India: Hyderabad trust uses zakat to promote education

A Muslim trust here is showing the way how a collective system of 'zakat', an obligatory system of charity in Islam, can lift the community out of poverty and illiteracy. 

Though many organisations collect zakat and use it for the poor and needy, the Hyderabad Zakat and Charitable Trust is delivering tangible results in the area of education.

 More than 25,000 students are studying in educational institutions run by the trust in Telangana, Andhra Pradesh, Karnataka and Maharashtra. Started in 1990, the trust, headed by philanthropist Giasuddin Babu Khan, has so far helped over 400,000 students graduate. Many of them are now engineers, doctors, lawyers and chartered accountants. 

"The trust has done a lot of work in education. We have so far spent Rs.110 crore on our activities," Mohammed Ziauddin Nayyar, trustee, Foundation for Economic and Educational Development (FEED), a part of Zakat Trust, told IANS. 

Zakat, one of the five pillars of Islam, is a mandatory charity for every well-to-do Muslim as a measure to remove economic inequality.

According to Islamic scholars, every Muslim whose assets reached 'anisab' or minimum value (current market price of 60.65 tolas of silver) has to pay 2.5 percent Islamic annual tax on his wealth. Most Muslims pay this during the holy month of Ramadan. 

For want of a collective system of zakat, the money gets scattered among individuals and charity groups. The Hyderabad trust is trying to show how zakat, if properly channelled, can achieve its purpose of eradicating poverty and backwardness. 

The trust, which believes that education is the most powerful weapon to battle poverty, has adopted 105 government-run Urdu medium schools. Over 3,000 students also study in its five English-medium high schools in Telangana.

 Focussing on excellence in education, the trust last year set up the Hyderabad Institute of Excellence (HIE) to hone the skills of 10th standard toppers from poor and needy families. More than 250 students are studying in 11th and 12th standards at its sprawling 120-acre campus near Hyderabad. 

They are also receiving coaching for entrance exams for professional courses. HIE will also have a high school from next year. "HIE is in line with the vision of Giasuddin Babu Khan to provide world-class facilities to poor but bright students so that they can excel and become assets," said Nayyar. The trust also helps the poor and needy with financial assistance to make a living. This Ramadan it distributed ration and clothes to 3,000 widows to help them celebrate Eid. 

The young widows were given packets worth Rs.950 to Rs.2,000. The trust also motivates young widows to re-marry and provides an assistance of Rs.25,000 each. It has helped in re-marriage of 120 widows. Last year, the trust received over Rs.9 crore zakat. 

It has a network of 60 employees to identify the deserving. The families of Babu Khan and Abdul Aleem Khan, who heads FEED, contribute the maximum for the trust. Hyderabadi Muslims settled in the US and the Gulf also make a sizable contribution. "After seeing our activities and the transparency, more NRIs are coming forward to contribute," Nayyar said. The trustees, however, feel that what the trust receives is not even one percent of the zakat Muslims can pay in Hyderabad and other parts of Telangana.

 According to Babu Khan, the potential of zakat collection in Telangana is Rs.1,000 crore but the actual collection and distribution is only Rs.100 crore. Community elders say only 10 percent Muslims pay zakat to institutions, mainly madarsas, while 90 percent pay to individuals who approach them. "They don't even check whether those seeking zakat are really poor and needy. Thus the really deserving who don't beg are deprived," said a member of Jamaat-e-Islami, which is active in distributing zakat. Activists also rue the fact that many wealthy Muslims don't pay total zakat. "If all Muslims pay zakat in full and it is channelled properly, the community can overcome the problem of poverty," said Nayyar.

(One India News / 23 July 2014)

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Saudi Market Surprise Sparks Speculation of Sukuk Access

Saudi Arabia’s plan to open its $531 billion stock market to foreigners is prompting speculation that Islamic bonds will be next.

The government’s approval of overseas financial institutions to trade equities may herald a similar relaxation of rules in the local-currency primary debt market, according to Mashreq Capital DIFC Ltd. and Rasmala Investment Bank Ltd. The nation’s Capital Market Authority said yesterday that the stock-market change would take place in the first half of next year.

“Capital markets are a package, you can’t have one part without the other,” John Sfakianakis, chief investment strategist at Riyadh-based investment company MASIC, said by phone yesterday. “The fact is that Saudi sukuk eventually should also be open to everyone.”

Opening the local-currency sukuk market would give foreign investors access to companies that sold 42 billion riyals ($11.2 billion) through a dozen sales in the past year. That’s more than three times the amount of dollar Islamic bond sales, which are open to overseas buyers.

