Who is eligible to receive zakat?
The Qur’an clearly outlines the eight categories of people who are eligible to receive zakat:
“Alms are meant only for the poor, the needy, those who administer them, those whose hearts need winning over, to free slaves and help those in debt, for God’s cause, and for travellers in need. This is ordained by God; God is all knowing and wise.”
– Al Qur’an: Surah Tawbah: Verse 60
These boundaries are set by Allah (SWT), and IRC believes that we – as zakat – will be held accountable by Allah (SWT) for how we distribute zakat funds, and the extent to which we adhere to the conditions and parameters set by Allah (SWT).
As such, Islamic Relief Canada will only distribute zakat to rights holders (directly or through projects) making sure there is individual ownership for the categories outlined above. When allocating zakat to projects, or applying for zakat funds to utilize in projects, Finance and programs must keep records as to how this project matches the criteria of zakat.
While the categories themselves are clearly set, their definition and interpretation – particularly in the contemporary context – require some clarification.
1. Fuqara & Masakin (Poor & Needy)
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Poverty is being in a state where one is unable to meet their essential needs. This can be assessed through local consultations and needs assessments.
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IRC recognises that in mentioning both fuqara (poor) and masakin (needy or extremely poor) Allah (SWT) is ensuring that we address the needs of both the poor and the ultra-poor. As such, it is critical that the needs of the ultra-poor are considered and prioritized where possible when identifying which projects to fund through zakat.
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IRC will use zakat to provide adequate assistance to meet the essential needs of rights holders.
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IRC believes that zakat can and should be used for emergency relief activities, such as the provision of food, shelter, clothing, medication and healthcare, water and sanitation, and other items or essential activities which can help alleviate the poverty or suffering of affected individuals.
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Zakat funds cannot be used in cases where additional conditions are added for its receipt (e.g., cash for work projects).
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Where possible, Zakat should also be utilized in a way that provides long-term solutions to the deprivations or needs of disadvantaged people. This could be achieved through developing sustainable livelihood projects, education, or health provision, or supporting other sustainable development activities for the poor and needy.
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IRC will focus its zakat implementation in areas where there is a clear Muslim majority among the population. However, as a humanitarian organization, IRC will do this in a way that does not discriminate between people on the grounds of race, religion, sect, gender, or ability and is bound by the internationally recognised humanitarian principles of impartiality, neutrality, independence, and humanity. To ensure non-Muslims in such situations receive the same level of assistance, additional funding should firstly be sought from other sources of funds. If other funds are not available, then zakat may be used.
2. Al ‘Amilina ‘Alayha (The Administrators of Zakat)
Islamic Relief Canada is a legitimate administrator of zakat. IRC in effect is a duty-bearer, with a responsibility to respect, protect and fulfill the rights of rights holders on whose behalf zakat funds have been collected.
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As such, IRC is eligible to take a reasonable portion of 12.5% of zakat funds to cover the costs of delivery of zakat eligible projects. Costs are incurred firstly in raising awareness and collection activities for zakat funds, and then administering those funds to ensure they reach the rights holders entitled to these funds. Our implementing partners such as IRW are also zakat eligible for their overhead costs
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Costs incurred by IRC are defined as direct, direct support costs or indirect costs. IRC must map and understand what costs are related to zakat projects and those that are eligible to be charged against the allowed administration charge from zakat funds.
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Direct costs are frontline delivery costs that include program costs and country office costs.
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Direct Support costs link directly to the project but are shared between different projects/services. Therefore, to arrive at the true cost of delivery, these costs should be charged to Zakat when needed.
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Indirect Costs include IT, HR, or finance costs that cannot directly be linked to the project.
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Costs associated with fundraising, marketing, event sponsorship, influencers, generic training, and governance costs are not eligible to be charged to the 12.5% administration category.
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To ensure transparency and accountability the programs and finance functions of IRC should report on the usage of zakat funds. IRC must demonstrate consistency, accountability and transparency in its internal environment and reporting for zakat purposes.
3. Al-Mu’allafati Qulubuhum’ (Reconciliation of Hearts)
Whilst IRC is inspired by its values, and proactively seeks to educate our supporters regarding Islamic values and teachings on poverty alleviation, as a humanitarian agency we do not engage in any proselytization activity. As such, IRC does not undertake any zakat activities under the category of mu’allafati qulubuhum.
4. Riqaab (Emancipation of Slaves)
The use of Zakat funds can rightfully be used for the emancipation of slaves. While projects of this nature are not the primary focus of Zakat spending for IRC, where IRC finds people suffering from a modern form of slavery – such as bonded labour, forced labour, or human trafficking – zakat funds may be utilised to emancipate people from such forms of slavery (provided that the funds do not profit perpetrators of such acts who have violated national or international law).
5. Gharimeen (Those in Debt)
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Zakat may be used to assist those in debt under the following conditions:
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The debtor must need financial aid (those with enough wealth to cover their debt cannot be assisted). However, they do not necessarily need to be destitute, but simply not have enough income or wealth to repay their debt.
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The debt should be due immediately. Those whose debts can be deferred may still be eligible to receive zakat but could be considered as less of a priority than those who need immediate assistance.
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Zakat funds may be used to pay unsustainable/unrecoverable debts. For example, in microfinance programs, IRC is permitted to create an accounting write off against the individual’s loan records using the zakat funds if the individual has incurred such a debt.
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IRC will rely on its implementing partners to use processes and criteria that verify that only those in genuine debt are supported. IRC should be able to have access to such information as and when needed.
6. Fi Sabeelillah (In the Cause of Allah)
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IRC takes the opinion that it is permissible to fund communal welfare assets and programs – such as clean water sources, health clinics, critical medical equipment, temporary food producing outlets (e.g., bakeries), water containers, schools, training centers, seed banks, communal farmlands, water dams, etc. – to reduce poverty and hardship in disadvantaged communities.
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Projects involving communal welfare will promote the principle of community empowerment through ownership. IRC will endeavor to adhere to the following conditions when funding communal welfare assets with zakat:
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The clear majority of the rights holders can be classified as being eligible to receive zakat (i.e., poor, needy, traveler, etc.).
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An assessment of the rightsholder community has been conducted, demonstrating the need for the asset in question in alleviating poverty and suffering.
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Consent should be sought from the target community to develop or implement the proposed asset.
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The project should ensure that rights holders can act as effective and responsible managers of the asset.
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Once completed, ownership and management of the asset is transferred to the local community (e.g., to a local community cooperative comprising an inclusive group of people), with an agreement to protect the asset’s intended usage for communities and individuals in need. It should explicitly state no person in need will be refused.
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The communal asset should always remain a not-for-profit property and for general welfare.
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The asset shall not be owned by any one person or a single group of people.
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IRC will use zakat to fund essential service providers – such as teachers, doctors, health workers, disaster recovery personnel, trainers, agriculture specialists who provide vital services directly to rightsholders, specifically addressing their needs or deprivations with the following conditions:
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The service provider is not an employee who provides general operational support and management, but someone who works on direct project delivery.
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An assessment and consultation of the rightsholder community has been conducted, demonstrating the need for the service in question (for protecting lives and alleviating poverty and deprivation).
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IRC only pays essential service providers for a limited time (no later than the project-end).
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Zakat funds can be used for education and training purposes to directly teach people about issues and skills that will allow them to come out of poverty. For example, learning how to start a home-based enterprise, farming methods, tailoring, animal rearing, health issues, hygiene and sanitation awareness and other livelihood options are all considered zakat eligible.
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Any costs which are specific and limited to the distribution or implementation of zakat goods/projects (e.g., petrol for delivery of goods, short-term hiring of transportation/ storage space, etc.) and are not part of implementing partners’ long-term assets or costs may be covered by zakat.
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Zakat funds can be utilized in conflict transformation projects that seek practical solutions that bring peace to communities, leading to a significant reduction in levels of hardship faced by people living in those areas.
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However, under this category IRC will not fund communications or advocacy work due to the difficulties in establishing and measuring the direct benefit of these initiatives to those in actual need.
7. Ibn As-Sabeel (The Travelers)
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IRC defines travelers as people who are at least 48 miles away from their home and unable to reach their destination (including refugees and internally displaced people) and who have been cut off from their wealth, assets, or source of income.
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This would apply to refugees who have not re-settled and are not in the category of fuqara and maskin (poor and needy).
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IRC may use zakat funds to provide sufficient food, clothing, shelter, transportation, education, healthcare, and any other needs.
Matters Relating to the Allocation & Distribution of Zakat
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Where appropriate Islamic Relief Canada will conduct research to identify the level of poverty in Canada. Where poverty or need is identified, IRC will develop a strategy to utilize a portion of zakat funds domestically. This amount will need to be determined by the Board of Directors.
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Islamic Relief Canada will not allocate funds to each of the categories of zakat in an equal measure, as some categories do not directly apply to its mission.
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Islamic Relief Canada may allocate as much zakat to each category as is relative to the need of rights holders and our capacity in each geographical location.
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Islamic Relief Canada will aim to allocate zakat funding within one year of receiving it and use it as quickly as possible.
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Islamic Relief Canada will not use zakat funds to use for any type of endowment or similar investment projects.
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Islamic Relief Canada takes the view that zakat cannot be given for loans or any other business enterprise.
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Zakat funds can be used on projects that are both short term (e.g., immediate humanitarian response) and long-term (such as multi-year livelihood programs).
Free Reserves
The term “reserves” is used to describe that part of a charity’s funds that is freely available for its operating purpose not subject to commitments, planned expenditure and spending limits. Reserves do not include endowment funds, restricted funds, and designated funds.
Zakat funds held have a direct impact on calculating free reserves.
The zakat funds (less than 12.5% of total zakat funds) should be excluded in calculating IR’s free reserve position.