 200 million dollars annually33. the stock market). In the above-mentioned study, Tunisians These figures do not take into were asked about the extent to which they consideration the zakāh that can be differentiate between zakāh and the taxes collected from other types of non-listed paid to the state, and who has the right to companies, liberal professions, gold and collect their zakāh if they found difficulties silver34. in spending it. The following are the results: An estimation of the potential of zakāh in • L ess than 40% of the respondents 2018 was also performed by the ATZ and are convinced of the difference amounted around TND 5 million (i.e. USD between zakāh and taxes paid to 1.745 million).35 the state. 3.5.4 TRANSPARENCY, • 84% of those who pay their zakāh ACCOUNTABILITY & GOOD have no difficulty in spending it on GOVERNANCE their beneficiaries, compared to 13% who find it difficult. Almost all projects submitted by the Islamic Finance Sub-Committee, or Interestingly, a study conducted by the associations, emphasize the need to Tunisian Association for Zakāh Sciences provide guarantees for the establishment of (ATZ) to assess the zakāh potential in such an institution based on transparency reducing/alleviating the poverty of 250,000 and good governance, so it must be: families, declared the recipients of the social subsidies of the Ministry of Social • A public institution with a non- Affairs in 2017 and came up with the administrative nature with a legal following: If the zakāh is collected in 2017, status and financially independent the portion of each above-mentioned family would be: • A n institution supervised and monitored by the state (the Ministry • 71 Kg of Olive Oil per year/ family of Social Affairs for the social role it can play and to reduce political • 7 3 Kg of Dates per year / family tensions, or the Ministry of Religious Affairs considering the link of zakāh • 1 8 pieces of bread daily/ family to religious matters). 32 In the book of the rehabilitation of religious space 34 Presentation of Achraf BOUDAIA, Chartered according to the Constitution of 2014 Public Accountant and Head of Tunis bureau of the ATZ, 33 “The Zakat in Tunisia, Reality and Prospects,” at delivered on March 27th, 2018 the Islamic Social Finance Workshop in the Arab Maghreb 35 Presentation of Achraf BOUDAIA, delivered on Countries, Tunis, 15 Ramadan 1438/10 June 2017 October 16th, 2018 69

Islamic Social Finance Report 2020 And the institution must maintain its 3.5.5 STRATEGIC ANALYSIS & accountability in accordance with the RECOMMENDATIONS laws and arrangements in practice, and be monitored by the State Controller. In the Strengths year 2014, around 36% of the respondents prefer that the state supervise the • The existence of a ready-made organization and disbursement of zakāh, sector project submitted by at while 46% of the respondents prefer the least two governments, subject supervision of the organization of zakāh to to discussion, ratification and be transferred to a reliable and independent implementation. institution. • D evelopment of the sector is part • T o create with it a Shari’a of the general struggle of post- Supervisory Board to monitor all revolution governments trying to put transactions in terms of legality, in place an Islamic financial system. income and disbursement. • T he existence of a sector-specific • D ata relating to zakāh payers should fund within the Tunisian legal not be disclosed, or used to harm system pertaining to the Tunisian their claimants or beneficiaries Union of Tunisian Solidarity. (recall of Basic Law no. 63 of 2004 of 27 July 2004 on the protection of • Research and seminars organized personal data). on this sector. • Raise zakāh funds through all Weaknesses means available; such as the transfer of remittances or direct • The current experience of the Zakāh deposits in postal or bank accounts, Fund is not successful. while respecting the privacy of zakāh payers, not to be disclosed • There is no special law that to fiscal authorities, and respecting encourages the payment of zakāh. their will to receive a certificate if they so desire. • There is no study that deals with all zakāh funds in detail. 70

ZAKĀH Opportunities Recommendations • The existence of an Islamic financial • Build a working group (which can system (Islamic banks, Takaful emerge from active civil actors insurance companies, Islamic in the field) to communicate the investment funds). cause to various parties and develop a vision leading to a • R equests from parts of civil society to gradual access to the desired develop the sector. situation. • T he relative success of the two • E ncourage the political will to neighboring countries, Libya and advance the cause and reassure Algeria, and some other Islamic the concerned parties. countries. • D evelop mechanisms of • Deepening social inequality and the coordination with the Ministry of state’s need for additional financial Social Affairs and social benefit resources programs to reduce the burden on the state budget (can be used • The trend towards establishing zakāh here from the ID program). institutions and encouragement from civil society is in line with the • Establishing a legal framework global trend towards encouraging regulating the zakāh sector. non-governmental organizations and the private sector to play a role in • Amend the tax legal framework to community development. encourage the payment of zakāh by deducting the amount paid • There is a general international trend from the amount of taxes. towards mobilizing financial resources from local communities. • Focus on the distribution of zakāh in a way that enriches the need of Threats the liquidators, and in a way, that helps the beneficiaries to create • The negative impact of some media. their projects. • Political disputes over everything • D evelop an information plan to related to religious affairs. introduce the sector and raise awareness of the importance and • Lack of sufficient political will to positive effects of paying zakāh. advance the sector. • Government fear of creating additional tax burden on citizens. • Fear of people in power controlling this sector and disbursing its funds in ways other than legitimate ones. 71

Islamic Social Finance Report 2020 3.6 SUCCESS STORIES & and the corporate communication GOOD PRACTICES department. Financial and Administrative Affairs which deals with the affairs of 3.6.1 ZAKĀH FUND, LIBYA employees and social researchers and finally the collection department, includes Introduction two units: the preparation and supervision unit, the Jibaya unit and finally the Zakāh One of the success stories in the zakāh Distribution department which includes sector in Libya is the outstanding sharp the Accounts and Supervision unit and increase in the value of zakāh funds raised Social Studies unit. These departments over the last five years. This is due to collaborate in an efficient manner and each Fund’s staff commitment, and their efforts fund’s branch in Libya has a small structure to achieve good performances despite the like the main office structure in a manner current tough economic circumstances. In that each branch collects and disburses addition, donations, grants and charities Zakāh to its beneficiaries in the same city collected from philanthropists, as a result in a semi-independent manner. However, its of the advocacy and public awareness relationship with the main branch is purely and education efforts carried at all organizational and administrative and administrative levels. This was positively feeds the main office with required data reflected on the performance of the fund, and information monthly and annually. whether in the collection methods (direct collection, or through zakāh offices, or bank In addition, the Fund adopts three Sharī‘ah accounts) or by the ways of disbursing committees dealing with the Sharī‘ah zakāh funds, such as paying zakāh to related topics of the Fund. Ultimately these some beneficiaries to buy cars to be used committees support the activity with the as taxis. Hence this has improved life Sharī‘ah provisions with regards to the quality for the needy and has made them collection and distribution of the funds. avoid demand and allows them to secure These committees are: permanent and decent revenues. Also, part of the Fund’s success contributed • Independent advisory committees in in financing the construction of 52 each of the Zakāh Fund’s branches apartments for poor youth and help them to in Libya specialized in investigating marry. and assessing zakāh beneficiaries’ applications and providing legal and Organization Structure legitimate provisions for each case. The organizational structure of the Libyan • A special committee reporting to Zakāh Fund consists of seven main the advisors’ office and its role is divisions, headed by the Chairman of the to support the advisors in solving Board of Directors. These departments issues and matters raised by Zakāh are: Advisory Board, of Planning and Fund’s branches or from one of the Supervision, Financial and Administrative departments within the Fund. It Affairs, Legal, Internal Audit, Investments, helps find fatāwa concerning all the legal issues at stake. 72

ZAKĀH • Dar al Iftaa to which the fund refers • B enefit from previous experiences when required. locally and internationally. The Zakāh Fund relies on qualified Libyan • Taking audacious but promising employees being paid from the Libyan state initiatives: the Zakāh Fund worked and not from the fund itself. It also works to open zakāh branches in cities in compliance and full transparency giving in Libya where zakāh was not effective and real information about the collected and formally disbursed for fund. It also publishes data and information hundreds of years, and the external in special reports that are easy for the observers have determined that public to understand. The fund also runs the work of these branches in such surveys through questionnaires to zakāh cities will never work, but statistics beneficiaries and payers in order to collect within short period has proven the their feedback with regards to the fund opposite. These small cities have performance. Finally, the fund calls auditors become competitive with the big and to evaluate the Zakāh Fund’s work and cities in their collection of zakāh, operations and to highlight any deviations and this is due to that the citizens’ or excesses. interest in paying their zakāh to a respected and trusted organization. Best practices within this sector include: Governance • E stablishment of good administrative of zakāh system The Zakāh fund operates under the within the Fund and the preparation supervision of four official and non-official of a simple documentary course. bodies monitoring its activities which increases people trust towards the Fund • I mplementing a developed follow- and thus increase the number of the zakāh up and supervision system, and rely payers and the fund’s size. The fund is on computer systems to relate the transparent in its operations by publishing main office to its branches data and information regularly on monthly and yearly basis. This information includes • B uilding an expanded database the amount of the collected funds and for all categories of zakāh payers the detailed disbursement disclosed in beneficiaries as well as link the an easily understandable manner in order Zakāh Fund with other public to reassure whoever wants to check the institutions, such as the National management of the funds. The four bodies ID System, the Social Security are: Fund and Solidarity Fund, Wealth Distribution Fund, and Ministry of • The Fund’s Board of Directors, Social Affairs. which draws the yearly action plan for the fund and its branches, and • Z akāh Fund must be open to supervises its execution. charitable NGOs and associations in order to coordinate efforts and • A dministrative Audit Bureau: avoid duplication in collection and which is a governmental body that disbursement. 73

