What is Zakat? Can it help us achieve the Sustainable Development Goals?
The Sustainable Development Goals (SDGs), will require a step-change in both public and private investment in developing countries. An estimated annual $2.5 trillion funding gap is required to meet the goals.Private sector contributions – through both good governance in business practices and investment in sustainable development – will be critical to the realization of the SDGs. Public sector contributions will remain indispensable, but may be insufficient to meet demands across all SDG-related sectors. Nevertheless, increasing private sector contributions poses challenges and policy dilemmas which must be addressed.
Islamic finance has the potential to play a crucial role in supporting the implementation of the Sustainable Development Goals (SDGs). In the face of significant financing needs for the SDGs, Islamic finance has untapped potential as a substantial and non-traditional source of financing for the SDGs.
The growth of Islamic finance has been rapid at 10-12% annually over the past two decades. By 2015, the industry had surpassed US$1.88 trillion in size and is projected to breach the US$ 3 trillion mark by 2020.. Islamic finance has emerged as an effective tool for financing development worldwide, including in non-Muslim countries, and may prove to be an important contributor towards realizing the SDGs.
Zakat and the SDGs
Zakat is a form of philanthropy found around the world. All Muslims eligible to pay it must donate at least 2.5 percent of their accumulated wealth. As such, it is one of the largest forms of wealth transfer to the poor and needy in existence. Inspired by the Muslim faith, Zakat is now a global phenomenon of relevance and not only in Muslim majority countries.
Alleviating hunger, poverty and inequality, promoting peace and protecting the environment are central to the core Islamic principles known as the Maqasid Shariah. The Quran identifies eight categories of eligible use for Zakat, including helping the poor and needy, refugees and displaced people and liberating those in bondage.In the Islamic faith, there are five foundational goals also known as Maqasid alSharia.These include: protection of faith, life, progeny,intellect and wealth.
Zakat aligns strongly with numerous SDGs, including no poverty (SDG 1), zero hunger (SDG 2), reduced inequalities (SDG 10) and others. Collaborating with Zakat donors and administrators reflects the spirit of partnership for the goals (SDG 17). It is about much more than mobilizing finance. Zakat can also help in achieving the SDGs by creating financial inclusion, which is considered as an enabler of other developmental goals. On top of aiding the achievement of the SDGs, this is a great business opportunity for Islamic banks to serve this un-banked population.
Zakat and Islamic finance have an underlying philosophy that embodies socially responsible development and is associated with a wide network of organizations crucial for promoting peace, development and tolerance.
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