an islamic instrument of poverty alleviation - bangladesh perspective

32 Pages·2010·0.43 MB·English

WAQF: AN ISLAMIC INSTRUMENT OF POVERTY
ALLEVIATION - BANGLADESH PERSPECTIVE

Foyasal Khan

Affiliation
MSS (Final Year), Session: 2008-09, Department of Economics, University of Dhaka,
Bangladesh. Website: http://www.econdu.ac.bd/
Address
C/O, Abdus Sattar Khan, Postal Printing Press, 80/A, BSCIC Industrial Area,
Post Office: Monnu Nagar-1710, Tongi, Gazipur, Dhaka, Bangladesh.
E-mail
[email protected]
[email protected]

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Seventh International Conference – The Tawhidi Epistemology:
Zakat and Waqf Economy, Bangi 2010

WAQF: AN ISLAMIC INSTRUMENT OF POVERTY
ALLEVIATION - BANGLADESH PERSPECTIVE

Foyasal Khan

ABSTRACT

Poverty alleviation has become a buzzword in Bangladesh over the last three
decades. Bangladesh has so far implemented five Five-Year Plans and one Two-Year
Plan and a Three-Year PRSP Rolling Plan to accelerate economic growth and
poverty reduction. Although the intensity of poverty lessened, its depth and severity
still persists. Instruments such as Micro credit and Safety Net Program have been
contributing to poverty alleviation, but it is proven around the globe that these two
instruments are not successful in reducing Income Inequality. This urges a new
strategy which can reduce poverty and income inequality. In this case, Waqf can be
one of the vital alternatives alongside Zakah because early history indicates free
education, scholarship, orphanage, free treatment, and inn for nomad was provided
by Waqf based institutions. In fact, Zakah and Waqf played the key role in reducing
poverty in Islam. At present Waqf based institutions are not growing at a considerable
level. But if we really want to do something for the needy and poor, we have to revive
this much needed institutions. Therefore, starting a worldwide Waqf movement is
indispensable. In this paper I will try to assess the role of Waqf in reducing poverty in

the context of Bangladesh and finally will try to present an insight how to revive it.

Key Words: Bangladesh, Poverty Alleviation, Islam, Waqf

1. Introduction

Bangladesh, the largest delta and the 3rd largest Muslim country in the world, is
located on the Tropic of Cancer in South Asia. Three sides (North, East and West) of
Bangladesh are surrounded by India and in south, Bay of Bengal is sited. Bangladesh,
has an area of 147570 square kilometers (56,177 square miles), is the most densely
populated country in the world, with 144.2 million people. Population growth rate is
1.26 percent and 977 people live in per square kilometer. It is also one of the poorest
and least developed countries in Asia, with a 2009 per capita GNP of only $690, a life
expectancy of 66.7 years.

Bangladesh experienced about 190 years of long British colonial rule that ended up in
1947 with the partition of Indian subcontinent and birth of two independent states viz.
India and Pakistan. Bangladesh became a province of Pakistan named East Pakistan.
Later in 1971, Bangladesh gained independence from Pakistan and emerged as a free
and sovereign nation in the world. Soon after Bangladesh became a member of the
Common Wealth, IMF, OIC and the United Nation. The country is run under
parliamentary system. Its population consists of Muslim 88.35%, Hindus 10.5%,
Buddhists 0.6%, Christian 0.3% and other 0.3%.

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To accelerate economic growth and poverty reduction, Bangladesh has so far
implemented five Five-Year Plans and one Two-Year Plan and a Three- year PRSP
Rolling Plan. Keeping the MDGs in vision, the government approved the Poverty
Reduction Strategy Paper (PRSP) and Bangladesh is now on the way to finalize the
2nd PRSP for attracting funds from IMF and the World Bank for poverty reduction. To
address the challenge of poverty reduction, the government has adopted a
fundamental strategy of seeking collaboration from NGOs and private sector,
especially by providing necessary support to the activities of NGOs.

