Shariq Siddiqui: We must work harder to understand not-for-profits’ costs

According to the Institute of Social Policy and Understanding, there are 3.45 million Muslims in the United States. Over three-fourths of Muslims are U.S. citizens, and over half were born in the United States. According to the Muslim Philanthropy Initiative at the Indiana University Lilly Family School of Philanthropy, Muslims in the United States give $4.3 billion in charitable donations each year, of which $1.8 billion is zakat.

Zakat is obligatory giving that requires each eligible Muslim to purify their wealth by giving away 2.5% of it to eight specific causes annually. Eligible recipients of zakat include the poor and the needy, zakat collectors, orphans, widows, those to be freed from slavery, the aged who cannot work to feed themselves, those in debt, in the cause of God and to benefit stranded travelers. Furthermore, Muslims are required to practice their faith (including zakat) with ihsan, or excellence.

These recipients were defined in the Muslim holy book, the Quran, over 1,400 years ago. While some are easy to define in the contemporary context, others require further analysis. For example, would a stranded traveler be a contemporary refugee, or displaced person, or someone whose car has broken down on the highway? How would we define modern-day slavery? At a time when we have rampant debt in nearly every poor and middle-class family, who could be excluded?

Complicating this theological debate is the modern debate regarding overhead, or administrative costs. This has become, sadly, one way in which some determine the “effectiveness” of a not-for-profit. In essence, the argument is that social good is only impactful when done cheaply.

This debate has seeped into Muslim debates over zakat. Zakat should be collected and distributed by professionals to fulfill one’s responsibility to do this practice with ihsan. Islamic law provides for a portion of zakat to be used for that purpose, arguably creating a theological requirement of a professionalized zakat (and in extension, philanthropic) sector.

Sadly, the arguments around overhead or administrative costs have made donors lazier, or practicing zakat with less ihsan. Ihsan, or excellence, should require that we learn about a not-for-profit, understand its theory of change, learn about its programs, develop trust, then make a philanthropic investment for social impact. Then it requires that the donor engage with the charity to learn how the money was spent and what impact was achieved.

Learning what the administrative overhead costs tells us nothing about these things. It is possible that a charitable institution spending a larger share on administrative cost is having a better impact than one with lower costs, and vice versa.

Would it be OK for a food security program to distribute larger amounts of low-quality food, resulting in obesity and illnesses like diabetes, or to develop a program that provides education about food and healthy food practices and ensures someone has a pathway out of hunger?

Would it be OK for me to give many poor people small amounts of zakat but make them dependent upon that annual amount versus giving fewer people larger amounts of zakat with appropriate support to help them out of poverty?

Would we prefer someone with little training (and therefore less costly) to provide counseling to a displaced person than someone who has experience and training?

When we simply discuss overhead and administrative costs, we are practicing lazy philanthropy. Muslims are called to greater ihsan in the practice of philanthropy (and in particular, zakat), which requires them to work harder.•

_________

Siddiqui is assistant professor and director of the Muslim Philanthropy Initiative at the Lilly Family School of Philanthropy at Indiana University. Send comments to ibjedit@ibj.com.

Click here for more Forefront columns.