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.