As an outcome of these development activities, Bangladesh has made commendable
progress in terms of reduction of income and human poverty. Bangladesh has
received universal appreciation for attaining success in reduction of human poverty in
education, health and nutrition. Bangladesh has already achieved three targets of
Millennium Development Goals (MDGs) such as (1) removing gender disparity in
primary and secondary education; (2) ensuring almost universal access to primary
education; and (3) ensuring access to safe drinking water. For the last five
consecutive years (2003-2007), Bangladesh attained the HDI rank of “Medium
Human Development,” according to the UNDP Human Development Reports. The
report on Household Income and Expenditure Survey (HIES) 2005 published by the
Bangladesh Bureau of Statistics (BBS) shows downward trend in income poverty.
The incidence of poverty at the national level declined from 48.9 percent in 2000 to
40.0 percent in 2005. By using lower poverty line, poverty declined to 25.1 percent in
2005 from 34.3 percent in 2000. 1

Despite these successes, poverty is the great enemy of Bangladesh because still 81.3
% and 49.6% people live below income poverty line $2 and $1.25 a day in 2000-2007
respectively. National Poverty Line is 40% in 2000-2006. Therefore recently prime
minister of Bangladesh Sheikh Hasina has deemed poverty as the worst enemy of
Bangladesh in her anti-poverty speech and determined to reduce poverty.

Every year numbers of safety net programs are being undertaken to reduce income
uncertainty and variability, maintain a minimum standard of living and redistribute
income from the rich to the poor. During the last two decades, the government of
Bangladesh has been pursuing a number of social safety net programs such as cash
transfer programs, food transfer programs, and micro-credit programs for self
employment and so on. But these programs is failed to achieve its goal. Recently
reckoning the existing social safety net programs to be inadequate for sustainable
poverty alleviation, leading Development practitioners of Bangladesh have called for
introduction of social protection to help the extreme poor graduate to an improved
status in society.2
More than 50 per cent of the hardcore poor, who are 25 per cent of the entire
population, are yet to be covered by the official safety net programs.3 So, Time has
come to think about full-fledged social security system which is now confined to

1 Chapter 13, Economic Review of Bangladesh 2007
2 Consensus of a seminar titled ‘Extreme Poverty and Graduation Dynamics’, jointly organized by
Power and Participation Research Centre (PPRC) and BRAC Development Institute held on October 4,
2009 at the LGED auditorium
3 Mohammad Abdur Razzak, the food and disaster management minister, GOB
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government officials only. Through protection social measures, we have to work out a
strategy to fight poverty in future.4
On the other hand, historically we know that besides public sector and private sector
in Muslim countries and Muslim communities, a third sector played a key role for
taking care of less privileged members of the society and could improve their socio-
economic status. Zakah and Awqaf as the two faith based third sector institutions led
from the front in fighting poverty and bringing social development in the lowest
income strata of population. If we properly utilize Zakah and Awqaf, they can still be
fruitful in alleviating poverty. Therefore, Islamic Economist Dr. Fahim Khan urges to
include zakah and Awqaf in PRSP. In this paper we will try to prove how Awqaf can
be emerged as an effective tool of poverty alleviation.

The paper is divided in eight sections. Following introduction, Section 2 briefly
discusses the methodology used in this paper. Section 3 define poverty and depicts
poverty scenario and section 4 reviews the poverty alleviation strategies and their
impact in Bangladesh. Section 5 highlights the poverty alleviation in Islam and
section 6 portrays the role of waqf in poverty alleviation. Finally recommendations
and conclusion is drawn in section 7 and 8 respectively.

2. Methodology:

The paper has been developed reviewing some current literatures, journals, reports,
and UNDP publications. In this sense, it is a survey article. In addition, to express the
salient features of Waqf census 1986, the first ever district wise complete census of
Waqf States conducting throughout Bangladesh by the Bangladesh Bureau of
Statistics at the request of the ministry of Religious Affairs, I have compiled the
census data as division wise which may be an another benchmark data on Waqf
Estates in the country. It has also incorporated enormous statistics and has related
them as supporting arguments.