In the 12 months through yesterday, only four dollar-denominated sukuk have been sold in Saudi Arabia. Those came from two issuers, Dar Al Arkan Real Estate Development Co. and Saudi Electricity Co., according to data compiled by Bloomberg. Twelve different borrowers, including National Commercial Bank and Almarai Co. (ALMARAI), each issued a riyal-denominated Islamic security in the period.

Pricing Tightly

“It’s a step in the opening up of Saudi capital markets overall, and that benefits sukuk investors because there will be more potential product if we can get access,” Abdul Kadir Hussain, who oversees about $700 million as chief executive officer at Mashreq Capital in Dubai, said in a phone interview yesterday. It will also make it easier for domestic borrowers to issue Islamic bonds, he said.

Access to the kingdom’s debt market may appeal more to investors wanting to broaden their exposure than to those seeking yield, according to Doug Bitcon, a Dubai-based fund manager at Rasmala.

“Lots of Saudi debt prices very tightly,” Bitcon said by phone yesterday. “I’m not sure how attractive that will be to international investors beyond portfolio diversification.”

The average profit rate, equal to a bond’s interest rate, of 41 outstanding sukuk from Saudi Arabia is 3.11 percent, according to data compiled by Bloomberg. That compares with 5.06 percent for 44 Islamic bonds outstanding from the neighboring United Arab Emirates, the data show.

Saudi Growth

Gross domestic product in Saudi Arabia will probably expand by 4.15 percent in 2014, versus 3.8 percent last year, economist estimates compiled by Bloomberg show.

The world’s biggest exporter of oil and de facto leader of OPEC is removing barriers to one of the most restricted major stock exchanges as the government pursues a $130 billion spending plan to boost non-energy industries. The move may lead to the country’s inclusion in MSCI Inc.’s indexes, which are used to measure performance by money managers with an estimated $9 trillion of assets.

“Opening the debt market would be part of the openness and all inclusiveness that the policy makers want to demonstrate,” Sfakianakis said.

(Bloomberg / 23 July 2014)

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H Abdur Raqeeb on The Need for Islamic Banking in India

India's central bank is reviewing regulations on Islamic banking in Asia's third-largest economy.

The Reserve Bank of India has set up an internal committee to examine the matter, unnamed sources told Firstbiz.com.

The RBI has reportedly set up a three-member panel comprising senior RBI officials Rajesh Verma, a deputy general manager with the Department of Banking Operations, Archana Mangalagiri, general manager, Non-banking Supervision and Bindu Vasu, joint legal adviser.

Islamic banking is practiced in several countries, including in the UK, which in June issued an Islamic bond that attracted orders in excess of £2bn ($3.4bn, €2.5bn) from global investors.

What is Islamic Banking?

Islamic banking follows the Shariah law. The model differs from conventional banking in that it does not accept deposits, only investments, which essentially make banking a venture capital activity. The model also encourages interest free loans in a bid to boost financial inclusion.

Islamic banking is also based on profit and loss-sharing; the model forbids the payment and receipt of interest and prohibits investment in businesses that are considered sinful – such as adult entertainment or the production of alcohol.

Speaking to IBTimes UK, H Abdur Raqeeb, General Secretary, Indian Centre for Islamic Finance (ICIF) told us how India stands to benefit from the roll out of Islamic banking.

Q: Do you think that India is a key place for growing the Islamic banking market and why?

AR: The misconception among many Indians is that Islamic banking caters to only the Muslim population. The model promotes financial inclusion. India's small farmers and petty traders for instance are still not part of the banking system despite over 40 years of nationalisation of the country's major banks. They cannot go to the capital markets to raise money. Islamic banking can cater to [the millions] outside the commercial banking system.

In addition, Muslims' savings are not being ploughed back into the Indian economy as a large section of the Muslim population here does not bank with commercial lenders.

Q: What needs to be done in terms of rolling out Islamic finance in India?

AR: Political will is necessary. The government has to take a decision on Islamic banking and the RBI has to regulate it. The central bank has to look into it.

We have been pleading with the government and have met Finance Ministry officials in the previous [Congress Party-led] regime.

Moreover, we don't have to use the term 'Islamic banking' in India. We can refer to it as alternate banking, which is what the UK calls it. Or, we could call it participatory banking, which is what they call it in Turkey.

Q: But, if India adopts Islamic finance on a broader scale, will this mean that a lot of the legal framework will have to change?

AR: Not much actually. We in India can borrow and benefit from examples of Islamic banking in the UK or in Singapore.

India Reforms

The question about whether India should allow Islamic banking has been debated for long.

In 2008, India's Planning Commission roped in Raghuram Rajan, the present RBI governor and a former Professor at the University of Chicago, to head its High Level Committee on Financial Sector Reforms (CFSR).

The CFSR, tasked to identify 'real sector reforms', recommended that New Delhi 'permit the delivery of interest free finance on a larger scale, including through the banking system.

