Zakat: A relief provider for Central Africa
IFN Article by Marvin Cole, CEO of Ovamba Solutions Inc.
The coronavirus pandemic’s impact on remittances and tithes has been devastating. 2020 has seen sub-Saharan African remittances drop by more than 23% to US$37 billion. In light of this, we have been thinking about and admiring the power of Zakat and its seamless presence at the intersection of wealth and the concept of giving.
Having witnessed the impact of religion and charity in Central Africa, it makes for great conversation to stack Zakat against tithing or other forms of giving. Tithing requires 10% of your earnings and is paid to the church. Zakat Niba is 2.5% or 1/40 after your expenses are deducted and is administered via the bank.
Then there is the main difference, which appears to be the way in which liquidity is unleashed in a single wave from all corners of the Islamic community. It is not an option, it is a certainty. Zakat blends faith and finance in a pragmatic and highly effective way.
Since the onset of the coronavirus pandemic, concerns and questions regarding innovative finance and blended capital have been coming up on policy discussions via Zoom and online events quite regularly. Ultimately, it comes down to innovating finance for a functional society. Even though Zakat Maal is the obligatory form of giving reserved for Muslims only, it has a measurable impact throughout local business communities and is gaining respect for its impact and importance.
Despite the additional XAF500 billion (US$896.06 million) that the BEAC Monetary Policy Committee made available to the banking system in March, very little capital actually made its way to SMEs or the informal sector. Spending contracted almost immediately. Banks shored up capital to maintain liquidity limits and earmarked funds for large commercial customers. For merchants and traders, there was Zakat and there was post-Ramadan spending. During economic uncertainty, this is a welcome and reliable relief.
More Islamic non-governmental organizations are seen getting to work in the CEMAC region and blurring the lines between faith and work. You could say that this might even be a forerunner of the UN Sustainable Development Goals! It is highly expected that we will see additional innovation around Zakat as an economic driver and more policymakers will seek ways to compliantly leverage this powerful tool.
This article was first published in IFN Volume 17 Issue 41 dated the 14th October 2020.