3. Defining Poverty and Poverty Scenario:

3.1 Definition and Concept of Poverty:

According to Merriam- Webster’s Collegiate Dictionary, poverty is “the state of one
who lacks a usual or socially acceptable amount of money or material possession.”
This definition contains two important ideas. First, the definition of poverty will be
different in different times and different societies: what is “socially acceptable” may
be differing in, say Bangladesh and Malaysia. Second, the focus is on the ability to
purchase goods and services (thus, on money) or on their ownership (material
possessions). (Jalil, 2007)

According to the Penguin Dictionary of Economics, poverty is “the situation facing
people whose material needs are least satisfied. Poverty can be defined by some
absolute measure (earnings below some specified minimum level) or in a relative
terms (the number of the poorest 10 percent of household, for example). Poverty

4 Salehuddin Ahmed, a former governor of Bangladesh Bank
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exists not merely because incomes are low, but also because the needs of some low
income household are high. (Bannock; Baxter; Davis, 1998)
The World Bank defines poverty as an “unacceptable human deprivation in terms of
economic opportunity, education, health and nutrition, as well as lack of
empowerment and security.”
Amartya Sen, 1998 Nobel Prize Winner for Economics, earlier defined poverty as a
situation where people lack the economic resources to realize a set of basic
functioning (1985 and 1993). In his book “On Economic Inequality (1997), argues
that, rather than comparing money or detailed quantities of consumer goods, we
should compare what is called ‘capabilities’. Loosely, it is a similar term of ‘quality of
life’. More precisely, a person’s capability is to be measured by the extent to which,
one reason or another, they are not able to do the various things they value doing,
leading the kind of life they value living or being the kind of persons they desire to be.
These value things, he suggested, may vary from the elementary, such as, being
adequately nourished, to the personal states, such as, being able to take part in the life
of community. This idea led Sen to a deeper definition of the concept of poverty
itself, namely capability deprivation. A person is in poverty if s/he is unable to do
many things they value doing. Obviously, the concept has two aspects. One aspect is
the physical, social and psychological process that generates the menu of desires or
aspirations; the other is the personal or social environment that constraints
achievement. In the subsistence society, the main need is food and the main constraint
is land. In the modern economy, needs, desires, and aspirations are broader and the
main constraint is money. So the issue is not, for example, freedom from hunger, but
rather the capacity to be well nourished. And he expanded upon this to other
freedoms. (Jalil, 2007)
Muhammad Yunus, 2006 Nobel Prize Winner for Peace, defines poverty as isolation.
The isolation is not necessarily geographic isolation; it is societal isolation, or
isolation from the mainstream. As Yunus explains, an individual borrows money
because she or he does not have any, and yet the reality is that one cannot borrow
money unless that person has already achieved a threshold of net worth. Through
microfinance, however, billions of people without access to financial institutions can
have the opportunity to be incorporated into the mainstream economy. The barrier of
isolation is effectively removed. (Source: Thomas Davis , 2009 from Vanderbilt
Magazine)
There is no single concept of poverty that stands outside history and culture. It is a
construction of specific societies. Moreover, different groups within a society may
construct it in different ways. Because of the moral imperative of poverty and its
implications for the distribution of resources both within and outside societies, it is a
political concept. As such it is highly contested. Concept of poverty has political
effects. 5
3.2 The scenario of Poverty in Global and OIC perspectives

The global fight against poverty has succeeded in bringing down the absolute number
of poor living on less than US$1 per day in developing countries from 1.2 billion
people out of the 6 billion in 1990 to just over 1 billion in 2002. In terms of the ratios,

5 Jalil; 2007
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the incidence of poverty in the developing world has declined from 28 percent in 1987
to 24 percent in 1998 and further declined to 20 percent. This decline is below the rate
needed to meet the international development goal of reducing extreme income
poverty by half by 2015.6
Against these global benchmarks, 400 million of the 1 billion people estimated to be
in absolute poverty lived in 31 of the 56 OIC member states, i.e. 40% of the world’s
poor live in the Muslim countries. In relative terms out of 975 million people living
in these countries 400 million or 40 percent are below the absolute poverty line. In
other words, the incidence of poverty in these 56 OIC member countries is double the
average of the developing world. 7

