Thursday, January 12, 2017

Cooperative Zakat System Manual

After much review and refinement, a completed cooperative zakat system manual has been put together.  Although the main beneficiary of this manual would be the collective area incorporating a cooperative structure, the manual will benefit any, and all, organizations and mosques which collect, handle and distribute zakat.  It contains policies and procedures for all three areas.
Please review, provide feedback and utilize to best possible ability.

Cooperative Zakat System Manual
click above to be directed to the manual

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Tuesday, September 16, 2014

Cooperative Zakat Distribution Structure

With a decentralized structure having proven its ineffectiveness over time, and a centralized structure proving difficult to implement, we moved to examine other structure types that could help accomplish our stated goals.  Not so surprisingly, this same dilemma is observed by zakat administrators across the world!  
Despite the fact that we could not get a decentralized system and centralized system to work efficiently in the region, each had its recognizable advantages.  In an attempt to develop the most effective and viable structure, we attempted to merge the respective benefits of each structure into a hybrid model.  The thought, in essence, was to take the good, leave the bad, and figure out how to design them into a viable structure.

Mohammed Mahmood, Professor of Political Science (Retired), Aligarh Muslim University (India) had a similar observation and an interesting approach to solve the problem:

"The intent of the Shariah is to support and maintain the indigent, disabled, sick, old and unemployed of a local community by pooling the zakat proceeds in a locally managed Zakat Fund/Baitul Mal. But it is possible that some local communities fall short of funds to meet their obligation. In that case other affluent communities may redirect their funds to the deficit communities. Since Muslim communities are dispersed and unorganized in a continental country centralization of collection of zakat funds or their centralized dispersal is neither desirable nor possible. Let us evolve a confederal approach to management and distribution of zakat funds with different regional and local communities cooperating with and aiding each other. This naturally implies transfer of funds from the developed rich regions to the underdeveloped poor regions on a voluntary and humanitarian basis."
Professor Mahmood does recognize that the optimal scenario, in his respective region, may be the cooperation of mosques in a respective region.  Along this line of thought and based on what our experience has shown, the cooperative structure, which we believe would benefit our region the greatest, took the following form:

Features of a Decentralized system to be incorporated
  • Local application
    • Simple path of coordination - removal of the bureaucratic exhibition
    • Ease of application for individual seeking zakat
    • Encourages integration with local mosque and leadership
    • Builds confidence and trust in local mosque and zakat system
  • Local review
    • Speed and efficiency between applicant, interviewer and ultimately the reviewing party
  • Local disbursement
    • Speed and efficiency as the applicant applies at the nearest mosque/organization
    • Use of local knowledge to identify specific issues affecting respective area.
  • Use of local imams and/or administrators knowledge of constituents
    • Benefiting from the existence of a relationship between local members and constituents that has been built gradually over time
    • Helps to identify individuals who are zakat eligible and unable, or unwilling because of social/societal pressure, to apply

Features of a centralized system to be incorporated
  • Standard application form at all mosques
    • Outward display of uniformity across the region
    • Facilitates ease of transfer between local mosques, i.e., application will be forwarded to local mosque of applicant for processing
  • Standard review process at all mosques
    • Transparency and clarification as to zakat eligibility
    • Removing inconsistency in the review process; which often led to applicants going out of area
  • A common distribution database
    • Standardization of distribution record keeping
    • Can assist in minimizing fraud
    • Can identify dependency would could be used to address any root causes
  • Single platform for communication between administrators
    • Ease of communication between regions
    • Facilitates ease of training and standardization of relevant items
    • Feedback loop to continually improve efficiency across region
  • Increase of distribution performance could be leveraged to increase zakat collection across the region
  • Ease of buy in as the community could measure and monitoring performance

Features of the cooperative system
  • Create a syndication method in which funds from nearby mosques could flow between each other in lieu of a centralized pool
    • Creates a working relationship between zakat administrators
    • Local mosques continue to retain full control of locally collected funds
    • Standardization of procedure will help quell reluctance of mosques to initiate the flow of zakat funds, if needed  

Accordingly the Zakat Review Process was amended to be consistent with the cooperative model, e.g., local application and local review.  Several items on the process are a result of systematic integration yet to be discussed.  

Initial results were very promising.  However the success, failure or evolution of the cooperative structure could only be fully gauged upon successful integration within the region.  Hence, the next post will cover the successes and challenges experienced with integration.