(International Business Times / 22 July 2014)

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Saudi Arabia tightens control on zakat

The Saudi Ministry of Social Affairs is warning Saudis seeking to fulfil their zakat duty during the holy month of Ramadan against donating funds to those who solicit money via social networking tools.

There is an inherent risk in using social networking tools such as Twitter and WhatsApp to make donations, the ministry said, as true identities can be concealed and well-intentioned donations can fall into the hands of terrorist organisations which sometimes use charitable organisations as a cover.

Those who wish to donate money are encouraged to give to the more than 700 licensed charitable organisations in the kingdom, to social security offices or to organisations involved in the Al-Khair al-Shamel (Global Goodness) project, the ministry said.

These groups document donations in a transparent fashion under the state's auspices, it added.

Before Ramadan began, the Ministry of Interior warned it would impose the penalty of precautionary sequestration on bank accounts found to be involved in the unregulated collection of donations.

Al-Qassim University lecturer Yasser al-Muhanna said the issue of zakat funds and charitable donations is of paramount importance in Saudi Arabia as some "proponents of deviant ideology" exploited people's religious sentiments to obtain money through duplicitous methods.

One of these methods involves shaming stock brokers and traders into donating money to dubious organisations by telling them large portions of their profits are "usury".

"This is aside from the phantom organisations that used to roam the towns and villages to collect donations, alms and zakat funds under the pretext of supporting the mujahideen," he said.

Saudi authorities have since taken measures to cut off this flow of funds, al-Muhanna said.

The task of monitoring the collection of zakat funds and donations has been brought under the auspices of the counter-terrorism strategy which has been in place since the 1990s, he said.

In 1995, the Ministry of Interior, the Saudi Arabian Monetary Agency and commercial banks formed special units to monitor and combat money laundering.

"In 2011, [authorities] began strict monitoring of the work of charitable organisations and legal amendments were made concerning the operation of banking and financial [institutions] to close any loopholes that may be exploited to raise funds for these groups," he said. "Additionally, banks insist on knowing the identity of their customers, their financial and commercial activities and nature of the transactions they conduct."

The government also made legal amendments to the zakat collection system in order to monitor investment activities that were not previously covered, particularly transactions involving goods, commodities, buildings, land and real estate, he said.

MONITORING MECHANISMS

"Zakat collection in Saudi Arabia is undertaken by the Department of Zakat, and the funds are distributed by the General Organisation for Social Security," Shamel Humaidan of the Department of Zakat and Income in Riyadh told Al-Shorfa.

The Ministry of Labour and Social Affairs also monitors charitable organisations through its Department of Organisations -- a group of chartered accountants who audit their accounts -- and via 400 social development committees across the nation which report on the organisations' work.

Last year, the ministry distributed 25 billion Saudi riyals ($6.7 billion), the total amount of collected zakat funds, in addition to 1.5 billion riyals ($400 million) paid out monthly by the General Organisation for Social Security to about 700,000 families, Humaidan said.

Saudi Arabia monitors the financial activity of charitable organisations by limiting them to one bank account administered by two members of their board of directors and by requiring they first obtain approval from the security authorities and the Saudi Arabian Monetary Agency to open the account.

These accounts are used for deposit only, not disbursement, Humaidan said, and no cash withdrawals or transfers abroad are allowed.

Meanwhile, the Ministry of Islamic Affairs continuously monitors the performance of imams, preachers and workers at mosques and intervenes immediately if any of them comes under suspicion, Adel al-Usaimi, imam of al-Khair mosque in Riyadh told Al-Shorfa.

"Several fatwas were issued by the supreme religious authorities prohibiting the payment of zakat and donations to misguided groups, most recently by the Grand Mufti of Saudi Arabia, Sheikh Abdul Aziz Al al-Sheikh, who warned against paying zakat or making donations to non-deserving recipients, especially terrorist groups that were included on the official list," he said.

In Saudi Arabia, cash donation boxes are not allowed in mosques, markets and malls, as cash donations are accepted only at banks, al-Usaimi said.

(Al-Shorfa.Com / 21 July 2014)

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Turkiye Finans raises $252 mln from first sukuk issuance in Malaysia

Turkish lender Turkiye Finans Katilim Bankasi has raised 800 million ringgit ($252.21 million) from an Islamic bond in Malaysia, its first issuance from a 3 billion ringgit programme announced last month.

The issuance by Turkiye Finans, in which Saudi Arabia's National Commercial Bank is the largest shareholder, is the first ringgit-sukuk done in Malaysia by a Turkish issuer.

Proceeds from the five-year sukuk will fund general corporate purposes and working capital requirements, according to HSBC Amanah Malaysia Bhd. HSBC Amanah and Standard Chartered Saadiq Bhd are jointly advising the Turkish bank.

