Zakat: Ramadan to fuel rapid growth in philanthropy among British Muslims

Proud track record of giving is now expanding rapidly in the UK

Happy volunteers at the philanthropic 'Iftar for All' project in North London during Ramadan 2020. Getty Images

With Ramadan now under way with its emphasis on charitable giving, it's apt to reflect that there has never been a more exciting time for philanthropy based on Islamic principles.

As a UK-based philanthropic adviser to global family offices and donors, I have had the pleasure of working closely with Islamic philanthropists and foundations in the Middle East and the UK. I have been inspired to learn about the principles of zakat and sadaqah, and have seen them influence the behaviour of many Muslim philanthropists.

Some estimates suggest that family businesses in the GCC have given up to $10 billion to philanthropy-supporting causes domestically and internationally.

We are now seeing this growth spread to the UK. As a leading centre for Islamic Finance outside the Muslim world, Britain, and London in particular, has become the destination of choice for an increasing number of high-net-worth Muslim individuals to undertake business activity, access wealth management advice, and enjoy personal family activity.

Estimates indicate that there are more than 10,000 Muslim millionaires in the UK with liquid assets of around £3.6 billion, and 13,000 Muslim-owned businesses in London.

While all the great religions claim to have a positive influence on charitable giving, Islam has a particularly proud track record. I have been reflecting on the three trends of Islamic giving in the UK which stand out the most for me.

First, the scale and structure of giving in Islamic cultures is impressive. Strong traditional values and religious faith provide solid foundations for meaningful and long-term giving. This has been proven in the most trying circumstances recently.

The meaning of Zakat

Since the outbreak of Covid, Muslims in the UK have donated £300 million to charity through zakat, the religious requirement for those above a certain financial threshold to give away a percentage of their wealth.

Last year's Ramadan, which took place in lockdown, brought record-breaking donations of more than £150 million.

There have been signs that Muslim philanthropists are following global trends towards new forms of impact investing or social enterprise. Some are also adopting different structures to administer charitable grants that didn’t exist a handful of years ago.

One example is donor-advised funds, which are becoming a popular philanthropic vehicle due to their administrative convenience, cost savings and tax benefits.

My organisation - The National Philanthropic Trust UK – has seen a 20 per cent increase in assets under management in the past five years.

There are currently £1.7 billion in assets under management by all UK donor-advised funds, including those of a number of Muslim philanthropists, as they can be used for sharia-compliant investments for their philanthropic capital.

I work with many Middle Eastern families who enjoy using the UK as a hub for their philanthropic activity.

It is an attractive jurisdiction in which to manage such capital due to its transparency and regulation, geopolitical neutrality, and established rules on giving to domestic and international charities. The UK’s popularity will rise as infrastructure for specific Muslim philanthropy continues to develop at pace.

How Zakat fosters collaboration and selflessness

The second reason I am so respectful of Islamic philanthropy is the level of collaboration among donors. Philanthropists regularly join forces with others to tackle big social issues, such as education, global health, climate change or poverty, in both Muslim and non-Muslim communities.

There is a genuine desire to work on solutions with their peers, or with other public or private institutions, in the knowledge that the scale of the challenges far outweigh the ability of any single donor to tackle them alone.

The philanthropists I work with are committed with a laser-like focus to having the largest possible impact, rather than being known individually for making a difference. There is no egotistical intention to try to reinvent the wheel.

Instead, most Muslim philanthropists scan the globe for best practices and seek to co-fund with others who have the best ideas, or who are simply doing the best work. This lesson in humility and expediency would be well heeded by philanthropists all over the world.

Engaging the next generation through Zakat

The third and final factor that makes me enthusiastic about Islamic giving is the level of engagement among the emerging generation of young leaders.

In the Middle East, where half the population is under the age of 30, it is heartening to see young people playing an active role in philanthropy. There is little doubt that this stems from the importance Muslims attach to charity from a young age.

Nowadays, opportunities for young people to thrive in philanthropic giving are greater than ever before, especially for the 2nd and 3rd generation family members who have made the UK their home and can experiment within the safe structure of family foundations or donor-advised funds (DAFs).

Social media savvy and globally connected through education or experience, the next generation's horizons are limitless

I recall working with one family whose matriarch set up two DAFs to manage the family’s philanthropy in the UK. One was used for grant-making and the other exclusively to engage her teenage children in financial education through impact investments. This kind of structure did not exist for previous generations.

I see young Muslim leaders in the UK with huge energy, passion and a strong desire to address global challenges driving a new appetite for social purpose. They want to consume sustainable products and make a sustainable impact on the world around them.

Social media savvy and globally connected through education or experience, the next generation’s horizons are limitless. We all stand to benefit as young philanthropists harness their creativity and embrace innovative, collaborative and impact-driven approaches to philanthropy.

A combination of historic traditions of giving, new methods that allow future generations of philanthropists to thrive, and a willingness to co-fund with others provides a positive context for the future of Islamic philanthropy. The UK is well positioned to embrace this.

It can offer new structures for giving while drawing on its diversity to embrace and understand deep-rooted cultural traditions. During the month of Ramadan, a period of reflection and compassion for Muslims around the world, that is something we can all draw great hope from.

John Canady is CEO of National Philanthropic Trust UK.

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