The goals of Islamic finance can be perceived right from the terms it rests upon. While the term finance suggests that Islamic finance addresses economic issues such as resource allocation and management as well as acquisitions and investments; the term Islamic implies there are certain unique factors embedded in it that create divergence from the existing or subsisting whether in its principle, operation or outlook. These factors are evidently drawn from the provisions of the Shari’a. Thus, Islamic finance is an ethical financial system that promotes healthy relationship among all stakeholders and takes into cognizance the concept of mutual risk and profit sharing. Transactions in this kind of financial structure are based on particular business activities and real assets.
Meanwhile, the main goal of Islamic finance is often captured in one general term of Maqasid al-Shari’a (the real essence of Shari’a). This terminology may be described simply as the objectives of Shari’a. It facilitates improvement and perfection of the conditions of well-being of individual in the society. Islamic finance introduces an economic system that is built on social justice and has positive impacts on the total welfare of the masses. Its non-negotiable and vehement prohibitions on financial transactions that are based on interest, gambling, speculation, fraud, bribery, corruption, and the likes align with Maqasid al-Shari’a.
“MANY INSTRUMENTS IN ISLAMIC FINANCE AS MENTIONED ABOVE ARE TOOLS TOWARDS ERADICATING POVERTY AND ENHANCING WELFARISM IN THE SOCIETY”
THE NEED FOR SOCIAL FINANCE
Hitherto, the traditional financial system has not been able to resolve some of the socio-economic problems ravaging the world economy. High rate of poverty, injustice, deprivation, ecological destruction and many others are manifestations of the multifaceted crisis enveloping the world. The situation is so deplorable that people can no longer meet their basic needs vis-a-vis food, clothing and shelter let alone other important needs such as health care and sanitation, safe water supply and so on.
Consequently, the emergence of Islamic economics and finance especially its phenomenal growth and success, at least in the last three decades, is considered not only as an alternative to the conventional system but also as a remedy to the world’s economic and financial crises. Being a divinely motivated system, Islamic social finance system is therefore set out to promote the general well-being of people as well as to enhance public and social benefits (Maslaha) which happens to be one of the manifestations of the Maqasid al-Shari’a. It therefore provides fundamental and substantive change to some of these lingering problems.
At this juncture, it must be emphasized that Islam values prosperity and particularly urges its adherents to aspire and work for bounties in this world while seeking the pleasure of their lord, Allah. It however establishes certain institutions charged with the aims of redistributing income and circulating wealth among people through charitable courses in the form of zakat and sadaqah. Besides there are other potent palliative measures that can be employed to eliminate poverty and bring about a just society, which are waqf and qard ul hasan.
Meanwhile, we must realize that poverty does not exist in isolation. It has been found to have direct impacts on many aspects of our socio-economic lives such as education; health; labour market; agriculture, livestock and food security and many others. Many instruments in Islamic finance as mentioned above are tools towards eradicating poverty and enhancing welfarism in the society. Giving the principles of fairness, justice and equity that characterize Islamic finance, it is unambiguous that adopting its model of poverty alleviation ensures that every individual in a society is confident of a minimum income which in the long run contributes to social security system within such society.
ZAKAT AND SADAQAH
The institutions of zakat and sadaqah are among several instruments instituted in Islam to combat poverty and promote the well-being of people. These institutions also encourage wealth circulation and redistribution of income. Zakat is one of the cardinal principles of Islam and so it is obligatory on adult wealthy Muslims, whether male or female, whose wealth meet certain stipulated conditions. These conditions include the fact that the source of the wealth must be lawful (halal); the payer must not be a Muslim, adult, sane and must not be indebted in anyway, the amount must reach the minimum allowable rate (nisab) within the course of a year.
Sadaqah, on the other hand, is the supererogatory form of zakat and it is also enjoined on every privileged Muslim who may not necessarily be rich but are comfortable. It does not have the conditions attached to zakat other than the fact that the source of wealth must be lawful. Thus, the rich who pay their zakat do additional rewarding acts through paying sadaqah. Others who are not qualified to pay zakat (simply because their wealth do not meet the minimum amount) are encouraged to pay sadaqah; it is actually a platform for all and sundry to participate. Zakat and sadaqah have many objectives in terms of spiritual, economic and social well-being. The Quran explicitly describes the spiritual objective in Q9 vs 103 as a means of purifying one’s wealth:
“Take out of their wealth Zakah that so thou mightiest purify and sanctify them”
A brief analysis of the above verse shows that the primary essence of zakat is to purify and cleanse the payers. In other words, just as the essence of fasting in Islam is to attain Allah’s consciousness, the very essence of zakat or sadaqah is soul purification and rejuvenation. Besides, zakat and sadaqah have been found to be helpful in purifying the human soul from the vices of stinginess, greed, covetousness, lustfulness as well as other inner germs of the spiritual diseases.
