Hundreds of financial institutions are involved in Shariah-compliant transactions, making Islamic finance an established and recognised industry around the world. Its assets were estimated at $2.88 trillion in 2019 and are expected to reach $3.69 trillion in 2024.

The growth of the industry fostered an increasing interest in developing Islamic social financial (ISF) tools, where Islamic finance is used towards contributing to environmental, social and humanitarian projects, in line with the spirit of Islam.

This is even more relevant today, as the Muslim world continues to be disproportionally affected by major humanitarian crises: 21 per cent of people living in Organisation of Islamic Cooperation (OIC) countries live under the poverty line, and 28 out of the 57 OIC countries are classified as “Low-Income Food-Deficit Countries”, with 224 million people suffering from malnutrition. This has led to the launch of several initiatives by United Nations (UN) agencies and diverse humanitarian organisations, to maximise the impact of ISF in support of global humanitarian efforts.

In light of this, and with more than 60 per cent of forcibly displaced populations coming from OIC countries, the UN Refugee Agency UNHCR identified a strategic alignment between ISF and its work, in which several initiatives were launched to maximize its impact to the lives of refugees and internally displaced persons (IDPs), with a focus on Zakat.

In 2019, the Refugee Zakat Fund launched by the UNHCR, supported over one million beneficiaries. The following year, it further increased its impact through a global Ramadan campaign, Sadaqah Jariyah projects, purification funds from a leading financial institution and more than 30 partnerships with key stakeholders.

The UNHCR’s Refugee Zakat Fund was able to provide lifesaving assistance to more than 2.1 million beneficiaries in 13 countries through Zakat and Sadaqah funds in 2020. This confirmed the high potential of ISF and the need to include it in humanitarian responses, following the disastrous economic consequences of the Covid-19 pandemic. It also further underpinned the importance of building strategic partnerships between varied and complementary institutions, especially at a time when it is challenging for the current level of crises to be dealt with by a single entity.

We all have a role to play to unlock the full potential of ISF. Religious leaders have the power to provide support to beneficiaries in the field, as well as guidance to humanitarian organisations on compliance issues with regard to implementing ISF tools. Multi-lateral institutions can share governance and transparency mechanisms, as well as best practices on effectively implementing humanitarian programmes. Islamic institutions have direct contacts with Muslim communities and can help create awareness about the displacement crisis and about the importance of mobilising much needed resources, both in terms of funding and implementation on the ground.

In response to the displacement crisis, the UNHCR has been engaging with the OIC to collaborate. A seminar that took place on July 12 between both institutions was specifically focused on partnering to channel Islamic social finance tools to support displaced populations and host communities in OIC member states. This was in addition to the OIC’s International Islamic Fiqh Academy issuing a fatwa last year to distribute Zakat through the Refugee Zakat Fund.

This fatwa was followed by another one by the Muslim World League, based in Makkah, Saudi Arabia, which also supported in the UNHCR’s Live, Learn and Participate Project in 2020, to help strengthen protection and support services for children and youth in Sudan and Ethiopia. The UNHCR also collaborated with Cairo-based Al Azhar Islamic Research Academy to launch ‘30 Days of Kindness’ — a joint advocacy initiative to raise awareness about the needs of refugees and IDPs during winter. Besides non-financial engagement with these entities, the impact of Zakat and Sadaqah in 2020 would not have been realised without the financial support of long-term partners in the Middle East and Africa region.

The impact of the support we have rallied from donors across the world is significant, it is, however, unfortunately not enough. Every year, the number of displaced people hits a new tragic record. Around 2.4 million more people were forced to leave their homes in 2020 compared with 2019, reaching a total of 82.4 million. This represents more than the population of France, the UK or Thailand. ISF has a bigger role to play in assisting these populations. Therefore, we are actively re-thinking the impact and reach of ISF and how best it can be utilised on a global level to structurally impact humanitarian aid. More can be done, much more is needed.

Source:https://www.khaleejtimes.com/business/banking-finance/islamic-social-finance-has-a-bigger-humanitarian-role