Thursday, 18 April 2019 09:29

A child trust lifeline with corporate Zakat

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Issues of child abuse, neglect, malnutrition and exploitation are the focus of renewed attention from governments, policymakers and multilateral institutions.

For instance, the United Nations Millennium Declaration 2005 and the Sustainable Development Goals (SDG) 2017 have listed children’s rights to survival, health, and education into their main agendas.

Research has shown that children are the most vulnerable segment of a society and are exposed to abuse and violence. Each year, an estimated 0.5 to 1.5 billion children are involved in physical violence, 150 million girls and 73 million boys are raped or subjected to sexual abuse, 115 million children engaged in dangerous work and 264 million children have no access to school.

In Malaysia, 17.7 per cent of children below the age of 5 are stunted (Health Ministry 2017 records), 22 per cent are underweight and 23 per cent are either overweight or obese (United Nations Children’s Fund [Unicef] 2018).

The Malaysian government and policymakers, therefore, have shifted their attention towards strengthening the social protection system. For example, the Bantuan Sara Hidup (BSH) programme launched in 2018 offers unconditional cash transfers to B40 households to assist with rising costs of living. However, the existing protection schemes are not specifically designed to address the welfare of children during their first 1,000 days — the most vulnerable phase in their life, in which nutrition and beneficial healthcare are paramount.

This article, therefore, proposes the utilisation of corporate zakat — an annual religious obligation paid by business entities under the purview of zakat on wealth — to develop a child grant that seeks to complement existing government programmes.

An ongoing study by the International Institute of Advanced Islamic Studies (IAIS) Malaysia, in collaboration with Unicef and Iman Research, discovered that corporate zakat has the potential to address the required needs of children in Malaysia in terms of survival, nutrition, healthcare and education.

There are 693 Syariah-compliant listed companies under the Securities Commission and 16 Islamic commercial banks in Malaysia that are supposed to pay zakat. However, as of October last year, only 21 companies and 12 Islamic banks disclosed their zakat payment with an average payment of RM4 million accumulating a total collection of RM130 million. This is a far cry from its true potential, which is estimated to reach RM2.9 billion in 2019 and more than RM3.4 billion by 2031. This projection, however, does not include non-public Syariah-compliant firms, sole-proprietorships, Islamic cooperatives and small, medium enterprises in Malaysia.

On the other hand, the total budget of the child grant only amounted to RM1.9 billion, to cater approximately for 832,940 children under the age of 2 in 2019, with each child to be allocated RM150.

In Islam, zakat can be used for various socio-economic purposes such as education, healthcare and humanitarian causes as long as they fulfil the criteria of zakat beneficiaries (asnaf).

The Quranic verse (9:60) listed eight categories deserving of zakat: the poor (al-fuqara’); the needy (al-masakin); zakat collectors; those whose hearts are being reconciled (with Islam); freeing war captives; persons in debt; those who are in the path of Allah; and the wayfarers.

In this regard, the overwhelming majority of jurists from four established schools (Hanafites, Malikites, Syafi’ites and Hambalites) are of the view that children are also eligible to receive zakat if their guardians fall among the above eight categories.

A hadith narrated by al-Daruquthni from Abu Juhaufah reported that the Prophet Muhammad (PBUH) once sent a zakat collector who collected zakat from the rich people and distributed the collection among the poor. At that time, Abu Juhaifah was a young orphan who did not possess any wealth, so the zakat collector gave him a middle-aged camel. Thus, according to the Hanafi school, children of wealthy parents could not receive zakat because they are considered rich if their parents are rich.

In a report attributed to Caliph Umar al-Khattab, it is stated that the first poor (fuqara’) refer to Muslims and the second needy (masakin) to non-Muslims. Difference of religion is thus not a bar to zakat.

In a nutshell, corporate zakat is a high potential source of funding for a child grant programme in Malaysia, particularly for children of households belonging to the B40 category. Other potential avenues such as corporate social responsibility (CSR), sadaqah and waqf, can also be explored as complementary funding sources for the proposed grant.

From an Islamic viewpoint, the use of corporate zakat and other Islamic social finance instruments for a child protection system correspond to the higher objectives of Syariah (maqasid) on the protection of life and mind, and is supportive of the government’s new motto to promote Islam as rahmatan lil ‘alamin (a mercy to all creation).

To achieve corporate zakat’s fullest collection potential, this article proposes that relevant authorities, such as the Securities Commission (SC), Bank Negara Malaysia (BNM), and the Companies Commission of Malaysia (SSM), increase the promotion of zakat among Malaysian companies.

The corporate zakat payment needs to be emphasised as a tax obligation. This is particularly so since the National Fatwa Council of Malaysia (2001) and Selangor Fatwa Council (2003) have resolved that Islamic banks and Syariah-compliant firms are obligated to pay zakat.

It is also recommended that zakat payment becomes one of the determining criteria in achieving Syariah-compliant status for public-listed securities under the SC.

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The writer is a research fellow at the International Institute of Advanced Islamic Studies (IAIS) Malaysia

Published in: New Straits Times, Thursday 18 April 2019

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