Bangladesh has recently been termed globally as a model for poverty reduction by the World Bank because of its remarkable progress in reducing poverty and sustained economic growth. According to the Bangladesh Bureau of Statistics (BBS) estimation, poverty and extreme poverty declined respectively from 31.5 percent and 17.6 percent in 2010 to 20.5 percent and 10.5 percent in 2019. However, the COVID-19 pandemic has come as a threat to this noticeable success in poverty eradication in the last decade. The income of the working class in urban and rural areas has fallen sharply due to the lockdown. So, due to the adverse impacts of the coronavirus pandemic, Bangladesh will have 16.4 million new poor in 2020 as shown in a recent study (June 2020) by Bangladesh Institute Development Studies (BIDS)- an autonomous public research organization. The Center for Policy Dialogue (CPD), the independent think-tank, stated in June 2020) that Bangladesh’s national poverty rate has already risen to 35 percent in 2020 from 24.3 percent in 2016. Earlier an assessment by the South Asian Network on Economic Modeling (SANEM) in May 2020 indicated that the poverty rate in the country could be doubled from the existing 20.5 percent to more than 40 percent during this pandemic. From these estimations, it is clear that a significant portion of the country’s poor population may have to suffer from long-term poverty.
Kristalina Georgieva, Managing Director of the International Monetary Fund, has rightly labeled Covid-19 as “A global crisis like no other” which needs “A global response like no other’. In a similar fashion, Professor Rehman Sobhan, an eminent economist and the founder of CPD, has aptly termed it as a national crisis that needs to be dealt with a national agenda. So far Bangladesh has come up with a fiscal stimulus package equivalent to 3.6 per cent of its gross domestic product. Moreover, allocation in the social security sector has been increased from Tk. 81,865 crore in the revised budget of FY 2019-20 to Tk. 95,574 crore in the proposed budget for FY 2020-21, which is 16.83 percent of total budget and 3.01 percent of GDP. However, given the unprecedented nature of this global health-cum-economic crisis, Bangladesh’s fiscal package and budget allocation in FY 2020-21 might not be enough to meet the challenge at hand. Hence, economists suggest to design out-of-the-box policies to cope with this crisis. In this background, this writer argues that zakat can be an important instrument of poverty alleviation being an additional source of funds in government budgetary expenditures.
Since its inception in 1975, the Islamic Development Bank (IsDB) has been promoting Islamic finance worldwide to empower people for a sustainable future. IsDB’s relentless support to Islamic finance has drawn global attention lately. It is important to mention here that a number of thought-provoking studies have been conducted by international organizations like the United Nations Development Programme (UNDP), the United Nations High Commissioner for Refugees (UNHCR), the International Monetary Fund (IMF) and the World Bank to explore the potentials of the non-commercial instruments of Islamic finance such as Zakah, Sadaqah, Waqf and Qard al-Hasan (interest free loans) as additional sources of financing to fund Sustainable Development Goals (SDGs). In this context, the statement of Achim Steiner, the UNDP Administrator, is remarkable as he says, “the core principles of Islamic finance and Islamic social finance tools are highly aligned with the spirit of the SDGs. The UNDP and other parts of the UN have already begun to engage member countries on Islamic finance in innovative ways.” In line with these global efforts, hence, the Bangladesh government should look into the potential of integrating the institutions of zakat and waqf into the poverty alleviation strategic plan and social protection programs. As an immediate response to the coronavirus pandemic, it is argued that institutionalizing zakat could come in handy in terms of providing food and health care facilities to the affected poor people.
The government formed the Zakat Fund in 1982. It is operated by a board under the Islamic Foundation. The meager collection of zakat by the Islamic Foundation, at a time when the country has seen a substantial rise in the number of wealthy and financially-solvent people, displays that the foundation has failed to earn credibility and trust of rich people. In contrast, some voluntary organizations like the Center for Zakat Management (CZM), Anjuman Mofidul Islam, Quantum Foundation, and Ahsanullah Mission have shown a success, to some extent, in mobilizing and distributing zakat. Economist Dr. Hossain Zillur Rahman, an advisor to the former caretaker government of Bangladesh and the Chairman of BRAC, has conducted two studies in 2014 and 2018 on CZM’s Jeebika (livelihood) Karnaphuli Mohora project. He claims that success of the project in financially empowering the beneficiaries demonstrates that the institutionalization of zakat can be an effective instrument of poverty alleviation.
In a recent column in the Business Post, Dr. Baqui Khalily, Professor at the University of Asia-Pacific, underscores on a fund called “Zakat for State and Social Reconstruction” as part of his proposal of creating a “National Economic Recovery Fund” to tackle the economic fallout of Covid-19. In a recent television program, Shamim Osman, an MP from the Awami League, expresses his desire to raise a bill in the parliament for institutionalization of zakat under the auspices of the Prime Minister. In doing so, he suggests forming a committee involving ulamas (Islamic scholars) who are acceptable to all quarters, armies, police, bureaucrats, journalists, industrialists etc. He further emphasizes that through mass campaigns, a huge amount of funds can be raised from zakat. According to his estimation, there are at least 10 million people who are eligible to pay zakat. If they pay, on average TK 500,000 as zakat, then TK 5 trillion can be collected as zakat, which is equivalent to around 88 percent of Bangladesh’s national budget for FY 2020-21. So, he is confident in his statement that if zakat money is properly collected and distributed to provide food, shelter, education and health care to the underprivileged sections of society, there is no reason extreme poverty will continue in the country within the next five years.
Of course, the statement of Shamim Osman MP related to zakat collection seems an over exaggeration to many. However, the importance of zakat in poverty alleviation cannot be overstated. Some researchers show that the annual amount of zakat may be around 2.50 percent of the GDP. In a recent column in the Financial Express, Asjadul Kibria calculates that zakat collection in Bangladesh should be at least Tk 600.0 billion in FY 19.
In conclusion, it is said that awareness on zakat’s role in poverty alleviation has been increased in recent years among the politicians, policy makers and academicians. From the preceding discussions, it is also very clear that zakat can be a safe and a better option to assist millions of poor and vulnerable people in this period of a pandemic to finance social protection programs. Hence, the government of Bangladesh should not miss this opportunity of using zakat as a potent frontier in poverty alleviation through its institutionalization.
The author is an economist based in Dhaka, Bangladesh and holds a Ph.D. in economics from the International Islamic University, Malaysia. He has been a consultant to the UNDP and the UNCDF. He can be reached at foyasal.khan@gmail.com
