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Monday, 16 June 2014

Egypt intensifies efforts to regulate zakat

These efforts include regulating the work of charities and intensifying public awareness campaigns conducted via imams and mosques, officials told Al-Shorfa.
The Ministry of Endowments banned the collection of zakat donations in mosques last Ramadan, but the decision only went into effect this year.
The ministry issued a list of penalties for violators, and is moving, in co-ordination with Al-Azhar and security agencies, to prevent unauthorised donation boxes from being placed in mosques and gathering places, said Mahmoud Metwalli, a member of Egypt's Zakat Committee.
Zakat collection is restricted to Ministry of Endowments and Al-Azhar offices, as well as to around 14,000 licensed, nationally-recognised charitable organisations that receive zakat funds to disburse to the needy, Metwalli said.
"These organisations are subject to supervision and monitoring and are fully transparent with regard to the disclosure of collections and disbursements to the poor and the salaries of their employees," he told Al-Shorfa.
Zakat funds are disbursed each year by Al-Azhar and the endowments and social solidarity ministries to an approved list of eligible recipients, including the sick, orphans, widows and the poor, Metwalli said.
The disbursements are paid out directly or through post offices, in which case the payment dates are announced in the media, he said.
This year, an electronic link will be established between organisations that collect zakat, civil society organisations and the Ministry of Social Solidarity to monitor the funds and verify the beneficiary lists, he added.


In some cases, unlicensed or fictitious organisations that have no defined budgets are collecting funds, Metwalli said, and "thus, the fate of the money they collect is unknown".
Additionally, he said, some individuals go from house to house to collect money, claiming to represent a legitimate organisation.
To stop this type of abuse, Al-Azhar and the Ministry of Endowments are conducting awareness campaigns at mosques around Egypt on the need to restrict zakat payments to authorised parties.
"The awareness campaigns also include the circulation of the names of ministry representatives and licensed organisations and institutions, with emphasis that citizens need to check the ID cards of those who try to collect funds," Metwalli added.
"The state of lawlessness that prevailed in the past period allowed some suspicious individuals to once again infiltrate Egyptian society," said Al-Azhar University sharia professor Nayef Abd Rabbu, who serves as an advisor to the Ministry of Social Solidarity.
"These individuals belong to terrorist groups that wreak havoc in Egyptian territories and require financial support to maintain their existence, and the month of Ramadan represents a favourable opportunity for them," he said.
In response, he said, agencies concerned with the collection and disbursement of zakat are tightening their control over the process to prevent these funds from reaching the coffers of "terrorist groups".


Zakat funds are distributed based on lists of eligible recipients which are researched, vetted and compiled in advance, Abd Rabbu said, noting that Al-Azhar works with civil society organisations and charities to prevent beneficiaries from making multiple claims on these funds.
"The amount of money paid by Egyptians for zakat may reach up to 15 billion Egyptian pounds ($2 billion)," Abd Rabbu said.
Sheikh Abdullah Abdelradi, imam of al-Mustafa mosque in Dokki district, said he has been active in raising public awareness against giving zakat to non-officially licensed parties.
"There are many who exploit the surge in donations during the month of Ramadan to support some extremist and terrorist groups," he told Al-Shorfa.
The Ministry of Endowments is working to eliminate this practice by prohibiting mosques from accepting zakat and cash donations, he said.
"I personally, and other imams, ask citizens who wish to donate to mosques to donate in kind, that is to bring to the mosque equipment it needs" such as air conditioning units, fans, loudspeakers, prayer rugs and other necessities, Abdelradi said.
In-kind donations also can include maintenance work or joining the mosque's charitable organisation to organise evening banquets, or Rahman tables, during the month of Ramadan, he said.
"This way, [the handling of] funds is restricted to official parties only," he said.
In his religious sermons and speeches, Abdelradi said he stresses the need to refrain from giving money to unknown individuals or organisations, "especially those who go door to door to collect donations and zakat for a particular cause or project".
He also suggests that in lieu of cash, those who wish to donate more than the required amount of zakat could pay for student textbooks or tutoring or offer to pay the debts of a struggling family.
(Al-Shorfa.Com / 13 June 2014)
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MENA SMEs Turn To Islamic Financing For Funding

Around 35 per cent of SMEs in the MENA region are excluded from the formal banking sector because they are seeking shariah compliant products that are not readily available in the market, according to a new study by International Finance Corporation (IFC).
The study, which was carried out across nine countries, found a potential market gap of up to $13.2 billion for SME Islamic financing in the region.
Despite the rising demand for Islamic financing among SMEs, the study reported a gap in Shariah complaint offerings among regional lenders. Of the 36 per cent of banks in the MENA region that offer SME products, only 17 per cent offer Islamic options.
The study also noted a significant variation across countries; demand for Islamic banking is as high as 90 per cent in Saudi Arabia while falling low as four per cent in Lebanon.
A high level of risk aversion by banks, poor regulatory environments, differing perceptions of Islamic finance, and a lack of relevant products were found to be hindering the growth of Islamic SME banking.
“The Islamic banking industry is not adopting measures that would grow the market. They don’t have a strategic outlook and there is a lack of product innovation,” added Attiq ur Rehman, partner, Israa Capital.
The study was carried out in Iraq, Pakistan, Yemen, the Kingdom of Saudi Arabia, Egypt, Lebanon, Morocco, Tunisia and Jordan.
But figures are not widely different in other GCC countries, experts noted.
“What we see in Saudi will be applicable to the rest of the GCC region as markets are very similar in that sense,” said Mouayed Makhlouf, regional director for IFC, MENA.
“But more importantly, the study reveals a significant, untapped ‘new to bank’ funding opportunity, as banks and other financial institutions lack adequate strategic focus on this segment to offer Shariah-compliant products. It also highlights the measures they need to take to overcome this.”
The Islamic banking industry is expected to develop significantly over the next few years.
“Islamic banking has a compound annual growth rate of 15 per cent whereas conventional banking in these countries is not more than seven per cent,” said Rehman.
“Islamic banking grew even during the crisis period of 2008 to 2010 when conventional banking slowed. It maintained that growth pattern after that as it saw a phenomenal growth in 2013.”
Rehman attributed the growth in Islamic finance in the region to lower non-performing ratio (NPR) of loans compared to conventional banking.
“The reason is that there are real transaction and people’s tendency to default is low because willful defaulters are less in Islamic banking as compared to conventional banking,” he said.
Fuelled by economic growth in core Islamic financial markets, global Islamic banking assets are set to exceed $3.4 trillion by 2018 according to a report released earlier this year by Ernst & Young (EY).
EY’s Global Islamic Banking Centre said the combined profits of Islamic banks broke the $10 billion mark for the first time at the end of 2013.

(Gulf Business / 14 June 2014)
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