Islamic Social Finance Report 2020 supervises and controls all state- Challenges owned institutions, including the Zakāh Fund. Its main role consists • Lack of coordination between on appointing the staff, branch the Zakāh Fund and other state managers and members of the institutions, as well as civil society Board of Directors. organizations is a major obstacle facing the Fund and preventing it • Libyan Audit Bureau which is from achieving its objectives. in charge of the follow up of all Fund’s operations including zakāh • Z akāh Fund is constrained by collection, monitoring Zakāh the lack of information and data. distribution, and disbursement to Relying only on its own database is final beneficiaries. The audit bureau not sufficient for its work because also monitors consistency of the some relevant information is not funds allocated from state to Fund’s being shared by the other actors in staff and ensures that Zakāh Fund the poverty alleviation activities. complies with financial regulations in both zakāh collection and • Political and economic instability disbursement. and insecurity in Libya is a serious obstacle, especially in regard to • A ll Libyan citizens: All Libyans the field executive department’s can have a control on the fund, activities, Zakāh collection and especially zakāh payers, donors social research. and charities, and have the right to ensure that the collected zakāh • L ack of fatāwa as well as laws and has been paid to appropriate sound regulations are two main beneficiaries. factors in non-investment and recycling of zakāh funds. Zakāh Fund has established social research teams in all Libyan cities. Men and 3.6.2 TUNISIAN ASSOCIATION OF women teams in charge of carrying social ZAKĀH SCIENCES, TUNISIA research for zakāh applicants. In fact, the applicant is required to provide documents Introduction proving his critical needs and poverty. In addition, the researcher visits him at his/ Founded in 2012, the Tunisian Association her residence to check his living conditions of Zakāh Sciences deals with the and certify his need for Zakāh. Accordingly, accountancy and Fiqh of the obligation despite the harsh economic conditions, of Zakāh. It is headquartered in Sfax and Zakāh Fund contributed to alleviate has four branches in Tunis, Gafsa, Nabil poverty rates in Libya and assisted in and Sousse. Cooperation agreements building 52 apartments in the city of Tripoli have been made with the Ministry of and contributed to the marriage of 52 Religious Affairs, Zaytouna University and young men and women. In addition, among the Sudanese Zakāh Chamber and the another success of Zakāh Fund is buying Jordanian Zakāh Fund. cars for a group of poor people to work as taxis drivers. The association was elected at the founding session of the Global Union for 74

ZAKĀH Zakāt Rite as a member of the Board of Organization Structure Directors, and the association’s president was appointed as the supervisor on the The highest authority in the Tunisian union affairs, plans and programs in the Association of Zakāh Sciences is the French-speaking African region. National Conference which convenes every three years and elects members The association is always committed to be: of the governing body for a term of three years subject to renewal once only. Next • I ndependent and far from all is the National Council, which convenes political conflicts. every six months to evaluate the activities of the association and control projects • A scientific reference in the and activities for the upcoming period. jurisprudence of zakāh. The governing body, which represents the association with the official Tunisian • A specialized body in the calculation and international bodies, ensures the of zakāh for institutions and implementation of the decisions of the individuals. National Council. • A n active party in the awareness The four branches of the association and training sessions related to operate under the supervision of the zakāh. governing body, and help individuals and 75

Islamic Social Finance Report 2020 companies to calculate their zakāh. The concerning the organization of executive board appoints an executive associations. director for the association who cannot be a member of the governing body of • T o comply with the legal system and the association and is responsible for the bylaws of the Tunisian Association management of the association in terms of of Zakāh Sciences. financial and administrative management and currency. Since the foundation of the • T he Association accounts shall be association, Sheikh Habib has adopted this revised by a committee of expert plan. accountants in accordance with the law number 112-93 concerning The association has a Sharī‘ah and the maintenance of accounts in the accounting committee at its headquarters Tunisian Republic. in Sfax as well as in the four branches. The Sharī‘ah and Accounting Committee • M onitor the accounting of the is formed by the decision of the Board of association annually by an auditor Directors of the association. The governing who is a member of the body of body also appoints a chairperson for the Tunisian Accountants. Sharī‘ah and Accounting Committee and its members and also appoints its rapporteur. • D eposit all revenues of the association in a bank account, and The Sharī‘ah and Accounting Committee is all expenses exceeding the amount entrusted with the following: of 200 USD are paid in writing or using a bank transfer. • C ounting and calculating zakāh for individuals and institutions. Contribution to Knowledge • Answering all legal and accounting The Association contributes to increasing questions related to zakāh in knowledge in the field of Zakāh through: particular, and the Islamic economy in general. • S upervising the training of 1,000 university professors and students • Conducting research and studies from the bachelor and master’s related to the objectives of the degree students in economics and association. Islamic finance in Zakāh Accounting in the faculty of Economics and • A ssisting universities and all Management in Sfax, and Zaytouna scientific bodies related to zakāh in University and the Higher Institute particular, and the Islamic economy of Technological Studies in Rades. in general. • O rganizing national and • Training students specialized in international forums and seminars. Islamic finance. The association organized the previous four sessions of Sfax Governance International Conference on Islamic Finance in cooperation with the • C ompliance with decree No. 88 of Faculty of Economic Sciences and 2011 dated 24 September 2011 Management of Sfax, Zaytouna 76