"Following this debut issuance, we hope to see more cross-border sukuk issuances by Turkish issuers in Malaysia, giving the Malaysian investor community an opportunity to diversify their investments," said Wasim Saifi, chief executive of Standard Chartered Saadiq, in the statement.

Turkey Finance is one of four Islamic banks in the country, with a sole focus on loans to corporate clients. The bank in June established a 3 billion ringgit programme, with sukuk of one to 20 years. 

(Reuters / 21 July 2014)

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Prudential sees big potential for takaful business in Sarawak

KUCHING: Prudential Assurance Malaysia Bhd (Prudential) foresees huge opportunities for takaful business to widen its reach throughout Sarawak.

A Prudential senior agency mananger said the local market is widely untapped and believed that the increasing level of awareness on standard of living and quality healthcare will attract people to obtain more protection services.

Firdaus Lau Abdullah, a senior agency manager with Prudential said, “For the whole Malaysia, there are still a significant percentage amount of people who do not have insurance.

“A statistic which was conducted not so long ago revealed that there are just 11 per cent insurance penetration rate throughout Malaysia.

“Therefore, the remaining 89 per cent are still in need of insurance and the market is huge.

“In Sarawak, there are a lot of Bumiputera and they will require insurance services for instance takaful as the standard of living keeps going up and people require better healthcare services,” he told The Borneo Post when interviewed recently on the sidelines after Prudential’s carreer talk held here on Saturday.

He added that Sarawak is a land of rich resources which enables its economy to grow strongly.

He explained that as the economy grows, people will need more insurance as a solution for retirement purposes or financial benefits against illness.

Firdaus who hails from Kelantan and comes here from Kuala Lumpur, also observed that there are more private hospitals being built compared to the last time he visited Kuching several years ago.

He noted that the rising number of private hospitals showed that people wants better and quality healthcare for their families and loved ones. He added, insurance is one of the services which can reduce the financial burden of the people in the event that they are struck with certain illness.

Meanwhile, Firdaus pointed out that Prudential BSN Takaful Bhd’s (PruBSN) business has a leading market share in the takaful industry.

His view was in line with PruBSN which had recently reported that its new business increased 15 per cent to RM265.7 million on an annual contribution equivalent (ACE) basis for the financial year ended December 2012.

PruBSN added that the results has confirmed the company as the leading takaful provider in Malaysia with a market share of 28.4 per cent.

PruBSN noted that its strong financial performance in 2012 was achieved due to the strength of Prudential’s franchise in Malaysia, its robust multi-distribution channel strategy and new product launches.

On a side note, Firdaus’s wife, Norlia Hassan is one of the top agents for Prudential Malaysia and was awarded the top Bumiputera agent for 2010 and 2011; attributable to her strong determination and willingness to live a better life with her family.

She observed that having been in the insurance industry for more than 14 years and gaining numerous awards with Prudential, she followed a good system which include several attributes such as discipline, determination, sincere, sacrifice, structure, persistent, goals setting and willingness to learn.

Norlia revealed that during her earlier days in the industry, she approached approximately 50 to 100 people a day to educate people about the need of having an insurance. Norlia said her inspiration is her children and her aspiration is to have a better standard of living with her family members.

As for Firdaus who has more than 19 years of experience in the insurance industry, he said he considers success as living financially independent and having a balanced life in work, spiritually and in social life.

(Borneo Post Online / 21 July 2014)

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Ramadan Question: How much Zakat Al Fitr?

At the end of the Month of Ramadan every Muslim individual bears the responsibility to donate Zakat al Fitr, an amount of money specified by the local religious authorities to be donated for the cause of charity.

The amount of this donation in the UAE has been assessed to be Dh20 for the year 2014, confirmed a mufti speaking on the Fatwa toll free number of the General Authority for Islamic Affairs and Endowments (GAIAE).

This amount should be referred to whenever the individual has performed his fast in the UAE, he added.

If a person has performed his fast in a foreign country, the amount determined in that country should be taken in to account. If the person carried out some of the fast in the UAE, and then traveled to complete the fast in another country the second country should be referred to for the determination of the amount.

This being said, the destination of the donation can be anywhere, as long as it serves a poor Muslim person. If people prefer to send Zakat al Fitr to their home country they are permitted to do so, explained the mufti.

It is important to send the money on time so it will reach the destination before Eid al Fitr, he added.

If the fast was performed in the UAE and the donation will be sent to another country, the amount should be Dh20.

In order to donate Zakat al Fitr in the UAE there are many channels, such as the various charity organisations in the country.

But if the zakat is paid to a poor individual Muslim this is also accepted, the mufti concluded concluded.

(Emirates News / 18 July 2014)

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