Indonesia

IsDB and Indonesia’s BAZNAS Launch Project to Unlock Zakat Potentials for Poverty Alleviation and COVID-19 Response


Jakarta, Indonesia, 5 November 2020 – The Islamic Development Bank (IsDB) Group and Indonesia’s National Board of Zakat (BAZNAS) – the country’s sole official entity to manage Zakat funds - are partnering in a transformative and pioneering pilot strategic Technical Assistance (TA) project to integrate Zakat with some of Indonesia’s Community Driven Development (CDD) Programs.

Jakarta, Indonesia, 5 November 2020 – The Islamic Development Bank (IsDB) Group and Indonesia’s National Board of Zakat (BAZNAS) – the country’s sole official entity to manage Zakat funds - are partnering in a transformative and pioneering pilot strategic Technical Assistance (TA) project to integrate Zakat with some of Indonesia’s Community Driven Development (CDD) Programs.

H.E. Dr. Bandar Hajjar, President of the IsDB Group, in his keynote address to the launching of the TA project, referred to the opportunities that this IsDB-BAZNAS project can avail adding: “The project seeks to leverage crowdsourcing's enormous potential, motivating the crowds to become an active network of developers.  This is in line with IsDB President's Five-Year Program (P5P) and the New Business Model to create partnerships and transform the IsDB into a Bank of developers. In particular, the P5P’s aim is to make the IsDB more competitive and responsive to the needs of its member countries. The programme also aims to make the IsDB the partner of choice in addressing development challenges by achieving the six key pillars namely awareness, linkages, competency, funding, delivery and reinforcement.”

The TA project seeks to develop a model to improve the collection of Zakat, and effectively channel and maintain a sustainable flow of funds to support successful national-level CDD programmes, which have strong grassroots poverty reduction and livelihood enhancement impacts.

IsDB through its Islamic Finance Advisory and Technical Assistance Division, Islamic Financial Sector Development Department (IFSDD) and Islamic Solidarity Fund for Development (ISFD) which is IsDB Group’s poverty alleviation arm will provide a US$ 515,000 Technical Assistance grant to support this US$ 745,000 pilot project. BAZNAS will be the Executing Agency that will manage the implementation while providing US$ 250,000 to the project. 

Recognizing the immense need to support communities in dealing with the COVID-19 pandemic, part of the grant funds, under this project, from the ISFD which is IsDB Group’s poverty alleviation arm, would be utilized to support BAZNAS in dealing with COVID-19 response activities, and serve to stimulate the leveraging of Zakat to augment these efforts on a sustainable basis. The Health section of the programme works to provide a healthy, clean environment through a handwashing drive covering 78 schools and benefitting around 19,000 students, while the Economic section of the programme provides livelihood recovery support to 35 micro-entrepreneurs operating Zmart retail stores.

According to H.E. Prof. Dr. Bambang Sudibyo, Chairman of BAZNAS, “as per its role BAZNAS focuses on helping the poor in Indonesia. In these pandemic days, the poor are the most affected, not only health-wise, but many have also lost their jobs and income. With this IsDB funded project, it is expected that more and more poor people will be supported to recover their livelihoods and cope with the pandemic.”

The locations of the pilot project are expected to be in Bogor City in West Java Province, Pariaman City in West Sumatra Province, Tana Toraja Regency in South Sulawesi Province, Kendal Regency in Central Java, Sarolangun Regency in Jambi Province, Lombok Island in West Nusa Tenggara.

Zakat, which is the third pillar of Islam, has been used as a social financing instrument through Islamic history to address poverty within the less privileged segments of communities. However, it has primarily been channelled at the individual level, and there is still a lot of unrealised Zakat potential across the world. In Indonesia alone, according to the Indonesia Zakat Outlook 2019 by BAZNAS, the amount of Zakat collection could attain 3.4% of total GDP, or around IDR 462 trillion (US$ 31 billion) if the full collection is realised from the individuals and corporates.