ZAKĀH University, Sfax University, Gafsa • P ublication of the first book by University, the Islamic Research and the association in March 2017 Training institute in Jeddah, and entitled: “The Fiqh and accountancy Al-Zawia University in Libya. 1,200 framework for the Zakāh of participants benefited from these business activities” in 5,000 copies. four events. These books were used in training seminars organized in cooperation • The association also organized four with the Ministry of Religious Affairs international seminars on zakāh in and the Tunisian Union for Industry, Tunis Commerce and Handicrafts. • The publication of “Sanabel”, the • T he association will soon issue its first is written every three months second book under the title “Zakāh in 3,000 copies, of which 10 were of Agricultural Activities”. It will be issued, and the second is electronic dedicated to educating farmers and it was monthly distributed to and helping them to calculate their more than 20,000 e-mail addresses. zakāh. • Organizing training courses • ‘Hello Zakāh’ mechanism: according to an agreement with the Putting voice distributor on the Ministry of Religious Affairs to train number 53.600.100 to answer all preachers and imams. 2,150 imams questions related to jurisprudence and preachers attended the 2016 and accounting for callers by 4 and 2017 sessions. legal accountants’ experts. The association receives hundreds of • Organizing awareness sessions calls each month from Tunisia, in the field of Zakāh for various Algeria and Libya. professional sectors and scientific groups. The total beneficiaries • Creation of the Facebook page for the year 2012 to the end of “Tunisian Association of Zakāh April 2017 was more than 6,000 Sciences” that has 64,000 followers. beneficiaries. • Creation of the association’s • F urnishing the Zakāh Mail program, website which was broadcast weekly by Zitouna Radio Channel for the Holy Contribution to Poverty Alleviation Qur’ān from January 2017 to the end of Ramadan during the same The contribution of the association is to year. fight poverty by calculating the zakāh of hundreds of companies whose zakāh • A weekly live broadcast on the exceeds 200,000 USD annually and urging Facebook page of the association them to spend their zakāh to start projects about Zakāh. Various professional for unemployed graduates and for the poor. activities throughout the summer of 2016. 77

Islamic Social Finance Report 2020 Challenges • L ack of awareness on the role of zakāh and the culture of zakāh as • Convince the government a cornerstone of the economic and the Assembly of People’s system. Representatives to accept the law related to the Tunisian Zakāh • P olitical rejection from several Foundation. political parties in Tunisia. • B ad legacy related to the way • B eing accused of political affiliation Tunisian people deal with the to parties of a religious nature. National Solidarity Fund 26-26. • Difficulty in dealing with expenses, • T he lack of expertise in the with no contribution of the state to jurisprudence of zakāh and its pay administrative expenses and accounting due to the absence equipment. of teaching zakāh accounting in Tunisia for more than 50 years • Restrictions on many charities that and the absence of any scientific collect and distribute zakāh funds, reference on how to calculate and prosecution of defaulters zakāh. among them by the government under the Supreme Decree of the 78 year 1922.

04 AWQĀF 4.1 ALGERIA1 2 Al-Khairat, the awqāf institution of Bayt al- Maal, and the awqāf institution of people of 4.1.1 OVERVIEW OF THE SECTOR Andalusia. The institution of waqf has been in During the colonial period, the French existence in Algeria since the arrival of the administration through its decrees and Islamic conquest of the Maghreb in the successive decisions and laws regarding Seventh Century. However, it has witnessed the waqf, undermined the foundation of the major ups and downs at different points waqf system and destroyed its features, in time in history. The Ottoman period in contradicting what was noted in the article Algeria (before 1830) was characterized 5 of the Treaty of 1830 on handing over of by the development of awqāf and their the city of Algiers, which recommended the spread throughout the country, from the preservation of the assets of the awqāf. late 15th Century until the beginning The colonial forces worked to destroy of the 19th Century. The expansion the structure of the awqāf. Many of the continued until waqf accounted for a Algerian awqāf were lost during this dark large proportion of the urban agricultural period of its history, which made the search property. During this period, economic for these properties and reallocation of and social awqāf expanded to include real what stood for it almost impossible without estate and agricultural lands, in addition to the efforts of the Algerian state in the many shops, hotels, bread ovens, oases, legislative and financial fields. International waterways, tanks, lime kilns, and many efforts have also helped to recover many other estates, farms, orchards and parks. of them in the period from the mid-nineties The awqāf sector comprised several to the present (funded by the Islamic charitable organizations with a religious Development Bank). character, had a legal personality and a special administrative status. Examples The initial period after independence include the awqāf institution of the two was not very encouraging for the awqāf Holy Mosques, the awqāf institution of the sector. In contrast, the period from the Algerian Great Mosque, the Awqāf Subul end of the eighties to the beginning of the nineties, observed a strengthening of the 1 Data delivered by the Ministry of Religious legal status of the awqāf, albeit at a slow Affaires & Waqf pace. The beginning of the 21st Century 2 “Financing the Local Development from an witnessed further legislation in the field of Islamic Perspective: The contribution of the funds of awqāf and investment. Zakāh & Waqf”, Wasila Essebti, PhD Thesis, University of Mohamed Khidhr University, Biskra, Algeria 79

