by Stefanie Rubin - Investment Funds, Middle East, South Asia, East Asia and Pacific -

MICROCAPITAL.ORG STORY: As Part of Malaysian Government Initiative, BMB Group and Organization of The Islamic Conference’s (OIC) International Zakat Organization (IZO) Will Launch The World Zakat Fund (WZF) in 2010 With Plans to Raise $750m in First Year

The World Zakat Fund (WZF), established as part of an initiative by the Malaysian government to alleviate poverty, will launch in the first quarter of 2010. According to a statement released to the media, it will be the world’s first Islamic charity fund [1]. The fund aims to use Zakat, “which refers to the Muslim duty of giving a fixed portion [usually 2.5 percent] of one’s wealth to the poor and needy,” for economic development and poverty alleviation [2]. The BMB Group (BMB), an alternative asset manager based in the Caymen Islands which focuses on high-profile Islamic and Eastern investors, will co-manage the fund along with the International Zakat Organization (IZO), a charitable body of the Organization of The Islamic Conference (OIC), an inter-governmental organization established in 1969 and second largest in size only to the United Nations [3]. The BMB Group is also charged with raising USD 750 million in the fund’s first year of operation.

BMB Islamic UK Ltd, a subsidiary of the BMB Group based in Malaysia, will manage 65 percent of the funds, which will include investment in small and medium-sized enterprises and “social enterprises” such as hospitals and educational institutions. The remaining 35 percent will be managed by IZO and used for immediate relief funding.

Mr. Humayon Dar, Executive Director and Head of Islamic Advisory for the BMB Group, says that the WZF already has USD 50 million in soft commitments and expects the fund to grow to USD 10 billion over 10 years. Mr. Dar explains, “if we have 200,000 high net worth Muslim individuals and get 2.5 percent of their wealth (USD 200 billion) as Zakat, we can raise USD 5 billion. Among these high net worth individuals are 400 billionaires who represent another major source of Zakat funds” [4]. According to a report by Reuters, about USD 20 to 30 billion in zakat money is already distributed each year.

The investments will be compliant with Sharia, or Islamic law, which prohibits receiving interest on financial transactions. To learn more about Sharia law, refer to a paper wrap-up published on MicroCapital entitled, “Islamic Microfinance: An Emerging Market Niche.” The concept of the fund brings up contention among Islamic scholars, many of whom argue that zakat should not be used for investment, but for immediate relief. Mohamad Akram Laldin, an Islamic scholar on the HSBC Amanah Sharia advisory board, says the controversy will make it difficult to attract conservative Muslims [1].

The WZF will be directed towards the 57 member states of the OIC. Representatives of the heads of state of each country will sit on a council of trustees, along with the board of directors, International Advisory Board and internal and external auditors [4].

By: Stefanie Rubin, Research Assistant

Bibliography:

[1] Reuters. “First Islamic Charity Fund Plans Q1 Launch.” http://www.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUSLF34088920090929

[2] BMB Group: The World Zakat Fund: http://www.bmbgroupltd.com/

[3] Organization of The Islamic Conference: http://www.oic-oci.org/page_detail.asp?p_id=52

[4] Islam Online. “Global Zakat Fund.” http://islamonline.com/news/articles/28/Global_Zakat_fund.html

Similar Posts: