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This work is a product of the staff of the Islamic Research and Training
Institute (IRTI) with external contributions. The findings, interpretations, and
conclusions expressed in this work do not necessarily reflect the views of
IRTI or IsDB, or IsDB Board of Executive Directors. IRTI does not guarantee
the accuracy of the data included in this work. Content of this report is
intended to provide general information only and as such should not be
considered as legal or professional advice.

FOREWORD ........................................................................................1


1.0 EXECUTIVE SUMMARY..........................................................................5

2.0 REGION UNDER FOCUS .......................................................................15

2.1. Trends in Economic Aggregates...............................................16

2.1.1 Economic Growth........................................................................... 17

2.1.2. Structure of Economies................................................................. 19

2.1.3. Unemployment.............................................................................. 20

2.1.4. Inflation......................................................................................... 22

2.1.5. Savings and Investments.............................................................. 23

2.1.6. Income Distribution....................................................................... 25

2.1.7. Incidence of Poverty..................................................................... 26

2.2. Potential of Islamic Social Finance...........................................28

2.2.1. Estimating the Resource Gap for Poverty Alleviation.................... 28

2.2.2. Estimation of potential resources from Zakāh.............................. 28

3.0 ZAKĀH ......................................................................................31

3.1. Algeria ......................................................................................31

3.1.1. Overview of the Sector ........................................................................... 31

3.1.2. Regulatory & Policy Framework .............................................................. 31 Institutional and Supporting Infrastructure ............................... 32

3.1.3. Zakāh Collection & Disbursement .......................................................... 34 Transparency, Accountability & Good Governance .................... 38

3.2 Libya..................................................................................................42

3.2.1 Overview of the Sector ............................................................................ 42

3.2.2 Regulatory & Policy Framework ............................................................... 42 Institutional Structure ................................................................ 43 Supporting Infrastructure .......................................................... 45

3.3.3 Zakāh Collection & Distribution................................................................ 45

3.2.4 Transparency, Accountability & Good Governance................................... 48

3.2.5 Strategic Analysis & Recommendations................................................... 49

3.3 Mauritania ......................................................................................52

3.3.1 Overview of the Sector............................................................................. 52

3.3.2 Regulatory and Policy Framework............................................................ 52 Institutional Structure ................................................................ 52

II Supporting Infrastructure............................................................ 54

3.3.4 Transparency, Accountability & Good Governance................................... 54

3.3.5 Strategic Analysis & Recommendations................................................... 54

3.4 Morocco ......................................................................................55

3.4.1 Overview of the Sector............................................................................. 55

3.4.2 Regulatory & Policy Framework................................................................ 56 Institutional structure & Supporting infrastructure..................... 58

3.4.3 Zakāh Collection & Disbursement............................................................ 59

3.4.4 Transparency, Accountability & Governance............................................ 60

3.4.5 Strategic Analysis & Recommendations................................................... 61

3.5 Tunisia ......................................................................................64

3.5.1 Overview of the Sector............................................................................. 64

3.5.2 Regulatory & Policy Framework................................................................ 64 Institutional Structure ................................................................ 65 Supporting Infrastructure............................................................ 67

3.5.3 Zakāh Collection & Disbursement ........................................................... 68

3.5.4 Transparency, Accountability & Good Governance................................... 69

3.5.5 Strategic Analysis & Recommendations................................................... 70

3.6 Success Stories & Good Practices ......................................................72

3.6.1 Zakāh Fund, Libya.................................................................................... 72

3.6.2 Tunisian Association of Zakāh Sciences, Tunisia..................................... 74

4.0 AWQĀF ........................................................................... 79

4.1 Algeria ......................................................................................79

4.1.1 Overview of the Sector............................................................................. 79

4.1.2 Regulatory & Policy Framework................................................................ 80 Institutional Structure & Supporting Infrastructure..................... 82

4.1.3. Creation, Preservation & Development.................................................... 83

4.1.4 Transparency, Accountability & Good Governance................................... 84

4.1.5 Strategic Analysis & Recommendations................................................... 84

4.2 Libya ......................................................................................86

4.2.1 Overview of the Sector ............................................................................ 86

4.2.2 Regulatory & Policy Framework................................................................ 89 Institutional Structure ................................................................ 89 Supporting Infrastructure ........................................................... 90

4.2.3 Creation, Preservation & Development..................................................... 90

4. 2.4 Transparency, Accountability & Good Governance ................................. 91

4.2.5 Strategic Analysis & Recommendations................................................... 92

4.3 Mauritania ......................................................................................95

4.3.1 Overview of the Sector............................................................................. 95

4.3.2. Regulatory & Policy Framework............................................................... 95

IV Institutional Structure................................................................. 97 Supporting Infrastructure ........................................................... 98

4.3.3 Creation, Preservation & Development .................................................... 98

4.3.4 Transparency, Accountability & Good Governance................................... 98

4.3.5 Strategic Analysis & Recommendations................................................... 99

4.4 Morocco ....................................................................................101

4.4.1 Overview of the sector............................................................................ 101

4.4.2 Regulatory & policy framework............................................................... 104 Institutional structure................................................................ 108 Supporting infrastructure.......................................................... 109

4.4.3 Creation, Preservation & Development .................................................. 109

4.4.4 Transparency, Accountability & Good Governance................................. 111

4.4.5 Strategic Analysis & Recommendations................................................. 115

4.5 Tunisia ....................................................................................117

4.5.1 Overview of the Sector........................................................................... 117

4.5.2 Regulatory & Policy framework.............................................................. 118 Institutional structure................................................................ 119 Supporting infrastructure.......................................................... 120

4.5.3 Creation, Preservation & Development................................................... 121

4.5.4 Transparency, Accountability and Good Governance............................. 121

4.5.6 Strategic Analysis and Recommendations............................................. 121

5.0 ISLAMIC MICROFINANCE................................................... 125

5.1 Algeria ....................................................................................125

5 .1.1 Sector Overview...................................................................................... 125

5.1.2 Legal framework and Microfinance policies........................................... 125

5.1.3 Islamic Microfinance Initiatives.............................................................. 127

5.1.4 Strategic Analysis and Recommendations............................................. 128

5.2 Libya ....................................................................................130

5.2.1 Overview of the Sector .......................................................................... 130

5.2.2 Microfinance Legal & Policy Framework................................................ 130

5.2.4 Strategic Analysis & Recommendations................................................. 138

5.3 Mauritania ....................................................................................141

5.3.1 Overview of the Sector........................................................................... 141

5.3.2 Microfinance Regulatory & Policy Framework........................................ 142

5.3.4 Islamic Microfinance Initiatives ............................................................. 145 Microfinance institutions.......................................................... 145 Charitable Associations............................................................ 146

5.3.5 Strategic Analysis & Recommendations................................................. 147

5.4 Morocco ....................................................................................148

5.4.1 Overview of the Sector........................................................................... 148

5.4.2 Microfinance Regulatory & Policy Framework........................................ 149 At Micro level............................................................................ 149 At Macro level........................................................................... 151 At Meso level............................................................................ 151

5.4.3 Islamic Microfinance Initiatives.............................................................. 154

5.4.4 Islamic crowdfunding or collaborative financing ................................... 155

5.4.4 Strategic Analysis & Recommendations................................................. 157

5.5 Tunisia ....................................................................................159

5.5.1 Overview of the Sector........................................................................... 159

5.5.2 Microfinance Policy & Regulatory Framework........................................ 161

5.5.3 Islamic Microfinance Initiatives.............................................................. 163 Qar� �asan Pinancing Program and YESP (YES-Tu) ................ 163 Zitouna Tamkeen (ZT) ............................................................. 165

5.5.5 Strategic Analysis and Recommendations............................................. 166

5.6 Success Stories & Good Practices ....................................................169

5.6.1 Zitouna Tamkeen, Tunisia....................................................................... 169

5.6.2 Al-Baraka Bank of Algeria Microfinance Experience, Algeria ................ 174

5.6.3 “4US” Management Information System (MIS), Morocco...................... 178

Islamic finance has steadily evolved over the last
several decades with the spotlight shifting from
Islamic commercial banking, insurance, investment
funds and financial markets to Islamic social
finance. However, the focus has often remained on
the former, the for-profit segments of the Islamic
economy. Studies and estimates for the Islamic
financial services sector have traditionally excluded
the Islamic social, philanthropy-driven and not-
for-profit segments and focused on Islamic banks
accounting for nearly 80 percent of global Islamic
financial industry assets. The other components
under focus include: sukuk (15 percent), Islamic
IRTI launched the investment funds (4 percent) and Islamic insurance
maiden issue of (1 percent). A steady double-digit growth in these
ISFR in February sectors has also resulted in Islamic finance
2014. Globally, it maturing as a discipline, with a proliferation in the
was the first ever number of teaching and research programs across
publication to use the globe focusing on Islamic commercial banking,
the term “Islamic Islamic funds, sukuk, Islamic capital markets and
social finance” to
describe the Islamic The Islamic Research and Training Institute (IRTI)
philanthropy- of the Islamic Development Bank Group, however,
based and not-for- noted quite early that there has been a gross
profit sector. The imbalance in resources committed to research
report, focusing on and documentation relating to the Islamic social,
philanthropy-based and not-for-profit sector. There
the zakāh, awqāf
were not many initiatives around to strengthen and
and microfinance mainstream this component of the Islamic financial
institutions in South services sector. The concern about this imbalance
and South-East Asia led IRTI to embark on a multi-year project that
brought to the fore resulted in publication of the annual Islamic Social
some interesting Finance Reports (ISFR). IRTI launched the maiden
facts. issue of ISFR in February 2014. Globally, it was the
first ever publication to use the term “Islamic social
finance” to describe the Islamic philanthropy-based
and not-for-profit sector. The report, focusing on
the zakāh, awqāf and microfinance institutions in
South and South-East Asia brought to the fore some
interesting facts. A small upward push in zakāh and

waqf mobilization in many countries could generate enough funds to meet the resources
gap for poverty eradication. Such resource raising was also a clear possibility because
countries that were proactive in reforming their respective Islamic social finance sectors
were also the ones with steady double-digit growth rates in the flow of social funds.

Soon, IRTI’s pioneering efforts in underlining the significance of Islamic social finance led
to a number of forums, seminars and conferences being organized around the theme.
In a meeting of the Governors of Central Banks and Monetary Authorities of the OIC
Member States, in Surabaya, Indonesia on 6 November 2014, the OIC Secretary General
called for the rejuvenation of Islamic social finance (i.e. zakāh and waqf) for the purpose
of mobilizing adequate resources to address the problems of financial exclusion, poverty
and unemployment among the vulnerable groups of population in OIC Member Countries.
Based on the deliberations, the meeting adopted its Final Communique containing a set of
recommendations to further increase intra-OIC cooperation in this domain.

The second issue of ISFR released in March 2015 contributed further to bridging the
information gap relating to the sector. It focused on zakāh, awqāf and not-for-profit
microfinance sectors in selected countries in Sub-Saharan countries, such as, Sudan,
Nigeria, Kenya, Tanzania, Uganda, Mauritius, and South Africa. And in October 2017, the
third issue of ISFR was released. This issue of the report analyzed the Islamic social
finance sector in the Russian Federation, Kazakhstan, Kyrgyzstan, Tajikistan, Bosnia and
Herzegovina, and Macedonia.

IRTI, as part of its flagship research and publications program, has dedicated significant
resources to publication in the field of Islamic social finance. Since inception, IRTI has
produced as many as 26 books and monographs and 30 policy/working papers relating to
zakāh, awqāf and Islamic microfinance in multiple languages.

Indeed, due to the pioneering efforts of IRTI, Islamic social finance is now firmly etched
as the new paradigm that reflects the objective and spirit of Islam, perhaps far better than
the for-profit financial institutions and markets. To this end, IRTI embarked on producing
the annual Islamic Social Finance Reports. The present Report focuses on the north-west
African countries of Algeria, Libya, Mauritania, Morocco, and Tunisia.

The Report was prepared by a team comprising of researchers from IRTI led by Dr.
Mohammed Obaidullah with support from regional experts who have painstakingly collected
and analyzed data pertaining to the sector. They used a variety of means including personal
visits and focus group discussions involving key stakeholders in the sector. Let me take this
opportunity to congratulate the team for producing an excellent piece of work. At the same
time, let me also invite you to share your feedback on how to further enhance its value to the
research community.
Dr. Sami Al-Suwailem
Acting Director General, IRTI

This issue of the Islamic Social Finance Report
focuses on the north-west Africa. This is in
continuation of the earlier issues focusing on
countries in South and South East Asia, Sub-
Saharan Africa, Russian federation and selected
countries in the Central Asia and the Balkan region.
The Report has benefited from the comments
of and presentations by several scholars and
representatives of Islamic organizations from
the region under focus. Most of them actively
participated in the preparatory events for the study.
One such event is worth mentioning. IRTI organized
The Report has benefited a preparatory workshop in Tunis inviting over two
dozen scholars and professionals from the region
from the comments
who discussed the findings of the Report in detail.
of and presentations
by several scholars A team of researchers from IRTI supported by
and representatives of external experts from the region under focus
Islamic organizations jointly contributed to this study on the Islamic
from the region under social finance sector. Dr Nasim Shah Shirazi,
Professor at the College of Islamic Studies, Hamad
focus. Most of them
bin Khalif University deserves special mention
actively participated for authoring Chapter 2 of this report on the
in the preparatory economic fundamentals of the region under focus.
events for the study. The team of external experts was led by Mazen
One such event is Dakhli and comprised of Adel Enpaya, Mounir Tlili,
worth mentioning. Habib Lacheb, Ali Said, Aymen Doghri, Younes
IRTI organized a Boubechtoula, Hichem Boukharrouba, Monsef
preparatory workshop Bentaibi, Adil Zarfi, Yasser Bentaibi, Zakaria Kharchaf
and Mohamed Cheikh Abdallahi. The contribution
in Tunis inviting over
of the Tunisian Association for the Zakāh Sciences
two dozen scholars and is also humbly acknowledged. Finally, I would like
professionals from the to acknowledge the support of the Islamic Financial
region who discussed Sector Department of the IsDB in co-organizing
the findings of the the Validation Workshop which contributed to the
Report in detail. updating of the data in significant measure.

We are much beholden to all who have contributed

to this study and look forward to receiving their
continued support as we move forward.
Mohammed Obaidullah
Project Leader

The Islamic social finance sector broadly
comprises of the traditional Islamic
institutions based on philanthropy e.g.
zakāh, �adaqah and awqāf; those based
on cooperation e.g. qar� and kafālah; and
the contemporary Islamic microfinance
institutions that aim at making a dent in
poverty. This issue of the Islamic Social
Finance Report (ISFR) presents the trends,
challenges and prospects for the various
segments of the Islamic social finance
sector in north-west African countries,
namely Algeria, Libya, Mauritania, Morocco
and Tunisia.

The study involved careful collection and

analysis of data and information pertaining
to legal and regulatory frameworks as
well as good and bad practices at macro,
meso and micro levels. Attempts to
collect, analyze, collate and interpret data
involved personal visits to key stakeholder
organizations, e.g. ministries of religious
affairs, central banks, apex regulatory
bodies, networks and associations, and
major private organizations. Methods of
data collection involved interviews, focus
group discussions and workshops. Some
of the collected data may appear not quite
up to date (e.g., last data point relating to
2016-17). However, this is the most recent
data officially available, or data that could be
compiled given the many constraints. Before
the key findings of the study are presented,
some recent developments pertaining to the
countries need to be highlighted.

Islamic Social Finance Report 2020

Algeria has well established institutions Notwithstanding the major constraints

of zakāh and awqāf. However, the local highlighted above, the data that could finally
researchers were not very successful in be collected were invaluable and provided
collecting and collating the relevant data. the researchers with excellent insights into
From an Islamic microfinance perspective, the inter-country differences in practices.
it is important to note that the legal The following observations have serious
framework for Islamic banking has recently policy implications and therefore, may form
been introduced in the country, even while the basis of further research and policy
several Islamic financial institutions have dialogue.
been operating there for decades.
The following are the major findings in
Libya has been in a state of war for many relation to the zakāh sector.
years now. Yet, it seems that there is
progress happening on the ground and • W
orsening social inequality and the
the country has well-established zakāh governments’ need for additional
and awqāf institutions. Furthermore, financial resources in the region have
the country saw the inception of the created great opportunities for the
first Islamic microfinance institution - zakāh and waqf institutions. This is
Namaa Tamweel - by the Assaray Trade further strengthened by advocacy
and Investment Bank (ATIB). The local and requests from a large part of the
researcher for this study was not able to civil society to develop the sector.
provide additional inputs due to difficult • T
he existence of a dedicated law
war conditions. of zakāh has a significant positive
impact on the efficiency of the zakāh
Mauritania recently introduced an Islamic
management in a country. This is
Banking legislation which may have
witnessed in countries like Algeria
far-reaching consequences for Islamic
and Libya (even in a state of on-going
microfinance in the country.
war). There is a move for the same in
Morocco has perhaps one of the most Mauritania as well as in Tunisia. Draft
developed awqāf and microfinance sectors laws that specify the methods of
in the region. While it has not witnessed collecting and disbursing zakāh are
any major changes in the zakāh and awqāf already in place.
sectors in recent times, the introduction of
• A
dedicated law of zakāh should
crowdfunding legal framework supporting
ideally lead to a functional Zakāh
Islamic finance transactions stands out
Fund. A well-performing Zakāh
as a major development from Islamic
Fund (as in Algeria and Libya) is
microfinance perspective.
characterized by good organization
In Tunisia, there is neither any zakāh and and proper coordination. This,
awqāf institution, nor a “clear” regulatory however, may not always be the
framework related to Islamic social case. Morocco has witnessed an
finance. A bill to institute a Zakāh Fund was inexplicable gap between formulation
recently presented but was rejected by the of zakāh law and implementation of
legislature. a proper zakāh organization.

Executive Summary

• I t is felt that while dedicated databases, or for documentation

laws are needed, these need not and dissemination of the working
to be rigid too. For instance, it is results of the Funds.
observed that the Libyan Zakāh
Fund recorded financial surplus at • T
he importance of human resource
the end of each financial year due development for the zakāh sector
to such rigidity. The rates of zakāh can hardly be overemphasized.
distributions are defined in Libyan While some zakāh institutions (e.g.,
law and cannot be violated. This is in Algeria and Libya) have highly
often contrary to the economic and professional staff, there is a serious
living conditions. Too many laws, dearth of talent that needs to be
regulations and fatāwa may restrict urgently addressed. Also, there is
and complicate the work of a Zakāh a dearth of university programs
Fund. for the development of qualified
specialists in the field of zakāh.
• A
n efficient Zakāh Fund is usually Moreover, there is a significant need
accompanied by a high level of to promote scientific research in
community awareness of the the field of zakāh. More researches,
importance of zakāh. The Fund discussions, and studies are
proactively engages in enhancing needed with Sharī‘ah Committees
community awareness and of the Funds and Fatwa issuing
involvement. It usually seeks to authorities. More attention must
establish a database of zakāh be given to jurisprudence of the
payers and beneficiaries. However, various zakāh issues, with regard
the Zakāh Funds in this region are to the inclusion of some segments
yet to introduce technology for of those entitled to zakāh in the
creation and management of such eight categories (e.g., Sabeel Allah

Islamic Social Finance Report 2020

and Ibn Sabeel)1 . In the absence with other forms of Islamic

of such research, training and finance such as waqf and Islamic
capacity building, the sector faces microfinance.
roadblocks created by officials
trained in Western countries and • T
here is a dire need for a national
vested interests. policy and campaigns for zakāh
collection and distribution. Such a
• T
he existence of an Islamic national zakāh policy with relevant
financial system – Islamic banks, strategies should identify sectors to
insurance companies – or the be exempted, study the components
establishment of Islamic banks of the national economy for better
for many zakāh payers has a clear allocation of zakāh, incentivize
salutary effect on the zakāh system payment of zakāh, promote zakāh
(as in Algeria, Mauritania). Islamic at important religious and national
financial institutions can provide events and build awareness about
payment systems for zakāh in such enhanced role of zakāh.
• E
ven in countries with an official
• T
here is an absence of any Zakāh Fund, a large chunk of zakāh
preferential provision for zakāh is still given by payers individually,
in the existing tax system even away from official channels. This
in countries with well-developed is perhaps due to a trust-deficit
Zakāh Fund (e.g. in Algeria, Libya, or lack of confidence in the zakāh
Mauritania). Indeed, the zakāh management system among a
system should be integrated with section of zakāh payers.
the tax system to put to rest any
fear of creating additional burden on The following are the major findings in
the citizens. relation to the waqf sector.

• T
here is grave need for proper • T
he institution of waqf in the
coordination and communication Maghreb has a rich and long history
between the Zakāh Fund and spanning many centuries. Over the
other state institutions, such ages, it has played an active role
as the social security fund, in the cultural construction of the
ministry of social affairs and the society through its contributions
wealth distribution fund, to avoid to the social, economic, political
duplication in payment of financial and even environmental sectors. It
aid to beneficiaries. This also has contributed to the provision of
underscores the need for a unified stable resources to provide public
and commonly-shared database services and social institutions
between the Zakāh Fund and the with the necessary tools to meet
aforementioned institutions. Zakāh the needs of the communities. It
funds are also not well-integrated has helped reduce stratification
among members of society, through
1 The eight categories of zakah beneficiaries are
material and moral support for the
speficied by the Holy Quran (see Chapter 9 Verse 60)
fragile classes of society.

Executive Summary

• N
otwithstanding its benevolent • T
he existence of a dedicated
role in the society, the institution law alone cannot ensure its
has witnessed major ups and effective implementation. This
downs, often due to political can only be achieved by setting
factors. Waqf came to the Maghreb up a strong institutional support
countries with Islamic conquest. structure with high administrative
Initially in the form of religious competencies to deal with waqf in
awqāf (e.g. mosques), it soon terms of identification, codification,
became a dominant sector of the registration of waqf assets and
economy making provision of reviewing the regulations governing
social and public goods. With a the use thereof. A good institutional
hostile colonial rule, however, most structure for waqf presumes the
of the awqāf assets were lost. In existence of a strong, independent
the post-independence era, some and professional apex organization.
of the lost awqāf were salvaged Unfortunately, most Maghreb
and recovered. A process of countries are characterized by the
rejuvenation of the awqāf has begun absence of adequate supporting
with identifying and documenting infrastructure for awqāf sector.
such properties that have been The apex regulatory body for waqf
lost since the colonial era should should be dedicated to waqf and
be expedited with the involvement waqf alone. For example, in Algeria,
of experts in the field of surveying. the Directorate of Waqf is merged
In the province of Tripoli alone a with Hajj, and this implies neglecting
systematic attempt to enumerate the administrative aspects of the
and record the waqf assets was waqf during periods of preparation
undertaken. The first attempt of for hajj. Therefore, the Algerian
reclassification identified about Awqāf Department should be
11,000 real estate, 6,000 mosques, removed from the administrative
and more than a thousand schools constraints attached to the Ministry
of Qur’ān memorization. of Religious Affairs. Awqāf and
should be given full autonomy by
• W
aqf assets have been lost not establishing the National Awqāf
only due to politically hostile forces, Office. Similarly, in Libya, the
but also due to plain and simple GAAIA is a religious institution
human greed and avarice. The legal whose role is limited to following
and regulatory system of waqf up and supervising mosques and
must therefore be strengthened in schools. It is characterized by
order to provide greater protection mismanagement of waqf assets
for waqf properties. In Libya for and the use of traditional systems
example, legal texts provide waqf in asset evaluation, which make
assets with special protection it difficult to control and detect
compared to private and public deviations and bad practices.
funds. There is need for a dedicated This agency needs to transform
waqf law that is able to preserve itself for development of the waqf
existing awqāf assets and recover
lost awqāf assets.
Islamic Social Finance Report 2020

sector. The story is similar in the case

of Awqāf National Establishment in
Mauritania. The institution, established
nearly four decades ago, is yet to reach
anywhere near its potential in terms
of contribution to the economic and
social development of the country.
The reasons are not too far to seek.
To date, there is no legal framework
regulating the body, which has caused
interference in its powers with other
bodies affiliated to the Ministry
of Islamic Affairs. It suffers from
negligence and mismanagement, due
to lack of accountability and law. As
a result, it suffers from a huge trust-
deficit vis-à-vis ordinary citizens of
the country. Generally, in the Maghreb
countries, there is absence of effective
accounting and financial supervision for
waqf activities. The lack of confidence
among the public also stems from
the fact that often the desire of waqf
founders is not respected. This is again
due to the lack of sufficient awareness
of the sanctity of awqāf deeds that
document the intention of the endower/
waqf regarding the benefits and the

• T
he awqāf assets that have been
preserved well are characterized by
low income generating possibilities.
Often, the concerns about preservation
have pre-empted any possibility of
development of the property and
enhancement of its earnings potential.
It is a delayed but rational realization
among many scholars and observers
that awqāf assets can serve their
purpose only when they are well-
maintained and developed. An undue
concern about preservation may result
in such assets becoming obsolete over

Executive Summary

time. By finding ways to enhance more objectively and at a national

these assets and their earning scale. The apex body for awqāf
power, the quantum of benefits is yet to adopt market price as
for the intended beneficiaries can benchmark for fixing the rentals on
be optimized. This realization has waqf assets. In many instances,
led to, for example in Algeria, the there are either no, or improper
identification of a total of 4,621 use of contracts for the use of
real estate awqāf with potential waqf assets due to negligence and
for development. In Libya too, the administrative corruption in the
waqf assets held by the GAAIA agency. Many tenants (including
spread across most cities of public institutions) do not fulfill
the country are characterized by their obligations and have past
excellent locations suitable for dues. Further, there are a number
development projects of various of instances of misclassification of
types - residential, commercial land as rural and of low value, while
and social, etc. The investment of they have become urban since long
real estate assets under waqf in time ago. Therefore, there is a need
prime areas and locations spread to reclassify them and align the
throughout the country should lead rental rates with the market.
to partnerships with both public
and private sectors in agricultural, • L
ack of manpower and material
industrial, commercial, tourism, resources to assist the waqf
communications, and transportation organization in carrying out its
sub-sectors. tasks and to ensure serious follow-
up remains a major constraint.
• H
uman greed has often led not only Availability of specialized talent
to outright encroachment of waqf in awqāf management remains a
assets, but also to their utilization challenge that must be addressed
at grossly below-market rates. with a sense of urgency. It is felt
Leasing of waqf land and buildings that an independent apex institution
have in too many instances been would be in a better position to
undertaken at extremely low prices mobilize required human and
resulting in loss of income. While financial resources for efficient
laws in some countries have been management and development of
specific that an asset under waqf awqāf.
cannot be sold or mortgaged, these
have been less careful in putting • N
ew awqāf related investments
a stop to irrational leasing rates should be tackled as part of a
for assets under waqf. A case in long-term strategy that requires
point is the city of Tripoli in Libya a specialized management team
where amendment of rental prices and a high degree of experience in
had a major positive impact on monitoring, and managing these
waqf income in recent times. The projects. Waqf investments need
same needs to be undertaken to be enhanced in partnership with
professionals well-versed in the

Islamic Social Finance Report 2020

art and science of investments. dedicated agencies for cooperation

Creation of waqf funds and the and external relations would act as
financialization of waqf should a catalyst for rejuvenating the global
throw up new and innovative as well as the regional awqāf sector.
financial instruments, strengthening
the capital market, providing • C
onsidering awqāf as a pillar of the
alternative tools for raising national economy, its importance
resources for development of must be driven home through the
awqāf as well as for meeting the dissemination of annual reports of
social and developmental goals. awqāf organizations as well as of
The growing Islamic fervor in the other relevant information among
societies in this region is expected the public. Waqf-related courses
to drive people to support and must be offered in the curricula of
practice waqf after facilitating universities and institutes. Other
it through new and innovative mechanisms of capacity building,
structures for contributing to e.g. seminars, conferences and
endowments such as waqf bonds meetings, may be employed in order
and waqf funds. A case in point is to build managerial expertise, and
the enabling legal framework for feed innovations relevant for this
waqf in Morocco that encourages sector.
the possibility of issuing waqf • T
here is need for a national policy
bond as instruments for the benefit for waqf, which would help create
of general waqf in the context of greater synergies between the
seeking the public charity. different sectors of the economy.
The waqf program in a country
• It is important to recreate a culture
should be integrated with the
that promotes waqf as an important
public expenditure program of
socio-economic institution through
the governments. The allocation
the media through dedicated
of important financial resources
agencies for information and
for some aspects of the awqāf
marketing. Awareness of the
sector within the general budget
importance of awqāf among
of the country will thereby reduce
investors and businessmen needs
the burden on the waqf-specific
to be enhanced through training
budgets. An effective linkage
courses in the field. Awareness
between the waqf sector and the
campaigns need to be undertaken
Islamic financial services sector
on a large scale with a view to
can open a new perspective for
spreading the culture of the waqf.
investment of waqf-owned financial
Successful experiences of waqf
assets. Similarly, the waqf sector
should be documented and shared
should also be integrated with the
zakāh and Islamic microfinance
• D
evelopment of international sectors.
cooperation in the field of awqāf,
through programs and activities of

