1. Introduction

At AFH, we have always been committed to fulfilling our mission of aiding those in need and making 
a positive impact on the lives of disadvantaged communities. As we strive to enhance our efforts in 
providing humanitarian assistance, we recognize the vital role that Zakat, one of the Five Pillars of 
Islam, plays in empowering those less fortunate. We are humbled to share some remarkable news 
that will significantly strengthen our ability to serve those in need.

We are delighted to announce that Islamic Relief has generously allowed AFH to adopt their well-crafted Zakat policy. Islamic Relief's commitment to excellence, demonstrated through their diligent  research and consultations with esteemed Islamic Scholars, such as Sheikh Abdullah Judai, Mufti  Barakatullah, and Sheikh Akram Nadawai, has been truly commendable.

 
By embracing this policy, we aim to save valuable resources and ensure that the maximum amount  of funds go directly to those who are most deserving and in need.

While the core aspects of Zakat distribution will remain unchanged, we recognize the uniqueness of  AFH's operations and the importance of adapting the internal processes to align with our own  organizational values and principles. Therefore, before implementation, we will thoroughly review  the policy, carefully aligning it with our existing framework, and ensuring it complements our overall  good governance approach.

As we adopt the Zakat policy, we share with you the two fundamental elements that constitute this policy.

The first element of the policy focuses on the core principles and guidelines governing Zakat  distribution. This part, which we refer to as the "The Zakat Distribution Policy," outlines in detail how  the funds raised as Zakat will be allocated and utilized to make a tangible difference in the lives of  those less fortunate. The Zakat Distribution Policy will be made accessible to the public on our website, ensuring transparency and openness about our Zakat initiatives.

The second element pertains to the internal processes and systems established by AFH to ensure the seamless and responsible execution of the Zakat distribution. Referred to as the "Internal Zakat Implementation Guidelines," this document outlines the specific steps, procedures, and controls that 
will be in place to align the policy with our unique organisational structure and operations. This document will remain dynamic and subject to revision as we learn from our experiences and receive valuable feedback from our dedicated staff, both at our international office and in the field.

We would like to assure all our supporters and donors that every step of the process will be  meticulously examined to ensure transparency, accountability, and effectiveness. The policy will go  through rigorous internal scrutiny, involving our team of experts, to ensure its relevance to our  specific initiatives. Subsequently, the final approval will be sought from our esteemed Board of Trustees, whose guidance and oversight have been instrumental in shaping our organisational journey.

 

 

2. Definitions

Admin / or Support Cost – Direct Support and Indirect Costs

Direct Cost: Direct project delivery costs that include programme costs and country office costs. 
Direct Support Costs: Link directly to the project but are shared between different projects/ services. 
Indirect Costs: These include IT, HR, or finance costs that cannot directly be linked to the project.

Charities SORP: A Statement of Recommended Practice which sets out how charities should prepare their annual accounts and report on their finances. The SORP is an interpretation of the underlying financial reporting standards and generally accepted accounting practice.

AFH International: This refers to our UK office which coordinates the international work of AFH as well as overlooking the operations in UK in terms of community fundraising, external relationships, etc...

AFH Affiliate/Partner: This refers to AFH offices such as AFH Canada who are independent organisations but share the common vision, mission and values with the rest of AFH Family. Affiliate offices have their own independent boards and the aim that they become major contributorsfor AFH’s global operations.

Country offices: These are offices set up for the main purpose of providing humanitarian and development projects.

AFH International ELT: Refers to the AFH Executives leaders from across the globe both representing country offices and affiliate offices. This includes Directors and at times head of departments of AFH International.

Poverty: According to the United Nations, poverty isthe inability to have opportunities, and a violation of human dignity. It means the lack of basic capacity to participate effectively in society. It means not having enough to feed and clothe a family, being unable to access education or healthcare, not having assets from which to generate a dignified living, and not having access to credit. It means insecurity, powerlessness and exclusion of individuals, households, and communities. It means susceptibility to violence, and often implies living in marginal or fragile environments, without access to clean water or sanitation (UN Statement, June 1998 – signed by the heads of all UN agencies).

Rightsholders: Rightsholders are individuals or social groups entitled to certain rights from dutybearers, which can be state or non-state actorslike AFH. A directly reached rightsholder hasinteracted with AFH or its Affiliates, such as receiving project inputs, participating in activities, or accessing services.

Zakat: One of the five pillars of the Islamic faith requiring Muslims who meet the necessary criteria to give a part of their wealth each year to a charitable cause.

 

 

3. Context

The Messenger of Allah, may Allah bless and grant him peace said ‘Islam is based on five things: 
Testifying that there is no god except Allah and that Muhammad is the Messenger of Allah 
(shahada); establishing the prayer (salat); paying the zakat; the Hajj; and the fast (sawm) of
Ramadan’

Narrated by Imams Bukhari and Muslim

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)

Zakat is a mandatory duty for Muslims possessing wealth over a threshold, emphasized as an act of worship alongside prayer in the Qur'an. It calls for wealth redistribution to benefit the poorest and vulnerable. Zakat's benefits are both spiritual and worldly, purifying hearts and promoting social security networks.