Islamic Social Finance Report 2020 Post-independence, the awqāf sector in under the supervision of the Director Algeria was put under the control of the General for the Public Property government and regulated by the French Department. law which was perhaps the primary reason why awqāf were excluded from the social • D ecree of 31 October 1838: The work arena. However, the waqf properties decree was issued to facilitate continued to exist, and were distributed the liquidity of the awqāf and the as the waqf of schools, seminaries and controlling process of the waqf. mosques. • Decree of 30 October 1858 and 4.1.2 REGULATORY & POLICY Act of 1873: This decree was FRAMEWORK followed by the last resolution, known as the 1873 Act, which The colonial France, in the early years of aimed at eliminating the deadlines the occupation, enacted several resolutions of religious institutions in favour of and decrees, which include the following: the European settlement expansion in Algeria and the elimination of the • Decree of “Debarmont” on economic and social foundations of September 8, 1830: This decree the Algerian people. led to the confiscation and seizure of all waqf assets. The next day, The existence of waqf properties after “Debarment” issued another the independence pushed the Algerian decree granting itself the right and legislators to organize and regulate the authority to manage and dispose legislation necessary to run the awqāf of the religious property by renting according to a legal administrative system, and distributing the rents to the which responds to the nature of these beneficiaries. properties and responds to the objectives for which they were established. Several • Decree of 7 December 1830: In laws have been put in place to ensure the December 1830, the French general good functioning of the Awqāf Department Joseph Clozel, issued a decision to in Algeria. abolish the Custodian of the Two Holy Mosques under the pretext While there was a Ministry dedicated that its revenues were spent on to Awqāf in 1963, the subsequent foreigners. years witnessed a gross neglect and marginalization of the sector. The absence • The report of the French Minister of a national policy for awqāf led to its slow of War dated 23 March 1843, “The and steady demise in the Algerian society. expenses and incomes of religious The waqf administration was soon limited institutions include the budget at the national level to a branch office of the of the French government”: This Ministry of Religious Affairs. As part of the decree authorized the Europeans to restructuring of the Ministry of Religious own the awqāf and to put the same Affairs, a Directorate was established under the name of “Directorate of Religious Rites and Waqf Properties”. After the 80

AWQĀF promulgation of the 1989 Constitution, Regarding the laws of the administration of which approved the protection of waqf awqāf after 1991, the Directorate of Awqāf properties, the name was changed to the has tried to cover the lack of legal texts Directorate of Awqāf and Religious affairs. by using the brochures and notes specific The issuance of the law of awqāf 91/10, to the modalities of the organization and which was based on the background of the management of waqf property and the regulation of waqf property and protection, control of income. The legal texts include: marks the beginning of a new era for the waqf sector in Algeria. With an increasing • M inisterial Circular No. 37 of official interest and the expansion of 05/06/1996 determining how to pay waqf activities, the process of recovering rent for awqāf. property from nationalized waqf and those • Memorandum No. 01/96 dated encroached upon by private by individuals 03/07/1996 specified for how to and institutions was seriously taken up. pay the waqf rent. The Awqāf became a self-contained Directorate after the issuance of Executive • Memorandum No. 03/96 of Decree 94/490 of 21 Rajab 1415. 17/07/1996 containing financial reporting (according to standard forms) and dates of dispatch. 81

Islamic Social Finance Report 2020 • Ministerial Circular No. 56 of The law also gives the authority 05/08/1996, addressed to the in charge of awqāf the right to governors and principals, which conclude contracts. includes the subject of expanding the circle of interest in waqf 4.1.2.1 INSTITUTIONAL STRUCTURE & property. SUPPORTING INFRASTRUCTURE • M emorandum No. 01/97 dated The Department of Awqāf in Algeria 05/01/97 containing organizational is not an independent administration. directives for the management This is evidenced by Executive Decree of awqāf, especially regarding No. 146/2000. Article 3 of this Decree the rationalization of the waqf states that the Directorate Awqāf and financiers, the relationship of the Hajj includes sub-directorates for waqf path to the tenant and the dispute resolution, investment, and of documents to be provided in the Hajj and Umrah. It was observed that waqf files. each sub-directorate had a group of offices whose staff was usually below • M emorandum No. 02/97 dated the required level. The sub-directorate 19/07/1997, which includes the for research on waqf properties and need to care for the development disputes includes office of research and and valuation of property waqf. registration of waqf properties, office of technical studies and cooperation and • E xecutive Decree No. 98/381 office of disputes. However, the sub- of 01/12/1998 sets forth the directorate of awqāf property investment conditions for the management, includes office of investment and protection and the means of development of waqf properties, office managing the waqf property. It of the management of resources and contains five chapters - general expenditures of property waqf and office provisions, status, management of waqf property maintenance. of waqf properties, renting waqf properties, financial provisions, Awqāf Committee and the final provisions. This decree gave an administrative and A focus on the central administration organizational boost to the awqāf of the Awqāf in Algeria shows that it department in Algeria. is not an independent administration, but a branch of a larger administration, • Law No. 01-07 of 22 May 2001 mentioned earlier as the Awqāf amended and complied with Law Committee. This committee consists of: No. 91/10 of 27 April 1991. It contained a series of amendments, • Director of Awqāf most notably the details of the investment and development of • S ub-Director of Awqāf Investment waqf property. The Department of Awqāf is entrusted with the tasks to • I n charge of legal and legislative invest and develop waqf according studies to the formulas specified in the law. 82