Executive Summary

The following are the major findings in same time, the existing law on
relation to the Islamic microfinance sector. microfinance allowed the MFIs
to include Islamic microfinance
• I slamic microfinance essentially products in their portfolio. In
involves a marriage between contrast, the existing law in Tunisia
tools and models of conventional is observed to be too rigid and not
microfinance with the norms of flexible enough to fit the specific
Islamic finance. The need for regional or sectorial needs. It needs
Islamic microfinance was acutely major reforms to be able to ensure
felt as conventional microfinance transparent and clear execution of
had a low acceptance among poor contracts. In a country like Algeria,
Muslims in the Maghreb as well as on the other hand, a financial
in the rest of the world. The poor system for granting microfinance is
Muslims were seen to “self-exclude” simply non-existent. MF providers
themselves from the conventional are supposed to be linked with
riba-based microfinance due to a public banks that do not pay
conflict with their basic beliefs. sufficient attention to microfinance
Market surveys revealed that a because they focus their expertise
strong and popular demand exists on other activities.
for Sharī‘ah-compliant microfinance
in most of the Maghreb countries. • T
he strong support by policy
makers to microfinance is seen as
• C
onventional microfinance in a tool to alleviate poverty matched
some countries, such as Morocco by initiatives at the meso level too.
and Mauritania, provided a strong For example, the introduction of
background, and a network Islamic microfinance in Morocco
of microfinance institutions benefited from the availability of
functioning under the supervision consultancy firms with considerable
of the central bank (not as informal experience and readiness to work
associations or cooperatives), on this sector. Some Moroccan
a carefully configured enabling firms had already worked for
regulatory and policy framework. In years on developing Management
such countries, it was not difficult Information Systems to closely
to initiate Islamic microfinance assist MFIs in achieving their goals.
with modifications in the products Switching to Islamic microfinance
to make them Sharī‘ah-compliant. was an easy proposition for them.
The existence of a dedicated
law for microfinance and Islamic • W
hile the Morocco experience
finance paved the way for the birth underlined the strengths of Islamic
of Islamic microfinance sector. In replications of conventional
Morocco, for example, the opening microfinance models and products,
of participative banks opened vast there were major weaknesses
opportunities for Islamic MFIs too. Much of the weaknesses with
as windows of the banks. At the perpetuation of indebtedness or a

Islamic Social Finance Report 2020

culture of debt remained even after largest number of beneficiaries

adoption of Islamic microfinance. in rural areas, by encouraging the
For example, in Morocco as well opening of branches in the interior.
as Tunisia, undue emphasis was The paradox of microfinance is that
placed on developing a single the people who need microfinance
Islamic debt product (murāba�ah) the most (the most vulnerable) are
that would replace the conventional also the riskiest group, residing
counterpart without altering the in remote and unreachable areas
rules of the game. Less attention and who are unable to offer
was paid to developing the sector guarantees to cover their financing.
as a whole or to the possibility of It is felt that microfinance must
integrating zakāh and awqāf in the be made affordable by cutting
models of Islamic microfinance. many elements of costs, e.g.
In Morocco, for example, it is felt establishment of a fund to cover
that existing MFI might focus just the lack of guarantees for the most
on the form and neglect the spirit vulnerable ones, simplification
of the Sharī‘ah by adopting single of documentary procedures for
loan-based products that will fail microfinance clients according
to replace the culture of debt with to the nature and potential of
that of economic empowerment. these clients, mobilizing large new
Indeed, there is an urgent need to investments in rural infrastructure,
work on financing the economic agricultural research and
opportunities of small investors agricultural guidance services,
and entrepreneurs, especially the facilitation of the spread of low-
poorest rural population, through cost financial services through the
the provision of integrated Sharia- Internet and mobile phones.
compliant financial services in the
form of grants, loans, financing, Given that some of the countries in the
deposits and savings accounts, etc. region have long years of experience
in creating and sustaining an enabling
• H
igh cost of microfinance environment for microfinance, as well
contributes to financial exclusion as Islamic microfinance, there is a huge
by pushing the products beyond scope for learning from each other. The
the reach of the poorest of the creation and the development of a network
poor and the marginalized sections in the MENA region to promote and assist
of the society. The costs may be Islamic microfinance institutions and
either financial or non-financial forge close cooperation and partnerships
and both direct and indirect. For amongst them is an idea that merits
example, failure to apply one of serious consideration. While there is a
the safety standards in Islamic huge popular demand for microfinance
microfinance, which is the necessity in accordance with the Sharī‘ah in the
of ensuring the eligibility of the region as a whole, there is a serious lack of
beneficiary, leads to higher costs specialized competencies for this sector.
for the MFI. Another element of
cost is the cost of reaching the

This report covers five north-west African 2005-18. Mauritania has the lowest total
countries, namely Algeria, Libya, Mauritania, population (4.54 million) and the highest
Morocco, and Tunisia. All these countries average annual population growth rate
are Muslim-majority countries. The Muslim (2.9 percent) among the countries under
population varies from 96.6 percent to study during the same period. Morocco
about 100 percent in these countries. is the second most populous country
(35.22 million) and recorded the lowest
Among the countries under focus, Algeria population growth (1.19 percent) in 2018
is the largest country by size and by among the selected countries of the region.
population. Its population reached 42.58 Tunisia is the smallest country in size but,
million in 2018, with an average annual with 11.66 million people, the country is
growth rate of 1.97 percent during 2005- more populous than Libya and Mauritania.
18. The estimated population of Libya Tunisia’s population has been increasing at
was 6.51 million in 2018, with an average average annual rate of 1.08 percent during
annual growth rate of 1.2 percent during 2005-2018 (Table 2.1).

Table 2.1: Total Population and Population Growth (2018)

Population Growth % of Muslim

(2005-18) Population*

Algeria 42.58 1.97 99

Libya 6.51 1.2 100

Mauritania 4.54 2.9 99

Morocco 35.22 1.19 96.60

Tunisia 11.66 1.08 99.10

Source: International Monetary Fund, World Economic Outlook Database, April 2019

Islamic Social Finance Report 2020

Based on the World Bank classification

2.1. TRENDS IN ECONOMIC of countries for the fiscal year 2017-
AGGREGATES 18, using 2018 data and employing the
Atlas methodology, Algeria and Libya fall
This section presents some of the socio- in upper-middle-income countries while
economic indicators, such as per capita Mauritania, Morocco, and Tunisia are in
income, economic growth, the structure of the list of lower-middle-income countries
the economies, employment, savings and (Figure 2.1). In terms of per capita income,
investment, and inflation, for the countries Libya enjoys the highest (US$ 7235.0)
under study. These indicators directly and per capita income followed by Algeria
indirectly affect the earnings and poverty (US$ 4278.9) and Tunisia (US$ 3446.6).
levels of households. Mauritania has the lowest per capita
income (US$ 1218.6) among the selected
The selected countries under study are at countries in 2018 (Figure 2.2).
different levels of economic development.

Figure 2.1: GNI per capita, Atlas method, 2018 (current US$)

4000 3000 3500

2000 1100
Algeria Libya Mauritania Morocco Tunisia

Source: WB, WDI, 2019.

Figure 2.2: GDP per capita 2018 (Current US$)

Tunisia 3446.6

Morocco 3237.9

Mauritania 1218.6

Libya 7235.0

Algeria 4278.9

Source: WB, WDI, 2019

Region Under Focus

grew at an average annual rate of 5.57

2.1.1 ECONOMIC GROWTH percent, which is the highest growth rate
among the selected countries, followed by
The countries in focus made promising
Mauritania (4.83 percent), Morocco (4.04
economic progress over the last two
percent), Algeria (3.01 percent) and Tunisia
decades. The real GDP of all the countries
(2.92 percent (Figure 2.3).
under study, except Libya, almost doubled
during this period. Libya demonstrated The selected countries reveal the exciting
good progress from 2000 to 2010, where its experience of their annual economic
real GDP increased from US$ 48.03 billion growth rates. The economy of Algeria was

Table 2.2: GDP in Billion (constant 2010 US$)

2000 2010 2018

Algeria 110.4236 161.2073 203.354

Libya 48.02634 74.77344 50.28273

Mauritania 2.700575 4.337794 5.941726

Morocco 57.51965 93.21675 122.8677

Tunisia 29.14231 44.05093 50.9103

Source: WB, WDI, 2017.

Figure 2.3: Average Annual GDP Growth (2005-18)

4.5 4.04
3.01 2.92


Algeria Libya Mauritania Morocco Tunisia

Source: WB, WDI, 2017. Note: For Libya growth rate is for the period 2005-10.

in 2000 to about US$ 75 billion in 2010, but growing positively from 2000 to 2005,
it slid to US$ 50.28 billion in 2018 (Table 2). where its annual growth rate was the
During 2005-2018, the economy of Libya highest (7.2 percent ) in 2003 followed by

Islamic Social Finance Report 2020

(5.91 percent ) in 2005. In the subsequent in 2006. However, the GDP growth rate
years, it never touched the figure of 4 has been declining onward and reached a
percent, and the growth rate remained very negative figure of -1.04 percent in 2009.
low. It recorded the lowest annual growth The economy of Mauritania again gained
of 1.6 percent in 2017. momentum from 2010 onward, where
GDP grew an average annual rate of about
Even before the civil war in Libya, the 5 percent during 2010-14. The following
economy was experiencing a fluctuating years witnessed low growth rates and
growth rate during the last decade. The reached 3.6 percent in 2018. Morocco was
country experienced a meager -1.76 growing, on average, around 4 percent per
percent annual growth rate in 2001 year during the last one and a half decade,
compared to 13.02 percent in 2003. The except for the year 2016, when it registered
economy showed a promising growth rate a growth rate of 1.10 percent. However,
onward, but it suffered during the financial growth rate again picked up and reached
crisis, where its annual growth rate dropped about 3 percent in 2018.
to -0.79 percent in 2009. The country has
been facing a significant economic loss Similarly, Tunisia experienced good
due to the civil war, and consequently, the progress of about 4.5 percent annually
annual growth rate dropped to about -62.08 during 2001-2007. It was not affected
percent in 2011(Figure 2.4). However, much by the financial crisis as it registered
after gaining a considerable jump in its an average annual growth rate of more
annual growth (123.1 percent) in 2012, its than 3 percent during 2008-2010. However,
growth slid to negative numbers during after that period, the country was severely
the subsequent years and picked up again affected and recorded a growth rate of
to about 27 percent and 7.84 percent in about -2 percent in 2011. Subsequently, the
2017 and 2018 respectively. Mauritania economy picked up, but the growth rate
maintained a respectable high growth rate remained below 2.0 percent per annum in
during 2003-2006, with about 19 percent recent years (Figure 2.4).

Figure 2.4: Trend in GDP Growth Rate






2000 2005 2010 2015 2018

Algeria Libya Mauritania Morocco Tunisia

Region Under Focus

by Algeria and Morocco (about 12 percent

2.1.2. STRUCTURE OF ECONOMIES each), and Tunisia (9.54 percent). The
economy of Libya recorded relatively the
The composition of the GDP of the country
lowest (1.87 percent) contribution from
depends on its level of development. The
the agricultural sector in GDP compared
relative contribution of agriculture sector in
to other countries in focus in 2008. The
the GDP falls with the increase in per capita
value addition of services sector to GDP of
income, whereas the relative contribution
Tunisia was found to be the highest (60.31
of industrial and services sectors in the
percent) in 2017, followed by Morocco
GDP increases with the increase in the
(49.96 percent) and Algeria (45.62 percent).
level of per capita income. The table
The relative share of the industrial sector in
below shows that some of the countries
the GDP of all countries except Libya was
experienced quick structural change
in the range of about 23 percent to about
compared to the other countries in focus.
37 percent in the same year. However, Libya
Morocco and Tunisia experienced slow
registered very high (78.20 percent) relative
progress in structural change, while other
contribution of the industrial sector in
countries in focus registered good progress
GDP in the year 2008. Algeria experienced
in structural change comparatively (Table
a rapid fall in the relative share of the
industrial sector in the GDP. It recorded
The relative contribution of the agriculture about 54.37 percent in 2000, which fell to
sector to GDP of Mauritania was the about 37 percent in 2017 (Table 2.3).
highest (23.88 percent) in 2017, followed

Table 2.3: Value Addition by Agriculture, Industry and Services sectors in 2017
(% of GDP)

2000 2010 2017

Agriculture 8.40 8.47 12.27

Algeria Industry 54.37 50.49 37.24

Services 32.24 38.19 45.62

Agriculture 5.20 1.87 ..

Libya Industry 66.08 78.20 ..

Services 28.72 19.94 ..

Agriculture 34.37 20.29 23.88

Mauritania Industry 26.21 39.01 26.75

Services 35.20 36.07 36.87

Islamic Social Finance Report 2020

2000 2010 2017

Agriculture 11.88 12.94 12.38

Morocco Industry 26.96 25.66 26.13

Services 50.55 51.04 49.96

Agriculture 10.01 7.53 9.54

Tunisia Industry 26.65 28.98 23.12

Services 51.63 56.68 60.31

Source: WB, WDI, 2017, and 2019. * Figures for Libya are for the years 2002 and 2008.

Figure 2.5: Value addition by Agriculture, Industry and Services Sector, 2017
(% of GDP)

Agriculture Industry Services

50.0 45.62

37.24 36.87

30.0 26.75 26.13

23.88 23.12

12.27 12.38

Algeria Mauritania Morocco Tunisia

Source: WB, WDI, 2019.

(on average, about 18 percent) per annum

2.1.3. UNEMPLOYMENT during 2000-18, while other two countries,
i.e. Algeria and Tunisia, also recorded high
The following figure demonstrates
(about 15 percent each) unemployment
unemployment as a percentage of the total
rates during the same period. Morocco and
labor force in the selected countries. All the
Mauritania experienced unemployment
countries in focus have been experiencing
rates of about 10 and 10.71 percent,
unemployment in double-digit. In Libya,
respectively, during the same period (Figure
the unemployment rate remained high

Region Under Focus

Figure 2.6: Average Annual Unemployment (% of Total Labour Force), 2000-18

Tunisia 14.62

Morocco 10.1
Mauritania 10.71
Libya 17.95

Algeria 14.92

0 2 4 6 8 10 12 14 16 18 20
Source: WB, WDI, 2019.

High youth unemployment is a severe was high (about 42 percent) in Libya,

problem for any country across the globe. followed by Tunisia (about 35 percent),
Young people remaining unemployed for and Algeria (about 30 percent). The youth
an extended period lose motivation, suffer unemployment was around 16 to 22
from mental disorder and feel alienated percent in the other two countries under
from society. In 2018, youth unemployment study in the same period (Figure 2.7).

Figure 2.7: Unemployment, youth total (% of total labor force ages 15-24)
(modeled ILO estimate), 2018.


Morocco 34.83 29.95


Libya 21.88 41.93

Algeria 15.99

Source: WB, WDI, 2019.

Algeria has been successful in reducing decline in unemployment during 2000-08,

its unemployment rate from about 30 but subsequently, it increased again and
percent in 2000 to about 12 percent over reached about 15.48 percent in 2018, which
the last 17 years. Tunisia experienced a was close to the unemployment rate of

Islamic Social Finance Report 2020

2000. Morocco was successful in reducing percent during 2000-2003 and declined
unemployment gradually, which reached subsequently to around 10 percent. Libya
around 9 percent in 2018 from about is a unique case where unemployment
14 percent in 2000. The unemployment remained almost around 18 percent during
in Mauritania remained around 12 2000-18(Figure 2.8).

Figure 2.8: Trend in unemployment (2000-18)


2000 2005 2010 2015 2018

Algeria Libya Mauritania Morocco Tunisia

Source: WB, WDI, 2017.

rate has been fluctuating very sharply, with

2.1.4. INFLATION a high inflation rate (about 12 percent) in
2005 and the lowest inflation (about 0.5
In Morocco, the average annual consumer
percent) in 2015. During the past one
prices have been low (1.61 percent) during
and a half decades, Tunisia and Algeria
the last decade. From 2005 to 2018,
recorded a smooth low-level positive trend
inflation in the country remained below
in inflation. However, in the case of Libya,
two percent except for the years 2006
inflation rate has been highly uneven.
and 2008, where inflation was more than
Consumer prices increased from a low level
two percent. The other four countries,
of 2.6 percent in 2005 to about 16 percent
as depicted in Figure 2.10, have been
in 2011. Nevertheless, inflation receded
experiencing an average annual inflation
in the subsequent years, sliding to 2.43
rate in the range of 4 to 5 percent except
percent in 2014. Unfortunately, inflation
for Libya that witnessed an average annual
rose again after 2014 and reached 28.53
inflation rate of about 10 percent during
percent in 2017 (Figure 2.10).
the same period. In Mauritania, the inflation

Region Under Focus

Figure 2.9: Average annual consumer prices (2005-2018)

Tunisia 4.59

Morocco 1.61
Mauritania 4.8
Libya 9.99

Algeria 4.46

0 2 4 6 8 10

Source: International Monetary Fund, World Economic Outlook Database, April 2019

Figure 2.10: Consumer Prices (Annual %)


2005 2010 2015 2018

Algeria Libya Mauritania Morocco Tunisia

Source: IMF, World Economic Outlook Database, April 2019

and a half decade. Algeria invested on

2.1.5. SAVINGS AND an average about 39 percent of GDP per
INVESTMENTS annum, compared to its GNS of about 40
percent of GDP during 2000-18. However,
Figure 2.4 shows the Total Investment Figure 2.12A shows that GNS remained
(TI) and Gross National Savings (GNS) as significantly high than TI during 2000-13,
a percentage of GDP for more than one and in the following years TI exceeded

Islamic Social Finance Report 2020

the GNS. The GNS has been showing a of Tunisia and Morocco, the average annual
declining trend from 2008 onward. The TI was slightly higher than average annual
investment, which is more than 25 percent GNS during the same period. However,
of the GDP, is considered a healthy sign for Tunisia TI per annum was less than the
the sustainable growth of the economy. required level of investment for sustainable
Mauritania has been investing, on average, development of the economy. However, the
about 39 percent of GDP per annum TI jumped up to about 33 percent in 2018,
compared to about 23.51 percent of GNS while the GNS further declined to 8.93
during the same time. The gap between TI percent in the same year (Figure 2.11B).
and GNS is significantly high. In the case

Table 2.4: Total Investment (TI) and Gross National Savings (GNS)
percentage of GDP

TI (2018) GNS (2018) TI (2000-18) GNS (2000-18)

Algeria 48.88 39.78 39.33 45.42

Libya 33.40 .. 38.37 ..

Mauritania 40.70 22.65 38.90 23.51

Morocco 33.29 28.79 31.22 27.68

Tunisia 33.29 8.93 23.77 16.74

Source: IMF, World Economic Outlook Database, April 2019

Figure 2.11A: Total Investment (TI) and Gross National Savings (GNS) percentage
of GDP





2000 2005 2010 2015 2018

Algeria TI Algeria GNS Mauritania TI Mauritania GNS

Source: IMF, World Economic Outlook Database, April 2019

Region Under Focus

Figure 2.11B: Total Investment (TI) and Gross National Savings (GNS) percentage
of GDP





2000 2005 2010 2015 2018

Morocco TI Morocco GNS Tunisia TI Tunisia GNS

Source: IMF, World Economic Outlook Database, April 2019

GINI Index was 40.6 percent in 2000 and

2.1.6. INCOME DISTRIBUTION remained about the same (39.5 percent) in
The table below illustrates income the subsequent years. The data on income
distribution in the countries under focus, distribution in the case of Algeria was
estimated using the GINI index. Mauritania available for the year 2011, which showed
and Tunisia experienced an improvement a better income distribution (27.6 percent)
in income distribution by about 8 percent than other countries under study.
during the last decade. In Morocco, the

Table 2.5: GINI Index

2000 2004 2005 2006 2008 2010 2011 2013 2014 2015

Algeria .. .. .. .. .. .. 27.6 .. .. ..

Mauritania 39 40.2 .. .. 35.7 .. .. .. 32.6 ..

Morocco 40.6 .. .. 40.7 .. .. .. 39.5 .. ..

Tunisia 40.8 .. 37.7 .. .. 35.8 .. .. .. 32.8

Source: WB, WDI, 2019.

Islamic Social Finance Report 2020

2.1.7. INCIDENCE OF POVERTY under study. In Algeria, the headcount

estimated at the national poverty line was
Table 2.6 shows the incidence of poverty 5.5 percent of the population in 2011, while
in the selected countries estimated at US$ under international poverty lines of US$
1.90 (PPP, 2011), US$ 3.20 (PPP, 2011), 1.90 and US$ 3.20 the headcount was 0.5
and national poverty lines. The poverty percent and 3.9 percent respectively in the
headcount dropped in all the countries same year.

Table 2.6: Poverty Headcount (% of Population)

2000 2004 2005 2006 2007 2008 2010 2011 2013 2014 2015

.. .. .. .. .. .. .. 0.5 .. .. ..

Algeria .. .. .. .. .. .. .. 3.9 .. .. ..

.. .. .. .. .. .. .. 5.5 .. .. ..

19.6 14.4 .. .. .. 10.8 .. .. .. 6 ..

Mauritania 45.5 42.5 .. .. .. 34.3 .. .. .. 24.1 ..

51 46.7 .. .. .. 42 .. .. .. 31 ..

6.3 .. .. 3.1 .. .. .. .. 1 .. ..

Morocco 27.8 .. .. 17 .. .. .. .. 7.7 .. ..

15.3 .. .. .. 8.9 .. .. .. 4.8 .. ..

5.9 .. 3.3 .. .. .. 2 .. .. .. 0.3

Tunisia 22.8 .. 15.1 .. .. .. 9.1 .. .. .. 3.2

25.4 .. 23.1 .. .. .. 20.5 .. .. .. 15.2

Source: WB, WDI, 2017

1. Poverty headcount ratio at $1.90 a day (2011 PPP) (% of the population).
2. Poverty headcount ratio at $3.20 a day (2011 PPP) (% of the population).
3. Poverty headcount ratio at national poverty lines (% of the population)

Region Under Focus

A significant drop in poverty headcount reduced significantly from 27.8 percent

was recorded in Mauritania. The headcount of the population to about 7.7 percent of
measured under US$ 1.9 dropped from the population measured under US$ 3.20
19.64 percent in 2000 to about 6 percent during the same period. Under the national
in 2014, while headcount under US$ 3.20 poverty line criteria, about 15 percent of
was dropped from 45.5 percent to about the population was registered as poor in
24.1 percent during the same period. The 2000, which declined to about 4.8 percent
incidence of poverty measured under the in 2013.
national poverty line was registered at 51
percent in 2000. It dropped to 42 percent in Tunisia has been very successful in
2008, and further declined to 31 percent in combating poverty. It experienced a low
2014. level (5.9 percent) incidence of poverty
in 2000, which further declined to about
In Morocco, the status of people improved 0.3 percent in 2015. Similarly, headcount
significantly. This is evident from the measured under US$ 3.10 dropped from
reduction in poverty during the early about 23 percent to 3.2 percent during
2000s. Using US$ 1.9 poverty line criteria, the same time. However, the incidence of
the poverty headcountfrom 6.27 percent poverty estimated by using national poverty
in 2000 to 1 percent in 2013, while it line criteria was 25.4 percent in 2000, which
fell to 15.2 percent in 2015.

Islamic Social Finance Report 2020

that countries in focus require a small

2.2. POTENTIAL OF ISLAMIC percentage of GDP to meet their resource
SOCIAL FINANCE requirements for poverty reduction. Under
US$ 1.90 a day, Algeria requires 0.01
Islamic social finance can be a significant percent of GDP, while Mauritania, Morocco,
source of funding for the uplift of the and Tunisia require 0.25 percent, 0.08
underserved communities across the percent, and 0.03 percent of GDP to meet
globe. It has great potential, which can the poverty reduction gap respectively.
be optimally tapped with the commitment However, under US$ 3.20 Mauritania needs
of the country concerned and prudential about 2 percent of its GDP to meet the
management. This section provides insight resource shortfall for the poor population,
into the resources required to meet the while that of Morocco, Tunisia, and Algeria
poverty gap of each country under study need about 1.0 percent, 0.26 percent and
and then estimates the potential of Islamic 0.07 percent of their GDP respectively for
social funds to meet the resource gap in the same purpose.

Table 2.7: Resource Gap for Poverty Alleviation

Resource Gap as % of GDP at Resource Gap as % of GDP at

$ 1.90 per Day $ 3.20 per Day

Algeria 2011 0.01 0.07

Mauritania 2014 0.25 1.97

Morocco 2013 0.08 0.90

Tunisia 2015 0.03 0.26

Source: Our Estimates

these countries. Unfortunately, the data

on waqf is not available for the countries
concerned, and we have estimated the RESOURCES FROM ZAKĀH
potential of zakāh only in these countries.
Table 2.8 presents the estimates of zakāh
2.2.1. ESTIMATING THE potential¹. We are using Kahf (1989)
estimates of zakāt potential with specific
RESOURCE GAP FOR POVERTY changes. Zakāh potential is based on
ALLEVIATION three different opinions of jurists regarding
zakātable assets, which are denoted as Z1,
The resource gap has been estimated Z2, and Z3. The countries under study have
by using the poverty gap index, an great zakāt potential as depicted by the
international poverty line of US$ 1.90 a day,
and US$ 3.20 a day. Table 2.7 illustrates 1 For estimation methodology, see Shirazi (2014)
and Shirazi and Fouad (2010).

Region Under Focus

table, which could range between about 2 The potential resources that can be
percent of GDP to about 4 percent of GDP. generated under three different scenarios
Algeria can generate an amount of revenue (Table 2.8) are more than the resources
of 1.78 percent of GDP under Z1, 3.81 needed to fill the poverty gap (Table 2.7).
percent of GDP under Z2, and 4.30 percent Thus, all the countries under study can pull
of GDP under Z3. Similarly, other countries up the underserved people from poverty,
in the table show that on average they can provided that social finance is implemented
collect about the same amount under three and managed correctly.
different scenarios.

Table 2.8: Estimate of Zakāh Potential*

Country Year Z1 % of GDP Z2 % of GDP Z3 % of GDP

Algeria 2011 1.78 3.81 4.30

Mauritania 2014 1.78 3.81 4.30

Morocco 2013 1.74 3.72 4.19

Tunisia 2015 1.78 3.82 4.30

Source: Our Estimates


Shirazi, Nasim Shah, and Md. Fouad Amin

(2010), Prospects of Poverty Elimination
through Potential Zakāh Collection in OIC
Member Countries: Reappraised. Journal
of Economics, Banking, and Finance, Vol 6,
Number 3.

Shirazi, Nasim Shah (2014), Integrating

Zakāh and Waqf into the Poverty Reduction
Strategy of IDB Member Countries. Islamic
Economic Studies, Vol 22, No.1.

Kahf, Monzer,(1989), Zakāt: Unresolved

Issues in the Contemporary Fiqh, Journal of
Islamic Economics, Vol. 2, No. 1, 1989, pp.

Islamic Social Finance Report 2020

The Algerian Fund of Zakāh serves also as
Like several other Arab and Islamic a charitable foundation aimed at achieving
countries, Algeria has adopted the Zakāh solidarity in society. The process of
Fund as an official body collecting zakāh. organizing and disbursing zakāh is a task
The Zakāh Fund is a religious social pertaining to the Ministry of Religious Affairs
institution operating under the supervision and Awqāf in line with the Article II of the
of the Ministry of Religious Affairs and constitution that states that “Islam is the
Awqāf. The ministry guarantees legal religion of the state.” The notion of zakāh is in
coverage, according to the law handling the following legal pronouncements:
the mosque institution under Executive
Decree No. 91-82 of 1991. The Zakāh Fund • Executive Decree No. 89-99 of 23 Dhul-
Qa’da 1409H corresponding to June 27,
collects zakāh through its branches located
1989 for the powers of the Minister of
in various states of the country, and then
Religious Affairs, especially Articles 10
distributes it to its legitimate beneficiaries
and 14 thereof.
through the same branches. The
experiment started in 2003 with two pilot • E
xecutive Decree No. 91-81 of 7
mandates, Blida and Sidi Bel Abbes states. Ramadan 1411H corresponding to March
23, 1991, which includes the construction
Two accounts of the mosque institution
of the mosque, its organization,
were opened at the state level in the form
administration and determination of its
of money orders to receive zakāh and
function, especially Article 22 thereof.
sadaqa funds. In 2004, this process was
generalized to all the states of the country • E
xecutive Decree No. 91-82 of 07
by opening postal accounts at the level of Ramadan 1411H corresponding to
March 23, 1991, which includes the
each state, which is affiliated to the Zakāh
establishment of the mosque institution,
Fund, through which the fund receives and
especially Article (d) of Article 5 thereof
disburses money through remittances only.
• E
xecutive Decree No. 91-82 of 25 Rabie
1 “Financing the Local Development from an Al Awal 1421H corresponding to 28 June
Islamic Perspective: The contribution of the funds of 2000, which includes the organization of
zakāh & Waqf”, Wasila Essebti, PhD Thesis, University of the central administration in the Ministry
Mohamed Khidhr University, Biskra, Algeria
of Religious Affairs and Awqāf.

