Shariq Siddiqui: Which nonprofits should get Muslim zakat?

Muslims across the world (and here in Indiana) have welcomed the Muslim holy month of Ramadan. During Ramadan, Muslims fast from dawn to dusk, do additional worship, give charity and contemplate how they can make themselves and the world a better place. According to research by the Muslim Philanthropy Initiative at the Indiana University Lilly Family School of Philanthropy, nearly 70% of Muslims in the United States report giving zakat in Ramadan. This makes Ramadan a critical month for nonprofit institutions to solicit zakat funds.

Zakat, or obligatory charity, is one of the five pillars of Islam. It requires Muslims to give 2.5% of their surplus wealth to eight prescribed categories.

Zakat can be collected by institutions, but due to distrust in institutions, zakat has become more individual than communal. Further research by MPI suggests that Muslims in the United States give $1.8 billion in Zakat annually, and the vast majority is spent on local causes. This research also suggests that Muslim Americans give roughly half their donations to non-Muslim-led institutions.

However, nonprofit institutions have taken important steps to build trust among Muslim donors. Some examples of these activities include:

Muslim American charities were among the very first to embrace the Charity Navigator as a way to evaluate their impact.

A recent article published by the MPI team reports that Muslim Americans are more likely to donate to nonprofits that are approved as 501(c)(3) organizations. This is true even if they don’t take the itemized tax deduction and therefore cannot benefit from their donation in terms of tax relief. Arguably, they likely perceive the 501(c)(3) status as a mark of government legitimacy.

More recently, nonprofits are seeking to respond to Muslim concerns about how these nonprofits use the zakat funds. It isn’t just important that these organizations have great impact and use these funds legally, it is also important that these nonprofits use them in compliance with Islamic religious requirements. Many nonprofits and organizations are adopting zakat policies. These include organizations that are not led by Muslims, like the UNHCR, Save the Children and OXFAM.

The MPI recently convened a group of scholars to discuss challenges of collecting and distributing zakat in the contemporary United States. This resulted in a report that outlines these conversations and also examines the zakat policy of the largest Muslim-led nonprofit in the United States, Islamic Relief USA.

The report outlines the critical steps Islamic Relief USA undertook to develop a zakat policy. First, the process was board-led rather than staff-driven to provide independence to the process. Second, the organization engaged with nationally known Islamic scholars who brought diverse perspectives to the table. Third, none of the scholars were compensated—they volunteered to do this. So their opinion could be seen as independent. Fourth, the policy is publicly available on the Islamic Relief USA website. While not all scholars at the convening agreed with all points of view within the Islamic Relief USA Zakat Policy, they agreed that diversity in Islamic thought permitted various approaches to zakat. They all agreed that Islamic Relief USA’s process was likely the best approach in dealing with how nonprofits should approach the development of zakat policies.

Ultimately, there was consensus that nonprofits seeking zakat should have zakat policies, should make them available to the public, should state the process through which the policy was developed, and name the scholars who were part of the process.•

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Siddiqui is assistant professor and director of the Muslim Philanthropy Initiative at the Lilly Family School of Philanthropy at Indiana University. Send comments to [email protected].

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