Islamic Finance Series: The Challenge of Spirituality in Islamic Finance | Money Now!: Living on Charity & the Need For Institutional Sustainability
“We need the money, now, brother,” I was told. A masjid was being expanded, and the community had apparently gone beyond its means in doing so. Donations had slowed. Was it too late for bank financing? Would construction have to stop? This statement had came in reply to a suggestion: "Why not take the land you have, gather investors, and build a small commercial retail space – a grocer, a donut shop, and maybe pizza? Drop those assets into a trust of some kind and some of the income generated could be earmarked to support the masjid long term?" But the community now had to make a decision based on the short term. It had put itself in a position of risk. A year later, a small strip mall opened up close by – with a donut shop, a pizza place, and so on. It had nothing to do with the Muslim community though.
We returned to the United States, after living abroad, and have since sought to reintegrate and contribute to our communities. One observation we have made upon our return is that a number of masaajid and community centers are mortgaged to support bank financing obtained to help acquire or construct them in the first place. That’s not something we recall happening from our parent’s generation. A prominent national Muslim leader had once said to one of us, "Your generation is not nearly as generous as your parents." Is that why mortgage financing is now being used? Have our needs exceeded our means? Or do we like to use other people’s money to fund our own consumption?
Debt can be a form of servitude; debtor-creditor relationships divide. As tempting as it is (to us, at least) to discuss whether the financing relied upon by some communities is a ribawi loan is really beside the point for our immediate purposes. What is concerning is that if payments are missed, guarantors fail to step up, or there is some other default under the financing documentation, the masjid or center could be taken away. It has been pledged as security after all. That’s not a result that we are supposed to allow. Could a masjid closure happen someday? Due to default? Or even a lack of interest (pun intended)? The prohibition of riba has been interestingly juxtaposed in the Qur’an to verses encouraging sadaqa as if to tell us the two are diametrically opposed morally and in their collective consequences. Can sadaqa reduce riba?
One among many things you learn while living in the Gulf countries is humility and a willingness to let go and let the future unfold, without a desire or perceived ability to control. Setting life up – renting a home, moving into it, obtaining electricity and water, and enrolling kids in schools was not so straightforward, as we’re used to here in the States. In the midst of adjusting, one thing that dawned upon us is how our parents not only moved to the other side of the world and established their personal lives, but amazingly navigated a foreign world – legally, culturally, and practically - and established masjids and community centers. We cannot imagine the level of work and difficulty we would have encountered and endured to determine how to and then actually set up, say, an educational center in a Gulf nation. (This is by no means meant as a negative aspersion on Gulf nations from which we learned and gained. The point is our parents generation is to be commended.)
These centers and their various communities need to be sustained and sustainable – spiritually, socially, and financially. They will not simply become, but must be developed into, thriving institutions. Development will require proper intent, an articulated, dynamic vision, and planning. But let’s step back for just a moment: What does it mean for an institution to be sustainable?
To us, it means that an institution must think about its current and its future generation’s well-being. A more formal definition is for institutions to have a “clear, compelling plan for expanding impact and achieving long-term financial and operational sustainability.” Leaving aside the tautology, for Islamic centers and masjids this means, at a high level, its leaders thoughtfully creating mission and vision statements and designing programs that support that mission and vision. And that, in turn, means understanding the current generation socially, emotionally, and spiritually. It requires some forecasting.
This is to be done, at least in part, by constructing and refining governance mechanisms that systematically consult and include (think, shura) relevant stakeholders – the women, men, and youth of the community, neighbors, local organizations with similar, complimentary, and even very differing visions, and so on. Good governance means, in part, that leaders are known, available, and held responsible; decision processes should be transparent. Transparency "helps to transform ‘I’ into ‘we’ ”. Confident, capable leaders create ‘spaces’ where stakeholders can regularly provide feedback and share knowledge and experience to construct wiser, more widely respected decisions. Being open to feedback is critical to learning, improving, growing, and sustaining. Hopefully, we are well aware of the spiritual values and inner realities that both lead to, and result from, good governance.
Strategic thinking and financial sustainability must be pondered and developed within this broadly described framework. Together with governance, they enable resiliency – the capability of an institution to respond to the challenges that will arise. It is time for communities to start (and some certainly are) thinking about the operation of their masjids and centers from a business perspective. We’re not enouraging, by any means, some profit maximization goals here. Nor are we going so far as to uncritically embrace philanthrocapitalism. We’re talking about communities educating themselves – by other communities and by experts - as to how institutions are built, maintained, and grown, and why some thrive, some fail, and many muddle along in mediocrity.
The earliest masjids and community centers were led by individuals who volunteered tremendous amounts of time and were adept at developing a vision that was both far-seeing and achievable. Fast forward to the present, and we seem to find that we can often not rely on a handful of volunteering individuals to financially and operationally carry the weight. Our needs, and the ones imposed upon us, have come to include committed and regularly available leadership; intelligent, relevant scholarship; human and other support for both of the foregoing; counseling services; programs design and implementation; social activities for adults and various youth levels; building and grounds maintenance (both ordinary and structural); development (i.e., fundraising) and finance; interfaith and local community outreach efforts; and public relations; among others. Does – and can – a community fund all of the foregoing (and more) with day-to-day donations, typically reaching an apex in Ramadan?
We won’t answer that question. We think each community should analyze its receipts of donations for itself against projections of expenses – expenses that should include line items for execution of its strategic plan for the next several years. Many communities may very well find that they have yet to articulate a mission, vision, and strategic plan that integrates their stakeholders’ thoughts, experiences, and aspirations. That’s certainly an excellent starting point for sustainability. A community might find its donations to be a large component of what it needs – perhaps sufficient. Others might also find – or seek - a multifaceted asset base generating multiple income streams.
Is relying on donations sustainable? Was it, in fact, ever? After hearing that charity just isn’t enough repeated by more than a few, we wondered how can something so elemental to our faith, namely zakah, and more broadly, sadaqah, and as important in our social and religious history as awqaf, be so emphasized and successful and yet be insufficient? Answers seem to depend on what we mean by donations, for what purposes they are made, and how they are spent. For starters, donations are not simply obtained from a box passed around (too often, oddly, during a khutbah). Instead, our institutions must think more differently and systematically about creating donors and partnering with them, and thereby increasing the amounts donated. Donors and donations have to be cultivated, and we have to think how best to deploy charity when we give and when we receive – linked to our missions, vision, and strategic plans. Good governance and the right organizational culture - marked by inclusiveness, consultation, and transparency actually has been found to help develop donors. Communities and organizations might, for example, ask a donor what compelled him or her to give. That information should be gathered to inform and create strategy and programs. Rather than begin with money or place it at the center of conversations, a community ought to ask relevant stakeholders and donors, actual and prospective, to take responsibility with the community in answering difficult questions and in overcoming challenges: What programs will grow our connectedness with Allah? How can we get the teenagers involved? Asking for ideas and talent is much more likley to engender a deeper relationship of mutual trust and confidence from which the organizational will qualitatively and quantatively gain.
Communities must educate themselves and their stakeholders on how to donate better. Professor Kamali writes, “better methods of collection and utilization [of zakat and sadaqa] should be sought.” Planned giving (a present decision to gift in the future), for example, long a critical component of religious institutions’ financial development in the U.S. seems to be a rarity in the young American Muslim community. Yet our always long term-thinking Shari’ah affords the opportunity to designate one third of one’s estate by will to our mosques and centers. We hope that future posts will cover planned giving in some detail.
But what of those communities that find donations to be insufficient or that seek to diversify and increase their (and perhaps others’) means of financial sustainability? How will a community obtain the financial resources it seeks? Professor Kamali goes on to recommend that we tap the potential of zakah and sadaqah al-fitr – forms of donation – and also employ charitable endowments and trusts to “create investment opportunities for local communities”.
Some communities might want to set aside something to begin an endowment and periodically raise and put aside more for that purpose. Hopefully, with prudent management the endowment generates enough income to use for some portion of each year’s operating budget, without touching the corpus itself. A community, and of course the individuals who comprise it, should assess which assets are income- producing that can be devoted to community well-being. That assessment may very well lead to identifying idle assets that can, with the right expertise, be transformed into income-producing ones. We certainly have wealth in our communities, nationally speaking, that exceeds individual needs to ‘drop’ some of it into a waqf, or trust vehicle (of which there are several under US law, deserving of further study) such that the income (or a portion thereof) could be earmarked to create positive impact. In fact, creating such trust vehicles for donations can not only benefit our communities, but can also actually increase the value of the donor’s estate that is left behind for their family.
The more sophisticated minded may think about investing in assets beyond public equities to create investment opportunities (a tax exempt Islamic issuance would be something! But maybe a simpler rentable property might be an easier starting point), to support community businesses and entrepreneurs that can be translated into social-spiritual welfare. We would be remiss if we did not also mention the opportunity to partner with ‘neighbors’ in supporting good, and not exclusively good with an Islamic or Muslim label. We hope to delve into these ideas with some depth in future posts. Our hope that this article serves as a platform for critically important conversations here online and, perhaps more importantly, face-to-face in communities, guided by professionals engaged by communities who have knowledge and experience in these disciplines.
Generating income for community institutions, making them financially sustainable, while also helping community members create and preserve wealth, is a means the goal of which is Allah. He, Exalted and Majestic, is indeed beautiful and loves beauty. In the absence of order and organization, thoughtfulness and planning, resilience and sustainability – elements of beauty - division and dissolution become likely spiritually, socially, and materially.
Umar F. Moghul is a corporate and finance lawyer, whose practice has involved Islamic business transactions for the better part of 15 years. He is also an adjunct faculty member at the University of Connecticut School of Law where he teaches courses in Islamic law and Islamic finance, fields in which he is widely published, and a Trustee of the Hartford Seminary. He is passionate about questions of Islamic ethics, business, impact, and sustainability.
Sajjad Chowdhry is an experienced entrepreneur with stints in real estate finance and development, SMEs, research/consulting, and oil/gas in the United States and abroad. He is passionate about sharing Islam's spiritual guidance as well as translating its vast heritage into practical solutions with the objective of enhancing our community's lived reality.
 Skoll Awards Overview, Skoll Found., http:// www.skollfoundation.org/about/skoll-awards/.
 Jennifer McCrea and Jeffrey C. Walker, The Generosity Network, New Transformational Tools for Succcessful Fund-raising, Page 131 (2013).
 Philanthrocapitalism is “the application of business techniques to philanthropy.” It “emphasizes a complete remaking of philanthropic giving in the image of business. . .adopt[ing] a belief that business methods are superior and “looking to imbue capitalist/ business principles and market-based theory into the work of not-for-profit, private foundations.” Garry Jenkins, Who’s Afraid of Philanthrocapitalism, Case Western Law Review, Vol. 61:3, Pages 755, 756 (2011).
 Mohammad Hashim Kamali, The Middle Path of Moderation in Islam: The Qur’anic Principle of Wasatiyyah (Oxford University Press, 2015), Page 241.
 See id.