2 Ibid
Islamic Social Finance Report 2020 INSTITUTIONAL AND SUPPORTING • Research and training

INFRASTRUCTURE3 • Sharī‘ah supervision
At the organizational level, the Algerian The National Zakāh Fund Committee
Zakāh Fund consists of a National consists of:
Committee which is the organizing body
of the Fund. It formulates and follows up • T
he Supreme Council of the Fund,
the national policy of zakāh and examines which consists of the following
litigations. It contains members of the elements:
supervisory committees who monitor
* C
hairman of the Supreme
the work of province committees. A
Council of Zakāh Fund
province committee (at each province)
has the task of identifying and finalizing * H
eads of state committees of
eligible recipients of zakāh in the form of Zakāh Fund
subsidies and loans from the Fund. A basic
committee (at each district) has the task of * Members of the Sharī‘ah Board
the identification of zakāh recipients in the
* R
epresentative of the Supreme
Islamic Council
Accordingly, the Zakāh Fund works in * R
epresentative of the Ministry of
cooperation and coordination with religious Solidarity
committees, and the civil society as well.
In order to organize its activities, three * R
epresentatives of the Ministries
organizational levels have been developed that are related to the Zakāh
to enable the Fund to reach the depth Fund
of Algerian society and thus achieve its
objectives: * Top givers of Zakāh

Committees of the Supreme Council of

National Zakāh Fund Committee
Zakāh Fund, which are:
It works at the national level, and among its
* C
ollection and Disbursement
functions we find:
• D
rawing up and monitoring the
* I nformation, Communication and
Fund’s national policy
Relations Committee
• Disputes resolutions
* F
inancial, Administrative and
• E
stablishment of a national Zakāh Training Committee
card for beneficiaries
* Audit and Oversight Committee
• S
etting up regulations related to the
The National Office of the Zakāh Fund
collection and distribution of Zakāh
consists of:
• D
evelopment of the national
* H
ead of the National Office of
program of communication
Zakāh Fund
3 Ibid


* T
he Board of Directors (shall and qualified beneficiaries, ensuring
meet under the chairmanship homogeneity of work and ensuring
of the Minister or his the accuracy of the distribution
representative) process

* Sharī‘ah Commission • Monitoring and follow-up task

* S
ecretary General with four • Dispute resolution
• Communication task
Province or State Committee for Zakāh
Fund: The Basic Committee of the Zakāh Fund:

This committee consists of an Executive It consists of the executive office and

Office, Panel of Deliberations and the deliberation body. The functions of
Committees of the state deliberative body. this committee are beneficiary statistics,
The committee has the following functions: establishment of guidelines, collection,
disbursement, follow-up and sensitization.
• O
rganization of work, including
establishment and coordination The Algerian Zakāh Fund reinforces the
of grassroots basic committee, supporting infrastructure in favour of zakāh
creating credit cards for eligible and it aims to:

Islamic Social Finance Report 2020

* C
all to perform zakāh duty, which • 50% for the poor and needy
is the third pillar of Islam, and its
revival in the hearts of Muslims • 1
2.5% for salaries of officials and
and in their transactions operational expenditure of the
Zakāh Fund
* Collect donations and aid
• 3
7.5% for investment and Qar�
* D
isburse zakāh funds to the �asan
Sharī‘ah authorities
If the collected zakāh funds are less than
* R
aise awareness and inform DZD 5 million:
individuals and competent
authorities on methods of • 87.5% for the poor and needy
collecting and distributing zakāh,
• 1
2.5% for the salaries of officials
through various media such as
and operational expenditure of the
radio, television and the internet.
Zakāh Fund

3.1.3. ZAKĀH COLLECTION & The last item may be distributed as follows:

% is allocated to run the basic
committees in the districts
The work of the Algerian Zakāh Fund is
divided into two main parts: • 4
.5% is allocated to run the province
Zakāh Collection:
• 2
% is allocated to the National
It is done through postal accounts opened Committee of Zakāh.6
at each province of the country. The Imam
can be a mediator between people who Within the broad categories as above,
give zakāh and this current postal account specific allocations are determined by
if he gives these people receipts for the mosque commissions. Widows with their
received amounts, or signs with the Masjid’s children come first, followed by divorced
committee on minutes indicating the amount women with children. Each family’s share is
collected in the Masjid (upon which it will be defined according to the importance of the
obligatory on his part to deposit the same collected money in its region.
in the postal account)5 . The zakāh should
Development of Zakāh outcome
be given to mosque commissions or put in
zakāh boxes that are in each mosque office. Zakāh outcome fulfilled the Fund and
The money must not be kept in the mosque has seen considerable development. The
and the Imams should count it and transfer it following table shows the growth in the
to the current account of the Zakāh Fund. volume of Zakāh Funds over a 14-year
period. 7
Zakāh Disbursement:
6 Naoual Ben Amara and Larbi Atia, Toward the
If the collected zakāh funds are greater than
Adoption of a Governance Model in Zakah Foundations:
DZD 5 million: The Case of the Algerian zakāh Fund, p: 113, International
Journal of Business and Management Review, Vol.4, No.2,
4 Ibid
pp.104-118, March 2016
5 Bertima & Abdeli, 2014:7
7 IBID p :113

Table: Statistics of Collected Zakāh in Algeria from 2003 to 2016 (in million DZD)

Year Zakāh al Fitr Zakāh al Maal Zakāh of Crops Total

2003 25.7 30.4 0.0 56.1

2004 114.9 108.4 16.6 239.6

2005 172.2 335.8 0.7 508.7

2006 215.2 439.1 32.1 686.4

2007 258.2 435.5 38.8 732.5

2008 241.0 370.0 43.1 654.1

2009 305.0 589.5 42.1 936.7

2010 322.1 536.6 40.5 899.2

2011 373.4 781.3 44.4 1199.1

2012 444.7 801.5 60.7 1306.9

2013 446.0 779.1 75.8 1300.9

2014 437.6 804.3 76.7 1318.6

2015 473.4 686.0 91.7 1251.1

2016 515.3 678.7 73.1 1267.2

Islamic Social Finance Report 2020

Year Zakāh al Fitr Zakāh al Maal Zakāh of Crops Total

2003 0.2 0.3 0.0 0.5

2004 1.0 0.9 0.1 2.0

2005 1.4 2.8 0.0 4.2

2006 1.8 3.7 0.3 5.7

2007 2.2 3.6 0.3 6.1

2008 2.0 3.1 0.4 5.5

2009 2.5 4.9 0.4 7.8

2010 2.7 4.5 0.3 7.5

2011 3.1 6.5 0.4 10.0

2012 3.7 6.7 0.5 10.9

2013 3.7 6.5 0.6 10.8

2014 3.6 6.7 0.6 11.0

2015 3.9 5.7 0.8 10.4

2016 4.3 5.7 0.6 10.6

1 USD = 120 DZD

Source: Ministry of Religious Affairs and Awqāf of Algeria


Regarding allocation of zakāh funds, the The projects financed by the Fund are
Algerian Zakāh Fund raised a slogan that subject to specific conditions which were
says, “We don’t give it to him to remain poor identified due to specificity of the Fund’s
but to become a muzakki”. Therefore, the transactions especially for projects of
Ministry of Religious Affairs and Awqāf social and economic interest, craft projects,
allocated a portion of zakāh funds to construction, service projects, nurseries,
investment, which constitute 37.5 percent productive and agricultural projects, usually
of the total proceeds of zakāh. The Ministry with Qar� �asan financing. It is the most
of Religious Affairs and Awqāf signed an widely used mechanism to finance projects
agreement with Al Baraka Bank of Algeria to help the poor, and it is often used to
to be a technical agent in the field of ensure the continuity of simple investment
investing zakāh funds. activities, and to keep jobs associated with
those activities.

Table: Statistics of Collected Zakāh in Algeria from 2003 to 2016 (in million DZD)

Total beneficiaries of al Qar�al �asan

Number of beneficiaries Amount (Million DZD)

2003 138

2004 355 20.22

2005 565 51.60

2006 776 90.11

2007 625 137.44

2008 531 112.33

2009 710 98.68

2010 901 149.79

2011 1049 226.53

2012 1213 345.38

2013 606 344.21

2014 606 175.94

Total 7469 1752.21

Source: Official website of the Algerian Ministry of Religious Affairs and Awqāf.

Islamic Social Finance Report 2020

• M
ini projects financing: This repays the loan in different ways,
financing covers housewives, depending on the parties involved in
handicapped people who are able the funding process:
to work, as well as unemployed
youth. The National Commission * I f the parties of the funding
of Zakāh Fund defines a limit for process are the bank and
this type of financing, and the Bank the financed poor, exemption
will directly pay the supplier (no from repayment of six months
relation between the supplier and is granted, after which the
the beneficiary). beneficiary starts to repay the
loan installments depending on
• S
upporting projects secured at the the contract.
Loan Guarantee Fund: These loans
materialize through an agreement * I n case of third party, the National
between the Fund and the Ministry Agency for Conducting Mini
of Religious Affairs and Awqāf, in Loans, the financed repays 70%
consultation with the Al Baraka of the good loan, benefits from
Bank of Algeria which is a member the exemption for one year, then
of the Loan Guarantee Fund of small repays depending on the contract.
and medium-sized enterprises. After repayment of the bank loan,
the financed starts to repay the
• H
elping enterprises in debt that Agency’s loan, with 3 years of
are capable of recovery: The Bank exemption.
determines a list of the beneficiaries
of this type of financing by TRANSPARENCY, ACCOUNTABILITY &
identifying their needs, to what GOOD GOVERNANCE 8
extent they are recoverable and how
Governance of zakāh foundations in Algeria
to pay those debts. The assistance
has become very significant in the light
includes only the principal, but not
of current developments. The governance
the interests paid to banks.
meachism should apply the principles
• C
reation of companies between and basics of governance to improve the
the Fund of Zakāh Investment and performance of zakāh projects, and develop
Al Baraka Bank of Algeria: These the methods of supervision and control to
projects are implemented through strengthen credibility in zakāh foundations’
an agreement between the Al activities. The governance system for zakāh
Baraka Bank of Algeria and the foundations may involve the following:
Ministry of Religious Affairs and
• Assist zakāh foundations to
Awqāf. The Bank determines the
implement their tasks with efficiency
size and quality of the projects to
while achieving economic and
be implemented. The unemployed
legitimate (according to Sharī‘ah)
capable of working will benefit from
requirements for investing zakāh
these projects. After approval by
the Zakāh Fund and Al Baraka Bank
8 “Financing the Local Development from an Islamic
of Algeria, the financing is granted Perspective: The Contribution of the Funds of zakāh &
to the beneficiary. The beneficiary Waqf”, Wasila Essebti, PhD Thesis, University of Mohamed
Khidhr University, Biskra, Algeria

• S
eparate powers and conflicting • R
ealistic monitoring and evaluation
positions to ensure clear of performance of projects funded
mechanisms are implemented by zakāh foundations;
for assuming responsibility and
accountability when collecting and • I dentification of the tasks and
distributing zakāh; responsibilities of the administrative
and organizational structure in
• E
nsure an unbiased opinion by zakāh foundations;
Sharī‘ah control bodies in zakāh
foundations relating to their • P
roviding necessary and relevant
transactions; and information to facilitate prudent
investment of zakāh resources; and
• C
omplete the institutional and
• D
esignation of committees to
Sharī‘ah framework of zakāh
foundations. follow up the performance of zakāh
Two groups of determinants can be defined
depending on the proper application The rules of governance in activating the
of governance principles for zakāh Algerian Fund of Zakāh play a fundamental
foundations: role in achieving economic efficiency in
the investment of zakāh funds. The Fund’s
• E
xternal determinants: they include management must provide the necessary
laws regulating the economic information for the different parties in time
activity of the state, including the to gain their trust. This will contribute to
operation of zakāh foundations increase in resources and exploiting the
resources in a way that allows to achieve
• I nternal determinants: they include social justice and contribute to economic
internal laws and regulations development. Thus, the system of
within zakāh foundations. They are governance plays a major role in improving
the way of decision-making and the performance of the Algerian Zakāh
the allocation of responsibilities Fund.
and powers between the parties
concerned with the application of To sum up, governance aims to achieve
governance, which reduces conflicts individual and societal interests which
between the interests of these are rooted in the Islamic Sharī‘ah.
parties. Commitment to rational governance
system will lead to the development of
The prerequisites for the good application the Fund, overcome problems, increase its
of governance principles for zakāh competitiveness, and achieve its financing
foundations: and Sharī‘ah objectives. It will lead to
• E
stablishment of legal and efficient information-sharing, and effective
legislative framework to regulate overall control to assess performance and
the administrative performance of enhance confidence in zakāh projects.9
zakāh foundations;
9 ibid 115

Islamic Social Finance Report 2020

The governance principles guiding the Strategic Analysis & Recommendations

Algerian Zakāh Fund may be enumerated
as follows: The strengths of Algerian zakāh system
include the following:
• E
nsure sound basis for collecting
and distributing zakāh: develop • T
he existence of a functional Zakāh
sound rules for distributing zakāh Fund is certainly a strength of the
outcome in ways preserving the existing system.
dignity of the poor and needy and
• T
here is a high level of community
ensure compliance with rules of
awareness of the importance of
ethical and professional conduct of
the administrators of this process.
• T
he establishment of some Islamic
• E
nsure transparency: disclose banks in the country that serve as
information and data relating to the payments system for many zakāh
collection and distribution of zakāh payers.
funds, in order that people who
give zakāh ascertain the extent to The weaknesses on the other hand are as
which their funds are faithfully and follows:
efficiently invested.
• A
large chunk of zakāh is given
• E
nsure equity in the distribution of by payers individually, away from
zakāh resources among eligible official channels.
• T
here is considerable lack
• D
emonstrate socially responsible of confidence in the zakāh
behavior building social cohesion management system among a
section of zakāh payers.
• E
nsure autonomy: stay away from
all internal and external pressures • T
here is an absence of a national
that affect the good performance policy and campaigns for zakāh
of its duties; set up the principle of collection and distribution, which
autonomy to achieve its strategic adversely affects the system.
• T
here is an absence of any
• A
pply the principle of accountability preferential provision for zakāh in
by emphasizing the responsibility the existing tax system.
of the Board of Directors in
the compliance with laws, the • Z
akāh funds are not well-integrated
application of ethical standards, the with other forms of Islamic
acceptance and strengthening of all finance such as waqf and Islamic
methods of control and review to microfinance.
ensure efficiency. 10
• T
here is a dearth of university
programs for the development of
10 ibid 116 qualified specialists in the field of


• We propose some measures
to activate the organization
of zakāh, some of which may
require a choice between
alternatives, as follows:

• I mplement a national zakāh

policy with relevant strategies.

• Identify sectors to be exempted.

• S
tudy the components of the
Algerian economy for better
allocation of zakāh.

• Incentivize payment of zakah.

• P
romote zakāh at important
religious and national events.

• B
uild awareness about enhanced
role of zakāh.

• P
romote scientific research in the
field of zakāh.

Islamic Social Finance Report 2020

and explained in the Prophetic Sunnah,

3.2 LIBYA according to the doctrine of Imam Malik,
which are explained in the Libyan Zakāh
The Zakāh Department in the General
Authority of Awqāf and Islamic Affaires
GAAIA did not have any significant activity The Libyan government has been
prior to the establishment of the Libyan interested in organizing the collection
Zakāh Fund in 2012.The GAAIA aimed to and disbursement of zakāh funds since
collect and distribute zakāh funds, but this the early 1970s. The Law No. 89 of 1971
policy was not as effective as it should was issued to put in place the appropriate
have been. There are no statistics or collecting and distributing policy of Zakāh.
database for zakāh payers or beneficiaries. This work was not performed under an
This is perhaps due to the widely held independent financial and administrative
belief among policy makers that there is no organization, but through a department
acute poverty in the Libyan state, thanks of the GAAIA. In 1980, this law was
to the liberal grants, bonuses, salaries and amended by the Law No. 13/1980. The
other forms of support provided by the most important amendments were the
state to all Libyans, including low-income establishment of a special Zakāh Authority
people, divorcees, widows, and people with known as the General Authority of Zakāh
disabilities. However, as the population (GAZ) instead of being a department of
and commodity prices has continued to the GAAIA. Despite of these amendments,
increase, the cash flows have failed to keep the GAZ was not very effective for several
pace and proved inadequate to cover the reasons. The most notable is the lack
basic needs of people. of trust between the GAZ and Libyans;
indeed people were convinced that their
In 2012, the Libyan Zakāh Fund,
money would not be spent in the right
was established as an independent
way. During this period, there were no
institution. Its management is concerned
statistics regarding zakāh payers or
with establishing a database for the
beneficiaries. There is no database for
beneficiaries and zakāh payers. It
this sector because the government
manages zakāh funds and adopts modern
was not concerned with this sector.
technology in collecting and distributing
This institution became ineffective until
zakāh. The Fund also tries to coordinate
Decree No. 49 of 2012 for establishing
and cooperate with other public institutions
the Libyan Zakāh Fund, with financial and
such as the Social Security Fund, Solidarity
independent management, and adopted its
Fund, and Wealth Distribution Fund to
administrative, regulatory structure, and its
unify efforts and prevent duplication of
regulations from the Council of Ministers.
distribution of funds. The mechanism
12 Hazem Zohdi, former director of Department
of zakāh distribution is based on eight
of Zakāh distribution & former director of Libyan Zakāh
categories specified in the Holy Qur’ān, Fund (Tripoli branch) Islamic and Social Finance for the
11 Adel Diab, former chairman of Libyan Zakāh Fund, Arab Maghreb Countries, working paper presented at the
an interview on 05/06/2017 workshop, Tunis on 10/6/2017


In 2014, the Zakāh Fund introduced a new collection includes a preparation

project that addressed the administrative and supervision division as well as
problems and obstacles to its work, a collection division. (3) Finally, the
including an attempt to find a mechanism Department of Zakāh distribution,
for investing Zakāh funds, and establishing includes a distribution division, and a
a new mechanism for the disbursement social researchers division.
and collection of Zakāh. However, this law
has not yet been established because there These departments and divisions work in a
is no political and legislative stability in the consistent manner to achieve the goals of
country. the Zakāh Fund. Every branch of the Zakāh
fund in each city has a similar structure INSTITUTIONAL STRUCTURE13 to the main structure, so that each branch
collects Zakāh and distributes it to the
Zakāh Fund supervises 38 branches across beneficiaries in the same city. However,
the country. It aims to raise awareness the relationship between the main branch
about the obligation of Zakāh, and its (headquarter) and its branches is an
importance. It also makes an extra effort organizational supervisory relationship,
to establish a database for all the poor were these branches must submit the
and needy people throughout Libya. In necessary information monthly and
addition, the Zakāh Fund works to improve annually.
the efficiency of institutional work by
introducing the required technology to Regarding legal issues of the Zakāh
provide a service for Zakāh beneficiaries, Fund, the former relies on three special
and improving the relationship between the independent advisory committees
Zakāh Fund and other public institutions from which the rules for collection and
including civil organizations. distribution of Zakāh are derived. The
First Committee in each of the Zakāh
Chart 3 shows the organizational structure branches in Libya is a specialized
of the Libyan Zakāh Fund, which includes: committee for studying applicants of Zakāh
beneficiaries and determines the legal
1. Seven main departments: Department
(sharia) application for each issue. The
of Advisers (consultants), Department
second committee is a special committee
of Planning and Follow-up, Department
pertaining to the department of advisors.
of Fund Affairs, Department of Legal
Its duties are mainly to find fatāwa
Affairs, Department of Internal Audit,
concerning all the legal issues raised to
Department of Investment , and
it by the branches or from the bureau.
Department of media.14
Finally, the Bureau of Fatwa (Dar Al Ifta) “is
2. Three main administrative departments: the independent committee affiliated with
Department of Financial and the President of the Republic or its place”
Administrative Affairs, which is may require to consult from time to time
concerned with staff’s and financial depending on the need.
affairs. The Department of Zakāh
The Zakāh Fund’s staff are qualified
13 Hazem Zohdi, Islamic and Social Finance for the Libyan employees receiving their salaries
Arab Maghreb Countries, working paper presented at the
from the state budget and not from the
workshop, Tunis on 10/6/2017
14 Department of investment is still proposal, and it
has not effective yet.
Islamic Social Finance Report 2020

Fund’s funds. This staff tries to establish a necessary information from zakāh payers
database in order to work according to the and its beneficiaries. It also tries to know
principle of transparency and disclosure, as their views regarding the performance
well as by publishing data and information of Zakāh Fund. Finally, specialists from
in special reports that are easy for the the Audit Bureau are hired to evaluate the
public to understand. In addition, it performance of Zakāh Fund, and to monitor
relies on a special questionnaire to get any deviations.

Chart (3): The organizational structure of the Libyan Zakāh Fund









Source: Libyan Zakāh Fund


There are no supporting institutions for DISTRIBUTION
the Libyan Zakāh Fund, such as charities
or training centers or other organizations. Table 1 refers to development of Zakāh
However, the Zakāh Fund used media Fund during 2010-2016. It indicates that
(initially) to broadcast workshops, there is a significant development in
seminars and conferences to emphasize collected and disbursed zakāh. Funds
the importance of paying Zakāh and its collected as zakāh increased from Libyan
important role in the preservation of the Dinars 6.7 million in 2010 (0.007% of GDP)
Libyan community, especially under the to 29.3 Million in 2016 (0.04% of GDP).
current circumstances. In addition, the On the other hand, the amount of money
Zakāh Fund uses social media to publish disbursed to beneficiaries rose from Libyan
its reports and the results of its work. Dinars 4.3 million in 2009 to about 21
million in 2015 before falling to 19.6 million
in 2016.
Table 2. Zakāh funds and expenditures during the period 2010-2016
(Thousand Libyan Dinars)

Year 2010 2011 2012 2013 2014 2015 2016

Collection 6,660 4,774 8,531 18,732 22,349 25,349 29,264

Disbursement 4,347 6,169 9,387 12,397 20,603 21,603 19,615

Source: Periodic reports of Libyan Zakāh Fund for the years 2010-2016. The average exchange rate of the Libyan
Dinar is 1.301 $

Chart 1: Collected and Disbursed Zakāh during the period 2010-2016


2015 2014 2013 2012 2011 2010
Expenditure Collection

15 Hazem Zohdi, Islamic and Social Finance for the

Arab Maghreb Countries, working paper presented at the
workshop, Tunis on 10/6/2017
Islamic Social Finance Report 2020

Chart 1 shows the collection and It increased from 1,185,372 LYD (9.6%)
disbursement of the zakāh funds during the in 2013 to 1,409,535 LYD (6.8%) in 2014.
period 2010-2016. It indicates the success But despite the increase, it decreased
of the Fund following the communication as a percentage of total by 0.1%. Zakāh
campaigns regarding the collection of distributed for Ibn Al-Sabeel rose slightly
zakāh and disbursement to the rightful from 300,147 LYD (2.4%) in 2013 to 310,807
beneficiaries. LYD (1.5%) in 2014, but as a percentage of
total decreased by 0.9%. The share of the
Libyan law prescribes the following staff working on collecting Zakāh fund,
allocation rule for zakāh.

Table 3: Distribution of Zakāh for the eight categories according to Libyan law

Category Percentage

Fuqara 55

Amilin Alayha 10

Muallafat Al-Qulub 10

Gharimun 10

Fi Sabilillah 10

Ibn Al-Sabil 5

Source: Libyan Zakāh Law No. 13/1980

Table 3 compares zakāh funds disbursed increased from 1,113,639 LYD (9%) in 2013
to the beneficiaries during 2013-2014. The to 1,130,162 LYD (5.5%)15 in 2014, but as
share of the poor and needy people was a percentage of total decreased by 3.5%.
the largest proportion of the zakāh funds. It The Fund did not spend any money for
increased by 4.5% in 2014, from 9,797,489 Muallafat Al-Qulub and for Fi Sabilillah in
LYD (79%) of the total Zakāh funds to 2013, while in 2014 it disbursed 11,500 LYD
17,233,514 LYD (83.5%). This is followed and 543,165 LYD for the two categories
by the money spent on the Gharimun respectively.
(Debtors), people that have debts because
of the rising cost of living, treatment 15 The average exchange rate of the Libyan dinar is
1.301 $
expenses or purchase of basic needs.


Table 3: Distribution of Zakāh for the eight categories according to Libyan law

Categories 2013 % 2014 %

Fuqara & Masakin 9,797,489 79.0 17,233,514 83.5

Gharimun 1,185,372 9.6 1,409,535 6.8

Ibn Al-Sabil 300,147 2.4 310,807 1.5

Amilin Alayha 1,113,639 9.0 1,130,162 5.5

Muallafat Al-Qulub 0 0 11,500 0.1

Fi Sabilillah 0 0 543,165 2.6

Total 12,396,647 100 20,638,684 100

Source: Periodic reports of Libyan Zakāh Fund for the years 2010-2016.

Chart 2 supports the above table, and In summary, no zakāh funds have been
shows zakāh funds disbursed during the spent on the following categories:
year of 2014, indicating that most of these Muallafat Al-Qulub and Fi-Sabilillah. This
funds were spent on the poor and needy is because issuing a fatwa by Sharī‘ah
people, according to the regulations on the committees is quite complicated (i.e. the
disbursement of zakāh funds in the Libyan process of issuing a fatwa regarding zakāh
law. distributions is problematic), especially in
the current situation in Libya.

Chart 2. The distribution of zakāh funds for the years 2013-14

Poor & Needy
Debtors 16,000,000
Ben Sabeel
Staff 10,000,000
Maollafat Qulobhm 6,000,000
Sabeel Allah 2,000,000
2014 2013

Islamic Social Finance Report 2020

Zakāh branches throughout the

Libyan cities collect all categories 3.2.4 TRANSPARENCY,
of Zakāh, including Zakāh al-Fitr, al- ACCOUNTABILITY & GOOD
Kaffaaraat, charity, sheep, agricultural
crop, and other types of Zakāh. The
Zakāh Fund collects directly from The Zakāh Fund publishes monthly and
the people, businessmen, and firms. annually all necessary data and information,
Zakāh is collected in three different according to the principle of transparency
ways, through the staff of Zakāh and disclosure. Zakāh Funds and Zakāh
Fund, bank accounts, and directly distribution will be published in an easy
through branches. As shown in Table way, so it can be understood by all people.
(1), Zakāh funds collected increased There are four official and non-official bodies
from less than 6.7 million LYD in controlling and monitoring the Zakāh Fund.
2010 to 29.3 million LYD in 2016. This This mechanism contributes to public trust
is due to people’s awareness of the and to the increase of the number of Zakāh
obligation of paying Zakāh, and their payers. These bodies are:
trust in the Zakāh Fund.
• C
hairman, Board of Directors: The
However, distribution of zakāh funds chairman implements the main strategy
increased from 4.3 Million LYD in for Zakāh Fund and its branches.
2010 to 21 Million LYD in 2015, The chairman also supervises the
and then decreased to 19.6 Million implementation of a yearly plan and
LYD in 2016. Zakāh collections are controls its work.
distributed for the benefit of all
legal categories explained in Qur’ān • A
dministrative Authority: It is a public
and Sunnah. In 2014, the number institution caring about supervision and
of Zakāh payers reached a peak of control of all public entities. It appoints
33,356. Most of the beneficiaries employees, managers, and Chairman of
are the needy and poor (31,830 Board.
beneficiaries), followed by staff (595),
• L
ibyan Audit Bureau: It monitors all
Ibn Al-Sabil (535), and Al-Gharimun
the Fund transactions including Zakāh
(363). However, the category of
collection and distribution. It also
Sabeel Allah and Muallafat Al-Qulub
controls the allocated money for Zakāh
are less than 20 beneficiaries each.
Fund from state budget, and ensures
The category of the needy and
that financial regulations are followed.
poor people is about 55% of total
beneficiaries. Payments were made • P
ublic: This category includes zakāh
in the form of monthly grants for payers and charities in order to ensure
divorced and widows, sick people that Zakāh Funds are directed to the
and disabilities, large families right beneficiaries, by informing them
whose income is very low, home about the periodic reports of Zakāh
maintenance, support to youth to get Fund and presenting their comments
married, and help to find jobs to the through the various complaints.
poor and needy.


Fund and other state institutions,

3.2.5 STRATEGIC ANALYSIS & such as the Social Security Fund,
RECOMMENDATIONS Ministry of Social Affairs and the
Wealth Distribution Fund, which
Strengths results in double payment of
financial aid to beneficiaries.
• L
ibyan Zakāh Fund has a
professional and educated staff. • T
he lack of a unified database
between the Zakāh Fund and the
• T
here is always consistency
aforementioned institutions.
between the main branch and other
branches throughout the Libyan • T
he Libyan Zakāh Fund is
cities. surrounded by laws, regulations and
fatāwa that restrict and complicate
• D
uring the last five years, Zakāh
its work.
Fund has achieved several
objectives including the definition of • T
he Zakāh Fund needs to introduce
Libyan Zakāh Fund, the importance the technology and electronic
of Zakāh for Zakāh payers, and programs used in establishing
for community through different databases and tabulating and
broadcasts, which led to an increase preparing periodic reports that
in Zakāh funds dramatically. showcase the Fund’s work results.

• Z
akāh Fund seriously tries to • T
he Zakāh Fund’s lack of
establish a database containing full disclosure and complete
Zakāh payers and beneficiaries. transparency when it comes to the
amounts collected and disbursed
• R
eviving the obligation of Zakāh
and the actual Fund’s contribution to
for public, and accepting zakāh
improving the recipients conditions
and charity and spending them for
beneficiaries with confidence in Opportunities
accordance with the provisions of
Islamic law. • T
he legislation of Zakāh funds
investment is crucial for the Libyan
Weaknesses Zakāh Fund.

• L
ibyan Zakāh Fund records financial • C
alling for replacing Zakāh with the
surplus at the end of the financial tax.
year for several reasons, the most
important of which is that the rates • T
here is a proposal to amend Law
of Zakāh distributions are defined in No. 49/2012 on the establishment
Libyan law, and cannot be violated. of the Zakāh Fund by making it a
This is not helpful to the economic financially and legally independent
and living conditions of the people. entity, and not affiliated with the
GAAIA, and giving it broader powers
• L
ack of coordination and to carry out its duties and functions.
communication between the Zakāh In addition, the Zakāh Fund remains

Islamic Social Finance Report 2020

restricted by law and regulations. • P

olitical, security and economic
However, the amendment proposals instability negatively affects Zakāh
will support the Zakāh Fund to payers and the citizenry in general.
achieve its goals. The payers’ businesses/activities
are affected by the instability on the
Threats one hand, and on the other hand,
instability leads to poverty rates
• T
he attempt to merge the Zakāh
increase, making it difficult for the
Fund with the General Authority for
Zakāh Fund to help all beneficiaries.
Awqāf and Islamic Affairs GAAIA,
which may frustrate its staff.


Recommendations the burden on the fund due to the

increase in the number of poor and
Despite the development and progress of the needy, and shortage of Zakāh funds.
Libyan Zakāh Fund, it suffers from difficulties Investment of Zakāh Funds in projects
and obstacles that must be resolved. Below that generate income can support
are highlights of the key issues and some Zakāh Fund to achieve its objectives.
• C
oordination between Zakāh Fund and
• M
ore researches, discussions, and other state institutions, especially Tax
studies are needed with Sharī‘ah Authority, Ministry of Social Affairs,
Committee of the Fund and Dar Al- Social Security Fund and Wealth
Fatwa, and more attention must Distribution Fund.
be given to jurisprudence of the
various Zakāh issues, with regard to • T
he material and moral support must
the inclusion of some segments of be provided by the state to the Zakāh
those entitled to Zakāh in the eight Fund so that the Fund can revive
categories, for example, Sabeel Allah the obligation of zakāh, charity and
and Ibn Sabeel. donation.