At AFH we believe that zakat should be central to our work, fulfilling this duty responsibly to protect lives, strengthen communities, and fight poverty worldwide. This policy ensures AFH's zakat activities align with Islamic teachings, fulfilling our responsibility faithfully.

 

4. Policy statement

AFH acknowledges the utmost significance of upholding transparent and accountable governance of Zakat funds, rooted in the overarching principles laid out in the Qur'an and Sunnah from a theological perspective. Furthermore, we recognize the regulatory aspects of the Charity SORP and Trust law in the UK.

The implementation of this policy ensures a consistent and unified approach towards handling Zakat funds, while also facilitating the dissemination of detailed and relevant implementation guidelines at all levels. This comprehensive policy serves several essential purposes:

✓ Providing guidance to AFH on determining eligible projects to receive Zakat contributions.

✓ Encouraging active participation from Country Offices in the decision-making process concerning the allocation of Zakat funds.

✓ Seeking scholarly clarification on matters related to our Zakat activities, such as support costs and the distribution of Zakat to different types of rightsholders. (this has been adopted from AFH scholarly approved Zakat Distribution Policy)

✓ Developing robust processes to ensure transparent collection, financial management, allocation, distribution, monitoring, and the impact assessment of Zakat funds, all in alignment with Islamic principles.

✓ Enhancing both internal and external transparency concerning the collection, financial management, allocation, disbursement, monitoring, and impact of Zakat funds within AFH.

 

 

5. Scope

This policy is binding on AFH International, including Country Offices. It will have implications for the following areas of our work: Governance, AFH Affiliates/Partners, Programmes & Country offices, MEAL and Finance. The International Zakat implementation guidelines outlines the key responsibilities of each these functions and countries.

 

 

6. Policy goals and objectives

The overall aim of the Zakat Distribution Policy is to ensure that AFH’s global zakat activities are in full accordance with the teachings of Islam, thus enabling AFH to fulfil its obligation to in the best way possible.

The specific objectives are:
a) To ensure appropriate governance of the trust from theological and charity trust law of zakat funds.

b) To provide clear guidance to AFH trustees, management and staff on how zakat should be fundraised, accounted for, allocated, distributed, monitored and the impact of social- economical value zakat has had to enhance communities/societies.

c) To provide transparency and accountability to stakeholders on how they should expect AFH to collect, allocate and distribute zakat.

d) To improve internal and external communications on AFH’s distribution of zakat and its impact.

e) To ensure that AFH’s zakat activities are conducted in the most transparent and Islamically-compliant manner possible.

f) To enable AFH to utilise zakat within our programmes in a manner that ensures the maximum impact and efficiency in reducing suffering and poverty.

 

 

7. Distribution of Zakat

At AFH, we have always been committed to fulfilling our mission of aiding those in need and making a positive impact on the lives of disadvantaged communities. As we strive to enhance our efforts in providing humanitarian assistance, we recognize the vital role that Zakat, one of the Five Pillars of Islam, plays in empowering those less fortunate. We are humbled to share some remarkable news that will significantly strengthen our ability to serve those in need.

While the core aspects of Zakat distribution will remain unchanged, we recognize the uniqueness of AFH's operations and the importance of adapting the internal processes to align with our own organizational values and principles. Therefore, before implementation, we will thoroughly review the policy, carefully aligning it with our existing framework, and ensuring it complements our overall good governance approach.

Who is eligible to receive zakat?

The Qur’an clearly outlinesthe 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 AFH believes that we –as zakat administrators, 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, AFH must only distribute zakat to rightsholders (directly or through projects) which are relevant to the categories outlined above. When allocating zakat to projects, or applying for zakat funds to utilise in projects, AFH must provide a justification 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.

 

 

1.1 Fuqara & Masakin (Poor & Needy)

1.1.1 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.

1.1.2 AFH 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 ultrapoor. As such, it is critical that the needs of the ultra-poor are considered and prioritised where possible when identifying which projects to fund through zakat.

1.1.3 AFH will use zakat to provide adequate assistance to meet the essential needs of rightsholders.

1.1.4 AFH 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.

1.1.5 Zakat funds cannot be used in cases where additional conditions are added for its receipt (e.g., cash for work projects).

1.1.6 Where possible, Zakat should also be utilised in a way that provides long-term solutions to the deprivations or needs of disadvantaged people. This could be achieved through developing sustainable livelihoods projects, through education or health provision, or supporting other sustainable development activities for the poor and needy.

1.1.7 AFH will focus its zakat implementation in areas where there is a clear Muslim majority among the population. However, as a humanitarian organisation, AFH 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.

