Photo for illustrative purposes only. A man receiving zakat from officers at the Al Falaah Mosque in Bogor, West Java, Indonesia, on Mat 27, 2019. Lilil Aini/Shutterstock

Islamic Finance

Indonesia national zakat agency collaborating with IsDB in $745k community-driven program

JAKARTA - The Islamic Development Bank (IsDB) Group and Indonesia's National Zakat Management Agency (BAZNAS) are working together to integrate zakat with a number of Community-Driven Development programs (CDD) in the Southeast Asian country.

The multilateral lender and its member organisation for poverty alleviation, the Islamic Solidarity Fund for Development (ISFD), will provide a grant for technical assistance of $515,000 to support a pilot project worth $745,000. BAZNAS will add $230,000 as the agency that will manage and implement the project.

The program aims to make the best out of the potential of zakat, infaq, sadaqah and other Islamic social funds, motivating people to become part of an active development network, said IsDB Group President Dr. Bandar Hajjar during a webinar on Nov 5.

This is in line with the IsDB President's Five Year Program (P5P) and a new business model to create partnerships and transform the organisation.

“In particular, the P5P's goal is to make the IsDB more competitive and responsive to the needs of its member countries. This program also aims to make IsDB the partner of choice in overcoming development challenges by achieving six main pillars, which are awareness, linkages, competence, funding, delivery and strengthening,” said the IsDB Group President.

The technical assistance project aims to develop a model for increasing zakat collection and effectively channel and maintain a sustainable flow of funds to support the success of the Community Driven Development program at the national level. This is expected to improve livelihoods and reduce the level of poverty at the lowest quantile.

In addition to the CDD program, some of the funds will also be allocated for COVID-19 countermeasures. The program will work towards improving the quality of health and environmental hygiene through a hand-washing movement that covers 78 schools with 19,000 students as beneficiaries. The program will also provide economic recovery support for 35 micro entrepreneurs of retail kiosks that fall under BAZNAS’ assistance.

The head of BAZNAS, Prof. Dr. Bambang Sudibyo, said the program will help the poor, who are the most affected by COVID-19 not just in terms of health and healthcare but also because many of them have lost their jobs and incomes as a result of the economic downturn caused by the pandemic.

This latest collaboration extends the partnership between IsDB and BAZNAS, that have been working together for more than ten years, Prof. Dr. Bambang added.

Zakat is the third pillar of Islam and a key social finance instrument in the Islamic economy, especially to address poverty. However, the global consensus is that its full potential is still unrealized. In Indonesia, the potential amount of zakat is 3.4% of total GDP, or nearly 462 trillion rupiah ($31 billion) if the collection is applied to each individual and corporation, based on the 2019 Indonesian Zakat Outlook by BAZNAS. Actual zakat collected in 2019 was 10.22 trillion rupiah.

(Reporting by Yosi Winosa; Editing by Emmy Abdul Alim

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