• S
ome of the departments of the • A
mendments and modernization of
Zakāh Fund and its branches depend the laws and regulations of the Zakāh
on manual classification and manual Fund should be undertaken.
registration, which affects the
• I t is recommended to establish a
performance of the Zakāh Fund and its
Maghreb regional zakāh organization
functions, the Zakāh Fund must rely on
that brings together Arab Maghreb
computer automation as a key factor
countries to supervise the
for development of Zakāh work.
coordination of business between the
• I t can be said that the Zakāh Fund zakāh funds and the exchange of aid
in Libya works alone in collecting and expertise.
money and disbursing it to its
• T
he different zakāh funds need more
beneficiaries, without cooperation of
communication with one another, and
other institutions, so it is necessary
one of the most important things that
to find partnerships with charities,
makes this communication strong and
non-governmental and governmental
smooth is the presence of clear and
institutions to stimulate this sector.
highly efficient standards that evaluate
• T
here is redundancy in the collection zakāh institution’s work.
of funds in Libya, which appears in the
• W
e recommend finding accurate
tax authority in Libya and Libyan Zakāh
standards to evaluate all zakāh
Fund. There are appeals to match
business (administration, Sharī‘ah,
them and unify their efforts.
legal, financial, accounting, economic,
• M
ore attention must be given to technical, communication, charitable
studies, researches and discussions projects, etc.)
to find a Fatwa for the investment of
• This would bring the Zakāh Funds
zakāh funds, in order to try to reduce
closer together and ensure a level-
playing field for them all.
Islamic Social Finance Report 2020

The Committee had to examine the

3.3 MAURITANIA16 following points:


he permissibility of the state taking
over zakāh matters.
Historically, Mauritania did not benefit
• T
he limits of the state’s intervention
from a state-operated system of zakāh
in zakāh matters.
management after the Almoravid dynasty
era, as the country did not know of a • Ways of zakāh collection.
central state from that moment until the
French colonization. The Mauritanian • E
xperiences of other countries and
people were mainly living in tribes and institutions.
in the countryside. A strong drought hit
• Role of zakāh in poverty alleviation.
the country in the 1970s, which harmfully
damaged the cattle that constituted the The recommendations of the Zakāh
basic wealth of the population. This was Committee included the following.
the major factor that sparked the tribe’s
urbanization and their migration to the INSTITUTIONAL STRUCTURE18
main cities in the country.
On the permissibility of the state taking
It was only in the early 1980s that the over zakāh matters:
state established a public institution for
• Z
akāh is the third pillar of Islam and
zakāh and awqāf under Decree No. 119/82,
therefore the Committee considers
providing with some degree of financial
the importance of organizing it
to ensure its performance in the
required manner.
here is a sovereign factor in it and
the role of the Governor in this field
In 2003, the Finance Law stipulated that is important.
zakāh would be deductible from the income
• Z
akāh is a means to revive the
tax. However, this provision remained
civilizational dimension of the
unapplied. In 2005, at the request of the
central state.
Minister in charge of the Islamic Affairs,
a technical committee17 was formed to • I t is a key factor in the reduction of
consider the study of zakāh collection and poverty.
the means to do it.
• A
center for the attraction of foreign
16 Paper “Overview on Zakāh & Awqaf Sectors in zakāh should be set up.
Mauritania”, Abdallahi Ould Addoud, Deputy CEO of the
Awqaf National Institution (Mauritania), presented during • I ssues relating to taxation, public
the Kick-off Workshop of the “Islamic Social Finance
expenditure, and transparency in
Report”, held in Tunis on 10 June 2017, and co-organized
by IRTI (IsDBG) and Zitouna Tamkeen MFI zakāh disbursement should be
17 Unsigned draft of the minutes of the Technical addressed.
Commission entrusted in 2005 by the Minister of Islamic
Affairs to study the practical arrangements for the matters
18 Ibid
of the Zakāh in Mauritania.


• T
here is a need to improve the The Committee also noted the need to
payment of zakāh among many high facilitate overcoming all obstacles that may
net-worth individuals. prevent the collection of zakāh. Among these
On the limits of the state’s intervention in
zakāh matters: • A
civilizational barrier, related to the
absence of the concept of an Islamic
The method of the intervention of the state state
should take the form of supervision, thus
• A
psychological and social barrier,
providing flexible methods of collection
related to the non-responsiveness of
and disbursement to the expected zakāh
the muzakkis to the method of zakāh
authority and opening the way for Muzakkis
to be aware of the way their zakāh is spent.
The Committee also recommended a gradual
The Committee concluded that the increase in zakāh collection as follows:
following institutional actions are
necessary: • T
he zakāh authority should initially
limit the collection to 50%, leaving the
• T
he enactment of a law regulating rest to the muzakki to distribute by
the collection and disbursement of himself.
• S
tarting with the registered
• T
he establishment of an institutions.
independent institution to deal with
the collection and disbursement of The Committee also recommended to:
zakāh. • B
enefit from existing institutions and
• T
o provide the institution with structures (Awqāf National Institution,
the necessary means to carry Association of Mauritanian Scholars
out its mission, which requires League, Committee of Mosques and
independence and protection, Madrasas19 ).
through: • T
he state shall bear the costs of the
establishment and management
* G
iving it the appropriate legal
of the authority during the first two
* P
roviding it with the appropriate
• T
he work of the authority shall be
human capital through
concentrated during the first two
◊ E
stablishment of a legislative years in the city of Nouakchott and
council comprising of all other major cities, if possible, after
types of stakeholders which a simplified regional office will
◊ Establishment of an executive be opened at the level of the internal
body with the necessary regions.
executives to manage it However, these recommendations, which
(different specialties) were accompanied by the preparation of a
* Providing it with the necessary draft law that specifies the methods of zakāh
equipment and means
19 Traditional Islamic Schools
Islamic Social Finance Report 2020

collection and disbursement, are yet to be • T

here are no studies that deal with
implemented. the economic and financial aspects
of zakāh.
Therefore, until today, there are no official
structures responsible for the collection Opportunities
and distribution of zakāh in the country
and the zakāh is still practiced in an • T
he existence of an Islamic financial
informal manner. There is no systematic system in Mauritania (Islamic
data available on zakāh collection and banks, insurance companies).
distribution. • R
equests from a large part of civil
society to develop the sector. SUPPORTING INFRASTRUCTURE
• W
orsening social inequality and the
In Mauritania, we do not find an entity that
Government’s need for additional
is fully dedicated to zakāh knowledge,
financial resources.
researches, training, etc. However, the
zakāh rules are taught in the Islamic • M
obilizing financial resources from
universities and schools and mentioned in local communities.
the Juma’ah (Friday) sermons.

he process faces roadblocks
ACCOUNTABILITY & GOOD created by officials trained in
Western countries and vested
GOVERNANCE interests.
Although the zakāh collection and • G
overnment seems to be under fear
distribution are not institutionally organized, of creating additional tax burden on
Mauritanian people usually give importance citizens.
to disbursing it to one of the deserving
categories. Therefore, they may disburse it
by themselves or give it to a reliable person
with proven honesty to do it on their behalf. Recommendations

• T
he speedy enactment of a law
3.3.5 STRATEGIC ANALYSIS & regulating the collection and
RECOMMENDATIONS disbursement of zakāh

• T
he establishment of an
independent institution to deal with
• T
he existence of a draft law that the collection and disbursement of
specifies the methods of collecting zakāh
and disbursing zakāh,


• T
here is no special law that
encourages the payment of zakāh in

At present, Morocco is one of the Muslim

3.4 MOROCCO countries that does not yet benefit
systematically from the zakāh funds.
3.4.1 OVERVIEW OF THE SECTOR However, since 1979, Morocco began to
think about the integration of zakāh into
Since the Islamic conquest, Morocco the economic and social fabric at the
became one of the Islamic countries initiative of the late King �asan II. And as
where most of the successive states and from then, a private account for zakāh was
dynasties looked after organizing the added in the Finance Act of 1980 called
collection and disbursement of zakāh as “Zakāh Fund”. This account includes a
a third pillar of Islam and as a financial credit balance for zakāh collections and
obligation taken from the rich and given a debit balance for the disbursement of
to the poor. This situation continued until zakāh funds, but no provisions have been
the colonialism period in the beginning of recorded to date. Eighteen years later,
the last Century, when the state stopped zakāh was again under focus at another
the collection of zakāh and it was replaced initiative of the late King �asan II in 1998.
by the so-called system of arrangement The Ministry of Awqāf and Islamic Affairs,
“Attartib system”20 . Since then, the in collaboration with the Ministry of
Moroccans have been giving out their Economy and Finance, prepared a draft law
zakāh individually in an informal manner. to organize zakāh and prepare guidelines
for zakāh in collaboration with some
The first phase was from the Islamic
Moroccan Sharī‘ah Scholars. However, the
conquest until the establishment of
death of King �asan II in 1999 halted the
the Almoravids dynasty (1056-1147)
when zakāh was collected and spent
in a decentralized manner by the local In 2003, the King Mohammed VI
authorities, and the surplus was given to reintroduced the idea of organizing zakāh.
Bait al-Mal. The second phase was after But there has been no implementation to
the Almoravids until the beginning of the date, although the Minister of Awqāf and
20th Century. During this period, the system Islamic Affairs mentioned in 2009 the
shifted in favor of centralized management, expected issuance of a royal decree for the
with exceptions sometimes in favor of establishment of the Zakāh Fund.
decentralized local spending, especially
for zakāh al-fitr. And the third phase was It should be noted that the estimates
the era of colonialism when the state of zakāh collections in Morocco for the
abandoned its role in zakāh management. period 2015-2017 range between 2.7 and
3 billion USD, or about 2,77% of GDP; the
20 The era of Hassan I (1873-1894), “the system estimates are from 0.8 to 0.9 billion USD
of arrangement of charity” was arranged next to Zakāh, for agriculture GDP and from 1.9 to 2 billion
in which Zakāh was collected beside some taxes. This
USD for non-agriculture activities.
tax was one of the most important direct taxes before
the French protectorate in Morocco. The arrangement
In case of zakāh institutionalization, the
or “Attartib” includes three taxes: the tax on annual
agricultural crops, the tax on fruit trees, and the tax potential of zakāh collection is between
on livestock. See: http://abdelghafour19.blogspot. 0.9% and 2.15 of GDP, and ranges from 0.9

Islamic Social Finance Report 2020

to 2.3 billion USD. The potential of zakāh collect and distribute zakāh in accordance
distribution is between 0.81 and 1.94 of with the Supreme Committee’s program.
GDP, and ranges from 0.8 to 2.1 billion USD.
It is noteworthy that besides the official
efforts to organize zakāh, there were other
3.4.2 REGULATORY & POLICY Moroccan efforts to institutionalize zakāh,
FRAMEWORK especially the efforts of the “Moroccan
Association for Studies and Research
Several questions have been raised in in Zakāh”, which was established in
Morocco about the reasons for the non- 1994. The association has undertaken
activation of the Zakāh Fund since 1980, several initiatives to urge and encourage
despite its inclusion in the Finance Law, decision makers to institutionalize zakāh
and especially after the speech of King in Morocco, like the letter that was sent
�asan II in 1998 when he announced to the Moroccan Government (1998-
the state’s supervision on reviving and 2002), in which the association called
organizing zakāh. In the same year, a for activating the Zakāh Fund, which was
committee composed of representatives of initially included in the Financial Law
the legislative and executive bodies, some since 1980. A proposal21 was submitted
Sharī‘ah scholars of the Kingdom, as well
reflecting its perception about how to
as some experts in public finance, prepared
implement and organize zakāh in Morocco.
a project about how to organize zakāh in
The cornerstones of this proposal are: (A)
Morocco. However, there was no further
Organizing the collection and distribution of
action in this regard.
zakāh by establishing independent regional
This project includes the initial conception funds with public interest status, and a
of the structure of the zakāh institution, central fund for planning and coordinating
which will supervise the collection and without any direct interference of the state;
distribution of zakāh. The main elements (B) Adopting the principle of the optional
adopted in determining the institutional payment of zakāh and the encouragement
framework for zakāh are to make this of this option; (c) Establishing a Sharī‘ah
institution under the direct supervision of Supervisory Board. This proposal also
the King, emphasizing the role of zakāh as includes the launch of a comprehensive
the third pillar of Islam and its importance awareness program in the country about
in achieving solidarity and compassion zakāh, its provisions and purposes, and
among the people, and ensuring the the creation of a database of zakāh
flexibility in structuring the institution to beneficiaries.
enhance citizens’ confidence.
The Moroccan Association for Studies
The project proposed the establishment of and Research in Zakāh also seized the
a “Supreme National Committee for Zakāh” opportunity of the National Taxation
headed by the King, which shall work on a Conference in 2013 about Tax Reform to
program that includes specific objectives present a memorandum to the Ministry
within the strategy presented to the King. of Economy and Finance summarizing
It also proposed the establishment of
21 The proposal was published in 7th and 8th edition
regional committees for zakāh that will of the Journal of Zakāh Issues in 2002.


its vision of how to combine zakāh and integrate, in the list of deductible
taxes in Morocco and its proposal for a charges from the taxable base, the
new outlook to give zakāh a privileged zakāh paid to other categories of
position within the public finance and tax beneficiaries other than the Zakāh
system in Morocco. In this memorandum, Special Fund,
the Association clearly adopted the idea of
revising the tax system in a new model that • R
evise and complete the article 10
is different from the models that call for to indicate the categories of zakāh
the application of new taxes, such as the beneficiaries eligible for this tax
tax on wealth, capital tax, inheritance tax deduction.
and social solidarity tax, that completely • E
nsuring the tax neutrality to avoid
disregard the zakāh obligation, which is any additional tax pressure.
a pillar of Islam and an important part of
the authentic Moroccan civilization and • O
pening the door to donations to
the cornerstone of Islamic economy. In ensure the collection of charity
this context, the Association presented funds.
several proposals that would achieve a
On the other hand, it should be noted that
smooth integration of zakāh in the tax
Morocco has a legal framework since
system in Morocco. The last memorandum
1958 for the associations of public and
was presented to the National Taxation
charitable interest status, which operate
Conference about Tax Reform that was
in the social and humanitarian sectors,
held in Rabat in May 2019. The proposals
and thus can benefit from the zakāh
include the following recommendations:
funds besides donations. This framework
• T
he introduction of an optional provides a broad potential for associations
zakāh system by adding some items to fund their programs and projects.
concerning the integration of Zakāh
In this regard, public funds originating from
regulations within the framework of
the public sector can be distinguished from
General Tax Code.
other funds, whether they are from self-
• A
dopt the necessary regulations for financing, contributions from individuals,
the activation of the “Zakāh Special from private sector, from foreign or public
Fund” provided for by the finance charity petitions that was regulated by a
act since 1980. law act in 1971. The purpose of the Act
is to facilitate the associations’ access
• T
he coexistence between the tax to funds and property through various
and zakāh systems. campaigns aimed and addressed to the
• T
he right to benefit from the public.
deduction from the tax for the
The Prime Minister’s publication on the
amount paid to the “Zakāh Special
partnership between the government
and Associations, issued in 2003, is also
• R
evise and complete the article 10 considered one of the most important
of the General Tax Code in order to references of the institutional framework

Islamic Social Finance Report 2020

of the association which constitutes an the collection and distribution of zakāh.

important turning point in the history of
the relationship between the Government The proposal of the Moroccan Association
and associations. The framework of for Studies and Research in Zakāh includes
partnership and contracting is based on the creation of a central fund for zakāh
results and performance, the optimal under the supervision of a national council,
targeting of priority categories and areas and regional funds for zakāh under the
of intervention, good governance and supervision of regional councils. The
simplification of the provision of public Association also advises the creation of
support, and improvement of coordination links between the various branches in the
and control. country, in which a group of persons meet
to collect their zakāh in one fund and use
Following the adoption of the Kingdom’s it in social projects for the benefit of those
new constitution in 2011, it became who are entitled to zakāh. Therefore, this
necessary to develop the organizational bilateral cooperation, within civil society,
legal framework for the association. contributes in human development by
Support and inclusion in the democratic means of the basic legitimacy of zakāh.
transformation process is envisioned
by the constitutional document, in On the actual level, the public interest and
which civil society and associations charity association may be considered as
should help to protect human rights, an important institutional structure in the
development and awareness. As a result zakāh sector. This status entitles them with
of interactive meetings and seminars many privileges and rights more than the
with civil actors organized in 2015, a other institutions because they can appeal
code for the associations was prepared for public charity. The total number of
taking into account the new constitutional associations recognized as public interest
requirements. The code limits the state was up to 217 in 2016 out of 130,000, a
of fragmentation of laws related to quarter of them engaged in social work.22
associations, especially with respect to the
Practically, the Moroccan Association for
principles of incorporation and dissolution,
Studies and Research in Zakāh and the
public interest status and controlling
“Journal of Zakāh Issues” which is issued
the public charity petitions as well as
by the Association, is one of the main
institutional and financial support.
supporting infrastructures for zakāh sector INSTITUTIONAL STRUCTURE & in Morocco.
Thus, in order to increase awareness of the
The project prepared by the Ministries of importance of zakāh and re-activate its role
Awqāf and Islamic Affairs, and Economy in sustainable development, the Moroccan
and Finance includes the main structures Association for Studies and Research in
for the organization of zakāh in Morocco Zakāh was established in 1994 by a group
which are the establishment of a Supreme
22 from the report published on the website of the
Committee for Zakāh for planning and General Secretariat of the Government on 27 June 2016:
coordination, and regional committees for


of scholars in various fields of knowledge, at the same time on the subject

specialists in the Islamic economy, of zakāh. At the end of 2016, Dar
businessmen and many economic and Al-Hadith Al-Hasaniyah School, in
social actors. Since its establishment, it a well attended event, discussed a
has been working to spread awareness PhD thesis prepared by a member
among the citizens of the necessity of of the Constitutional Council of the
zakāh, the promotion of studies and Kingdom on the topic of the “Theory
scientific research and seminars on zakāh. of Integration between Zakāh and
One of the most important achievements Tax”.
in this section is the participation in many
international conferences, regional and • H
igher Institute of Commerce and
national seminars on zakāh, organizing Business Administration, at the
workshops on zakāh and issuance the beginning of 2017, also received
“Journal of Zakāh Issues”. This journal a high attendance during the
has been publishing reports on research discussion of the graduation thesis
and studies on zakāh since 2000, and 38 to obtain the national diploma of
editions were issued by the end of 2016. accounting (CPA) in the subject of
The journal deals with the issues related zakāh accounting, with the presence
to zakāh and its jurisprudence in the past of the Prime Minister.
and present, and spreading the awareness • T
hree editions of research seminars
of the importance of this pillar of Islam, about “Zakāh, Waqf and Charitable
highlighting its economic, social, political Work” were organized in April
and educational role and effectiveness, and 2017, May 2018 and June 2019 at
defending the importance of institutional Mohamed V University on the theme
application of zakāh and proposing “Contemporary Islamic Thought
solutions to integrate it into the financial and Issues of Society and the
and economic issues of Morocco. Environment in the Mediterranean
World”, in cooperation with the
The scientific research in Moroccan
Moroccan Association for Studies
universities is one of the supporting
and Research in Zakāh.
infrastructures in the field of zakāh. This
subject receives increasing attention
among postgraduate researchers. This was 3.4.3 ZAKĀH COLLECTION &
facilitated by the supervision of students DISBURSEMENT
who are the members of the Association. In
recent years, several PhDs have discussed In an optimistic scenario, the estimation
about zakāh institutionalization in Morocco of zakāh funds can range from 2.5% to
and many master’s theses have been 3% of GDP, representing about USD 2.5 to
completed in different aspects of zakāh. 3 billion, in addition to zakāh al fitr, which
Here are some examples: ranges from $20 to $30 million annually.
However, the expected amounts of zakāh
• T
he Faculty of Literature and Human remain relatively low, thereby affecting the
Sciences in 2014, for the first time in impact of zakāh on development.
its history, discussed seven theses

Islamic Social Finance Report 2020

Moroccan Association for Studies and The Association also believes that the
Research in Zakāh, in one of its previous social investment approach should be
proposals on the priorities of distribution of adopted for zakāh beneficiaries based on
zakāh, advised for the allocation of 3/8 of the economic empowerment of the poor
zakāh collected for the poor and needy, 3/8 which is considered as an essential source
to help the unemployed and encourage self- of wealth. This is in addition to zakāh
employment, 1/8 for zakāh workers and support for Islamic microfinance activities
1/8 for literacy promotion. These priorities by providing zakāh resources to the
may be modified or other priorities may institutions offering Islamic microfinance
be added due to a greater effort in zakāh activities and services, and zakāh funds
distribution to enhance the production in the form of poor portfolios, as well as
and to increase the national wealth and the distribution of zakāh in the operational
development. fields in order to give this duty the proper
developmental character.
In November 2014, a memorandum to
the Economic, Social and Environmental
Council about the contribution of zakāh
on the distribution of wealth in Morocco, ACCOUNTABILITY &
advised that the support of the poor GOVERNANCE
should be reconsidered by allocating direct
support from zakāh funds in a manner that The criteria for accountability and
reduces the gap between the community transparency can be derived from the
classes. Accordingly, financial allocations contents of the aforementioned proposals.
should be allocated through the zakāh It emphasizes separation between
mechanism, which is specific and direct to the general and zakāh budget, so that
these categories. the zakāh institution is financially and
administratively independent, subject
Regarding the proposed projects for the to financial and Shari’a supervision,
distribution of zakāh, the association annual monitoring, good governance,
has a clear vision of the use of the zakāh accountability mechanisms and reports on
mechanism based on two main axes: direct financial and administrative achievements.
support for the poor and the destitute,
and on the other hand, the integration of In this context, it is proposed that
the unemployed who are able to work in the institution must be subject to the
income generating projects and programs, supervision of the Supreme Council of
in human and social development. Accounts and the General Inspectorate of
Finance, and the publication inspection
The Association considers that it is report to establish the trust in zakāh
necessary to identify the needs of all institution.
the participants in accordance with the
criteria of priority and regional, social and
economic environment, rural or urban, and 3.4.5 STRATEGIC ANALYSIS &
to determine them as per the program RECOMMENDATIONS
achievement and the extent of social
disability. In this segment, we outline some of the
strengths, weaknesses, opportunities and

threats posed by the organization of zakāh the organization of zakāh.

in Morocco:
• A
bsence of a national policy on
Strengths zakāh system.

• T
he announcement on several • A
bsence of privilege in the existing
occasions the intention of the state tax system, such as deduction of
to organize zakāh. the amount of zakāh from the tax
• R
eference to the Zakāh Fund in the
Finance Law. • T
he weakness of economic and
social impact of voluntary and
• H
igh level of community awareness individual payment of zakāh.
on the importance of zakāh.
• Z
akāh is not institutionalized in
Weaknesses covering the needs of the poor that
the state is also unable to cover
• A
bsence of formal or systematic
especially in the main social sectors
organization of zakāh.
such as health and social welfare.
• T
he fluctuation of political views
• L
ack of national campaigns to
about whether to proceed or delay
collect donations from zakāh funds

Islamic Social Finance Report 2020

in the context of seeking public budget. The zakāh budget, in the

charity for the benefit of the groups case of the regulation of zakāh, can
entitled to zakāh. more efficiently cover the targeted
portion of zakāh categories.
• L
ack of integration between
zakāh and other forms of Islamic • A
dvanced technological means
finance such as waqf and Islamic available in Morocco to raise the
microfinance. funds.

• A
bsence of university programs for • P
ossibility of supplying the zakāh
the preparation of highly-qualified institutions with a preferential tax
specialists in the field of zakāh. framework through tax exemptions
for all its actions and operations
Opportunities nationally or locally, like waqf.
• T
he existence of formal and civil • G
reat interest in research and
perceptions to organize zakāh. seminars in the field of zakāh
• T
he existence of many community • E
xistence of great interest among
needs that the state budget is a wide range of economic actors
unable to meet, and zakāh can to perform their zakāh duties
contribute to cover them. institutionally.
• L
aunching the activity of Threats
participatory banks and Islamic
finance in Morocco • F
ear of using zakāh funds in other
means than its legitimate use.
• T
he possibility of expanding the
competencies of the Sharī‘ah • F
ear of creating an additional
Committee for participatory finance tax burden on citizens in case of
to cover the field of zakāh mandatory application of zakāh.

• T
he possibility of expanding the • F
ear of using the information
powers of the Supreme Council authorized in zakāh as a basis for
of Accounts and/or the Supreme tax audits.
Council for Financial Control of
general Waqf to include also the • F
ear of applying zakāh to groups of
financial control of zakāh. society without others or applying
them to other activities and
• T
he possibility of collecting exemptions.
donations from zakāh funds in the
context of seeking public charity. • A
bsence of university programs for
the preparation and rehabilitation
• T
he existence of allocation of of highly competent frameworks
important financial resources to the specialized in the field of zakāh.
social sectors within the general



In this report, we propose some measures • M

otivate zakāh payment in
to activate the organization of zakāh, the form “zakāh links” among
some of which may require a choice individuals in the framework of
between different proposals: institutionalizing zakāh.

• T
he enactment of a national zakāh • S
tart to collect zakāh from
policy that affirms the status given institutions and companies.
by the state to the application • S
haring of information regarding
of this pillar to the benefit of the the top payers and the lists of
country and its citizens. beneficiaries of the distribution of
• E
xemption of some sectors at the zakāh to increase the confidence
beginning of the application of of the citizens.
zakāh in the framework of gradual • F
ocusing on the distribution
application. of zakāh on the operational
• S
tarting the application with areas that will spread the spirit
categories that will give impetus of initiative and work for the
to the success of the zakāh beneficiaries.
institutions such as participatory • A
llocation of consumption zakāh
banks, telephone companies, high to the poor who are unable to
value-added productive sectors work.
and institutions that benefit from
great privileges by the force of law • C
hoose the most important
or the nature of the market. religious and national events and
the best methods to promote the
• A
pply the 80/20 rule on the issue collection of zakāh.
of the mandatory rule and the
issue of priority sectors in the • I ntensification of awareness
performance of zakāh and thus activities to make zakāh a
apply the 20% premium. distinguished community affair.

• S
tarting with the obligatory • P
romotion of the scientific
application of zakāh on a person research in the field of zakāh.
who has a zakāh “Nisab” of more
• F
ollow up on the progress by the
than ten times the zakāh, and the
Supreme Scientific Council in
rest is applied gradually thereafter.
Morocco, and give more attention
• S
tudy the components of the to the various zakāh issues.
Moroccan economic system to
allow accurate estimation of the

Islamic Social Finance Report 2020

French protection), took only 36 Tunisian

3.5 TUNISIA riyals a year from all the inhabitants of
cities and tribes. Until Sadiq Bey doubled
3.5.1 OVERVIEW OF THE SECTOR the tax amount from 36 Tunisian riyals
to 72 Tunisian riyals and this led to the
The importance of studying the historical revolution. Ibn Abi al-Diyaf also mentions
foundations of the zakāh Institution in that another institution in Tunisia was
Tunisia stems from the fact that it provides existent, the Waqf Administration, that
us with a civilization-based benchmark, a the Bey resorted to its funds to pay the
sensible point of reference through which budget deficit. However, we do not find any
one can evaluate Tunisia’s experiences in mention of the zakāh institution, even by
this sector before the independence from reference to other sources.
the French and beyond. And by this, one
can help inspire the drawing of the future After the independence in 1988, an attempt
directions for this sector. was made by civil society in the city of
Sfax (capital of the south of Tunisia), to
Despite the scarcity of information related form the founding body of an association
to this sector, compared to the awqāf for the collection and distribution of
sector, some historical sources have zakāh. It was founded by Ahmad al-
talked about the role of governors and Aswad26 . One of its members, Al-Bashir
princes in Africa during periods of power bin Jedidia27 , informed us that the first
and stability, in collecting and distributing year, the association collected 300,000
zakāh, whether within the office of Tunisian dinars and one million Tunisian
Kharaj or independently. These sources dinars during the second year. However,
also spoke in the era of Al-Bayaat about this experience ran into strong political
their role in establishing Takayas23 and and administrative opposition and ended
Bimirmarstanaat24 , and how to employ in failure. Subsequently, a Zakāh Fund
zakāh funds and distinguish them from was established at the request of the
other funds collected in addition to government. Al-Tuhami was elected as
waqf and donations, to finance projects Chairman of the Higher Islamic Council
benefiting the poor and people of different and Director of Al-Zaytouna University. This
needs. Fund will be discussed in detail later.
It is certain to us, through some
sources and references, that the zakāh 3.5.2 REGULATORY & POLICY
institution did not exist in Tunisia before FRAMEWORK
independence. In his book “The defiance
of the people of the time with the News of The collection and distribution of zakāh
the Kings of Tunisia and the Era of Safety”25 requires a license to be obtained from the
, Ahmad bin Abi Diyaf mentions especially Presidency of the Government pursuant
in the section devoted to the revolution of to the higher order of 1922 revised on 21
Ali bin Ghathem, that the ruling authority December 1944. However, there is no legal
at that time (i.e 20 years before the text that prevents charities from accepting
zakāh money in cash or in kind. This is
23 Free of charge motels
24 Free of charge hospitals 26 No additional information about the person
25 P5-6 27 Retired Professor of Islamic Education


done by many of these associations, and It was asked for its chapters to be shortened,
donors are assured to have their money and some amendments were made to it
spent in legitimate ways. so that the Constituent Assembly could
discuss and ratify it. It was condensed into 3
As part of the institutionalization of this chapters (the first in the creation, the second
sector and other sectors of Islamic finance, in the resources of zakāh funds, the third in
a National Committee for the Development the Sharī‘ah Supervision Committee). For the
of the Legislative Framework for Islamic same purpose, an order for administrative
Finance was established by the Ministry of and financial management was prepared,
Finance in 2012. It was tasked with forming including 30 chapters in 2 sections. And
seven subcommittees (Islamic Contracts to this date, this is still on the National
Committee, Standards Committee, Islamic Assembly’s agenda.
Banking Committee, Islamic Funds
Committee, Awqāf Committee, Zakāh • A
second Ministerial council was
Committee) in order to prepare projects of conducted for the same purpose
interest in Islamic finance. The Ministry of on 2 May 2014, after which the
Religious Affairs has the task of preparing government spokesman called upon
the Awqāf and Zakāh projects. the National Constituent Assembly to
speed up the discussions regarding
A first committee was formed for the the creation and ratification of the
purpose of issuing a draft law that would Tunisian Zakāh House law.
create a new institution for collecting
and distributing Zakāh. The Ministry then INSTITUTIONAL STRUCTURE28
decided to change its composition, since
it did not show any signs of progress and In 1989, the state issued a fund for zakāh
form a new committee to submit a draft pertaining to the Tunisian Social Solidarity
law to create a “Zakāh House” after 8 Union29. In its second chapter, the Principal
sessions. Law describes the main function of this
fund, which is to “collect zakāh resources
• T
he first Ministerial council was in a special fund, to be disbursed according
conducted on 1 March 2013 to to religious teachings.” It also states that its
consider this project (32 points in budget is independent and that its accounts
4 sections and a memorandum of are separate from income and disbursement
reasons): from social solidarity accounts. It is also
to be administered by a national body
The establishment of a public composed of 11 members and by the
institution supervised by the Ministry of President of the Supreme Islamic Council.
Religious Affairs of a non-administrative Its management will be done in accordance
nature with a legal status and financially with Islamic teachings and in consultation
independent. with the Supreme Islamic Council regarding
matters of religious character.
* Administrative organization.
28 “Zakāh Guid , Republic of Tunisia, Prime Ministry,
* Financial Management. The Higher Islamic Council.
29 A consortium of charities under the supervision of
* Sharī‘ah Supervisory Board. the Ministry of Social Affairs

Islamic Social Finance Report 2020

This national body is represented by imams, preachers or religious

regional bodies and some local bodies, guides, and fill the role of vice-
each of which has a special fund which president;
uses the material resources available to the
Tunisian Union for Social Solidarity in the • M
ember of the governing body of
center or in the regions. The first national social solidarity and to be a general
symposium on zakāh funds was held on secretary;
22 June 1992. It was the first and last, • T
reasurer of the Regional
thus making the status of the zakāh funds Committee for Social Solidarity and
classified as follows: to be the assistant treasurer; and
• F
unds operating and seeking • 5
other members, including
to carry out what is entrusted representatives of the people
according to the decree and Sfax is reputable for righteousness and
at the head of these bodies, good behavior.
• Inactive funds, and The observer for the activity of this Fund
• Funds that don’t exist at all.
• T
he activity of the Fund began in
Chapter 15 of the Zakāh Fund’s Bylaws
stipulates that the regional organization 1989 (the year in which a campaign
of the Zakāh Fund is composed of 11 was launched against some political
members: opponents who could benefit from
these funds at the discretion of the
• A
representative of the organization political and security authorities),
known by his religious reputation as and completed its activities in 2006.
a member of the governing body of
• T
he income position of this Fund
the regional committee for social
was weak, given that the supervisor
solidarity and chairman of the
of this institution is the Government.
regional committee to facilitate the
Zakāh Fund; • T
he expenses of this Fund were
almost equal to its income, with no
• A
representative of the Supreme
knowledge of the citizens of the
Islamic Council, or one of the

Zakāh Fund
Income of the Expense of the
Banks & CCP Old Balance Extra Balance
month Month
BEST BANK 75,724,453 75,724,453

CCP 3050-00 28507,7 28,507,7

CASH 0 0

Total 104232,15 104232,153


As of 14 January 2011, the Fund had no • T

he Tunisian Association of
activity. The value of the Fund’s resources Islamic Economics, established in
as of March 2014 was 104,232,153 accordance with the provisions of
Tunisian Dinars (USD 37.01 million), Decree No. 88 of 2011 (the official
according to the latest report submitted by Journal 18/1 October 2011). The
the Tunisian Social Security Union. aim of this association is to: SUPPORTING INFRASTRUCTURE * S

upport scientific research in
Islamic economics.
• T
he Tunisian Association of
Islamic Finance, established in * o Conduct studies aimed at
accordance with the provisions of achieving balanced, sustainable
Decree No. 88 of 2011, a scientific and stable development by
association concerned with benefiting from the institutions
deepening scientific research in of the Islamic economic system.
the field of Islamic finance. The
* P
rovide advice to government
Association of Religious Affairs
bodies and public and private
submitted a draft law for a Tunisian
economic institutions that wish
Zakāh house supported by a
to apply the principles of Islamic
preliminary study, with a caption
economics and finance.
explaining the reasons and an
explanatory appendix to some • T
he Tunisian Association of Zakāh
terms prepared by Dr. Abdul Sattar Sciences, which was called the
al-Khuwaildi, Secretary General of Tunisian Association for Zakāh,
the International Islamic Center for was established in accordance with
Reconciliation and Arbitration based the provisions of Decree No. 88
in Dubai. of 2011 (Official Leader 74/2012).

Islamic Social Finance Report 2020

It cooperates with all relevant and the Ministry of Religious Affairs

structures and organizations commissioned a consulting firm to prepare
nationally and internationally in a study to diagnose the reality of religious
the area of zakāh. It organizes space in Tunisia and to prepare a vision for
annual international seminars and its rehabilitation, during which a survey was
awareness seminars for preachers conducted during September and October
and imams, in cooperation with 2014. The survey consisted of 1,200
the Ministry of Religious Affairs. interviewees representing citizens over
It is also a member of the Board the age of 18, with respect to the following
of Directors of the Global Union criteria:
for Zakāh Rite. It is linked to
• D
istribution between men and
several international partnership
agreements, interested in the
jurisprudence side of the studies, • Distribution by educational level.
seeks to deepen scientific • D
istribution between urban and rural
research and dissemination, and areas.
is a scientific reference in the
jurisprudence of zakāh companies • G
eographical distribution by
and accounting. It also issued Governorate.
a guide to zakāh accounting for The results, at the individual level, showed
commercial activities. that about 20% of all respondents paid
zakāh. And that the initial estimate of
In December 2016, the Association, in
collection of zakāh funds ranges widely
cooperation with Zaytouna University,
between 400 and 1,100 million Tunisian
presented to the Prime Minister the draft
dinars annually (without accounting for the
law “Establishment of the Tunisian Zakāh
zakāh of companies, which represent the
Foundation”. This project, before it was
bulk of zakāh funds). It may be noted that
sent, received the approval of Dar Al-Iftaa
such numbers are estimates only, and, as
after some amendments. This draft is not
mentioned earlier, there is no systematic
very different from what was stated in the
data available on the actual zakāh
first draft prepared in the first version of the
mobilized in Tunisia.
Sub-Committee tasked on the behalf the
Ministry of Religious Affairs. Based on the studies provided by experts
and researchers in the Islamic economy,
3.5.3 ZAKĀH COLLECTION & the rate of 5% of the national product can
DISBURSEMENT 30 be considered a reasonable proportion to
estimate the zakāh proceeds. Tunisia’s
There are no official statistics that gives gross national product for 2012 is
real figures on the amount of zakāh in estimated at 71 billion dinars; it therefore
Tunisia, but some of the figures presented means that the state can collect about 3.5
in some studies prepared by consulting billion dinars, or about 13% of the projected
firms mandated by official institutions can budget for 2013 and more than half of the
be used to indicate the amounts that can annual borrowing amount31.
be collected. The Tunisian government 31 These figures were presented in the dissertation
of Professor Hassan Kaneish, Chartered Accountant on
30 Archive of the Ministry of Religious Affairs the 9th page

Some other figures32 also indicate that the • T

ND 370 per month / family
zakāh funds in Tunisia account for about (coming from Banks deposits)
12% of Tunisia’s budget and 5% of the
gross national product per year to reach • 5
4,000 line of finance for each
US$1,500 million annually. Zakāh funds are unemployed to establish a micro-
also relevant to the money invested in the project valued at TND 10,000 each
Tunisian stock exchange, reaching about (coming from the listed actions in
200 million dollars annually33. the stock market).

These figures do not take into

In the above-mentioned study, Tunisians
consideration the zakāh that can be
were asked about the extent to which they
collected from other types of non-listed
differentiate between zakāh and the taxes
companies, liberal professions, gold and
paid to the state, and who has the right to
collect their zakāh if they found difficulties
in spending it. The following are the results: An estimation of the potential of zakāh in
2018 was also performed by the ATZ and
• L
ess than 40% of the respondents
amounted around TND 5 million (i.e. USD
are convinced of the difference
1.745 million).35
between zakāh and taxes paid to
the state.
• 8
4% of those who pay their zakāh
have no difficulty in spending it on ACCOUNTABILITY & GOOD
their beneficiaries, compared to 13% GOVERNANCE
who find it difficult.
Almost all projects submitted by the
Interestingly, a study conducted by the Islamic Finance Sub-Committee, or
Tunisian Association for Zakāh Sciences associations, emphasize the need to
(ATZ) to assess the zakāh potential in provide guarantees for the establishment of
reducing/alleviating the poverty of 250,000 such an institution based on transparency
families, declared the recipients of the and good governance, so it must be:
social subsidies of the Ministry of Social
Affairs in 2017 and came up with the • A
public institution with a non-
following: If the zakāh is collected in 2017, administrative nature with a legal
the portion of each above-mentioned family status and financially independent
would be:
• A
n institution supervised and
• 71 Kg of Olive Oil per year/ family monitored by the state (the Ministry
of Social Affairs for the social role
• 73 Kg of Dates per year / family it can play and to reduce political
tensions, or the Ministry of Religious
• 18 pieces of bread daily/ family
Affairs considering the link of zakāh
to religious matters).
32 In the book of the rehabilitation of religious space
according to the Constitution of 2014 34 Presentation of Achraf BOUDAIA, Chartered
33 “The Zakat in Tunisia, Reality and Prospects,” at Public Accountant and Head of Tunis bureau of the ATZ,
the Islamic Social Finance Workshop in the Arab Maghreb delivered on March 27th, 2018
Countries, Tunis, 15 Ramadan 1438/10 June 2017 35 Presentation of Achraf BOUDAIA, delivered on
October 16th, 2018
Islamic Social Finance Report 2020

And the institution must maintain its

accountability in accordance with the 3.5.5 STRATEGIC ANALYSIS &
laws and arrangements in practice, and be RECOMMENDATIONS
monitored by the State Controller. In the
year 2014, around 36% of the respondents Strengths
prefer that the state supervise the
• T
he existence of a ready-made
organization and disbursement of zakāh,
sector project submitted by at
while 46% of the respondents prefer the
least two governments, subject
supervision of the organization of zakāh to
to discussion, ratification and
be transferred to a reliable and independent
• D
evelopment of the sector is part
• T
o create with it a Shari’a of the general struggle of post-
Supervisory Board to monitor all revolution governments trying to put
transactions in terms of legality, in place an Islamic financial system.
income and disbursement.
• T
he existence of a sector-specific
• D
ata relating to zakāh payers should fund within the Tunisian legal
not be disclosed, or used to harm system pertaining to the Tunisian
their claimants or beneficiaries Union of Tunisian Solidarity.
(recall of Basic Law no. 63 of 2004 • R
esearch and seminars organized
of 27 July 2004 on the protection of on this sector.
personal data).
• R
aise zakāh funds through all
means available; such as the • T
he current experience of the Zakāh
transfer of remittances or direct Fund is not successful.
deposits in postal or bank accounts, • T
here is no special law that
while respecting the privacy of encourages the payment of zakāh.
zakāh payers, not to be disclosed
• T
here is no study that deals with all
to fiscal authorities, and respecting
zakāh funds in detail.
their will to receive a certificate if
they so desire.

Opportunities Recommendations

• T
he existence of an Islamic financial • B
uild a working group (which can
system (Islamic banks, Takaful emerge from active civil actors
insurance companies, Islamic in the field) to communicate the
investment funds). cause to various parties and
develop a vision leading to a
• R
equests from parts of civil society to gradual access to the desired
develop the sector. situation.
• T
he relative success of the two • E
ncourage the political will to
neighboring countries, Libya and advance the cause and reassure
Algeria, and some other Islamic the concerned parties.
• D
evelop mechanisms of
• D
eepening social inequality and the coordination with the Ministry of
state’s need for additional financial Social Affairs and social benefit
resources programs to reduce the burden
• T
he trend towards establishing zakāh on the state budget (can be used
institutions and encouragement here from the ID program).
from civil society is in line with the
• E
stablishing a legal framework
global trend towards encouraging
regulating the zakāh sector.
non-governmental organizations and
the private sector to play a role in • A
mend the tax legal framework to
community development. encourage the payment of zakāh
by deducting the amount paid
• T
here is a general international trend from the amount of taxes.
towards mobilizing financial resources
from local communities. • F
ocus on the distribution of zakāh
in a way that enriches the need of
Threats the liquidators, and in a way, that
helps the beneficiaries to create
• The negative impact of some media.
their projects.
• P
olitical disputes over everything
• D
evelop an information plan to
related to religious affairs.
introduce the sector and raise
• L
ack of sufficient political will to awareness of the importance and
advance the sector. positive effects of paying zakāh.

• G
overnment fear of creating additional
tax burden on citizens.

• F
ear of people in power controlling this
sector and disbursing its funds in ways
other than legitimate ones.

Islamic Social Finance Report 2020

and the corporate communication

3.6 SUCCESS STORIES & department. Financial and Administrative
GOOD PRACTICES Affairs which deals with the affairs of
employees and social researchers and
3.6.1 ZAKĀH FUND, LIBYA finally the collection department, includes
two units: the preparation and supervision
Introduction unit, the Jibaya unit and finally the Zakāh
Distribution department which includes
One of the success stories in the zakāh the Accounts and Supervision unit and
sector in Libya is the outstanding sharp Social Studies unit. These departments
increase in the value of zakāh funds raised collaborate in an efficient manner and each
over the last five years. This is due to fund’s branch in Libya has a small structure
Fund’s staff commitment, and their efforts like the main office structure in a manner
to achieve good performances despite the that each branch collects and disburses
current tough economic circumstances. In Zakāh to its beneficiaries in the same city
addition, donations, grants and charities in a semi-independent manner. However, its
collected from philanthropists, as a result relationship with the main branch is purely
of the advocacy and public awareness organizational and administrative and
and education efforts carried at all feeds the main office with required data
administrative levels. This was positively and information monthly and annually.
reflected on the performance of the fund,
whether in the collection methods (direct In addition, the Fund adopts three Sharī‘ah
collection, or through zakāh offices, or bank committees dealing with the Sharī‘ah
accounts) or by the ways of disbursing related topics of the Fund. Ultimately these
zakāh funds, such as paying zakāh to committees support the activity with the
some beneficiaries to buy cars to be used Sharī‘ah provisions with regards to the
as taxis. Hence this has improved life collection and distribution of the funds.
quality for the needy and has made them These committees are:
avoid demand and allows them to secure
• I ndependent advisory committees in
permanent and decent revenues. Also,
each of the Zakāh Fund’s branches
part of the Fund’s success contributed
in Libya specialized in investigating
in financing the construction of 52
and assessing zakāh beneficiaries’
apartments for poor youth and help them to
applications and providing legal and
legitimate provisions for each case.
Organization Structure
• A
special committee reporting to
The organizational structure of the Libyan the advisors’ office and its role is
Zakāh Fund consists of seven main to support the advisors in solving
divisions, headed by the Chairman of the issues and matters raised by Zakāh
Board of Directors. These departments Fund’s branches or from one of the
are: Advisory Board, of Planning and departments within the Fund. It
Supervision, Financial and Administrative helps find fatāwa concerning all the
Affairs, Legal, Internal Audit, Investments, legal issues at stake.


• D
ar al Iftaa to which the fund refers • B
enefit from previous experiences
when required. locally and internationally.

The Zakāh Fund relies on qualified Libyan • T

aking audacious but promising
employees being paid from the Libyan state initiatives: the Zakāh Fund worked
and not from the fund itself. It also works to open zakāh branches in cities
in compliance and full transparency giving in Libya where zakāh was not
effective and real information about the collected and formally disbursed for
fund. It also publishes data and information hundreds of years, and the external
in special reports that are easy for the observers have determined that
public to understand. The fund also runs the work of these branches in such
surveys through questionnaires to zakāh cities will never work, but statistics
beneficiaries and payers in order to collect within short period has proven the
their feedback with regards to the fund opposite. These small cities have
performance. Finally, the fund calls auditors become competitive with the big
and to evaluate the Zakāh Fund’s work and cities in their collection of zakāh,
operations and to highlight any deviations and this is due to that the citizens’
or excesses. interest in paying their zakāh to a
respected and trusted organization.
Best practices within this sector include:
• E
stablishment of good
administrative of zakāh system The Zakāh fund operates under the
within the Fund and the preparation supervision of four official and non-official
of a simple documentary course. bodies monitoring its activities which
increases people trust towards the Fund
• I mplementing a developed follow- and thus increase the number of the zakāh
up and supervision system, and rely payers and the fund’s size. The fund is
on computer systems to relate the transparent in its operations by publishing
main office to its branches data and information regularly on monthly
• B
uilding an expanded database and yearly basis. This information includes
for all categories of zakāh payers the amount of the collected funds and
beneficiaries as well as link the the detailed disbursement disclosed in
Zakāh Fund with other public an easily understandable manner in order
institutions, such as the National to reassure whoever wants to check the
ID System, the Social Security management of the funds. The four bodies
Fund and Solidarity Fund, Wealth are:
Distribution Fund, and Ministry of
• T
he Fund’s Board of Directors,
Social Affairs.
which draws the yearly action plan
• Z
akāh Fund must be open to for the fund and its branches, and
charitable NGOs and associations supervises its execution.
in order to coordinate efforts and
• A
dministrative Audit Bureau:
avoid duplication in collection and
which is a governmental body that

Islamic Social Finance Report 2020

supervises and controls all state- Challenges

owned institutions, including the
• L
ack of coordination between
Zakāh Fund. Its main role consists
the Zakāh Fund and other state
on appointing the staff, branch
institutions, as well as civil society
managers and members of the
organizations is a major obstacle
Board of Directors.
facing the Fund and preventing it
• L
ibyan Audit Bureau which is from achieving its objectives.
in charge of the follow up of all • Z
akāh Fund is constrained by
Fund’s operations including zakāh the lack of information and data.
collection, monitoring Zakāh Relying only on its own database is
distribution, and disbursement to not sufficient for its work because
final beneficiaries. The audit bureau some relevant information is not
also monitors consistency of the being shared by the other actors in
funds allocated from state to Fund’s the poverty alleviation activities.
staff and ensures that Zakāh Fund
complies with financial regulations • P
olitical and economic instability
in both zakāh collection and and insecurity in Libya is a serious
disbursement. obstacle, especially in regard to
the field executive department’s
• A
ll Libyan citizens: All Libyans activities, Zakāh collection and
can have a control on the fund, social research.
especially zakāh payers, donors
• L
ack of fatāwa as well as laws and
and charities, and have the right
sound regulations are two main
to ensure that the collected zakāh
factors in non-investment and
has been paid to appropriate
recycling of zakāh funds.

Zakāh Fund has established social 3.6.2 TUNISIAN ASSOCIATION OF

research teams in all Libyan cities. Men and ZAKĀH SCIENCES, TUNISIA
women teams in charge of carrying social
research for zakāh applicants. In fact, the Introduction
applicant is required to provide documents
proving his critical needs and poverty. In Founded in 2012, the Tunisian Association
addition, the researcher visits him at his/ of Zakāh Sciences deals with the
her residence to check his living conditions accountancy and Fiqh of the obligation
and certify his need for Zakāh. Accordingly, of Zakāh. It is headquartered in Sfax and
despite the harsh economic conditions, has four branches in Tunis, Gafsa, Nabil
Zakāh Fund contributed to alleviate and Sousse. Cooperation agreements
poverty rates in Libya and assisted in have been made with the Ministry of
building 52 apartments in the city of Tripoli Religious Affairs, Zaytouna University and
and contributed to the marriage of 52 the Sudanese Zakāh Chamber and the
young men and women. In addition, among Jordanian Zakāh Fund.
another success of Zakāh Fund is buying
The association was elected at the
cars for a group of poor people to work as
founding session of the Global Union for
taxis drivers.


Zakāt Rite as a member of the Board of Organization Structure

Directors, and the association’s president
was appointed as the supervisor on the The highest authority in the Tunisian
union affairs, plans and programs in the Association of Zakāh Sciences is the
French-speaking African region. National Conference which convenes
every three years and elects members
The association is always committed to be: of the governing body for a term of three
years subject to renewal once only. Next
• I ndependent and far from all is the National Council, which convenes
political conflicts. every six months to evaluate the activities
• A
scientific reference in the of the association and control projects
jurisprudence of zakāh. and activities for the upcoming period.
The governing body, which represents
• A
specialized body in the calculation the association with the official Tunisian
of zakāh for institutions and and international bodies, ensures the
individuals. implementation of the decisions of the
National Council.
• A
n active party in the awareness
and training sessions related to The four branches of the association
zakāh. operate under the supervision of the
governing body, and help individuals and

Islamic Social Finance Report 2020

companies to calculate their zakāh. The concerning the organization of

executive board appoints an executive associations.
director for the association who cannot
be a member of the governing body of • T
o comply with the legal system and
the association and is responsible for the bylaws of the Tunisian Association
management of the association in terms of of Zakāh Sciences.
financial and administrative management • T
he Association accounts shall be
and currency. Since the foundation of the revised by a committee of expert
association, Sheikh Habib has adopted this accountants in accordance with
plan. the law number 112-93 concerning
the maintenance of accounts in the
The association has a Sharī‘ah and
Tunisian Republic.
accounting committee at its headquarters
in Sfax as well as in the four branches. • M
onitor the accounting of the
The Sharī‘ah and Accounting Committee association annually by an auditor
is formed by the decision of the Board of who is a member of the body of
Directors of the association. The governing Tunisian Accountants.
body also appoints a chairperson for the
Sharī‘ah and Accounting Committee and its • D
eposit all revenues of the
members and also appoints its rapporteur. association in a bank account, and
all expenses exceeding the amount
The Sharī‘ah and Accounting Committee is of 200 USD are paid in writing or
entrusted with the following: using a bank transfer.

• C
ounting and calculating zakāh for Contribution to Knowledge
individuals and institutions.
The Association contributes to increasing
• A
nswering all legal and accounting knowledge in the field of Zakāh through:
questions related to zakāh in
particular, and the Islamic economy • S
upervising the training of 1,000
in general. university professors and students
from the bachelor and master’s
• C
onducting research and studies degree students in economics and
related to the objectives of the Islamic finance in Zakāh Accounting
association. in the faculty of Economics and
Management in Sfax, and Zaytouna
• A
ssisting universities and all
University and the Higher Institute
scientific bodies related to zakāh in
of Technological Studies in Rades.
particular, and the Islamic economy
in general. • O
rganizing national and
international forums and seminars.
• T
raining students specialized in
The association organized the
Islamic finance.
previous four sessions of Sfax
Governance International Conference on Islamic
Finance in cooperation with the
• C
ompliance with decree No. 88 of Faculty of Economic Sciences and
2011 dated 24 September 2011 Management of Sfax, Zaytouna


University, Sfax University, Gafsa • P

ublication of the first book by
University, the Islamic Research and the association in March 2017
Training institute in Jeddah, and entitled: “The Fiqh and accountancy
Al-Zawia University in Libya. 1,200 framework for the Zakāh of
participants benefited from these business activities” in 5,000 copies.
four events. These books were used in training
seminars organized in cooperation
• T
he association also organized four with the Ministry of Religious Affairs
international seminars on zakāh in and the Tunisian Union for Industry,
Tunis Commerce and Handicrafts.

• T
he publication of “Sanabel”, the • T
he association will soon issue its
first is written every three months second book under the title “Zakāh
in 3,000 copies, of which 10 were of Agricultural Activities”. It will be
issued, and the second is electronic dedicated to educating farmers
and it was monthly distributed to and helping them to calculate their
more than 20,000 e-mail addresses. zakāh.

• O
rganizing training courses • ‘ Hello Zakāh’ mechanism:
according to an agreement with the Putting voice distributor on the
Ministry of Religious Affairs to train number 53.600.100 to answer all
preachers and imams. 2,150 imams questions related to jurisprudence
and preachers attended the 2016 and accounting for callers by 4
and 2017 sessions. legal accountants’ experts. The
association receives hundreds of
• O
rganizing awareness sessions calls each month from Tunisia,
in the field of Zakāh for various Algeria and Libya.
professional sectors and scientific
groups. The total beneficiaries • C
reation of the Facebook page
for the year 2012 to the end of “Tunisian Association of Zakāh
April 2017 was more than 6,000 Sciences” that has 64,000 followers.
• C
reation of the association’s
• F
urnishing the Zakāh Mail program, website
which was broadcast weekly by
Zitouna Radio Channel for the Holy Contribution to Poverty Alleviation
Qur’ān from January 2017 to the
end of Ramadan during the same The contribution of the association is to
year. fight poverty by calculating the zakāh of
hundreds of companies whose zakāh
• A
weekly live broadcast on the exceeds 200,000 USD annually and urging
Facebook page of the association them to spend their zakāh to start projects
about Zakāh. Various professional for unemployed graduates and for the poor.
activities throughout the summer of

Islamic Social Finance Report 2020

Challenges • L
ack of awareness on the role of
zakāh and the culture of zakāh as
• C
onvince the government a cornerstone of the economic
and the Assembly of People’s system.
Representatives to accept the
law related to the Tunisian Zakāh • P
olitical rejection from several
Foundation. political parties in Tunisia.

• B
ad legacy related to the way • B
eing accused of political affiliation
Tunisian people deal with the to parties of a religious nature.
National Solidarity Fund 26-26.
• D
ifficulty in dealing with expenses,
• T
he lack of expertise in the with no contribution of the state to
jurisprudence of zakāh and its pay administrative expenses and
accounting due to the absence equipment.
of teaching zakāh accounting in
Tunisia for more than 50 years • R
estrictions on many charities that
and the absence of any scientific collect and distribute zakāh funds,
reference on how to calculate and prosecution of defaulters
zakāh. among them by the government
under the Supreme Decree of the
year 1922.
Al-Khairat, the awqāf institution of Bayt al-
4.1 ALGERIA 1 2 Maal, and the awqāf institution of people of
During the colonial period, the French
The institution of waqf has been in administration through its decrees and
existence in Algeria since the arrival of the successive decisions and laws regarding
Islamic conquest of the Maghreb in the the waqf, undermined the foundation of the
Seventh Century. However, it has witnessed waqf system and destroyed its features,
major ups and downs at different points contradicting what was noted in the article
in time in history. The Ottoman period in 5 of the Treaty of 1830 on handing over of
Algeria (before 1830) was characterized the city of Algiers, which recommended the
by the development of awqāf and their preservation of the assets of the awqāf.
spread throughout the country, from the The colonial forces worked to destroy
late 15th Century until the beginning the structure of the awqāf. Many of the
of the 19th Century. The expansion Algerian awqāf were lost during this dark
continued until waqf accounted for a period of its history, which made the search
large proportion of the urban agricultural for these properties and reallocation of
property. During this period, economic what stood for it almost impossible without
and social awqāf expanded to include real the efforts of the Algerian state in the
estate and agricultural lands, in addition to legislative and financial fields. International
many shops, hotels, bread ovens, oases, efforts have also helped to recover many
waterways, tanks, lime kilns, and many of them in the period from the mid-nineties
other estates, farms, orchards and parks. to the present (funded by the Islamic
The awqāf sector comprised several Development Bank).
charitable organizations with a religious
character, had a legal personality and a The initial period after independence
special administrative status. Examples was not very encouraging for the awqāf
include the awqāf institution of the two sector. In contrast, the period from the
Holy Mosques, the awqāf institution of the end of the eighties to the beginning of the
Algerian Great Mosque, the Awqāf Subul nineties, observed a strengthening of the
legal status of the awqāf, albeit at a slow
1 Data delivered by the Ministry of Religious
Affaires & Waqf
pace. The beginning of the 21st Century
2 “Financing the Local Development from an witnessed further legislation in the field of
Islamic Perspective: The contribution of the funds of awqāf and investment.
Zakāh & Waqf”, Wasila Essebti, PhD Thesis, University of
Mohamed Khidhr University, Biskra, Algeria
Islamic Social Finance Report 2020

Post-independence, the awqāf sector in under the supervision of the Director

Algeria was put under the control of the General for the Public Property
government and regulated by the French Department.
law which was perhaps the primary reason
why awqāf were excluded from the social • D
ecree of 31 October 1838: The
work arena. However, the waqf properties decree was issued to facilitate
continued to exist, and were distributed the liquidity of the awqāf and the
as the waqf of schools, seminaries and controlling process of the waqf.
mosques. • D
ecree of 30 October 1858 and
Act of 1873: This decree was
4.1.2 REGULATORY & POLICY followed by the last resolution,
FRAMEWORK known as the 1873 Act, which
aimed at eliminating the deadlines
The colonial France, in the early years of of religious institutions in favour of
the occupation, enacted several resolutions the European settlement expansion
and decrees, which include the following: in Algeria and the elimination of the
economic and social foundations of
• D
ecree of “Debarmont” on the Algerian people.
September 8, 1830: This decree
led to the confiscation and seizure The existence of waqf properties after
of all waqf assets. The next day, the independence pushed the Algerian
“Debarment” issued another legislators to organize and regulate the
decree granting itself the right and legislation necessary to run the awqāf
authority to manage and dispose according to a legal administrative system,
of the religious property by renting which responds to the nature of these
and distributing the rents to the properties and responds to the objectives
beneficiaries. for which they were established. Several
laws have been put in place to ensure the
• D
ecree of 7 December 1830: In good functioning of the Awqāf Department
December 1830, the French general in Algeria.
Joseph Clozel, issued a decision to
abolish the Custodian of the Two While there was a Ministry dedicated
Holy Mosques under the pretext to Awqāf in 1963, the subsequent
that its revenues were spent on years witnessed a gross neglect and
foreigners. marginalization of the sector. The absence
of a national policy for awqāf led to its slow
• T
he report of the French Minister and steady demise in the Algerian society.
of War dated 23 March 1843, “The The waqf administration was soon limited
expenses and incomes of religious at the national level to a branch office of the
institutions include the budget Ministry of Religious Affairs. As part of the
of the French government”: This restructuring of the Ministry of Religious
decree authorized the Europeans to Affairs, a Directorate was established
own the awqāf and to put the same under the name of “Directorate of Religious
Rites and Waqf Properties”. After the


promulgation of the 1989 Constitution, Regarding the laws of the administration of

which approved the protection of waqf awqāf after 1991, the Directorate of Awqāf
properties, the name was changed to the has tried to cover the lack of legal texts
Directorate of Awqāf and Religious affairs. by using the brochures and notes specific
The issuance of the law of awqāf 91/10, to the modalities of the organization and
which was based on the background of the management of waqf property and the
regulation of waqf property and protection, control of income. The legal texts include:
marks the beginning of a new era for the
waqf sector in Algeria. With an increasing • M
inisterial Circular No. 37 of
official interest and the expansion of 05/06/1996 determining how to pay
waqf activities, the process of recovering rent for awqāf.

• M
emorandum No. 01/96 dated
property from nationalized waqf and those 03/07/1996 specified for how to
encroached upon by private by individuals pay the waqf rent.
and institutions was seriously taken up.
The Awqāf became a self-contained • M
emorandum No. 03/96 of
Directorate after the issuance of Executive 17/07/1996 containing financial
Decree 94/490 of 21 Rajab 1415. reporting (according to standard
forms) and dates of dispatch.

Islamic Social Finance Report 2020

• M
inisterial Circular No. 56 of The law also gives the authority
05/08/1996, addressed to the in charge of awqāf the right to
governors and principals, which conclude contracts.
includes the subject of expanding
the circle of interest in waqf INSTITUTIONAL STRUCTURE &

• M
emorandum No. 01/97 dated The Department of Awqāf in Algeria
05/01/97 containing organizational is not an independent administration.
directives for the management This is evidenced by Executive Decree
of awqāf, especially regarding No. 146/2000. Article 3 of this Decree
the rationalization of the waqf states that the Directorate Awqāf and
financiers, the relationship of the Hajj includes sub-directorates for
waqf path to the tenant and the dispute resolution, investment, and of
documents to be provided in the Hajj and Umrah. It was observed that
waqf files. each sub-directorate had a group of
offices whose staff was usually below
• M
emorandum No. 02/97 dated the required level. The sub-directorate
19/07/1997, which includes the for research on waqf properties and
need to care for the development disputes includes office of research and
and valuation of property waqf. registration of waqf properties, office of
technical studies and cooperation and
• E
xecutive Decree No. 98/381
office of disputes. However, the sub-
of 01/12/1998 sets forth the
directorate of awqāf property investment
conditions for the management,
includes office of investment and
protection and the means of
development of waqf properties, office
managing the waqf property. It
of the management of resources and
contains five chapters - general
expenditures of property waqf and office
provisions, status, management
of waqf property maintenance.
of waqf properties, renting waqf
properties, financial provisions, Awqāf Committee
and the final provisions. This
decree gave an administrative and A focus on the central administration
organizational boost to the awqāf of the Awqāf in Algeria shows that it
department in Algeria. is not an independent administration,
but a branch of a larger administration,
• L
aw No. 01-07 of 22 May 2001
mentioned earlier as the Awqāf
amended and complied with Law
Committee. This committee consists of:
No. 91/10 of 27 April 1991. It
contained a series of amendments, • Director of Awqāf
most notably the details of the
investment and development of • Sub-Director of Awqāf Investment
waqf property. The Department of
Awqāf is entrusted with the tasks to • I n charge of legal and legislative
invest and develop waqf according studies
to the formulas specified in the law.


• D
irector of Guidance and Religious or less than ideal rent
• S
upervise the preparation of
• Director of Media Department a model book of conditions
for the rental of waqf property
• Director of Islamic Culture or its adoption in the light of
jurisprudence of awqāf and
• A
representative of the interests of regulations
state property
• E
xamine cases of renewal of
• A
representative of the Ministry of
extraordinary leases
Agriculture and Fisheries

• P
ropose after the study, the
• A
representative of the Ministry of
priorities of the regular expenditure
of the available waqf funds and the
• A
representative of the Supreme emergency spending
Islamic Council.
Central Awqāf Fund
The powers entrusted to this committee
The centralization in the management of
include the management, investment
the awqāf in Algeria led to the creation
and protection of the waqf properties, in
of the Central Fund for Awqāf, which was
particular to:
established based on a joint ministerial
• E
xamine cases of settling the status decision between the Ministry of Finance
of public and private awqāf, where and the Ministry of Religious Affairs No.
appropriate, and prepare standard 31 dated 2 March 1999. The resources
records on a case-by-case basis and revenues collected are deposited in
this Fund, after deducting the authorized
• S
tudy or adopt standard documents expenses.
for the work of waqf agents
• O
versee the preparation of the & DEVELOPMENT
working manual of the waqf
supervisor, or adopt his proposal, The waqf administration in Algeria was
and the necessary documentation subjected to a series of changes through
the various laws and decrees that were
• E
xamine cases of termination of aimed at preserving and developing
the functions of the head of the them. However, all these laws could
waqf property, and adopt standard not make them a modern and effective
documents for each case administration in carrying out their tasks.

• S
tudy the standard documents The number of awqāf properties was
relating to rental of waqf property 10,615 in 2016 increasing marginally from
and approve by auction, conciliation 10,401 in 2015.

Islamic Social Finance Report 2020

Table 01: Number of awqāf in Algeria as reported in November 1842

City Algiers Annaba Oran Constantine Total

Number of Awqāf
1,798 75 132 1,692 3,697

• T
he existence of institutional
4.1.4 TRANSPARENCY, structure for waqf.
• L
ack of manpower and material
The vastness of the Algerian land and the resources to assist Waqf
central character of the administration of department in carrying out its tasks
awqāf in Algeria made it extremely difficult and to ensure serious follow-up.
to manage waqf property efficiently and
ensure the principles of transparency and • T
he weakness of the laws governing
good governance. the awqāf in Algeria.

• A
bsence of adequate supporting
Article 23 of the law No. 90/25 highlights
infrastructure for awqāf sector.
the importance of the waqf and the
independence of its administrative and • T
he merger of Directorate of Waqf
financial management. with Hajj means neglecting the
administrative aspects of the waqf
The issue of the law of awqāf under the
during periods of preparation for
number 91/10 issued on 27/04/1991,
which approved the protection and
management and administration to the • A
bsence of effective accounting
authority entrusted with the awqāf, marked and financial supervision for waqf
the beginning of the independence of the activities.
laws of awqāf in Algeria in terms of various
provisions related to it and management. Opportunities

The Directorate of Awqāf is supposed to be • T

he high potential of properties and
independent and the specialized agency to real estate in Algeria
preserve waqf property. • Possible reform in the law of awqāf


ack of confidence among the
public as the desire of waqf
Strengths founders is not always achieved.
• Waqf has a long history in Algeria. • L
ack of sufficient awareness of
• T
he existence of many legal texts the sanctity of awqāf among some
and regulation on the waqf sector. actors.


Recommendations Information and Marketing.

• A
total of 4,621 real estate awqāf • W
aqf investments need to be
have been identified that need urgent enhanced in partnership with
development. professionals well-versed in the art
and science of investments.
• A
large number of property disputes
relating to awqāf are a real challenge • C
reation of Waqf Funds and the
for the justice system that must be financialization of waqf should
addressed. Records show that over throw up new and innovative
600 cases have been settled in favour financial instruments, strengthening
of awqāf and about 400 cases remain the capital market, providing
to be resolved. alternative tools for raising
resources for development of awqāf
• N
ew awqāf related investments as well as for meeting the social
should be tackled as part of a and developmental goals.
long-term strategy that requires
a specialized management team • T
he legal and regulatory system
and a high degree of experience of waqf must be strengthened in
in monitoring and managing these order to provide greater protection
projects. for waqf properties, through the
Directorate of Organization and
• T
here is urgent need for an apex Disputes, which manages the issues
independent institution, such as the of endowment before the judiciary,
National Awqāf Office in Algeria, that and introduces laws and regulations
would be in a position to mobilize that preserve waqf properties.
required human and financial
resources for efficient management • D
evelopment of international
and development of awqāf. cooperation in the field of awqāf,
through programs and activities
• A
vailability of specialized talent in of the Directorate of Cooperation
awqāf management remains a major and External Relations would act
constraint that must be addressed as a catalyst for rejuvenating the
with a sense of urgency. global as well as the Algerian awqāf
• I dentifying, retrieving and sectors.
documenting properties that have • F
inally, it is proposed that the
been lost since the colonial era, Algerian Awqāf Department must
through the Research Directorate and be removed from the administrative
the Waqf Property Survey, should be constraints attached to the Ministry
expedited with the involvement of of Religious Affairs and Awqāf
experts in the field of surveying. and be given full autonomy by
• I t is important to recreate a culture establishing the National Awqāf
that promotes waqf as an important Office.
socio-economic institution through
the media by the Directorate of

Islamic Social Finance Report 2020

Historically, Libyans have always showed
great interest in the institution of waqf
as one of the most important charity
activities. This is because Libyans culturally
are used to giving donations from their
assets, real estate and lands for the sake of
public utility, and because most of them are
deeply religious. The supervisory authority
of waqf affairs in Libya is the General
Authority for Awqāf and Islamic Affairs
(GAAIA), which is responsible for managing
and supervising all waqf assets. Since
the Islamic conquest until the beginning
of the Ottoman era, awqāf in Libya were
governed by the rulings of judges and
scholars, derived from the Holy Qur’ān and
the Sunnah. The administrative and legal
organization underwent changes since the
Ottoman period (1551-1911), through the
Italian occupation (1911, 1947-1951), then
during the reign of Qaddafi (1969-2011),
and finally after the events of 17 February
Until the year 2012, the number of
Table 4 shows the geographical distribution awqāf assets in the western region was
of the awqāf assets, where they were approximately 11,000 real estate properties
split into services: including shops and (agricultural and pastoral lands, service
administrative offices, housing, and and commercial buildings), 6,000 mosques,
agricultural land. The table shows that and cemeteries and schools of Qur’ān
waqf assets are concentrated in large cities memorization. Some of these assets have
such as Tripoli, Misurata, Western Mountain huge areas suitable for building residential
and Zliten, followed by other cities such and tourist cities and others could fit
as Benghazi, Green Mountain, Zawia, to be administrative and commercial
Derna and Jaffara. The weakness of this complexes that have high market values. In
classification is that it presents the assets addition, the value of the financial assets
in number of units and not in size. of the GAAIA, according to the preliminary
statistics of 2014, is half a billion Libyan
3 Mustafa Al-Sadiq Tabla, former Director General
of the General Authority for Awqaf and Zakat Affairs in
Dinars, part of which represents cash
Libya, an interview on 05/06/2017 at banks and the rest is loans to public
institutions as rentals or compensations.


Table 4. Geographical distribution of the assets of Awqāf in Libya

W. Mountain
G. Mountain


W. Coast







Service 341 24 14 9 27 406 37 51 102 46 10 17 24 5 110 106 35 1253 67 60

Housing 18 2 13 0 4 253 33 147 73 58 3 5 2 0 7 46 0 561 2 72

Lands 1170 0 0 1 0 30 266 393 289 235 4 984 0 2 39 353 387 1426 627 838

Total 1529 26 27 10 31 689 336 591 464 339 17 1006 26 7 156 505 422 3240 696 970

Source: Presentation of Mustafa Al-Sadiq Tabala, Badruddin Al-Toumi, Kick-off Workshop of the Islamic Social
Finance Report in Maghreb Countries, in Tunis on 15/09/1438H - 10/06/2017

Chart 3. Distribution of assets of awqāf in Libya based on type of assets




Charts 3 shows that approximately 64% of It is worth noting that there are property
the assets are agricultural lands (as noted investments also (Table 5) for the GAAIA
above, the unit of measurement is the in the cites of Tripoli and Misurata, with a
number of lands and not its area), followed total value of 26.95 million Libyan dinars,
by businesses and shops units accounting generating an annual return of 1.74 million
for about 25% of total assets. Finally, the Libyan dinars.
housing units account for around 12% of
the GAAIA assets. Table 5 shows the value of the property
investments, monthly and annual returns,
and the tenor for the invested capital.

Islamic Social Finance Report 2020

Table 5. Investment in awqāf assets in Tripoli and Misurata

Monthly Annual
Project Site Capital Tenor
income income
1 Tripoli 2,000,000 19,000 228,000 8.77
2 Tripoli 11,900,000 50,000 600,000 19.83
3 Tripoli 9,300,000 46,000 552,000 16.84
4 Misurata 3,750,000 30,000 360,000 10.417

TOTAL 26,950,000 145,000 1,740,000

Source: Presentation of Mustafa Al-Sadiq Tabala, Badruddin Al-Toumi, Kick-off Workshop of the Islamic Social
Finance Report in Maghreb Countries, in Tunis on 15/09/1438H - 10/06/2017

Table 6. Summary of financials for the investment of awqāf assets

Description Libyan Dinars

Total investment 26,950,000

Total annual return 1,740,000

Total annual operating costs 539,000

Net annual return 1,201,000

Net return during project period 60,050,000

Net cash flow 33,100,000

Rate of return on investment 222.82%

Rate of annual return on investment 4.46%

Source: Presentation of Mustafa Al-Sadiq Tabala, Badruddin Al-Toumi, Kick-off Workshop of the Islamic Social
Finance Report in Maghreb Countries, in Tunis on 15/09/1438H - 10/06/2017


Table 6 summarizes the feasibility study while leasing out the awqāf property. The
for the awqāf assets investment. The rental prices were determined by a decision
total investment value of 26.95 million of the GAAIA, according to the nature
Libyan dinars with a total operating cost and classification of assets (commercial,
of 0.54 million Libyan dinars. Net returns residential, agricultural), and depending
during the period of the project is 60.05 on the regions. However, these prices
million Libyan dinars with an annual yield were not in line with the market prices and
of 4.5% approximately. far from the real rental prices which led
to decrease in the annual revenues. It is
4.2.2 REGULATORY & POLICY worth mentioning that the annual revenues
collected during the previous years did not
FRAMEWORK exceed 5 million Libyan dinars, except for
what is leased to the government.
One key characteristic of the awqāf
system in Libya is duality. Its rules The challenges facing the Libyan awqāf
are derived from both the rules of sector may be summed up as following:
Sharī‘ah and the texts of the law. The
administration of rules and regulation • D
ecrease of rental income of waqf
are shared between civil donors and the assets compared to private sector
official institutions. Its litigations are owned assets.
submitted to the legal and civil courts. • S
ome waqf users of assets benefited
This organization structure is dictated from them without contracts.
in the Article 32 of the Waqf Law No.
124/1972 which states that the GAAIA • S
ome waqf users (individuals or
is responsible for the management of official institutions) did not pay their

Before the Ottoman rule, there was no
national institution managing the waqf The administration of awqāf is the key
affairs in Libya. The first institution was function of the GAAIA. The administrative
established under the Ottoman Awqāf structure consists of a number of
Management System and was issued in departments: the waqf property
December 1862. This was followed by department, the revenue department,
the rules issued by the Awqāf Authority the department of the guidance and
established by the Italian decree on supervision, the department of investment,
2/10/1917. The supervisory body for the department of maintenance, the
awqāf in Libya has been reorganized department of research and studies, and
many times in history. The latest the department of projects. The waqf
amendments were made by the Council property department comprises of three
of Ministers Decision No. 10/2016 units: classification unit, documentation
concerning the establishment of the unit, and archives unit. The revenues
General Authority for Awqāf and Islamic department consists of the collection unit
Affairs GAAIA. and the expenditure unit. The investment
department also includes two units: the
During the last few years, the GAAIA
planning and studies unit, and the contracts
did not rely on the actual market price

Islamic Social Finance Report 2020

Chart 4: An outline of the organizational and administrative structure of the Waqf

administration in the GAAIA.

Adminstration of waqf

Research and Investment Revenue

Study Dpt Dpt Dpt

Investment Maintenance Guidance and Waqf Property

Dpt Dpt Supervisory Dpt Dpt

Planning and Revenue and Enumerate
Studies Unit Collection Unit Unit

Contracts Expenditure Documentation

Unit Unit Unit

Source: Presentation of Mustafa Al-Sadiq Tabala, Badruddin Al-Toumi,

Kick-off Workshop of the Islamic Social Finance Report in Maghreb
Countries, in Tunis on 15/09/1438H - 10/06/2017

unit. These departments, sections and

administrative units operate in a consistent 4.2.3 CREATION, PRESERVATION
manner to supervise waqf assets and funds & DEVELOPMENT
through branches spread across Libya.
The GAAIA has, to a certain extent, an SUPPORTING INFRASTRUCTURE organized archive where it classifies and
saves documents of waqf assets and keeps
There are no supporting institutions in track of them. However, this is only in major
Libya, such as charities, service centers, or cities. There is usually little or no information
media channels, advocating and promoting about the waqf assets in small cities. The
the institution of waqf in Libya. The GAAIA is classification is based on the number of
the only agency that constitutes the awqāf units of assets, (administrative, commercial
infrastructure in the country.


or residential units), and it does not take • T

he competent court shall be required
into consideration the areas. Furthermore, to punish waqf manager in the case of
some of awqāf in Libya are still signing rental negligence of duty. (Article 41)
contracts for administrative, commercial
• T
he waqf manager deducts four
and residential use at cheap prices, and are
percent of the net proceeds of assets
not using market-based rentals. Currently,
and allocates them to the maintenance
plans are afoot to re-categorize, classify and
services of assets (Article 42).
revaluate all awqāf assets in Libya, using
modern valuation methods at market prices.
The Waqf in Libya is established in accordance ACCOUNTABILITY & GOOD
with the provisions of Law No. 124/ 1971,
which regulates the process and consideration
of waqf assets as follows: The accountability and governance system
• T
he waqf shall not be recorded, and of the awqāf consists of several bodies,
it shall not be valid, and it will be null as stipulated by the laws and regulations
and void unless it receives a certificate governing the awqāf, and can be summarized
from the relevant court. as follows:

• A
ny ruling of the court regarding • S
harī‘ah Supervisory: It is carried
regulating and controlling a waqf asset out through specialized scholars’
is a proof of waqf authenticity and the committees that provide the Shari’ah
said asset is protected. provisions from the Holy Qur’ān and
• N
o action may be taken to replace waqf Sunnah under the Imam Malik doctrine
assets, change its features, modify • J
udicial supervision: It is carried out
its conditions, borrow it or dispose of through the Libyan judiciary based on
it without the prior permission of the Libyan laws and legislation (Law No.
competent court. (Articles 2, 14, 38, 124/1971) regulating the waqf and
43) zakāh affairs. The disputes between
• T
he court only has the right to the GAAIA and other legal entities is
appoint waqf managers, question, settled in Libyan courts.
take disciplinary actions (such as
• A
udit and Administrative office:
dismissal) against them and the
Pursuant to Law No. 124/2013 and its
complaints brought against them
amendments, the GAAIA must annually
must be addressed to it. (Article 41)
submit an annual report to the Audit
• J
udicial authorities may prosecute Bureau in order to ascertain the validity
employees of the GAAIA, as well as of its financial transactions, and their
waqf managers, in the event of any compliance to the local financial and
criminal, civil or disciplinary liability. administrative regulations, especially
• E
ach waqf manager must submit given that it benefits from public
annually to the GAAIA a statement budgetary allocations.
of accounts supported by relevant 4 Mustafa Al-Sadiq Tabala, Badruddin Al-Toumi,
documents on all assets under his/her Islamic Social Microfinance for Small and Medium
management. (Article 40) Enterprises, Workshop in Tunis on 10/06/2017

Islamic Social Finance Report 2020

more interest in the awqāf sector. It

4.2.5 STRATEGIC ANALYSIS & is increasingly being seen to offer
RECOMMENDATIONS greater and unique options to address
various social needs as compared to
Strengths other official interventions.
• T
here is a systematic attempt to Weaknesses
enumerate and record the waqf
• W
aqf assets in Libya in general
assets. In the province of Tripoli only,
are characterized by low levels of
the first attempt of reclassification,
revenues. The GAAIA does not adopt
based on the number of properties
market price as benchmark for fixing
in 2012, identified about 11,000 real
the rentals on waqf assets. This
estate and 6,000 mosques, and more
negatively affects its general income
than a thousand schools of Qur’ān
and reduces its revenues.
• I n many instances, there are either no
• A
ccording to the statistics of 2014,
or improper use of contracts for the
the GAAIA has current assets
use of waqf assets due to negligence
exceeding 500 million Libyan dinars.
and administrative corruption in the
• T
he process of registration of waqf GAAIA.
assets is subject to the procedures
• M
any tenants (including public
governed by Libyan law and is under
institutions) do not fulfill their
the Libyan administrative control
obligations and have past dues with
which makes it difficult to misuse
the GAAIA.
• T
here are frequent instances of
• T
here has been a new trend for the
misclassification of land as rural and
waqf funds investment through
of low value, while they have become
projects that are generating an annual
urban since long time. Therefore,
return of approximately 4.5%.
there is a need to reclassify them and
• A
mendment of rental prices (within align the rental rates with the market.
the city of Tripoli only), had a major • T
he GAAIA does not adopt surfaces
positive impact on waqf income. (areas) as measurement unit in
• T
he accumulated waqf assets held assets classification, where every
by the GAAIA and which are spread asset is recorded as a single unit
across most cities of the country regardless of its size.
are characterized by excellent • T
he GAAIA is not open for other
locations suitable for development social and financial structures, hence
projects of various types - residential, more inclusive strategies have to
commercial and social, etc. be built in order to push the sector
• L
egal texts that characterize waqf further.
assets gives them special protection • I nstability in the management of the
compared to private and public funds. GAAIA, mismanagement of waqf
Further, the social position of waqf assets and the use of traditional
in the society makes people more systems in asset evaluation, prevent
protective towards this institution. a move towards optimal investment.
• Libyan society is showing more and These also make it difficult to control

and detect deviations and bad Libyan society has been driving
practices. people to support and practice waqf
• T
he staff of GAAIA lack adequate after facilitating it through new and
professional experience. There is innovative structures for investment
a serious shortage of specialized of endowments such as waqf funds,
expertise in the management of shares, and bonds.
waqf assets.
• T
he present regulatory framework
involving GAAIA needs a serious Political and economic instability, a
revisit. It lacks the characteristics of chaotic security situation, in addition to
proactive and enabling framework. the permeation of administrative and
• S
ome signs of financial and financial corruption, have all affected
administrative corruption in GAAIA, negatively the work of the GAAIA in Libya.
which negatively affected its A large scale non-compliance regarding
performance and weakened the the flow of benefits from waqf assets to
people’s trust. intended beneficiaries and encroachment
of waqf land and real estate constitute
major threats to the institution of waqf. In
The waqf sector can contribute significantly addition, the administrative instability of
to the provision of public goods in Libya. the GAAIA and the administrative conflict
This can only be achieved by setting up a at the higher levels within it, are not only
strong institution with high administrative impacting negatively the work of the staff
competencies to deal with waqf in terms of only, but also awqāf sector in general. The
identification, codification, registration of following points summarize the threats the
waqf assets and reviewing the regulations GAAIA faces:
governing the use thereof. It is also • S
ome of the recommendations and
possible to upgrade this institution through actions are based on inconsistent
the following: provisions which would blur the
• T
he institution must benefit from the features of the waqf.
conclusions and recommendations • M
ultiplicity of supervisory bodies,
from conferences, seminars for example, the intervention of the
and academic studies that were judiciary in the operations of the
prepared for the GAAIA on the GAAIA in terms of waqf assets and
importance of waqf, its role and its expenditures and clinging to the
approaches of development and fatāwa that allowed encroachment
the benefits of participating with of the waqf pose serious threat to
financial institutions in the field of the sector.
• W
aqf assets and investments
• T
he failure of the socialist and are not properly preserved and
capitalist regimes to achieve the maintained as required and are
economic well-being has led to the rather neglected or exploited for
increasing recognition of the third or cheap prices. This may lead people
voluntary sector. to move away from this noble
• The growing Islamic fervor in the Sunnah.
Islamic Social Finance Report 2020

Recommendations • R
e-archiving and documenting waqf
assets, using local and international
• T
here is a need to urgently reconsider
experts, and using advanced
the laws and regulations governing
information systems need to be
the work of the GAAIA in Libya.
urgently undertaken.
• T
he GAAIA is a religious institution
• T
he contracts for the use of waqf
whose role is limited to following
assets by private as well as public
up and supervising mosques
institutions must be reviewed
and schools. However, it should
and brought in line with modern
transform itself for greater
financialization of the waqf sector.
• T
he re-enumeration and
• T
he sunnah of waqf must be revived
classification of waqf assets
in the hearts of people, by involving a
throughout the Libyan cities must
large group of them as well as private
and public entities in the practice of
collective waqf work. This can be • T
he GAAIA must be given more
achieved through innovative waqf flexibility in the investment of
types such as waqf funds, equities waqf assets, and its development
and bonds for the support and and activation, to participate in
diversification of its accumulated the economic development of the
assets. country.

• T
he investment of real estate assets • T
he GAAIA must be assisted in
under waqf in prime areas and directing its endowment funds
locations spread throughout the in financing small and medium
country should lead to establishment enterprises for economic
of large partnerships with the public development, and paying more
and private sectors in the agricultural, attention to investment instruments
industrial, commercial and tourism for waqf:
sectors and in services such as * I jārah: Leasing waqf assets
communications, transportation, etc. at rentals based on prevailing
• C
onsidering awqāf as a pillar of the market conditions.
national economy, its importance
* D
ouble rents: Reconstruction of
must be driven home through the
property by the tenant, and then
dissemination of annual reports
leased for a long time by the
of awqāf organizations as well as
original owner.
other relevant information to the
public. Waqf-related courses must be * I slamic investment products,
offered in the curricula of universities such as, waqf funds, mushārakah,
and institutes. Other mechanisms isti�nā‘, muzāra‘ah and musāqāh.
of capacity building, e.g. seminars,
conferences and meetings, may • I nclusion of waqf curricula in
be employed in order to build specialized colleges, and the
managerial expertise, and feed dissemination of awareness and
innovations relevant to this sector. culture of the waqf among people.


The emergence of the independent state
4.3.1 OVERVIEW OF THE SECTOR has been accompanied by enormous
challenges. Among its tasks is the transfer
The country has known the institution of the nomadic society to a state of
of waqf since the advent of Islam along stability and the establishment of a modern
with the emergence of private educational entity, which necessitates keeping up with
institutions - the Mahadras. The Mahadras developments in the waqf in terms of legal
were mobile seminaries moving from one texts and investment methods.
location to another and benefited from the
profits of the charitable awqāf. The awqāf 4.3.2. REGULATORY & POLICY
comprised herds of livestock from camels,
cows and sheep, under the responsibility FRAMEWORK
of the teachers and mandated persons. In
In this context, in order to organize this
the cities and settlements, the term waqf
important institution, since the late 1970s,
was associated with the mosque and
the Mauritanian authorities have worked
its scientific and religious institutions in
to develop a legislative and regulatory
addition to some other public interests. The
framework. Awqāf was part of the mandate
awqāf were in the nature of:
of the Ministry of Islamic Affairs until the
• P
alm gardens and agricultural lands establishment of a national authority for
are disposed in the interests of the surveillance of the awqāf properties
the mosque and its annexes and in the country in 1982 under decree No.
villages of the hosts and to feed the 119/82. This structure has taken three
needy people. names throughout its history:

• R
esidential housing for Islamic • M
auritanian Awqāf Institution
sciences students and strangers. created in 1982, by decree No.
• F
ree water well for people and
livestock. • I slamic Awqāf Institution in 1984,
under the decree no. 128/84.
In addition to these, awqāf were also in the
nature of family awqāf that benefited the • N
ational Awqāf Institution - the
relatives (daughters, divorced or widows, current name of the institution - in
and other relatives in need) that were 1997, by decree No. 57/97.
dispersed across the Mauritanian society
The waqf sector in Mauritania still
in the countryside and cities. Such awqāf
suffers from a clear legislative gap. It is
were also in the nature of residential
managed by regulatory decrees and some
housing or gardens of palm trees, farms or
miscellaneous articles in laws related
5 Paper “Overview on Zakāh & Awqaf Sectors in to the issue of waqf, such as, the law
Mauritania”, Abdallahi Ould Addoud, Deputy CEO of the governing mosques, the law of obligations
Awqaf National Institution (Mauritania) presented during
and contracts.
the Kick-off Workshop of the “Islamic Social Finance
Report”, held in Tunis on 10 June 2017 and co-organized
by IRTI (IsDBG) and Zitouna Tamkeen MFI

Islamic Social Finance Report 2020

However, the text of the Constitution of • T

he legal order governing public
the Islamic Republic of Mauritania, dated institutions does not consider
20 July 1990, states in article 15 that “the the institution of waqf. The
right to property is guaranteed, the right characteristics of the main types
to inheritance is guaranteed, the property of public administrative and
of the waqf and the property of charitable commercial institutions, with
institutions are recognized and protected mixed capitals, are insufficient to
by law.” accommodate the nature of the
waqf institution.
The following facts define and describe the
legal, regulatory and policy environment for • T
he laws governing the
awqāf in the country. establishment and functioning of
associations and non-governmental
• T
here is no dedicated law to organizations do not refer to the
regulate waqf, contrary to most waqf. In fact, the properties of these
Arab and Muslim countries. associations are similar to those of
waqf properties. Their activities are
• T
he legal order No. 127/83
similar to the activities of the awqāf.
regulating real estate properties and
These are properties that are both
its amendment does not mention
private and public and at the same
time beneficial to the public.