 

 

1.2 Amileena alaiha (administrators ofzakat)

AFH is a legitimate administrator of zakat. AFH in effect is a duty-bearer, with a responsibility to respect, protect and fulfil the rights of rightsholders on whose behalf zakat funds have been collected.

1.2.1 As such, AFH is eligible to take a reasonable portion of 12.5% of zakat funds to cover the costs of delivery 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 rightsholders entitled to these funds.

1.2.2 Costs incurred by AFH are defined as direct, direct support costs or indirect costs. AFH must map and understand what costs are related to Zakat projects and those that eligible to be charged against the allowed administration charge from Zakat funds.

• Direct costs are frontline delivery costs that include programme costs and country office costs.
• Direct Support costs link directly to the project but are shared between different projects/ services. Therefore, a need to arrive at the true cost of delivery, these costs should be charged to Zakat when needed.
• Indirect Costs include IT, HR, or finance costs that cannot directly be linked to the project.
• Costs associated with fundraising, marketing, event sponsorship, influencers, generic training and governance costs are not eligible to be charged to 12.5% administration category.

1.2.3 Any funds taken by AFH offices from Zakat to cover administrative (direct support or indirect costs) must not exceed the agreed allocation of 12.5% in total.

1.2.4 To ensure transparency and accountability the programme and finance functions of AFH should report on the usage of Zakat funds. AFH must demonstrate consistency, accountability and transparency in its internal environment and reporting for Zakat purposes.

1.3 Mu’allafati quloobuhum (to reconcile hearts)
As a humanitarian agency we do not engage in any proselytisation activity. As such, AFH does not undertake any Zakat activities under the category of mu’allafati quloobuhum. (reconciling hearts).

1.4 Riqaab (emancipation of slaves)
Where AFH 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 “slave-owners” who have violated national or international law).

1.5 Gharimeen (those in debt)
1.5.1 Zakat may be used to assist those in debt under the following conditions:

• 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.
• 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.

1.5.2 Zakat funds may be used to pay unsustainable/unrecoverable debts. For example, in microfinance programmes, AFH 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.

1.5.3 AFH will develop and use processes and criteria to verify that only those in genuine debt are supported.

 

 

1.6 Fi sabeelillah (in the cause of Allah)

 

1.6.1 AFH takes the opinion that it is permissible to fund communal welfare assets and programmes - such as clean water sources, health clinics, critical medical equipment, temporary food producing outlets (e.g., bakeries), water containers, schools, training centres, seed banks, communal farmlands, water damns, - to reduce poverty and hardship in disadvantaged communities.

Projects involving communal welfare will promote the principle of community empowerment through ownership. AFH will endeavour to adhere to the following conditions when funding communal welfare assets with zakat:

• The clear majority of the rightsholders can be classified as being eligible to receive zakat (i.e., poor, needy, traveller, etc.).
• An assessment of the rightsholder community has been conducted, demonstrating the need for the asset in question in alleviating poverty and suffering.
• Consent should be sought from the target community to develop or implement the proposed asset.
• The project should ensure that rightsholders can act as effective and responsible managers of the asset.
• Once completed, ownership and management of the asset is transferred to the local community (e.g., to a local community cooperative compromising of 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.
• The communal asset should always remain a not-for-profit property and for general welfare.
• The asset shall not be owned by any one person or a single group of people.

 

1.6.2 AFH 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:

• The service provider is not an employee who provides general operational support and management, but someone who works on direct project delivery.
• 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).
• AFH only pays essential service providers for a limited time (no later than the project-end).

1.6.3 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.

1.6.4 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 AFH’s long-term assets or costs may be covered by zakat.

1.6.5 Zakat funds can be utilised 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.

1.6.6 However, under this category AFH 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.

1.7 Ibn as-sabeel (travellers)

1.7.1 AFH defines travellers 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.

1.7.2 This would apply to refugees who have not re-settled and are not in the category of fuqara and maskin (poor and needy).

1.7.3 AFH may use zakat funds to provide sufficient food, clothing, shelter, transportation, education, healthcare and any other needs.

 

 

7. Matters relating to the allocation & distribution of zakat

Each AFH office that collects zakat should conduct research to identify the level of poverty in their respective country. Where poverty or need is identified locally, the office must develop a strategy to utilise a portion of zakat funds domestically. This amount will need to be determined by each office  based on their environment.
■ AFH 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.
■ AFH may allocate as much zakat to each category as is relative to the need of rightsholders and our capacity in each geographical location.
■ AFH will aim to allocate zakat funding within one year of receiving it and use it as quickly as possible.
■ AFH will not use zakat funds to use for any type of endowment orsimilar investment projects.
■ AFH takes the view thatzakat cannot be given for loans or any other business enterprise.
■ 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 programmes).

 

 

8. 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 available zakat funds (total zakat funds less 12.5%) should be excluded in calculating AFH’s free reserve position.

 

 

9. Policy Review

The Zakat Policy will be reviewed as and when the situation requires and the Trustees will ensure that any future revisions remain compliant with Sharia and would require the approval of scholars.