Recently HDI for 2007 has been calculated for 182 countries. It is important to note
that these HDI results, based on 2007 data, do not reflect the effects of the global
economic crisis, which is expected to have massive impacts on human development
achievements in many countries around the world. Countries have been divided into
four distinct categories. These are Very High Human Development, High Human
Development, Medium Human Development and Low Human Development
countries. First three categories are dominated non-Muslim countries and last
category is highly dominated by Muslim countries which portrays the fragile situation
of Muslim countries. There is one Muslim country (Brunei Darussalam) in the top 30
Very High Human Development countries whereas among the 24 Low Human
Development countries 14 are Muslim countries. Distribution of countries is shown in
Table 1.

Table 1: Comparison on HDI performance by Muslim and Non-Muslim
Countries

Categories Total countries Non-Muslim Muslim Countries
Countries
Number % Number % Number %
Very High 38 100 34 89.47 4 10.53
HD
High HD 45 100 36 80 9 20
Medium 75 100 48 64 27 36
HD
Low HD 24 100 10 41.67 14 58.33
Total 182 100 128 70.33 54 29.67
Source: Author

Five large states based on population – Indonesia, Pakistan, Bangladesh Nigeria and
Egypt with cumulative population of 784 million people have 221 million people
living below the poverty line. The incidence of poverty in these countries is slightly
above 28 percent.

6 Meier & Rauch, 2005, p-30 ; Husain, 2007

7 Husain, 2007
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Fourteen states of Low Human Development category with a total population of 165
million people out of which more than 50 percent i.e. 85 million live below the
poverty line face severe problems and are also on a slipping path as far as fight
against poverty is concerned. These countries are in urgent need of assistance.
Fifteen states mainly in the Middle East and including Malaysia and Brunei are
relatively well-off and do not have serious poverty problem. Some of these rich
countries, though, have weak human development indicators which need immediate
attention by public policy makers.8

4. Scenario of the Economy of Bangladesh, Poverty alleviation strategies in
Bangladesh and their impact

4.1 Scenario of the Economy of Bangladesh

Although it has been said frequently that the level of poverty reduced but reality is
very different. In a country like Bangladesh, there is no scope to consider poverty
ratio and total population with poverty at the similar view. There is a meaningful
difference between the poverty ratio and the number of poor people. Considering the
number of country’s total population the trend of cumulative number of poor is
increasing, but statistically the poverty ratio is on decreasing trend as of 1 percent per
annum which is not addressing the decreasing of poverty in real sense. According to
the Household wise Income and Expenditure Survey (HIES) - 2005 of Bangladesh
Bureau of Statistics (BBS), the number of country’s total poor is 56 million, of which
42.1 million are extreme poor (those have less than $ 1 income in a day). In 1990-91,
the number of poor people in Bangladesh was 51.6 million, this number increased to
55.3 million in1995-96 and 55.8 million in 2000. During last 15 years, 1991 to 2005,
the number of poor people increased by 4.4 million.9

One of the main causes for increasing poverty rate in Bangladesh is existing income
discrimination. According to the Gini Co-Efficient, this income discrimination rate is
0.46. The difference between the income discrimination of rich and poor is on
increasing trend. According to the Poverty Monitoring Report-2005 of Bangladesh
Bureau of Statistics, in 1990 the income of the most 5 percent rich people was
equivalent to the 18 times of most 5 percent poor people’s income, and in 2005 this
situation is now raised to 84 fold.10

Land is unequally distributed in Bangladesh and poverty on the basis of land
ownership is severe. In 2005, the estimates of incidence of poverty by ownership of
land using the upper poverty line were found to be 46.3 percent for landless
households, 56.4 percent for owners of less than 0.05 acre land and 44.9 percent for
owners of 0.05-0.49 acre land. In 2005, moreover, the estimates of HCR by ownership
of land using the lower poverty line were found to be 39.2 percent for land size less
than 0.05 acre, 28.2 percent for 0.05 to 0.49 acre, 20.8 percent for 0.50-1.49 acre, 11.2
percent for 1.5-2.49 acre, 7.0 percent for 2.50-7.49 acre and 1.7 percent for 7.5 acre or
more land. So it is generally concluded that massive progress of the country’s poverty

8 Ibid
9 Equity and Justice Working Group (www.equitybd.org) , 2008
10 Ibid
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situation is merely a day dream without the development of the fortune of marginal
farmers.11

4.2 The poverty Alleviation strategies in Bangladesh:
Policies for poverty alleviation can be classified broadly into two categories: Indirect
Policies and Direct Policies. The first strategy provides opportunities to utilize the
assets of the poor i.e. physical labor trough pursuit of policies and programs for
realizing a higher rate of economic growth, to be achieved through appropriate policy
interventions to stimulate investment, GDP and employment growth in the economy
and the second strategy increases the productive capabilities of the poor to enable
them to take advantage of the available economic opportunities, to improve their
quality of life through augmentation of their levels of employment, income and
consumption.12

4.2.1. Indirect Policies for Poverty Alleviation:
The Indirect Policies are target neutral and potentially benefit all groups of the
population along with the poorer groups, through the trickle down process derived
from high investment for growth. High economic growth alone may not however
necessarily help in alleviating poverty. It is, therefore, necessary to formulate policies
to ensure a more equitable distribution of income, opportunities and choice.
Enhancing the productive capacities of the poor must thus be seen as integral to any
strategy for enhancing as well as sustaining aggregate economic growth. Improving
the real incomes of the numerous poor has considerable growth potential because it
involves raising the productivity of a numerically large segment of population. The
consequential enhancement in the incomes of the poor substantially enhances the size
of the domestic market which serves to stimulate growth in other sections of the
economy. Such a strategy for promoting poverty alleviating growth is of crucial
importance for low income, demand constrained economics.

4.2.2. Direct Policies for Poverty Alleviation:
Direct policies or target group oriented programs directed to the poor such as Social
Safety Net Programs have for many years been used in Bangladesh to alleviate
poverty.
Social safety net program includes Cash transfer programs, Food Transfer programs,
providing incentives, financial assistance and funds for poverty alleviation, Micro-
credit for poor, Infrastructure Development program etc. Every year the budget
allocation has been increased in case of every program. This is desirable, but from the
evidence it is said that there is a large gap between the allocation and implementation
of social safety net programs. Because of this large gap, SSNP’s are not much
effective in Bangladesh (Khan; 2009). The upward trends make doesn’t show an
overall optimistic view because the benefits are dragged down due to following
reasons:
(cid:1) Social Safety Net Programs are distributed by government officials. Most of
them are involved in corruption. According to the Corruption Database Report
2005 of Transparency International Bangladesh (TIB) about 71.9%
government officials and employees are involved in corruption.