Tuesday, September 9, 2014

Centralized Distribution System Experiment

With the zakat policy and procedure tentatively defined, we moved to examining different types of distribution structures.

Typically zakat model structures can be defined as centralized or decentralized.  Centralized models can be defined as a ‘one stop shop’ leveraging economies of scale in such issues as, protocol, operating procedure, credentials of administrators, accounting systems, resolution of jurisprudence issues, etc.

There are several centralized organizations operating nationally [Islamic Relief, Zakat Foundation of America] with local collection presence.  However the modus operandi observed was to assist those in need primarily overseas.  

Decentralized models are simply each mosque or organization operating independently of each other in terms of protocol, procedure, jurisprudence, etc.

At the inception of the cooperative, all mosques and organization models were decentralized.  The result of the decentralized structure could be understood by referring to the post Identification of the problem;’ a vicious cycle of not having the resources [financial, knowledge, volunteers, etc] to correct any deficiency, let alone stabilize and/or excel.

This quandary leaves the zakat payer to give zakat to an inefficient local mosque, an organization that primarily distributes internationally or embarking on their own independent distribution.

Similarly the zakat recipient is burdened with considerable challenges in obtaining zakat.

The initial inclination was to create a centralized system that would envelop the goals of the cooperative [detailed in the Goals of the Zakat Cooperative]

The apparent advantages a of centralized system were
  • Complete control of the review process; to ensure uniformity and consistency
  • Creation and use of a central database to facilitate efficiency and diligence
  • a central location [and/or virtual review process] where applications could be reviewed quickly
  • Cooperating zakat administrators could participate in the review process if so desired
  • Ease of integration at mosques; administrators would simply forward the application
  • Minimal involvement and commitment by administrators; not much time requirement

The centralized model concept was hinged upon the use of technology to expedite the process.  This primarily would be accomplished via the creation of a database where applications would be uploaded and reviewed - the details of the database will be discussed in a separate post.

We considered providing equipment to several of the mosques, i.e., computer and scanner, however the infrastructure was still not present; most mosques did not have an office, let alone a computer, scanner and internet connect.

This deficiency was corrected by setting up a courier to pick up applications and drop off checks for approved applicants.  Applicants that were either incomplete for required more information, the majority of them, were similarly shuttled.

This system worked well initially, however as more applications started to come in from surrounding areas, we discovered several issues that made the review process difficult;

  • Reviewing and deciding applications on paper, in lieu of an interview, was rather difficult.  Often times there was a communication barrier preventing applicants from completing the application and/or there existed nuances which could not be specified.
  • In the event of an inconsistency or when clarification was required, the application would be sent back to the mosque, which further delayed the process as they would need to contact the applicant for an explanation or clarification.
  • The meetings to review applications, of the initial zakat review panel, were taking quite a bit of time.  In the event a weekly meeting was canceled, the resulting meeting would take an exponential amount of time - ultimately rushing the review the process.
  • The virtual review method could not be instituted because of the lack of infrastructure, overburdening a small group of zakat administrators meeting in person.
  • Due to limitations with issuing checks, in the event a check could not be immediately, or was issued incorrectly, deadlines and due dates were often missed.  This was further compounded with the delivery mechanism.

In an attempt to circumvent longer wait times, applicants would avoid applying at their local mosque and make the journey to apply at the mosque where the processing was being completed.  This burdensome step was often difficult for applicants, many of whom lacked transportation methods to go out of their community.

Consequently the handicapped centralized model greatly lengthened review times and often forced applicants to seek assistance at mosques outside their immediate area.  The result was a regression of the zakat distribution process in the region.

We further attempted to rectify the performance gap witnessed and the optimal model that we had envisioned by making several adjustments to the policies, e.g., submission of only complete applications and attachments; however the results continued to be sub par.  

It was appearing, rather obviously, that the centralized model would be difficult to operate when not utilizing technology to full extent.  It has also been demonstrated, for years, that a decentralized system was quite ineffective.  This interesting predicament forced us to examine and consider other distribution systems that could help accomplish the stated goals.

We still have faith in this centralized model and believe that it could possibly work better if mosque infrastructure is improved.  However moving forward we attempted a hybrid structure which yielded some promising results.