AWQĀF INSTITUTIONAL STRUCTURE These resources, which are revenues

generated by the printing and publishing
The decree No. 57/97, issued on 28 June unit owned by the institution in addition to
1997, established a public institution called the rental of some shops, which constitute
the National Awqāf Institution. a total of about twenty percent of the total
annual income of the institution.
This decree sets out the functions of the
institution as follows: Because of this, the role of the National
Awqāf Establishment is mainly
• C
ontrol and maintain all places of concentrated in the following:
worship, the mosques, cemeteries,
appointing those responsible and • R
egistration of awqāf and
supervising the activities related to preservation of their title deeds
them. (often the floor of mosques) and
issuance of waqf deeds
• Manage all waqf funds.
• F
ollow-up of disputes related to the
• E
nsure the rehabilitation and care of awqāf of mosques with the judicial
orphans and help the poor. authorities
• C
oordinate and organize the • Issuing post-inspection
assistance provided by foreign statements at the request of some
charities of an Islamic nature implementing bodies for some
which allowed them to function in projects related to mosques
• R
ecommending some studies
• U
ndertake developmental and directed to funding institutions
investment projects in different after examination and analysis and
fields. related to mosques and educational
The administrative structure of the National complexes.
Awqāf Institution consists of: • P
reparation of some preliminary
studies of projects submitted by the
• A
board of directors, including the
awqāf to the funding agencies.
president and eight members that
represent various ministries and • S
upervising the distribution of
charity organizations. some aid such as sacrifice, clothing
and food provided by charities
• General administration.
and embassies of some Islamic
The National Awqāf Institution continues countries in some seasons.
to rely almost entirely on annual grants
• M
aintenance and restoration of
received from the Government, including
some mosques, such as the old
workers’ wages and a budget for
management, despite their industrial and
commercial nature. The publishing unit of the institution, in
cooperation with the Ministry, prepares

Islamic Social Finance Report 2020

and translates the Hajj guide and issues • E

stablishment of a fuel supply
a detailed annual Hijri calendar for all the station including a laundry and
national territory, distributed by the ministry maintenance complex.
to all mosques in the country.
• E
stablishment of a unit for the
This is in addition to the usual activity manufacture of bricks, which is a
carried out by the publishing unit of popular commodity in view of the
printing for research, literature, magazines, rapid urbanization that is taking
publications and others. place in the country. SUPPORTING INFRASTRUCTURE • O

pening a travel agency dedicated
to the Ministry of Religious Affairs
They are some actors in Mauritania that and delivering visas for Hajj and
help improvement of awqāf knowledge Umrah every season.
or practice such as Chinguitty Center for
Islamic Finance, University of Abdallah The institution is now preparing the
Yassin, the Modern University of Chinguitty, necessary studies for the establishment
the Mechoura Center, etc. These of some markets, shops and residential
institutions organized some seminars buildings on waqf properties, and once
related to awqāf with the support of these studies are completed they will be
national and international institutions. placed before prospective investors.

The media aspect: Through awareness

4.3.3 C REATION, PRESERVATION & campaigns, scientific symposia,
DEVELOPMENT conferences and forums inside and outside
the country, the institution has sought to
Policies for promoting the sector are to promote the waqf sector.
develop and improve the following aspects:

The legislative aspect: The institution of

awqāf has witnessed the enactment of a ACCOUNTABILITY & GOOD
law to protect waqf property and control
the behavior of the trustee manager and
ensure the achievement of the conditions The programs and activities conducted by
of the endower. the Awqāf National Establishment, or other
relevant structures such as, the Committee
The financial aspect: Through investment
of Mosques and Mahadras, are subjected
projects, the financial position of the
to conformity and regularity checks at three
National Awqāf Institution has improved
over time leading to an increase in its
revenues, and a decrease in its dependence 1. The first stage is internal, and is
on the aid provided by the state. The implemented through deliberations
institution is also in the process of at meetings of Board of Directors,
launching short-term investment projects Management Committee,
that are now fully developed and can be Supervisory Committee, External
implemented, including: and independent auditors.


2. The second one is intermediate • T

he Awqāf National Establishment
and is undertaken through general has been working to achieve social
inspection at the level of the Ministry stability and a sense of compassion
of Islamic Affairs. among the members of society
and to protect it from the maladies
3. The third and last one is at the top that usually arise in societies where
and concerns three structures: the the spirit of material selfishness
General Inspection of Finance, the prevails.
General Inspection of State and the
Court of Auditors. • T
here is a close relationship
between the sustainable Islamic
4.3.5 STRATEGIC ANALYSIS & endowment product and the
objectives and principles of
RECOMMENDATIONS sustainable development.

Strengths Weaknesses

• W
aqf has played an active role in the • T
he Awqāf National Establishment
cultural construction of the Islamic is yet to reach anywhere near its
Mauritanian society through its potential in terms of contribution
contributions to the social, economic, to the economic and social
political and even environmental development of the country,
sectors. although almost four decades have
elapsed since its establishment.
• W
aqf has contributed to the provision
of stable resources to provide public • T
o date, there is no legal framework
services and social institutions with regulating the Awqāf National
the necessary tools to meet the needs Establishment, which has caused
of the national community. interference in its powers with other
bodies affiliated to the Ministry of
• T
he system of the waqf has helped
Islamic Affairs.
reduce stratification among members
of society, through material and moral • T
he Awqāf National Establishment
support for the fragile classes of suffers from negligence and
society. mismanagement, due to lack of
Islamic Social Finance Report 2020

accountability and law. As a result, Recommendations

it suffers from a huge trust deficit
vis-à-vis ordinary citizens of the • T
here is an urgent need
country. to issue a legislative
framework that regulates
• T
he national institution is yet the functioning of
to benefit from the investment the Awqāf National
opportunities available to it. Establishment and grants
it full independence from
• T
he National Awqāf Register
the guardianship of the
contains more than a hundred waqf
Ministry of Islamic Affairs.
deeds. However, most of the awqāf
are not subject to the institution’s • A
wareness of the
guardianship. importance of awqāf
among investors and
• T
he Awqāf National Establishment
businessmen needs to be
does not have a clear strategy for
enhanced through training
the advancement of awqāf.
courses in the field.
• T
he awqāf sector must
• T
he mobilization of significant seek to restore confidence
additional financial resources between them and the
from waqf is likely to improve the citizens.
financing and development of the • Awareness campaigns
Department of Islamic Affairs in the may be undertaken in
general budget of the Government. various national wilayas
• T
he launching and developing of (provinces) with a view to
Islamic financial institutions open a spreading the culture of the
new perspective for investment of waqf.
waqf financial assets. • Successful experiences
Threats of waqf should be
documented and shared
• L
ack of confidence among citizens widely.
about the public management of
• T
he publishing unit of the
National Establishment
• L
ack of honesty and responsibility should be strengthened
of certain beneficiaries who are through partnerships.
in charge of the management and
• Various investment
exploitation of the assets of the
instruments may be
developed to facilitate
financing of the waqf


activating the institution of waqf through

4.4 MOROCCO mechanisms such as partnership contracts
for the development of waqf investments
4.4.1 OVERVIEW OF THE SECTOR and the issuance of waqf bonds to seek
public charity.
Moroccans have shown continuous and
permanent interest in awqāf since the The code considered His Majesty the King
Islamic conquest. They have provided many as the highest trustee of waqf. This task
distinct examples that highlight the strong is carried out under his direct authority by
position that Islamic civilization attaches the Minister of Awqāf and Islamic Affairs,
to the role of community-wide cooperation which makes waqf in Morocco a non-
among the members of society. governmental sector. In 2019, the code
of Awqāf was amended and completed
While the rules and regulations of awqāf by Dhahir No 1.19.46 published in official
seem to have taken shape at the beginning bulletin No 6759 of 11 March 2019, which
of the 20th Century, they were dispersed can enhance the regulations related to
in various legal texts. Most of them were Awqāf in Morocco.
issued during the colonial rule. These
texts have been systematically collated The Directorate for waqf administration has
and reviewed, leading to the issuance of a been created inside the Ministry of Awqāf
code of awqāf in 2010 which is considered and is managed through awqāf trusteeship.
one of the most important pieces of waqf The Supreme Council for Financial Control
legislation in the Islamic world. of General Awqāf was created to follow up
and inspect the financial management of
This code has come into force to preserve general waqf.
the privacy and the particularity of waqf
and provide it with modern legal means The revenues from Agricultural properties
to ensure effective preservation against (85000 Hectares) ranged from USD 6.2
aggression, crime and injustice. It has million to USD 8.8 million between the
come with administrative systems that period 2006-2007 and 2016-2017. As for
facilitate its utilization and benefits, as the urban properties, (57,028 units), the
well as investment tools that enable it revenues increased by 8% from USD 19.4
to contribute to economic and social million in 2007 to USD 36.4 million in 2017;
development projects. The code adopted whereas the revenues from monetary
the unity principle to consider waqf as one replacement reached USD 66.7 million
financial entity, emphasize public interest from 2007 to 2017 and for this period the
in its disbursement, and underlined the ministry approved 472 Waqf replacements.
intention of the waqf founder (waqif).
Historical context
This regulatory and policy environment
helped the awqāf sector overcome some Historically, waqf in Morocco is always
serious problems related to waqf sales considered as an exclusive heritage of
and exchanges, family waqf (waqf ahli) Moroccan Muslims, left by the ancestries
and customary rights. It also created as a material guarantee of the stability
new possibilities of developing and of Islam and the continuation of its rules

Islamic Social Finance Report 2020

and principles. The Moroccans recognized recognized the sanctity and the importance
the importance and the sanctity of waqf, of awqāf, they kept striving to preserve
and they keep on preserving some of their them from any aggression or behavior
wealth in the name of Allah for charity contrary to the objectives for which they
and solidarity, and therefore the prosperity were created. In the era of Al-Adarissa
of citizens was often correlated to the (789-921), the Mosques of Al-Qaraween
prosperity of waqf. and Al-Andalus in Fes as well as Bab
Dakkala Mosque in Marrakech were
Morocco, like other Islamic countries, came built. The era of the Almoravids (1056-
to know of general waqf with the arrival 1147) witnessed the construction of
of Muslim conquerors. Mosques were the many schools that were a destination for
first type of waqf institutions, dating back students of science from all regions at the
to the days of Uqba ibn Nafi ‘al-Fihri (681- charge of awqāf. More interest was given
683). And over the successive stages in to science and knowledge promotion, and
history, different kinds of waqf emerged

in religious, educational, social and health the first library in Morocco was established
areas due to the progressive practice of in the era of the Almohads (1121-1269).
waqf in the social life of Moroccans. The Marinids (1244-1465) were also
interested in the organization of waqf; they
In addition, when the Moroccan sultans
made trustees for waqf in various cities


(trustee for every waqf) and they worked In this period many distinguished awqāf
for establishing scientific schools and were created in terms of purpose and the
libraries. For example, they built new ones beneficiaries such as awqāf in the city
and expanded the old ones in the cities of of Fes, including a house dedicated for
Taza, Meknes, Sala, Marrakech and Sebta. wedding and to spend the honeymoon for
They also took care of building mosques the poor and needy, waqf for the removal
and hospitals by hiring doctors to take of stones from the roads, waqf for good
care of patients. In the era of Wattassides loans without interest; awqāf in the city
(1462-1554), the interest in scientific of Marrakech, including a refuge/ shelter
courses was a governmental mandate where 6,000 blind people could sleep,
that was not less than the position of eat and read; and the establishment of
the judiciary, fatwa and the ministry and hospitals called “”Bimarstan” in many
waqf revenues were used to help the Moroccan cities such as Fes, Marrakech,
patient and the homeless. However, the Meknes and Tetouan to treat the sick
mismanagement of waqf funds during and the disabled people; and other awqāf
this period caused a decline. This was dedicated to washing and burying the dead
one of the problems that were faced by from the poor and strangers.
Sa’adis (1554-1659). In their period, awqāf
organization focused on the construction The significant role of the waqf continued
or renovation of mosques, reviving some in the era of French protectorate, where
schools and establishing others, the Sultan Moulay Abdel Hafiz (1908-1912)
establishment of many watering places excluded the religious institutions and
next to the mosques. However, it has been Islamic sanctities from interference by
noticed that social waqf was absent in this the protectorate authorities. For the same
era. purpose, Sultan Moulay Yusuf (1912-1927)
issued more than 35 Dhahir to organize
The most important stage in the history waqf and set ongoing acts to protect them.
of waqf system in Morocco started with The waqf continued to follow the same
Alawite dynasty (since 1640/1666 AD), rules and regulations as those established
where new environment and context in the beginning of 20th Century, which
emerged and made the Kingdom of was known as the “awqāf regulations”, with
Morocco embrace the waqf because special reference to the provisions of the
the sultans of Morocco were perfectly Islamic Sharī‘ah derived from the Maliki
conservative in the principle that waqf jurisprudence.
cannot be sold or lost which create a
positive impact in the hearts of Moroccans During the post-independence phase (from
who become more encouraged to donate 1956), the organization of awqāf kept using
and make waqf. In the era of Mawla Ismail all decrees issued by the King, despite the
(1672-1727), all waqf properties were development of the trusteeship institution
recorded in special official books known for waqf, which moved from “Benniqa
as waqf transfers “Hawalat”. The General Al-Ahbass” and replaced by Ministry of
Trusteeship of Waqf was established under Awqāf having a modern structure. With
the name “Trusteeship of the Trustees”. the development of Moroccan society, the
need arose to organize waqf properties and

Islamic Social Finance Report 2020

preserve them with many legal procedures its consequences and effects.
for their development and investment, in
order to achieve the desired goals. This is The Code mentions that a general waqf
reflected in the issuance of the Awqāf Code is a legal entity since (art. 12) that cannot
in 2010, combining the legal texts related be seized or acquired by possession or
to waqf and its jurisprudential rules in prescription and it may not be acted on or
harmony with the Maliki School. disposed of except in accordance with the
requirements of the Code (art. 11).
In 2019, the code of Awqāf was amended
and completed by Dhahir No. 1.19.46 The Awqāf Code affirmed that the debts
published in official bulletin No. 6759 of owed to the general waqf are considered
11 March 2019. This amendment can as preferential debts and are not subject
enhance the regulations related to Awqāf in to prescription. They have a priority of
Morocco. collection after the dowry (Mahr), alimony
(Mout’a) and other expenditures due to
the wife, children and parents as per the
4.4.2 REGULATORY & POLICY family code in Morocco. In addition, the
FRAMEWORK Code provides general awqāf with several
exceptions regarding the conservation fees,
The issuance of the Awqāf Code on 23 litigation, expropriation for public interest
February 2010 and its amendment on and for seeking the public charity.
11 March 2019 are considered as a very
important event in Morocco, because The Code has five sections in addition
the legal framework of waqf has been to the introductory section that contains
updated and modernized to preserve general provisions about the definition
waqf, activate its economic and social of waqf, its types and the methods of its
functions, rationalize its management establishment (article 1). This section
and development and overcome the indicated that the trustee functions are
previous weaknesses in rules governing assigned to the King and executed under
waqf. For example, in the previous his authority with delegation to the Minister
legal texts governing waqf before the of Awqāf and Foreign Affairs (article 2).
issuance of Awqāf Code, there was no
legal requirement about how a waqf is However, the code of Awqāf (2019)
established as well as its consequences stipulated many details in Article 2a
and effects, which means that it was related to Awqāf strategy that should be
necessary to refer to the Fiqh in this matter. established by the ministry, which should
Conscious of the importance of this issue be based on global and detailed diagnostic
and the necessity to organize it with of Awqāf properties as well as to:
decisive regulation that would put an end to
• D
etermine the goals to be achieved
the differences and ambiguity, the legislator
in order to ensure the protection,
of this Code decided to allocate the first
development, and valuation of
section to this purpose. The first chapter
treats the elements and conditions of waqf
and the second chapter was dedicated to • D
etermine the means to achieve the
mentioned goals.


• E
stablish an accurate timetable for Waqif condition, achieve Waqf objectives
implementing this strategy. and its role in sustainable development, as
well as improving Waqf culture.
• A
dopt the governance system in
order to properly implement this The first section of the code of Awqāf
strategy, including the necessity contains 47 articles that concern the
of updating and improving establishment of waqf and its effects. This
Awqāf management as well section includes two chapters. The first one
as the definition of the tasks is about the elements of the waqf and it
and obligations of the various conditions, and the second one is about the
stakeholders. effects of the waqf contract.

• E
stablish a joint committee The second section concerns the general
to supervise and control the waqf and it contains two chapters.
implementation of this strategy and Chapter one includes general provisions,
the extent to which its objectives considering that the Waqf is a legal
are achieved. entity with several privileges in term of
conservation and litigation. The second
The main directions of this strategy, as
chapter treats the actions that occurred
per Moroccan Vision of 2030, include
on the general waqf, and it allocated some
the preservation of Waqf properties,
articles for compensation and exchanges
governance in Waqf management, respect

Islamic Social Finance Report 2020

in cash and in-kind, agricultural and non- The third section concerns the family
agricultural leasing with adequate rental waqf (Waqf Ahli) and joint or mixed Waqf
amount, the sale of the tree products, (Waqf Mushtarak). The first chapter has
seeds and other land or materials special articles about family waqf and
belonging to general waqf in order to its control, in this regard many countries
address the violation and injustice to which differed in dealing with the problems of
the waqf is currently being subjected, this type of waqf. The Moroccan legislator
and to liquidate the customary rights chose to retain the family waqf with its
established by general waqf in accordance reorganization under a law issued in
with the provisions and requirements to 1977 and then under the Awqāf Code by
preserve waqf rights. determining the ceiling of the permissible
waqf allowed in three levels: the first
In addition, article 60 stipulated that all beneficiary, his children and then the
legal actions aim at preserving them, children of his children. This waqf will then
developing their incomes in a manner be considered an heir if any. Otherwise it
appropriate to their nature, and achieving will be considered as general waqf if the
an apparent benefit of Awqāf. To this end, founder (waqif) did not specify another
the Endowment Department is charged reference. The chapter indicated that the
with investment and management of general waqf rules in term exchanges are
these funds in accordance with the rules applied also to the family waqf; clarifying
stipulated in this code and in accordance the terms of the trustee, its tasks and
with the strategy referred to in Article 2a. responsibilities, and the reasons for
termination its task. Other articles in the
As per Article 62, the Awqāf department
same chapter are about the liquidation of
may conclude, in the name of public Waqf,
the family waqf especially the control and
contracts and agreements for partnership
the rules of liquidation, the formation of a
with the public or the private sector in
liquidation committee to study the cases
order to implement investment projects
and prepare a report to be submitted to
or income-generating social projects, with
the government authority in charge of
the aim of developing Awqāf income and
awqāf to issue the liquidation decision
contribution in achieving economic and
and then publish each decision for onward
social development. These contracts and
information of the same by the committee
agreements must be concluded within
to the concerned people having the rights.
the framework of special investment that
The second chapter concerns the joint or
must achieve the benefit of Awqāf. The
mixed waqf (Waqf Mushtarak).
partnership must be accompanied by a
feasibility study that includes, in particular, The fourth section concerns the control of
estimated revenues of the project, the the financials of a general waqf. Basically,
obligations, contribution and share of the first chapter contains the principles
each party’s as well as the duration of the of financial and accounting organization
project, the guarantee of its completion and of general waqf followed by the financial
the mechanism for periodic evaluations of supervision and control of general waqf in
the various stages of project completion. the second chapter.


For example, the article 134 stipulated

that the preparation of waqf budget
must take into account the objectives
and contents of the strategy mentioned
in Article 2a as well as the reliability
of the estimates in light of economic
and social circumstantial data. This
budget must be prepared on the basis of
programming for at least three years for
total resources and expenditures.

In addition, the expenditures should

be presented in the form of programs,
projects and operations. Accordingly,
the budget is determined and classified
according to a decision of the
governmental authority in charge of
Awqāf, after consulting the Supreme
Council for the Control of Public Awqāf’
Finance (Article 138)

And as per Article 143, the budget

preparation must respect the financial
balance between incomes and
expenditures, include all mandatory
commitment and comply with the
opinions of the Supreme Council of
Oulemas related to public Awqāf to
ensure the Sharī‘ah compliance.

The fifth section includes the

conclusions and transitional rules
making references - in the absence
of a text in the Code - to the relevant
provisions and rules of the Maliki
doctrine and jurisprudence.

To activate the requirements of the

Awqāf Code, a decree was issued to
establish “the Supreme Council for
Financial Control of General Awqāf. The
Ministry also worked on the preparation
of regulatory texts represented in the
following resolutions regarding:

Islamic Social Finance Report 2020

• T
he status of the Central Controller, services concluded by the waqf
financial supervisor’s assistants administration for the benefit of
and local controllers who are general waqf.
responsible for monitoring waqf
accounts as well as the terms and • E
nacting the financial and
conditions of their appointment. accounting regulations of general
• T
he formation of the liquidation
committee for the family waqf and The annual budget for general waqf has
its functions. been prepared every year since 2014 and
it is presented annually to the the Supreme
• T
he determination of the Council for Financial Control of General
procedures for auctions, request for Awqāf for approval in accordance with the
proposals and the direct agreement provisions and regulations of Article 143.
especially for cash exchanges and
sales of general waqf. INSTITUTIONAL STRUCTURE

• T
he determination of the modalities As indicated in the Awqāf Code, the
of making in-kind exchanges for Ministry of Awqāf and Islamic Affairs is
waqf properties. the governmental authority responsible
for general waqf in Morocco. After the
• T
he sale of quarrying materials amendment of the Decree on 26 February
belonging to the general and mixed 2016, which provides its functions and
waqf organization, the central administration
• T
he classification of general waqf of the ministry includes, in addition to
budget. the general secretary and the general
inspectorate, seven directorates including
• T
he classification of accounting the Directorate of Awqāf, which administers
procedures of general waqf. the general waqf. The latter includes five
sections and 20 departments, and its tasks
• T
he definition of how to sell tree
products belonging to general and
mixed waqf. • P
reparation of plans and strategies
for the general waqf management.
• T
he application of Article 61 of the
Awqāf Code. • T
he management of all waqf issues
such as the counting of properties,
• T
he determination of the form of
classification and preservation of
waqf bonds, how they are issued
documents, and waqf maintenance
and the manner of subscription, as
and preservation.
well as how to collect donations
in cash and in kind for the • T
he completion of studies and the
establishment of religious, scientific development of plans and projects
or social projects. for waqf investments to take
benefits from all its potential.
• D
efining the system of
transactions and supplies and • T
aking administrative and
technical measures related to

the construction, maintenance, • P

leading before the courts to
installation and equipment of extract the rights of waqf properties
administrative buildings and waqf from its residents and to confront
properties. the claims of others in the case of
its establishment.
• C
ontrolling the family waqf,
maintaining and supervising them, • D
evelopment of waqf properties by
as appropriate, in accordance with working to raise its revenues and
the provisions regulating them. exploiting the surplus to buy new
properties if possible.
• T
racking various claims and
disputes related to waqf properties.
• M
aintenance of waqf properties
• E
ducating people about the to monitor and repair what are
importance of waqf, encouraging destroyed.
them, and supervising the
procedures. • T
o do everything that would
preserve the institution of waqf and
At the regional level, the Ministry is the respect of the term and words
represented by external departments of waqf founders (Waqif) because
called awqāf trusteeships in number of 36, of the religious and social value
they manage Awqāf which are under their that reflects the extent of Moroccan
territories and they implement the Ministry adherence to the Islamic religion in
plans. the form of unity and solidarity.

The trustee is still the head of waqf SUPPORTING INFRASTRUCTURE

management, his functions are still a
continuation of what his predecessor had The subject of the waqf had and is
in previous eras. He is still responsible still having great scientific attention in
within the area of his powers on issues Morocco. In this regard, many lectures on
related to general waqf as well as the waqf were given during the holy month of
control of family waqf. These can be Ramadan in the hands of His Majesty the
summarized as follows: King. The most recent of these lecturers
was in the 2013, with the study and
• C
ontrolling waqf properties by analysis of the subject of “Awqāf and their
counting the location and adjacent economic and social roles.”
area with the statement of the
resident or the lessee and the paid Morocco also held several international
value. conferences and seminars on awqāf
including the fourth forum on Waqf
• M
onitoring the safety of waqf Jurisprudence Issues organized by the
properties from the attacks from General Secretariat of Awqāf in Kuwait in
others, and to take administrative cooperation with the Ministry of Awqāf and
and legal measures to face the Islamic Affairs of Morocco and the Islamic
attack in case of occurrence. Development Bank in 2009. The third
international conference about the “Awqāf

Islamic Social Finance Report 2020

investments between social performance administration, and it is prohibited

and Sharī‘ah and legal rule” was organized to subcontract at all (Article 86).
in cooperation with the same institutions
in addition to the Islamic Institute for • T
he lessee is not allowed to acquire
Research and Training (IRTI) and Dar the right of rent on waqf properties
Al-Hadith Al-Hasaniyah in 2014. These for local or artisans’ use (Article
events have received great attention from 90).
Moroccan scientists and researchers and
all actors in waqf sector in Morocco. • T
he judgments and judicial orders
issued for the benefit of general
Moroccans are showing special interest waqf in the disputes concerning
in scientific research in the waqf, where their lease are final and decisive.
they have many contemporary works about The lessee cannot appeal (Article
waqf such as the Awqāf Journal that has 93).
published many of these research studies.
The Ministry of Awqāf and Islamic Affairs Among the provisions for the leasing of
also has printed and published several non-agricultural waqf property, it should be
books on the subject of waqf. noted that:

• T
he leasing of non-agricultural
4.4.3 CREATION, PRESERVATION waqf property must be for a period
& DEVELOPMENT that is not exceeding three years,
and should only be renewed after
Revenue from rental of buildings and the approval of the general waqf
agricultural lands is considered as the main department with an increasing rate
source of revenue that feeds the budget of of not less than ten per cent of
general waqf, estimated at about USD 45 the leasing value at each renewal
million per year. (Article 94).

For this reason, the Awqāf Code contains

• I f the lessee does not pay the rent
a set of provisions and articles relating to
for three months within eight days
the lease of waqf properties to protect and
from the date of receiving a warning
develop their resources (Articles 80-102) as
of performance, he is considered to
be in default, resulting in the right to
cancel and annul the contract and
• T
he leasing of general awqāf
payment of compensation (Article
properties must be authorized by
the waqf administration, and the
leasing value must be not less than
• T
he administration has the right
the market value (Article 80).
to terminate the lease contract of
non-agricultural waqf property if it
• T
he lessee does not have the
needs the property to establish an
right to sublease (Taliyah)
institution of a religious, scientific,
waqf properties without the
social or administrative nature, or
written permission of the waqf
if the purpose is to rebuild or make


significant changes to the property. It should be noted that funds received

The lessee has the right to get a from these exchanges should be allocated
compensation equivalent to the rent for the acquisition of new properties to
of the last three months in the first replace the old ones or for investment of a
case, and has the priority to rent of benefit to preserve the waqf assets and to
the reconstructed property in the develop its income (Article 60). The cash
second case (Article 96). exchanges follow the rules of Articles 63 to
71 whereas in-kind exchanges are subject
Among the provisions concerning the lease to the rules of Articles 72 to 75 of the Code.
of agricultural waqf, it should be noted that:
The exchanges of the real estate and
• T
he leasing of agricultural waqf movable properties, which are estimated
property must be for a period not to exceed 10 million dirhams (USD 1
exceeding 6 years, and should million), are subject to the prior approval
only be renewable for two periods of the King as the supreme trustee. The
after the approval of the general same exchanges are subject to the prior
waqf department with increasing approval of the Supreme Council for
rate of not less than 20 per cent of Financial Control of General Awqāf if their
the leasing value at each renewal estimated value ranges between 5 million
(Article 98). and 10 million dirhams (USD 0.5 million to
USD 1 million). Real estate and movables
• A
ll the constructions, trees and
exchanges with a value of less than five
installations established by the
million dirhams, as well as the exchanges
lessee on the property as per the
of movable assets with the specific values
implementation of the contract
that are used for benefit of general waqf
concluded with him at the end of
whatever their value, are subject to the
the lease relationship for any reason
approval of the Ministry of Awqāf and
will be considered as general waqf
Islamic Affairs, the governmental authority
(Article 99).
responsible for Awqāf.
• I t is not permissible to give the land
of the waqf in Mugharsah mode For the in-kind exchanges of general waqf,
(Article 102). the replacement asset must be a portfolio,
and it is value must be equal or more than
The Ministry relies on self-financing to the endowed asset. The estimated value
invest its waqf projects, such real estate of exchange and replacement should be
and commercial building, help for the determined by a professional accountant
construction and repair the mosques, certified in Waqf field.
repairing and maintaining waqf properties
with revenues. Currently, cash exchanges 4.4.4 TRANSPARENCY,
are the main source of waqf investments.
A total of 472 cash exchanges have been ACCOUNTABILITY & GOOD
approved from 2007 to 2017. These GOVERNANCE
payments were a total of about USD 467
million. The waqf is based on the voluntary
initiative of waqf founders. There is

Islamic Social Finance Report 2020

therefore the need to ensure the trust of the • T

he government authority in charge
founders. This will not be achieved without of awqāf may seek public charity
a system of supervision that ensures that automatically for the benefit of
the waqf management does not deviate general waqf and without prior
from achieving its objectives and fulfilling permission by collecting cash or in
the conditions and the purposes of the kind donations or by issuing specific
founders and to hold accountable those subscription bonds, called “waqf
who violate their obligations towards waqf. bonds”, their revenues are allocated
to establish religious, scientific or
The most important provisions of the social projects. (article 140).
Code about the principles of financial and
accounting organization of the general • T
he trustees–within their
waqf include the following: functions–are considered to
be personally responsible for
• A
ll general waqf constitutes one compliance with the rules of
independent legal entity, including commitment to the expenses
all general waqf properties, their included in the annual budget
revenues and all other funds of general waqf, giving orders
allocated for their benefit (Article for expenditures and liquidation;
133). compliance with the provisions
of the Awqāf Code and the texts
• T
he preparation of waqf budget
adopted for implementation related
must take into account the
to the management of general
objectives and contents of the
waqf funds, their preservation and
strategy mentioned in the article
the development of their revenues,
2a as well as the reliability of the
especially to comply with the legal
estimates in light of economic and
acts and provisions relating to the
social circumstantial data. This
conclusion of transactions; and the
budget must be prepared on the
collection of revenues of all awqāf
basis of programming for at least
under their control (Article 145).
three years for total resources and
expenditures (Article 134). • T
he financial management and
accounting of general waqf shall
• T
he annual budget of general
be subject to special financial and
waqf includes two parts: the first
accounting regulation, and shall be
part contains the resources, and
classified under specific accounting
the second part contains the
rules (Article 146)
expenditures. Each part consists of
two sections, one for management • T
he contracts, supplies and services
and the other for investment. In concluded by waqf administration
addition, the budget includes private for general waqf shall be subject to
accounts relating to specific waqf special system (Article 147).
projects (Article 135).