AWQĀF • D irector of Guidance and Religious or less than ideal rent Rites • Supervise the preparation of • D irector of Media Department a model book of conditions for the rental of waqf property • Director of Islamic Culture or its adoption in the light of jurisprudence of awqāf and • A representative of the interests of regulations state property • Examine cases of renewal of • A representative of the Ministry of extraordinary leases Agriculture and Fisheries • Propose after the study, the • A representative of the Ministry of priorities of the regular expenditure Justice of the available waqf funds and the emergency spending • A representative of the Supreme Islamic Council. Central Awqāf Fund The powers entrusted to this committee The centralization in the management of include the management, investment the awqāf in Algeria led to the creation and protection of the waqf properties, in of the Central Fund for Awqāf, which was particular to: established based on a joint ministerial decision between the Ministry of Finance • Examine cases of settling the status and the Ministry of Religious Affairs No. of public and private awqāf, where 31 dated 2 March 1999. The resources appropriate, and prepare standard and revenues collected are deposited in records on a case-by-case basis this Fund, after deducting the authorized expenses. • Study or adopt standard documents for the work of waqf agents 4.1.3. CREATION, PRESERVATION & DEVELOPMENT • O versee the preparation of the working manual of the waqf The waqf administration in Algeria was supervisor, or adopt his proposal, subjected to a series of changes through and the necessary documentation the various laws and decrees that were aimed at preserving and developing • E xamine cases of termination of them. However, all these laws could the functions of the head of the not make them a modern and effective waqf property, and adopt standard administration in carrying out their tasks. documents for each case • Study the standard documents The number of awqāf properties was relating to rental of waqf property 10,615 in 2016 increasing marginally from and approve by auction, conciliation 10,401 in 2015. 83

Islamic Social Finance Report 2020 Table 01: Number of awqāf in Algeria as reported in November 1842 City Algiers Annaba Oran Constantine Total 3,697 Number of Awqāf 1,798 75 132 1,692 Properties 4.1.4 TRANSPARENCY, • The existence of institutional ACCOUNTABILITY & GOOD structure for waqf. GOVERNANCE Weaknesses The vastness of the Algerian land and the central character of the administration of • L ack of manpower and material awqāf in Algeria made it extremely difficult resources to assist Waqf to manage waqf property efficiently and department in carrying out its tasks ensure the principles of transparency and and to ensure serious follow-up. good governance. • The weakness of the laws governing Article 23 of the law No. 90/25 highlights the awqāf in Algeria. the importance of the waqf and the independence of its administrative and • A bsence of adequate supporting financial management. infrastructure for awqāf sector. The issue of the law of awqāf under the • T he merger of Directorate of Waqf number 91/10 issued on 27/04/1991, with Hajj means neglecting the which approved the protection and administrative aspects of the waqf management and administration to the during periods of preparation for authority entrusted with the awqāf, marked hajj. the beginning of the independence of the laws of awqāf in Algeria in terms of various • Absence of effective accounting provisions related to it and management. and financial supervision for waqf activities. The Directorate of Awqāf is supposed to be independent and the specialized agency to Opportunities preserve waqf property. • The high potential of properties and 4.1.5 STRATEGIC ANALYSIS & real estate in Algeria RECOMMENDATIONS • P ossible reform in the law of awqāf Strengths Threats • W aqf has a long history in Algeria. • L ack of confidence among the • The existence of many legal texts public as the desire of waqf and regulation on the waqf sector. founders is not always achieved. 84 • Lack of sufficient awareness of the sanctity of awqāf among some actors.