Friday, August 29, 2014

Policy and Procedure defined

Following the delineation of the goals of the project, the ensuing steps revolved around identifying a viable structure and creating a procedure compatible with said goals.  The formation of both could not be complete independent of each other - they had to be worked on simultaneously.  This article will only touch upon the zakat policy and procedure.  The subsequent article(s) will discuss the different structure as well as outline the pros and cons - ultimately defining the current structure realized.  

Therefore outlined below is the most current zakat policy and procedure.  There were several policy revisions and alterations that corresponded with structural changes, hence a more complete understanding of the process will become evident following the discussion of the structure.

The process implemented currently involves the completion of an application.  The application makes it easier to document and track applicants.  However there was the concern that overly burdening zakat requestors may in fact turn them away.  In the Quran the reference is made to those who do not ask for assistance;  

[Charity is] for the poor who have been restricted for the cause of Allah , unable to move about in the land. An ignorant [person] would think them self-sufficient because of their restraint, but you will know them by their [characteristic] sign. They do not ask people persistently [or at all]. And whatever you spend of good - indeed, Allah is Knowing of it. [2:273]

We were unable to form a non application based system.  In smaller mosques, where the Imam and administrators intimately know the constituents, they were able to clearly identify those in need and provide.  However on a larger scale, we could not formulate a method.  This will continue to be one area that we plan on revisiting.  

The application used was a compilation of applications used at different mosques.  We took the most relevant items with the intent of keeping the application short and easy to complete.  Currently it stands at one page, with the back (second) page meant for the administration.  Also taken into consideration with the application was the ease of scanning and or inputting information to a database, as well as the environmental impact; several applications observed were greater than four pages.

The application can be viewed here.  It is currently being used in four locations, with the intent to be used in more locations rendering a uniform process throughout the region.

The zakat review process can be viewed here.  

The steps of the review process were grouped and summarized below.  Notes particular to the process are noted below;

The process opens with a quick explanation on the pillar of zakat, as well as the responsibility required by the administrator.  

We recommend that a Zakat Policy be posted, in a conspicuous location, to direct constituents pertaining to the receipt of zakat.  The recommended Zakat Policy and Procedure for posting can be viewed here.  This posted form plays a greater significance is mosques without offices, as constituents often are left baffled as how to receive zakat.    

One particular mosque without an office resolved this issue with a zakat application drop box viewed here.  Subsequently applicants would be contacted and an appointment would scheduled at an unassuming time.

Note that the requirement to apply at the most local mosque was added significantly later in the process.  This outcome will be discussed with the structure of the cooperative.

There is also a requirement for an interview; email or form submissions are not allowed.

Lastly, it was highly recommended that the individual conducting the interview jot down notes, thoughts and recommendations pertaining to the applicant and situation.  This helps overcome any language barriers and nuances otherwise difficult to determine when review paper applications.

Determination of eligibility to receive zakat
Upon successful application submission, the determination of eligibility would have to established.  A large number of applicants in our initial trial were requesting amounts under a certain threshold [$350].  In an attempt to expedite applications under this threshold, applications below it could be processed without committee review.  Periodic reviews of completed applications would happen to ensure compliance.   

Establishment of need
The heart of this process lays in this nuance area.  On one side, the goal is to fulfill the request of those eligible without overburdening the applicant.  However, on the opposite side, we strive to protect the funds of the zakat giver by sifting through the information to ensure that everything is legitimate as we have experienced forged documents.  What is most often experienced is the negligent spending and saving habits of individuals ultimately leading the working poor to a deficiency.  
Most people applying are not interested in financial counseling or recommendations pertaining to their financial well being.  They simply need a bill paid.  More often than not, the bill is paid.  In the event a trend is established, by repeated requests for similar items, an intervention pertaining to their habits is more warranted.

Most important was simply setting up a protocol which would guarantee a consistent process for applicants as well as administrators.

Type and amount of need
We are fortunate to live in a country and society that offer plenty of social services and assistance methods to those eligible.  However the majority of these programs take quite a bit of time to complete - from applying to approval.  Unfortunately time is not on the side of most applicants.  In the event time may not be of the essence, or a pattern was identified, or the request lay outside the realm of our assistance, applicants are requested to apply at outside agencies.  Currently we do not have a protocol to follow up with applicants to ensure successful agency assistance.  This also warrants revisiting in the near future.