11 Economic Review of Bangladesh, 2009
12 Hassan & Rahman; 2003, p- 263
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(cid:1) Focusing largely on transfer payments rather than for enhancing the
capabilities of the poor.
(cid:1) Lacks of sustainability as these programs are mainly driven by foreign aid.
(cid:1) The actual numbers of beneficiaries were less than the officially determined
number.
(cid:1) Local political leaders are grabbing aid able goods such as rice, wheat, lentils
etc through VGF card manipulation.
(cid:1) Nearly 50 percent of the recipients of the stipend at school and Madrasah level
are fake and they are getting the stipend money illegally in collusion with a
section of corrupt teachers.
(cid:1) Anomalies are found in transportation, handling of grains and inaccurate
weighing for distribution.
(cid:1) Needy and poor people are not conscious about their rights.
(cid:1) Information gap persists between recipients and authority.
(cid:1) Failure of government in selecting effective programs.
During the last decade the government, quasi- government bodies and many small and
big NGO’s have focused on developing a collateral free credit delivery system for
providing credit to the poor to increase self employment opportunities and income in
order to alleviate poverty of the particular target groups. The Grameen Bank (GB),
Swanirvar Bangladesh (SB), Bangladesh Rural Development Board (BRDB),
Bangladesh Rural Advancement Committee (BRAC), Proshika, Association for
Social Advancement (ASA) may be mentioned, among others, as the principal
organizations engaged in such credit programs directed to the poor. Besides this
interest based micro credit programs, Islami Bank Bangladesh Limited (IBBL) is
operating an Islamic micro credit program named Rural Development Scheme (RDS).
Main pitfalls of micro credit institutions are:
(cid:1) Creditors do not get much time to invest their credit as he has to pay the first
installment just one week after taking credit.
(cid:1) Subsistence people who takes credit due to consumption purpose.
(cid:1) There is no sound program to meet immediate consumption demand of the
lower strata of population.
(cid:1) To pay the loan of a particular microfinance institution, most of creditors go to
another microfinance institution.
(cid:1) Local micro credit providers always create pressure on creditor and creditors
are being mentally and in some cases physically tortured by them.

5. Poverty Alleviation in Islam:
According to Professor Abulhasan M. Sadeq (1997), any poverty eradication scheme
has to be based on an inquiry into the causes of poverty. At macro level, there are two
possible causes of poverty. First is the low level of GNP and second, the unequal
distribution of income. At micro level, poverty may be caused by several reasons. A
person may be poor because he is unemployed, handicapped and so on or, just he is
born in a poor family and hence is deprived of equal social opportunities.

Qaradawi has shown three ways of Islamic solution of poverty problem in his book
named “Poverty Alleviation in Islam”. These ares-

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(cid:1) First way, related with Self Responsibility: If a person has ability and
opportunity of working, he must work to manage his livelihood. The duty of
society and state is to assist him through training and giving money in which
s/he can find a suitable job.
(cid:1) Second way, related with Muslim Ummah: Those who takes responsibility for
providing financial security of the poor to perform the ordained obligatory
duty on him or hoping to find the return from Allah. This security system is
ensured in the following ways:-
(cid:2) Spending for the nearest relatives
(cid:2) Preserving the rights of the neighbors
(cid:2) Paying obligatory Zakah
(cid:2) Providing ordained incidental right on wealth such as Kaffara (fine),
Mannot (promise), helping the vulnerable people and so on.
(cid:2) Temporary or perpetual voluntary Sadakah such as Waqf system

(cid:1) Third way, related with Islamic state: whose Shariah obligation is to take
initiative for the excellence of every destitute who has no guardian or no way
to earn, whither he is Muslim or not, if he live in a territory of Islamic state.
The sources of such state guardianship are as follows:-
(cid:2) Zakah: main everlasting source of treasury of Islamic state in
alleviating poverty.
(cid:2) Other Sources: one fifth of Ganimath, Fai, Kiraj, Jijiya, wealth without
heir etc.
(cid:2) Extra sources: Imposing tax on rich, if amount of zakah and other
sources are not enough to reduce poverty.

A poverty alleviation program should keep all these in view for an effective policy
formulation and implementation. The poverty alleviation would thus include polices
as follows:
1. To increase GNP with a pragmatic and effective economic development plan,
2. To achieve equity in the distribution of income
3. To provide equal opportunities to all in the society for upgrading economic
conditions of the disadvantaged strata of the population, and
4. To address individual issues of specific situation

Islamic approach to poverty alleviation involves three distinct sets of measures:
1) Positive measures: Islam engages different positive measures in alleviating
poverty. Such measures are:
a) Income growth
b) Functional distribution of income
c) Equal opportunity.
2) Preventive measures: In an Islamic economy, preventive measures would be
taken so that wealth is not concentrated in a specific section of population.
Such preventive measures include:
a) control over ownership and
b) prevention of malpractices
3) Corrective measures: Under such measures, Islamic principles establishes
different modes of wealth transfers so that wealth is not concentrated among
the rich:
a) Compulsory transfers: Zakah
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