AWQĀF Recommendations Information and Marketing. • A total of 4,621 real estate awqāf • Waqf investments need to be have been identified that need urgent enhanced in partnership with development. professionals well-versed in the art and science of investments. • A large number of property disputes relating to awqāf are a real challenge • Creation of Waqf Funds and the for the justice system that must be financialization of waqf should addressed. Records show that over throw up new and innovative 600 cases have been settled in favour financial instruments, strengthening of awqāf and about 400 cases remain the capital market, providing to be resolved. alternative tools for raising resources for development of awqāf • New awqāf related investments as well as for meeting the social should be tackled as part of a and developmental goals. long-term strategy that requires a specialized management team • The legal and regulatory system and a high degree of experience of waqf must be strengthened in in monitoring and managing these order to provide greater protection projects. for waqf properties, through the Directorate of Organization and • T here is urgent need for an apex Disputes, which manages the issues independent institution, such as the of endowment before the judiciary, National Awqāf Office in Algeria, that and introduces laws and regulations would be in a position to mobilize that preserve waqf properties. required human and financial resources for efficient management • D evelopment of international and development of awqāf. cooperation in the field of awqāf, through programs and activities • A vailability of specialized talent in of the Directorate of Cooperation awqāf management remains a major and External Relations would act constraint that must be addressed as a catalyst for rejuvenating the with a sense of urgency. global as well as the Algerian awqāf sectors. • Identifying, retrieving and documenting properties that have • Finally, it is proposed that the been lost since the colonial era, Algerian Awqāf Department must through the Research Directorate and be removed from the administrative the Waqf Property Survey, should be constraints attached to the Ministry expedited with the involvement of of Religious Affairs and Awqāf experts in the field of surveying. and be given full autonomy by establishing the National Awqāf • It is important to recreate a culture Office. that promotes waqf as an important socio-economic institution through 85 the media by the Directorate of

Islamic Social Finance Report 2020 4.2 LIBYA 4.2.1 OVERVIEW OF THE SECTOR3 Historically, Libyans have always showed Until the year 2012, the number of great interest in the institution of waqf awqāf assets in the western region was as one of the most important charity approximately 11,000 real estate properties activities. This is because Libyans culturally (agricultural and pastoral lands, service are used to giving donations from their and commercial buildings), 6,000 mosques, assets, real estate and lands for the sake of and cemeteries and schools of Qur’ān public utility, and because most of them are memorization. Some of these assets have deeply religious. The supervisory authority huge areas suitable for building residential of waqf affairs in Libya is the General and tourist cities and others could fit Authority for Awqāf and Islamic Affairs to be administrative and commercial (GAAIA), which is responsible for managing complexes that have high market values. In and supervising all waqf assets. Since addition, the value of the financial assets the Islamic conquest until the beginning of the GAAIA, according to the preliminary of the Ottoman era, awqāf in Libya were statistics of 2014, is half a billion Libyan governed by the rulings of judges and Dinars, part of which represents cash scholars, derived from the Holy Qur’ān and at banks and the rest is loans to public the Sunnah. The administrative and legal institutions as rentals or compensations. organization underwent changes since the Ottoman period (1551-1911), through the Italian occupation (1911, 1947-1951), then during the reign of Qaddafi (1969-2011), and finally after the events of 17 February (2011). Table 4 shows the geographical distribution of the awqāf assets, where they were split into services: including shops and administrative offices, housing, and agricultural land. The table shows that waqf assets are concentrated in large cities such as Tripoli, Misurata, Western Mountain and Zliten, followed by other cities such as Benghazi, Green Mountain, Zawia, Derna and Jaffara. The weakness of this classification is that it presents the assets in number of units and not in size. 3 Mustafa Al-Sadiq Tabla, former Director General of the General Authority for Awqaf and Zakat Affairs in Libya, an interview on 05/06/2017 86

AWQĀF Table 4. Geographical distribution of the assets of Awqāf in Libya Zliten Megeb Tripoli Jaffara Zawia W. Coast Ghadames Nalout W. Mountain Sabha Butnan Derna G. Mountain Marge Benghazi Ijdabiah Kufra Wahat Sirt Misurata City Service 341 24 14 9 27 406 37 51 102 46 10 17 24 5 110 106 35 1253 67 60 Housing 18 2 13 0 4 253 33 147 73 58 3 5 2 0 7 46 0 561 2 72 Lands 1170 0 0 1 0 30 266 393 289 235 4 984 0 2 39 353 387 1426 627 838 Total 1529 26 27 10 31 689 336 591 464 339 17 1006 26 7 156 505 422 3240 696 970 Source: Presentation of Mustafa Al-Sadiq Tabala, Badruddin Al-Toumi, Kick-off Workshop of the Islamic Social Finance Report in Maghreb Countries, in Tunis on 15/09/1438H - 10/06/2017 Chart 3. Distribution of assets of awqāf in Libya based on type of assets Service Housing Lands Charts 3 shows that approximately 64% of It is worth noting that there are property the assets are agricultural lands (as noted investments also (Table 5) for the GAAIA above, the unit of measurement is the in the cites of Tripoli and Misurata, with a number of lands and not its area), followed total value of 26.95 million Libyan dinars, by businesses and shops units accounting generating an annual return of 1.74 million for about 25% of total assets. Finally, the Libyan dinars. housing units account for around 12% of the GAAIA assets. Table 5 shows the value of the property investments, monthly and annual returns, and the tenor for the invested capital. 87