Record keeping and review
As previously mentioned, the majority of applications requested less than $350.  To ensure prompt handling, the review process could be completed by one person - the interviewer.  The cornerstone of this method is the periodic review, conducted by the larger zakat committee, to ensure compliance.  Hence there must be a safe method of storage for applications.

Defining of Asnaf
The review process is concluded with a quick explanation on the different categories of recipients as well as distribution allocation.  With the prevalence of poor and needy in the immediate vicinity, the priority defines was with the poor and needy.

With the process clearly defined, subsequent articles will outline the structure implemented.  If you have any questions or recommendations pertaining to the process, please feel free to comment or contact us.

Friday, August 22, 2014

The objectives of the Inland Empire Zakat Cooperative

With the strengths and weaknesses of the local zakat sector clearly identified, it was now time to put together objectives that would not only resolve the impasse existent in the local zakat sector, but ensure that the outcome can expand and is easily replicable.  Hence, we had to move beyond SMART goals to SMARTER goals.  The additional E corresponds (easily) Expandable - the addition of local mosques is simple and encouraged.  The R would correspond with Replicable - as the intent is not only to expand our local area of cooperation, but to create a system that could be duplicated elsewhere.

The objectives could be broken down into several areas.  The general objective, or mission, would correspond to the long term goal to be accomplished.  The remaining three goals, Management, Platform and Legal correspond to the targeted statements outlining the direction and focus.  Lastly, the strategy would correspond to the method of implementation.

  • To advance the field of study and research in the area of American Islamic Finance; specifically zakat management [collection, handling and distribution].
  • To create and achieve an effective, efficient and expandable working model for zakat management in the geographic area.

  • to foster a working relationship between Mosque and Islamic organizations in the IE specifically on the zakat (and possibly social service) sector
  • Implementation a transparent system for the a) collections b) handling c) distribution of zakat.
  • Educate [zakat professionals and constituents] of rulings and rights.

  • Design a platform that would influence and address large scale behavior.  
  • Create a welcoming and encouraged feedback system where the findings and suggestions can immediately implement change.
  • Devising and implementing regulation mechanisms.
  • Standardized and transparent accounting and operating procedures.
  • To create a distribution model that ensures the most efficient and robust distribution method which balances invasiveness and ease [for the applicant] but yet ensures diligence in the review process.
  • To ensure that specific rights of the zakat are handled correctly.
  • To ensure proper handling of the zakat funds.
  • To offer the resolution of jurisprudence issues by implementing views and rulings that fit our community best while attempting to retaining and respecting the divergence of views among different schools of thought.
  • To focus on the poor and needy in the vicinity; as the Inland Empire, according to a 2013 US Census Bureau report, ranked the highest, among the nations largest 25 metropolitan areas, for residents living below the poverty line.

  • Capitalize on the wealth of cumulative knowledge and experience in the region.
  • Capitalize on volunteers in existing mosques and organizations.
  • Create a cooperative of mosques and organizations working together vs a new organization.

Thursday, August 21, 2014

Identification of the problem

The very essence of Islam is an all inclusive system of life with guidelines set by the creator.  The system includes all aspects life from business dealings to relationships with our neighbors.  Also included are the dealings of charity and rights of the destitute in society.    

Zakat, being part of the larger socio-economic system in Islam, is the safety net decreed by the creator for providing for the poor and needy.  Having interaction with the poor and needy, as well as individuals requesting and applying for zakat at local mosques, it was fairly obvious that the rights of the poor and needy in the community were not being met.

Spurred with a few others who work in the local zakat sector, or who have interest, we decided to assess the current state of zakat in our respective community.  We formulated a questionnaire to be addressed to zakat workers or mosque administrators within our geographic area.  The Inland Empire boasts over a dozen mosques and organizations within a fairly small area.  The sample size and close proximity would only help clearly identify any problems that did exist.   

Subsequently we met with eight mosques and inquired about their zakat dealings.  The questionnaire can be viewed here.

An amazing happened when talking to the respective zakat worker.  Literally every one indicated that they were well aware of deficiencies within the system.  However due to the reality of volunteer driven mosque management, the correct and implementation of issues were always low level priority items.