Meanwhile, there are many socioeconomic benefits of paying zakat and sadaqah. It reduces concentration of wealth in the hands of the few, thereby enhancing circulation of wealth. It also helps the less-privileged in the society including the poor, orphans, widows who are unable to fulfil their needs not because they are handicapped or lack administrative acumen or are bereaved of ideas but because they do not have the capital or the resources to transform their ideas into realities.
“TAKE OUT OF THEIR WEALTH ZAKAH THAT SO THOU MIGHTIEST PURIFY AND SANCTIFY THEM”
The institution of zakah also provides a platform to help people the less-privileged members of the society either by virtue of insufficiency of wealth or inability to work as a result of one disability or the other. Therefore, the sets of individual should not be unduly subjected to abject poverty but could be assisted swiftly through the proceeds of zakat and sadaqah, thereby reducing poverty rate to the barest minimum.
Furthermore, the Quran identifies the recipients of the proceeds of zakat and by extension of sadaqah. These are people who for one reason or the other, are under either temporary or permanent circumstances that are beyond their control and thus do not have the wherewithal to help out and comfort themselves; hence, the need to assist them. The list of categories of people that are entitled to the proceeds of zakat as enumerated in Q9:60 are: the poor; the needy; Zakat collectors; winning over hearts (i.e people whose faith are weak and new revert); slave seeking ransom; the indebted, in the cause of Allah swt (i.e the participants in the cause of establishing Islam as well as the erecting facilities/ structures such as mosque, school, hospital, Muslim cemetery, orphanage homes, etc.); and wayfarers.
The categories of people the Almighty Allah enumerated in the Quran as recipients of zakat and by extension sadaqah cut across people of different classes of needs. They represent conditions or circumstances human beings can find themselves by virtue of divine decree or individual laxity or incapability or insufficiency or whatever. The bottom-line is that at that material time they are in need and will like to meet or satisfy their needs. Their state of affairs makes the susceptible to violence as the popular saying “a hungry man is an angry man”.
Since the Maqasid Shari’a is peaceful co-existence of people irrespective of their racial, religious, ethnical, and socio-economic backgrounds; zakat and sadaqah, therefore, play an important role in realizing this objective. Given the fact that everyone cannot equally be blessed and everyone cannot be a leader, the onus lies on the privileged ones to assist the less privileged; this is the nature of life. Therefore, to bring about desired peace in any society the principle of equity as instituted in zakat and sadaqah must be ingrained.
Unfortunately, the rate of social insecurity and poverty in the world is becoming alarming not because there is no more soil to till or the water from the sky has stopped endlessly. But the problem is that the wealthy or should I say the privileged have continued to impoverish the poor ones through conditional financial aids in form of loan imbued with compound interest. The economic interests of the big nations supersede whatever interests other nations of lesser socio-political status may harbour.
Thus, today we put profit above people; greed above need; rule of gold above golden rule and the consequences of our nonchalant attitude, greed and selfish interest include prevalence of violence; insecurity and insurgency, militancy, hatred, despondency, distrust and of course poverty.
The institutions of zakat and sadaqah provide a palliative measure to the problem of social vices and poverty that is ravaging the world. For zakat, only 0.025 (or 2.5%) of one’s wealth is to be remitted annually as zakat, while for sadaqah it is as much as you can afford. In a sophisticated environment, scholars agree that the zakat might be remitted to a zakat-based institution or organization that collects and disburses zakat and sadaqah appropriately.
In some other societies, especially Muslim states, zakat and sadaqah are placed under a ministry or government parastatal that does not only oversee the payment of zakat and sadaqah but also oversees the distribution taking into cognizance the eight categories of people mentioned in the Quran. Both the zakat and sadaqah proceeds can be used to facilitate or finance the less privileged that are business-driven or artisans but lack financial wherewithal to establish themselves in their respective careers.
Besides, these proceeds can also be used for community-based activities such as paying tuition fees, hospital bills and so on for the poor and their children. Their proceeds can also be channelled towards reducing illegal sexual intimacy among young adults who are ripe for marriage. These unmarried men and ladies who are likely to constitute nuisance to the society can be helped by empowering them so that they can get married as soon as possible. We can use these proceeds to assist the debtors by offsetting their debts thereby making them free of the pang of debt.
Furthermore, we can empower the unemployed youths by organizing skill acquisition programmes for them from the proceeds of zakat and sadaqah. This makes them to be self-sufficient and even be employers of labour in their own realms. This might not only cut down the number of people that run after white-collar job but also reduce unemployment in the long run and so the society becomes a better place for us all to live.
WAQF
Waqf is another palliative measure Islam introduces as a social finance technique to combat poverty and promote peaceful and healthy relationship among members of a community. By a way of definition, waqf can be described from literary perspective as to hold, confine, detain, or restrain. In technical or usage form, the term waqf means protecting something, by preventing it from becoming the property of a third person. It could be described as withholding the ownership of a designated asset while releasing its usufruct. Besides, it represents property or assets dedicated in perpetuity for specific beneficiary for the purpose of achieving specific objectives. According to most scholars, waqf is often seen as Sadaqatu Jariya (continuous charity).
Waqf may be cash money, real property, land, building, agricultural machineries, livestock, shares or any movable property which can be made use of even if it is a common property. In other words, waqf does not apply to perishable commodities because their benefits and usufruct cannot be extracted; they are rather consumables. Therefore, perishable items such as food, farm produce and the likes cannot be made waqf.
A person may dedicate his property as waqf property for a specific objective while at the same time more than one person or a group of people can join hands together to form a waqf through cash or in-kind shares. Whatever be the case, the objective of such must be clear. Meanwhile, the waqf property is expected to be effectively managed so that it does not get reduced and adequate accountability and transparency must be ensured. The Islamic law that governs the waqf property allows the provider of such asset (waqif) or his designate to manage it.
Waqf is one good means that we can take advantage of to combat poverty that is ravaging the world. The proceeds from waqf asset could be utilized to provide small-scale business opportunities for the poor or empower artisans who have the prerequisite knowledge and skill but do not have the financial ability to start-off or take care of the basic needs of the less privileged or the physically challenged if they do not fall within the category of people who are able and are willing to work. The proceeds can also be deployed to provide infrastructural facilities that every member of the community especially the poor will benefit from.
Thus, if we must take the bull by the horns in our struggle to fight poverty, we must begin to look in the direction of the opportuties available in waqf. While the government is duty-bound to provide an enabling environment, the individuals and groups of individuals, the wealthy and the philantropists should employ this by parting their wealth for the overall well-being of all and sundry. The almighty Allah has stated that in Q3vs 92 thus: “Never will you attain righteousness until you spend from that which you love …”
QARD HASAN (BENEVOLENT LOAN)
Qard hasan is yet another method that can be employed to curtail poverty to the barest minimum level and promote social well-being. Qard hasan is simply an interest-free loan; a beneficial loan or benevolent loan or gratuitous loan. It means lending with no interest and no profit out of merit. Therefore, it is a kind of loan contract (or debt based) that involves two parties on the basis of social welfare. The lender is fully aware that he is making a loan to someone in need without expecting anything return from him or any mortal but his intention is in order to please Allah.
This contract fulfils the short-term need of a borrower. At maturity which may be determined and agreed by both parties, the repayment must the exact amount borrowed, that is, no interest or riba is charged or applicable. One of the benefits qard hasan is that it establishes cordial relationship among the poor and the rich.
The value of qard hasan is mentioned in various portions of the Quran, one of such is that Q57 vs 18 that goes thus:
“Indeed, the men who practise charity and the women who practise charity and (they who) have loaned Allah a goodly loan – it will be multiplied for them, and they will have a noble reward.”
Relaying his experience during Isra’ wal miraj, the Prophet (SAW) remarked:
“In the night of the journey, I saw on the gate of heaven written, ‘reward for Sadaqah is ten times and reward for Qard (or an interest-free loan i.e. Qard-al-Hasana) is eighteen times’. So, I asked the angel, how is it possible? The angel replied, ‘because the beggar who asked had already had something but a borrower did not ask for the loan unless he was in need.” – Sunan Ibn Majah.
CONCLUSION
The overall interest of the Islamic social finance is the provision of finance to the poor so as to increase their income and wealth thereby making them to be less dependent on others for sustenance. Therefore, the concept and application of Islamic social finance will genuinely cater for the needs of the poor and the less privileged and of course, in the long run, generate socio-economic growth of the community at large.
Since everything was given to us a gift as we do not own all of the things that keep us alive we should not hesitate to reciprocate by giving out, especially things we have as excess to those who are in need of them so as to bring about peaceful co-existence. Consequently, for us to promote healthy relationships among people of different backgrounds and socio-economic statuses, concerted efforts should be made not only by government but also by the privileged individuals in the society to enhance adequate framework for Islamic social finance. By so doing, poverty which has been found to be the root of all social vices and social insecurity will become a thing of the past and the world will become a better place for us to live.
“INDEED, THE MEN WHO PRACTISE CHARITY AND THE WOMEN WHO PRACTISE CHARITY AND (THEY WHO) HAVE LOANED ALLAH A GOODLY LOAN – IT WILL BE MULTIPLIED FOR THEM, AND THEY WILL HAVE A NOBLE REWARD.”