Islamic Social Finance Report 2020 Table 5. Investment in awqāf assets in Tripoli and Misurata Project Site Capital Monthly Annual Tenor Tripoli 2,000,000 income income 8.77 1 Administrative 19.83 building 19,000 228,000 16.84 10.417 2 Administrative Tripoli 11,900,000 50,000 600,000 building 3 Administrative Tripoli 9,300,000 46,000 552,000 building 4 Administrative Misurata 3,750,000 30,000 360,000 building TOTAL 26,950,000 145,000 1,740,000 Source: Presentation of Mustafa Al-Sadiq Tabala, Badruddin Al-Toumi, Kick-off Workshop of the Islamic Social Finance Report in Maghreb Countries, in Tunis on 15/09/1438H - 10/06/2017 Table 6. Summary of financials for the investment of awqāf assets Description Libyan Dinars Total investment 26,950,000 Total annual return 1,740,000 Total annual operating costs 539,000 Net annual return 1,201,000 Net return during project period 60,050,000 Net cash flow 33,100,000 Rate of return on investment 222.82% Rate of annual return on investment 4.46% Source: Presentation of Mustafa Al-Sadiq Tabala, Badruddin Al-Toumi, Kick-off Workshop of the Islamic Social Finance Report in Maghreb Countries, in Tunis on 15/09/1438H - 10/06/2017 88

AWQĀF Table 6 summarizes the feasibility study while leasing out the awqāf property. The for the awqāf assets investment. The rental prices were determined by a decision total investment value of 26.95 million of the GAAIA, according to the nature Libyan dinars with a total operating cost and classification of assets (commercial, of 0.54 million Libyan dinars. Net returns residential, agricultural), and depending during the period of the project is 60.05 on the regions. However, these prices million Libyan dinars with an annual yield were not in line with the market prices and of 4.5% approximately. far from the real rental prices which led to decrease in the annual revenues. It is 4.2.2 REGULATORY & POLICY worth mentioning that the annual revenues FRAMEWORK collected during the previous years did not exceed 5 million Libyan dinars, except for One key characteristic of the awqāf what is leased to the government. system in Libya is duality. Its rules are derived from both the rules of The challenges facing the Libyan awqāf Sharī‘ah and the texts of the law. The sector may be summed up as following: administration of rules and regulation are shared between civil donors and the • D ecrease of rental income of waqf official institutions. Its litigations are assets compared to private sector submitted to the legal and civil courts. owned assets. This organization structure is dictated in the Article 32 of the Waqf Law No. • Some waqf users of assets benefited 124/1972 which states that the GAAIA from them without contracts. is responsible for the management of awqāf. • Some waqf users (individuals or official institutions) did not pay their Before the Ottoman rule, there was no rentals. national institution managing the waqf affairs in Libya. The first institution was 4.2.2.1 INSTITUTIONAL STRUCTURE established under the Ottoman Awqāf Management System and was issued in The administration of awqāf is the key December 1862. This was followed by function of the GAAIA. The administrative the rules issued by the Awqāf Authority structure consists of a number of established by the Italian decree on departments: the waqf property 2/10/1917. The supervisory body for department, the revenue department, awqāf in Libya has been reorganized the department of the guidance and many times in history. The latest supervision, the department of investment, amendments were made by the Council the department of maintenance, the of Ministers Decision No. 10/2016 department of research and studies, and concerning the establishment of the the department of projects. The waqf General Authority for Awqāf and Islamic property department comprises of three Affairs GAAIA. units: classification unit, documentation unit, and archives unit. The revenues During the last few years, the GAAIA department consists of the collection unit did not rely on the actual market price and the expenditure unit. The investment department also includes two units: the planning and studies unit, and the contracts 89

Islamic Social Finance Report 2020 Chart 4: An outline of the organizational and administrative structure of the Waqf administration in the GAAIA. Adminstration of waqf Research and Investment Revenue Study Dpt Dpt Dpt Investment Maintenance Guidance and Waqf Property Dpt Dpt Supervisory Dpt Dpt Planning and Revenue Classification Studies Unit Collection Unit and Enumerate Contracts Expenditure Unit Unit Unit Documentation Source: Presentation of Mustafa Al-Sadiq Tabala, Badruddin Al-Toumi, Unit Kick-off Workshop of the Islamic Social Finance Report in Maghreb Archieve Countries, in Tunis on 15/09/1438H - 10/06/2017 Unit unit. These departments, sections and 4.2.3 CREATION, PRESERVATION administrative units operate in a consistent & DEVELOPMENT manner to supervise waqf assets and funds through branches spread across Libya. The GAAIA has, to a certain extent, an organized archive where it classifies and 4.2.2.2 SUPPORTING INFRASTRUCTURE saves documents of waqf assets and keeps track of them. However, this is only in major There are no supporting institutions in cities. There is usually little or no information Libya, such as charities, service centers, or about the waqf assets in small cities. The media channels, advocating and promoting classification is based on the number of the institution of waqf in Libya. The GAAIA is units of assets, (administrative, commercial the only agency that constitutes the awqāf infrastructure in the country. 90