The results of deficiencies in the local zakat sector could be grouped into three main area; zakat collection, handling and distribution

Zakat collection
Every mosque surveyed did disburse zakat to individuals they deemed as qualified to receive.  However not every mosque collected zakat funds - or collections boxes were not specifically earmarked for zakat; sadaqa, Mosque donations, operations...

Zakat handling
Proper handling, as well as transparency, of funds has been shown to increase receipts, and quell mistrust, by building confidence.  A methods of mishandling observed was the commingling of zakat funds with other funds as well as a lack of transparency with the funds.  

Zakat distribution
This area comprised of the majority of deficiencies.  In an attempt to formulate a group, they’ll be broken into two subsets - managerial as well as legal issues.

Having previously served on a mosque board, as well on the boards of several other organizations, I understand that most of the individuals dealt with are volunteers; however all of them are overworked.  The addition of policies and procedures may not be warmly welcomed, as time is of limited quantity.  To further compound the issue, there existed a culture of frequent turn around is mosques with elected (or removed) managers/board members.  The turnaround typically replaces individuals (with more experience) with individuals who have no experience.  This would not only affect management effectiveness and synergy, but also impact the rules and requirements pertaining to zakat.  Hence an unsustainable model is created.

Only a handful of mosques had a procedure in place to assess applicants.  The end result was long turnaround times (also impacted by the overworked volunteers) and an inconsistencies with distribution policies.  In fact one applicant interviewed commented that his experience has shown that only a certain group/race would be given zakat from his local mosque.

Several mosques could not distribute, or severely limited distribution, due to limited zakat collections; primarily mosques in destitute areas.  This highlighted a more severe issue; a vicious cycle that was created where mosque that were unable  to collect could not meet demands for distribution.  Ironically the opposite scenario also existed.  

We were not made aware of any internal or external auditing of any funds or procedure, which could lead to mishandling or mistrust of the procedure as noted previously.  Several mosques did have financial figures posted, however were typically outdated.

The majority of mosques did not have a physical office, or one that is not commonly open, making the application process slightly more difficult.

There exists a large deficiency regarding the edifice of zakat law.  Workers, with good intention, are just simply never made aware.  The result is a system which contradicted several clear sharia principles, e.g., incorrect distribution of zakat al fitrah or lack of distribution because of an underlying sense of creating dependency (or transformation from a zakat recipient to payer would not materialize).  

There does exist a level of hesitation among zakat applicant because of an underlying sense of shame due to applying.  I believe that the real issue is lack of understanding of the specific rights of zakat; most, if not all, zakat khutbahs, seminars and talks revolve around the benefits of giving zakat as well as the jurisprudent requirements and amounts of zakat payments.  The constituents are never made aware of the right of zakat upon the recipient.  The Prophet(S), as well as subsequent leaders, would teach congregants about their respective rights quelling any shame associated with zakat receipt.  Zakat continues to be viewed a mere charity given to the poor at the discretion of an administrator.

Unfortunately there are fraudulent applicants; forged documents as well as applicants who may be recipients elsewhere without disclosure.  The reality creates a sense of hesitation to provide zakat to individuals who may be receiving zakat elsewhere.  There currently existed no method in place to verify or cross reference applicants at neighboring mosques.  There exists a coalition of mosques (Shura Council of Los Angeles), however zakat is not yet included in their activities.  Chicago boasts a council of Islamic Organization with an offshoot dealing specifically with zakat.

The current structure of mosques set in our country implies, to us, that the deficiencies noted in our geographic area, can be extrapolated to the larger area.  Hence the addressing of these particular issues will be of a greater benefit for more than our locale.

With the deficiencies being stated, it would be doing the local mosque community a huge disservice by not acknowledging the strengths.

Every mosque we spoke to has a very sincere group of volunteers that sincerely cared about the best interest of their community.  They worked tirelessly and had a commitment hardly rivaled.  The cumulative knowledge and experience is truly a benefit to our area.

The mosques with more stable management (less turn around), and the smaller mosques, knew their respective constituents very well.  They had intimate knowledge of the challenges, needs and threats of the community.

Lastly, we must emphasize the gratitude that must be conveyed to the local mosque leadership as well as the zakat workers who gave me the opportunity to discuss and reflect upon the pillar of zakat.

Consequently, the challenge now lay before us:
Given the strengths of the mosque community and administrators, could the identified zakat weaknesses be reduced or eliminated?