Why giving is good news for everyone


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ABU DHABI // The far-reaching effects that zakat has on a community have been detailed by two scholars who argued that it was important to both the giver and the receiver.

In a discussion about the social benefits of the Muslim charity doctrine, Dr Hassan Mohammad al Marzouqi from the United Arab Emirates University gave an account of how improving one person could benefit the whole community.

"Giving zakat is evidence that an individual has strong faith and is an act that purifies the soul," he said. "Giving zakat does away with miserliness, envy and hatred."

One of the most relevant social aspects of zakat was that it fostered brotherhood, compassion and harmony, Dr al Marzouqi said. Among the rewards for giving zakat were that it reflected positively on an individual's health and wealth and his family's wellbeing, he said.

People who gave happily of their wealth to others fulfilled their religious duties and their positive contribution was received with the same spirit, he said. The needy could therefore accept their help without a sense of humiliation, which promoted good social relations.

Zakat could also achieve social stability because collective action supervised by the state could help the poor to escape the cycle of poverty. The idea behind zakat, Dr al Marzouqi said, was to give the poor and needy enough money to achieve a decent life. He stressed that zakat was a duty.

The thread of belief was continued by Shaikh Taleb Mohammad al Shehi from the General Authority for Islamic Affairs and Awqaf, who spoke about the role of zakat in maintaining security.

"Zakat helps to consolidate security, safety and civil peace," he said. He also said that since many crimes were committed by people who needed money, zakat helped to spread morality and solidarity, promoted economic development and enhanced family bonds.

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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