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Insights on Islamic Finance & Philanthropy

From the GIIN Investor Forum

Foundations and Philanthropies with significant funding budgets have realized that, beyond pledges and giving, there is a need to focus on impact. This past October, this correspondent attended a session at the Global Impact Investors Network Forum in The Hague that featured several philanthropists and impact investors active in the Islamic finance tradition: Iqbal Khan of Fajr Capital, Lujain AlUbaid of Tasamy for Impact, Taha Lahbabi of Sana 3; and Danah Al Dajani, of Abdulla Al Ghurair Foundation for Education. In this article, I profile some of the work of these organizations.

The Abdulla Al Ghurair Foundation for Education purpose is to empower Emirati and Arab youth through education so that they can thrive and contribute to the development of the region. The foundation has created a Refugee Impact Fund which is focused on Georgia and Lebanon with a 3-year Mandate to support refugees. Now in its 4th year, the Fund has set aside $35m to support secondary education for refugees. The foundation works with the United Nations High Commission for Refugees (UNHCR) and focuses on providing food, education, and health for refugees. The aim is to move the children from learning to earning. The Foundation had a reference case of impact from a former Palestinian refugee who was earning over 3,500 euros working in France and had passed through the Foundation’s educational program. The Foundation works hard at choosing the right partner because a young, hungry person cannot learn.

 

Islamic girl with other students in classroom

Image Courtesy of Abdulla Al Ghurair Foundation for Education

Fajr Capital is a leading private equity investor in the Middle East and Southeast Asia focused on creating enduring value for shareholders. According to Iqbal Khan, Fajr Capital has created 10,000 new jobs during the past decade and had a realized return on investments of 20%. According to Iqbal, the firm operates with a philosophy of better ownerships and sees itself as the guardian of capital and companies that ultimately belong to millions of people, whose hopes and dreams rest on their shoulders.

Fajr Capital operates with the premise that the quality of governance and culture in the firm affects the quality of governance and culture in its investee companies. As such, without excellence in firm culture and governance, there will be no excellent outcomes from the investees or portfolio companies. According to Iqbal, one of Islam’s most important tenets is Zakat. Zakat requires adherents to voluntarily allocate at least 2.5% of wealth to charity over their lifetime. As a result, the firm is working with its partners and investors to institutionalize social responsibility and corporate philanthropy using the principles of Zakat. Zakat is both a spiritual duty and a vital part of the Islamic social welfare system. According to Iqbal, one does not have to be a billionaire to give Zakat.

Iqbal Khan of Fajr Capital

Iqbal Khan of Fajr Capital; Image Courtesy of National Zakat Foundation

Iqbal Khan describes how technology is increasingly being utilized to democratize philanthropy and wealth in the Muslim world. He highlighted how philanthropists in Egypt are feeding hungry school children through a school feeding program resulting in increased school enrolment. He described how one of the first impact bonds focused on prisoner’s integration in Peterborough, United Kingdom, ensuring that capital can and should do more than just appreciate in financial value. Iqbal Khan also described his role – through an umbrella organization for the UK Muslim community – to support the International Finance Facility for Immunization because of his personal conviction that the purpose would have the most impact on both Muslim and non-Muslim communities towards the eradication of polio. Afterwards, other Islamic administered institutions and funds also signed onto the bond.

Zakat requires adherents to voluntarily allocate at least 2.5% of wealth to charity over their lifetime. Zakat is both a spiritual duty and a vital part of the Islamic social welfare system. 

Asked about lessons for Islamic finance from conventional finance, Mr. Iqbal highlighted the concept of “marifa” that encourages the exchange of knowledge and the need to bring together diverse cultures towards what he calls an “alliance of goodness” and explained how knowledge he gained working for HSBC has facilitated excellent management of Fajr Capital.

In conclusion, Iqbal Khan believes that the world is deep in deglobalization and developed, rich countries are experiencing significant economic and social volatility, which in turn will have a significant negative impact on the poor within and outside the rich economies. The war in Ukraine means that the world is feeding on 2021’s food crops (wheat), and climate change and continued conflict means that 2022 crops will be severely impacted causing famine and more hardship. In addition, Iqbal Khan believes that any Asset Manager (philanthropy, responsible investing, or conventional finance) must always ask himself/herself the following questions over the Investment lifecycle:

What did I achieve?

Did I do my best?

Did I spread a message of love and goodness?

Ebuka Chukwuebuka is a Chartered Accountant and has earned the right to use the Chartered Financial Analyst (CFA) designation. He has more than 15 years combined experience in Audit, Advisory and Management Consulting with indigenous boutique firms and with globally renowned practices. He has advised high net-worth individuals, family offices, ... Read more

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