• T
he waqf administration shall, special supervision and control
at the end of each fiscal year, aimed at ensuring the safety of
set the management account the operations and transactions
relating to the outcome of the related to the implementation
implementation of the annual of the accounts and the annual
budget for the general waqf budget of the general waqf,
(Article 150). maintaining their accounting
and monitoring their conformity
• T
he general waqf shall be with the relevant texts. This
exempted, in respect of all their control is carried out at the level
acts, operations or transactions of the local waqf trusteeship
and the associated income, from under the authority of the Central
any tax, fee and benefit from any Controller (Article 152).
local or national tax deduction
(Article 151). • T
he Central Controller, his
assistants and local controllers
The most important provisions and in charge of the control of the
articles of the Awqāf Code about the accounts of the general waqf
control of general waqf are: shall, within their respective
competences, be personally
• T
he financial management responsible for the performance
of general waqf is subject to of control tasks (Article 155).

Islamic Social Finance Report 2020

• I n the exercise of their duties, an annual examination of the

the waqf trustees and their financial management, and
assistants, the central and local finally present every suggestion
controllers shall be subject or recommendation aimed at
to the disciplinary, civil and improving methods of managing
criminal liability rules (Article public Waqf, preserving them
156). and developing their revenues.

• A
council for the follow-up of • T
he opinions of the council,
the financial management of which may require Sharī‘ah
the general waqf, called the authentication and, must be
Supreme Council for Financial referred to the Supreme Council
Control of General Awqāf, will Oulemas for consideration and
be held next to His Majesty the issuance of a opinion in this
King (Article 157) regard, and such opinion is
considered as binding and must
• T
he council shall monitor be communicated for adoption
the financial management of by the governmental authority
general waqf, study the issues in charge of Awqāf and to the
related to them, give an opinion Supreme Council for the Control
on them, and propose all of Public Waqf Finance.
measures aimed at ensuring
their good management in • I n order to assist the Council
accordance with the principles in carrying out its duties, three
of transparency and good permanent committees have
governance, in order to been appointed, namely Budget
preserve awqāf and develop Committee, Examination
their income taking into the Committee, and Studies and
account the objectives and Research Committee. In
principles according to Awqāf addition, the Council can create
strategy mentioned in the other permanent or temporary
Article 2a (Article 158). committees to study specific
issues (Article 161).
• T
he council conducts all
research and investigation
work related to public, submit
a report of its findings to the RECOMMENDATIONS
King, prepare and present to
Waqf authority the financial The following are some of the strengths,
and accounting organization weaknesses, opportunities and threats of
for approval, provide opinion the waqf sector in Morocco.
on classified projects in the
annual Waqf budget and
on issues related to Waqf • Waqf has a long history in Morocco.
Management, carrying out


• W
aqf has a developed legal • T
he existence of many waqf
framework in Morocco. disputes and difficulties in judicial
• A
wqāf has a preferential
tax framework through tax • T
he weakness of economic and
exemptions for all its actions, social impact of waqf investment
operations or transaction at projects.
national and local level.
• T
he absence of major national
• T
he possibility of issuing waqf waqf projects in the social
bond as instruments for the sectors such as education, health
benefit of general waqf in the and social welfare.
context of seeking the public
charity. • F
ailure to carry out national
campaigns to collect donations
• F
inancial management of and issuance of waqf bonds in
general waqf is subject to the context of seeking public
financial supervision and annual charity for the benefit of general
inspection. waqf.

Weaknesses • L
ack of prudence in managing the
waqf expenditures.
• T
he absence of a consolidated
national policy for waqf. This • L
ow levels of annual surplus for
does not help to create greater waqf investment.
synergies between the different
sectors. • W
eakness in the disclosure of
general waqf funds to the public,
• L
ack of community awareness adversely affecting creation of
about the importance of waqf. new waqf.

• L
ack of institutional and human • L
ack of integration between
capacity in the area of waqf, waqf and other Islamic finance
which prevents the utilization instruments such as zakāh and
of all the possibilities allowed Islamic microfinance.
by the legal framework for the
preservation and development of • A
bsence of university programs
the waqf. for the development of
frameworks and competencies
• A
bsence of a special procedure specialized in the field of waqf.
for the family waqf properties
as in the case of general waqf Opportunities
• T
he allocation of important
financial resources for some

Islamic Social Finance Report 2020

aspects of the awqāf sector Recommendations:

within the general budget of the
country reducing the burden on • G
ive more attention to
the waqf-specific budgets. strategic planning, which is
allowed to take advantage
• T
he launching of participatory
from Waqf potential as a
banks in Morocco, which
community development.
opens a new perspective for
investment of waqf-owned
financial assets. • E
mpower institutional and
human capacity in the
• Advanced technology-driven area of waqf, to enhance
instruments available in the utilization of all the
Morocco to raise funds and possibilities allowed by the
donations. legal framework for the
preservation and development
Threats of the waqf.

• L
ack of confidence among
• G
ive more efforts for major
the public as the desire of
national waqf projects in
waqf founders is not always
the social sectors such as
achieved because of the unity of
education, health and social
financial liability of general waqf
considered as one legal entity.

• L
ack of sufficient awareness of • C
arry out national campaigns
the sanctity of awqāf among to collect donations and
some beneficiaries from issuance of waqf bonds in
investment opportunities in the context of seeking public
waqf field, and among some charity for the benefit of
parties responsible for waqf or general waqf.
intervening in it.
• T
he integration between waqf
• E
xpropriation of the waqf lands and other Islamic finance
and properties due to the laws instruments such as zakāh
of urban planning development. and Islamic microfinance.


From the awqāf that emerged in the

4.5 TUNISIA Hafsid and Ottoman era, we find schools
and health care institutions. These were
4.5.1 OVERVIEW OF THE SECTOR sponsored by many awqāf of land and
buildings which made it possible to
Waqf was known in Tunisia since the construct markets and hotels. Examples
Islamic conquest. Initially, it took the form include the awqāf by Aziza Othmana and
of mosques, such as, the Mosque of Uqba her grand daughter Fatma, as well as the
ibn Nafi6 in Kairouan. Since then, the Association of Awqāf that founded the
waqf sector expanded to include various Sadiki school11 , reshaped the Zaytouni
religious, educational, health and social education and established the Sadiki
types, and covered new areas. When Hospital, etc. During the Hosseini ruling,
Hafsi7 and Ottoman8 sultans realized the awqāf were handled improperly and
the importance of awqāf, they worked on incorrectly until the First Minister Khaïr-
endowing a lot of assets and protecting eddine Bacha created, in 1874, the Awqāf
them from all wrong manipulation that Association that oversees its management
violates the purpose of its existence. and conservation.
In the Hafsi era, several schools of science When the French occupation started in
were founded like the prestigious School 1881, the assets of the association were
of Kairouan in Medical Sciences and Fiqh, used for the interests of the colonization,
with its science and research spreading to and this undermined the awqāf. In 1956,
Western countries during the 13th Century. after the independence from the French
The proliferation of sciences in the Hafsi occupation, the government ceased the
era was due to awqāf, which was a tool of work of all public awqāf. Then in 1957, all
education sponsorship. This was in line private and common awqāf were stopped
with the foundation of awqāf institutions, too, without trying to rebuild and reform
especially in the era of Abbi Zakaria Al- them. Some of the reasons stated at that
Hafsi, and it continued under the ruling of time, were blatantly false, e.g. the system
Bayat9 and Dayat10 until 1705. Then came of awqāf being a retrospective disruption
the Husseini State which increased its to the economy, against Tunisia’s interests,
attention to awqāf. It provided continued negative for the modernity path, a tool for
education, health care and social welfare tax evasion and fraud by heirs and finally,
services until Ahmed Bay ruling (the first out of government reach.
half of the 19th Century). After that some
corruption appeared in the awqāf system. The estimated value of awqāf assets in
6 Founded by the Leader of the Islamic conquest 1944, before ceasing the work with it:
Uqba Ibn Nafi’ after conquering
7 Hafsi Dynasti governed Tunisia from 627H/1228 —— Land good for development: 482,292
to 982H/1574 hectares estimated to 401,181,000
8 The Ottoman governance of Tunisia started by
the Dayet then the Beyet
9 Bay: in Turkish, it means the Master or the Prince,
then started to be used for the Minister or the Governor of —— Land for agriculture: 57,504.8 hectares
a territory related to the Sultan worth 7,721,960,000 francs.
10 “Day” is a title that used to be utilized for the
Inkishari Warriors then it turned to be a title in the Ottoman 11 Very famous high school in the heart of Tunis

Islamic Social Finance Report 2020

—— Trees and plantation including When Khaïr-eddine Bacha knew about

olive productive plantations: valued the deteriorating situation of awqāf, he
554,473,000 francs. legislated the foundation of an organization
to repair, oversee and manage its
In the form of buildings and construction, development and investment. So came
awqāf included 42 buildings, 759 the order of Muhammad As-sadiq Bay
residential housings, 3127 shops, 35 coffee in 1874 for the establishment of Awqāf
shops, 47 hotels and motels, 21 spas and Association. The Association oversaw
46 bakeries, in addition to other religious the awqāf until 1956 when the sector was
facilities, schools, hospitals and diverse made to cease all operations.
In 2011, after core political changes in
4.5.2 REGULATORY & POLICY Tunisia, awqāf came under discussion
again through the formation of a National
FRAMEWORK Commission on the development of Islamic
finance in 2012. This led to the creation
Awqāf organization started in Tunisia
of sub-commissions to draft laws for
with the beginning of the Ottoman ruling.
different areas of concern including zakāh
The process must touch two important
and awqāf within the Ministry of Religious
dimensions: Sharī‘ah provisions and reality.
Affairs. The bill was tabled the same year
This was necessary to review the waqf
in the Constitutive Assembly for approval.
system to make it in line with the needs
The subject elicited divided opinions and
and requirements imposed by the everyday
controversial media comments, which led
to its non-approval until today. In 2013 the
Before the Hosseini era, meaning during committees of legislation and finances
the Hafsid and Ottoman ruling, waqf was within the constituent assembly conducted
ruled in accordance with the fiqh of waqf a hearing of different experts in Islamic
rules known to Islamic scholars, until the finance and laws who underlined the
beginning of the middle of the 19th Century importance of reviving awqāf in Tunisia,
when manipulation of awqāf began in the and stressed the fact that this project
era of Ahmed Bay Hosseini. He increased guarantees the State supervision on awqāf,
military budget and appointed some as it is entrusted to a public institution, as it
military persons as heads of awqāf. This is used in different other countries.
transferred awqāf leadership from scholars
The bill of awqāf contains these eight
to army and then later to the municipality.
Thus, waqf lost its independence and came
under the government control with the
• P
art 1: The general provisions which
supervision of the municipal council at that
define the waqf and its different types
time. General Hussein was the head of the
as well as the creation of the Public
council at that time and resigned due to
Trust that oversees the public awqāf.
his inability to stop the wrong manipulation
and corruption of awqāf that was done by • Part 2: The establishment of the waqf,
the Bay and his companions. structure, procedures, and conditions
set by law to create the waqf.


• Part3: The implications and legal * The variety of waqf formats.

consequences of waqf in creation.
* I ntegration of the bill in the
• Part 4: Management and supervision of Tunisian legal system.
the waqf.
* I nnovation in organizing the waqf
• P
art 5: The use and investment of the and creation of new institutions
funds generated by the awqāf. commensurate with the idea that
the provision of waqf is from
• Part 6: The expiration of the waqf. reasonable provisions based on
• P
art 7: Judge of awqāf or judiciary
specialized in looking into awqāf * C
onsidering the previous awqāf
concerns and issues. assets and issuing a final
judgment to keep them resolved.
• P
art 8: The final provisions are part
of the main choices that govern this The committee drafted this bill of Law
project and these choices can be based on the Tunisian Mudawana Fiqhiya
summarized in 6 choices as follows: and the most recent awqāf laws, such
as the Moroccan code of Awqāf, AAOIFI
* P
resentation of public waqf as Sharia Standard # 33 and other laws.
the project adopted all the types
of waqf: public, private and INSTITUTIONAL STRUCTURE
shared waqf.
Until eliminating the institution of awqāf
* P
utting protective measures after the independence from the French
necessary to guarantee/ensure occupation, the association of awqāf was
the waqf.

Islamic Social Finance Report 2020

responsible for supervising the awqāf of Mogharassah. After the deterioration

sector. It was founded in 1291 Hijri / 1874 of awqāf, by stealing its assets and
and its management includes a president, weakening its management, the occupation
vice-presidents and treasurer. created a ministry of Awqāf in 1945 that
had been cancelled later, and associated to
The agents are responsible for the direct the Great Ministry until 1956.
management of awqāf. The association
has deputies who represent it in all states After two months of independence, Habib
that have awqāf, including Kairouan, Bourguiba, Prime Minister at the time,
Sousse, Sfax, Beja, Testour, Jerid and issued an abolishing order of the awqāf
Djerba and other regions. The internal and dissolved the awqāf association, after
codes and procedures were set by being provided the necessary arguments by
superior order in 1874, and contain the lawmakers to make this decision without
administrative, financial and management returning to the provisions of awqāf. The
regulations of awqāf. They are designed awqāf then were considered state property
specifically to prevent the worsening and a massive liquidation took place for
of awqāf, such as bad regulation and the benefit of their beneficiaries and heirs.
interference by personal and political Since then the work with awqāf ceased
considerations, etc. completely in Tunisia.

The association has sought to retrieve The Ministry of State Property supervises
many Awqāf that were corrupted despite the previously named awqāf since it was
its young age, but also created new awqāf. moved under state ownership.
It achieved positive results in 1875 with a
surplus income of 597,474 riyals. This was The current bill is to establish a public
the result of transparency by its chairman institution with non-administrative purpose
Beyram V, and the deployment of all the that aims to nominate a general secretariat
reports and documents on the pages of the of awqāf and to assume the role of
official government journal, accessible to beholder of public and common awqāf, and
everyone. to oversee the private awqāf by designating
a supervisor if not designated by the waqif.
After Khaïr-eddine Bacha left the High
Ministry and Beyram V left the presidency SUPPORTING INFRASTRUCTURE
of the association, it continued on
Since 2011, several seminars and meetings
the same path, led by Sheikh Ahmed
have been held to introduce the waqf
Ouertani in 1878. Besides, in 1881, the
sector and the discussion around it has
French occupation worked to use the
been carried out by associations and
association assets to serve its interests
research centers. These include the Islamic
and the lands were stolen and given to
Economics Association, Islamic Finance
the settlers and its close allies. Thus, the
Association, Islamic Economy Forum
association deteriorated and especially
in Sousse and Center for Research and
after the release of some of the laws as
Studies in Dialogue of Civilizations and
an act of Inzaal, the law of upholding, the
Comparative Religions. Waqf is also taught
law of netting (replacement) and the law
in academic tracks established recently


in some Tunisian universities, including to build mosques, financial or in-kind

Zaytouna University, Sfax University, contributions to build them or to endow
the Higher Institute of Technological their furniture, books etc. Anecdotal
Studies, Bardas and others. Theses have evidence shows that some companies in
been prepared in the field of research Tunisia have been allocating part of their
and analysis, dealing with the Tunisian profits to the poor and needy on recurrent
experience and other experiences from basis.
around the world.
The establishment of the waqf in Tunisia
The establishment of the Awqāf
began on the basis of the Aqedah and the
Association in the era of Khairuddin Pasha
reality inherent in the Shari’ah, which was
was a qualitative shift and an attempt to
based on the Qur’ān and Sunnah and was
promote the endowments of the waqf
done according to the Maliki doctrine.
and the direct supervision of the vast
When the Ottomans came, they brought
property, in addition to the appointment
the Hanafi doctrine. Consequently, both
of agents and placed the organizational
doctrines were used in the courts. However,
hierarchy accountable and have a central
when differences emerged in the fatāwa,
administrative system with elected
the scholars usually took a tolerant view
deputies in different regions. This is why,
based on ijtihad approach.
the Association had special interests
After the abolition of the endowment such as the Office of the Registrar of
system in 1956 and the dissolution and Disputes and Financial Affairs, the Office
liquidation of the Awqāf Society, the public of Accounting for Agents, the Real Estate
endowments were attached to the state Department, the Land Survey Department
property, and the latter paid the expenses and the Inspection Department. According
of the association and returned the private to the internal arrangement, the Association
bonds either to the two positions if they is obliged to submit a report on its status at
were alive or to their heirs12. With regard the end of each year13.
to the annulment of waqf, we find that
Within the framework of the current draft
this work was on the basis of putting
law, rules and arrangements have been
an end to some of the practices in the
put in place to ensure transparency,
sector, including the establishment of a
accountability and good governance,
moratorium on male children to deprive
especially in the first chapter on the role
women of inheritance. It can be said that
of the General Secretariat of Awqāf and
the endowments in Tunisia, despite their
the fourth chapter on the supervision
abolition, are still implicitly practiced. This
is manifested in the donation of lands 13 Sheikh Mohamed Bayram V: Achievement of the
Shibani in Benghlith Sfax 2011, on the paper “Experience
12 “Amrali” dated 20 Shawwal 1375 AH provides of the Reformed Khair El-Din in the Tunisian Awqaf”
for the State to bear the expenses of the Assembly. The presented at the Awqaf Conference, organized by the
official Journal of the Republic of Tunisia No. 58 dated Tunisian Association for Islamic Economy and the General
1957 Secretariat of Awqaf in Kuwait in March 2012 in Tunis

Islamic Social Finance Report 2020

of the waqf and the fifth chapter on the • D

ifficulty in retrieving the waqf
exploitation and investment of waqf funds. properties for loss of documents.

• W
eakness of the religious faith,
4.5.6 STRATEGIC ANALYSIS AND with respect to raising funds for
RECOMMENDATIONS the benefit of the waqf or voluntary
work, and the absence of highly
To further diagnose the status of competent professionals and
endowments in Tunisia and then propose frameworks in the field of waqf and
practical steps to achieve the desired volunteers for charitable work.
situation, we present below the SWOT
analysis and recommendations for the • P
oor control over public funds,
sector. including waqf funds, which leads to
corruption and deviation, with weak
Strengths legislation or absence of deterrence.

• Waqf has a long history in Tunisia. Opportunities

• W
aqf, before the abolition of • T
he Tunisian desire for civil work
the legal framework, was based and its drive for volunteer charitable
on the system of jurisprudence work.
of the Maliki School and the
Hanafi doctrine and added to the • E
asy use of modern means of
contemporary fatāwa and systems marketing for the importance of the
developed by Khairuddin Pasha endowment and fundraising.
when it founded Awqāf Association
• P
ossibility of benefiting from
for the advancement of the sector.
the studies, conclusions and
• S
ubjecting the waqf funds to the recommendations of the
public financial control and the conferences and seminars that were
incentivization within the framework prepared about the endowment, its
of the draft law, as is the case importance, its role in development,
for companies of all types, with and its participation with the public
exemption from taxes. and private sectors.

Weaknesses • P
otential of waqf to address many
of the problems that the state was
• L
ack of awareness and marketing unable to resolve and its inability to
of its importance aggravated by a provide adequate public services,
complete absence of any discussion especially in health, education and
in the media and mosques. employment.

• L
ack of interaction between • P
ossibility of issuance of sukuk
economists and sociologists and mobilization of waqf funds for
and the decision-makers on the the benefit of public endowments
benefits from endowments and their with investment methods that
positive role in economic and social correspond to the economic reality,
development. especially after the ratification of


the Islamic sukuk law, giving the • E

mergence of some of the work that
waqf body the nature of the financial led to fatāwa and false jurisprudence
institution in the draft law authorizing that would compromise the unique
the financing and service activities as features of waqf.
other financial institutions.
• M
ultiplicity of bodies of governance
• T
he bill of law related to social and the lack of competent judiciary.
and solidarity economy, especially
chapters 4, 5 and 6 that evokes • L
ack of sufficient awareness of the
a social and solidarity economy sanctity of the endowments and
institution (very similar to Waqf related investment opportunities.
institution), supposed to be voted on • A
bandonment of most of the “high-
in the 2nd Quarter of 2020. quality” waqf lands or those suitable
for construction and the buildings
making the process of recovery
• P
olitical and economic instability almost impossible in many cases.
and insecurity with increasing
• E
xistence of a hostile economic
administrative and financial corruption.
policy of the waqf based on
ideological issues.

Islamic Social Finance Report 2020

Recommendations reference to the organs of the state,

except in the field of supervision and
The current financial difficulties experienced by coordination, so that the waqf has an
Tunisia and the weakness of political and socio- independent legal status with adequate
economic system calls for the restoration of the legal roles and responsibilities and that
awqāf system because of its expected positive protects the waqf from the effects of
impact on economic and social development. political and economic fluctuations.
• P
reparation of a clear strategy to • R
ethinking development methods
determine the investment policies of as a comprehensive value with the
waqf institutions and how to manage participation of the three sectors,
them while adhering to the legal controls especially the civil sector, including the
and keeping away from the excessive waqf.
risks involved in order to preserve capital
• R
aising awareness of the importance
and endowment.
of waqf, especially among the educated
• A
pproving the draft law of endowments and influential people.
to set up a body that manages this
• R
eference to the documents and
sector and helps to develop and
archives of the Ministry of State Property
maintain the suspended funds: the first
and the Ministry of Justice and the
part of the draft law of endowments.
archives of the courts and states to
• E
nactment of laws governing the work of reach the fact of the moratorium before
this body and its composition and giving the abolition, using the experts and the
it the nature of the financial institution to use of advanced information systems.
be able to raise funds and invest funds in
• R
eviewing the impact of the
order to achieve its objectives.
waqf contracts in line with recent
• S
tarting the revival of the waqf by developments and finding the inventory
following the methods of awareness- and classification of seized assets,
building and marketing with the including the property that was
participation of private and public incorporated into the state property.
entities in the practice of waqf and the
• R
eviewing the legislation and laws of
use of Friday sermons.
waqf to be able to keep pace with the
• E
stablishment of economic institutions reality of the contemporary waqf and
with high economic returns in all sectors give the Commission a wide range of
so that the waqf becomes a reality and investment assets and endowment
cornerstone of the national economy, development and activation in order to
even under other names. be able to participate in economic and
• D
irecting the suspended funds to small social development.
and medium enterprises and activating • D
irecting waqf funds to finance small
Islamic investment formulas such as and medium-sized projects and paying
mudharabah, isti�nā‘, leasing, istisqaa, attention to the forms of investment
etc. of waqf funds, especially in activating
• W
ork on the independence of the awqāf Islamic investment formulas such as
organization and management without leasing, participation, endowment funds,
and sukuk.

with a maturity between 12 to 601 months.
5.1 ALGERIA The public authorities consider it as a
tool aiming to achieve development and
5.1.1 SECTOR OVERVIEW increase employment rates as it targets
the most challenged among its population
Since independence, Algeria has made who have been suffering from high
huge efforts to recover all its rights unemployment rates.
and sovereignty including independent
The first microfinance experience in
monetary policies and issuing a local
Algeria goes back to 1999 and aimed
currency. It started with launching the
at creating 15,000 projects in several
Algerian central bank in 1963 and the
sectors. However, it has not met the
Algerian dinar later in 1964.
expected success as highlighted in the
During the 1970s and in the beginning 2002 international conference which
of the 1980s, the changes that were was a meeting of several prominent
brought to the Algerian financial sector microfinance experts to discuss “the
have demonstrated some limitations and Algerian microfinance experience” and its
weaknesses and addressing them has resolutions.
become urgent from both management
and governance points of view. Before 5.1.2 LEGAL FRAMEWORK AND
that, the creation of the financial money
market in June 1989 gave the opportunity
to the non-banking financial institutions Microfinance in Algeria is a key component
to access the money market. From that of the public policy to fight unemployment
moment, the Algerian banking sector has and social exclusion. Between 1999
witnessed several improvements and and 2002, the government has launched
adjustments in order to cope with the fast- a microfinance program under the
paced financial industry. These upgrades leadership of the social development
have been more and more inclusive agency2, providing loans ranging from
to further cover SMEs and very small 50,000 Algerian dinars to 350,000 Algerian
businesses, namely through microfinance. 1 Official Journal N° 6, 2004
2 As a representative of the Ministry of Labor,
Microfinance in Algeria is considered
Social Protection and Vocational Training,
a key vehicle to absorb unemployment and is replaced locally by the representative
and alleviate poverty. Financing amounts of Youth Employment and the National
through microfinance vary from 50,000 Unemployment Insurance Fund
Algerian dinars to 400,000 Algerian dinars

Islamic Social Finance Report 2020

dinars at a 20 percent interest rate. This strategy through and big network of
program has not succeeded due to several local associations and partnerships
handicaps and constraints3. to facilitate access to financing6.
It offers two types of financing
There are three other major initiatives of which one is a partnership of
undertaken by the Algerian government five public banks. The first one
in order to reduce unemployment and is a 36-months interest-free loan
promote very small businesses and SMEs to buy raw materials (Agency–
programs. This consists of creating Beneficiary) and is given directly
specialized national agencies which are: through the agency and should
not exceed 100,000 Algerian
• T
he National Agency to Support
dinars. It targets the people who
Youth Employment4: It was
have basic production equipment
created in 1996 and had a special
and machines but without funds
purpose. It operates under the
to buy raw materials (we note
lead of the prime minister and
that the financing value in the
the supervision of the minister
southern region can reach 25,000
in charge of employment and
Algerian dinars). The second one
has an independent funding and
is three parties financing (Agency-
management, and has 48 regional
Beneficiary-Bank) and consists of
and local branches across the
loans granted by the agency and
a bank to create projects which
• T
he National Agency for would not cost more than 1,000,000
Microfinance Management5: It Algerian dinars. The agency gives
is a decentralized network of 49 29% of the loan value and the bank
units in each region of the country 70% of the remaining amount. The
spread across the country and entrepreneur comes with only 1% of
supported by follow up cells in the the funding.
smaller rural regions. This body
• T
he National Fund for
provides fast loans with small
Unemployment Insurance7: Created
amounts (1,000,000 Algerian dinars
in 1994 as a national institution
maximum) with a short or long tenor
of social security, 8it has been
and which are generally subject to
in charge of monitoring and
a government subsidy in terms of
supervising the social benefits for
soft interest rates and a guaranty
the dismissed employees as part of
from the collective guarantee fund
a restructuring plan.
for microfinance. Based on its
recent publications, the agency has These three bodies offer technical and
granted 726,359 loans up to now. financial assistance to small business
All of them are interest free. This owners through subsidized loans with
agency builds a decentralization preferred pricing and also through training
3 Website of the Ministry of National Solidarity, 6 Microfinance Gateway, Alegria Portal: https://goo.
Family and Women’s Issues gl/tM8cGj
4 7
5 8 Under the tutelage of the Ministry of Labor,
Employment and Social Security
Islamic Microfinance

programs in the fields of financial and • E

xecutive Decree No. 04-14 of 29
administrative management of SMEs. Dhul-Qa’da 1424, corresponding to
22 January 2004, which includes
It is worth noting that there is a difference the establishment of the National
between the three institutions in terms Agency for the Management of
of the maximum amount which could be Microfinance and the definition of
granted and the nature of the targeted its basic law.
population and the social objectives
despite that they all operate almost in • E
xecutive Decree No. 04-15
the same manner in implementing their dated 29 Dhu al-Qa’da 1424,
programs. corresponding to 22 January 2004,
sets out the terms and conditions
We note also that the banks are key of the subsidy provided to
partners to these institutions given that beneficiaries of microfinance.
they offer the complementary financing
to the small projects according to the • E
xecutive Decree No. 04-16
partnerships requirements between the dated 29 Dhu al-Qa’da 1424,
institutions and the banks. corresponding to 22 January
2004, includes the establishment
Concerning the legal and regulatory of the Joint Guarantee Fund for
framework of the sector, it is defined by microcredit and the definition
the Government. The Ministry of National of its basic law, amended and
Solidarity, Family and Women’s Issues has supplemented.
developed proposals for the development
and improvement of the legal framework • E
xecutive Decree No. 05-414 of 22
of microcredit institutions. The Ministry of Ramadan 1426, corresponding to
Finance is responsible9 for overseeing the 25 October 2005, specifying the
modalities for the management
legal use of funds under the microfinance
of special allocation account No.
framework provided by the Ministry of
302-117 entitled “National Fund for
National Solidarity.
Microfinance Support, amended and
Below are a number of decrees, including completed10.
the organization of the sector, namely:
The Government has officially waived
• E
xecutive Decree No. 134-11 interest on loans for microfinance. In
dated 17 Rabi ‘Al Thani 1432 parallel, the ceiling of interest-bearing
corresponding to 22 March 2011 small loans has been raised, particularly
amends and completes Executive those for the southern states. According
Decree No. 04-15 dated 29 Dhu to Presidential Decree No. 13-73 on the
al-Qa’da 1424, corresponding to Microfinance Authority signed by the
22 January 2004, which defines President on 25 April 2015, microfinance
the terms and conditions of the recipients can benefit from an interest-
subsidy provided to beneficiaries of free loan to buy raw materials to start
microfinance. the activity, not to exceed 10 million
centimes (before it was limited at 3 million

9 Ministry of Finance Website 10 Official Journal

Islamic Social Finance Report 2020

centimes) and could reach the amount of Program DEVED-GTZ and with the
25 million at the level of the ten southern participation of the Ministry of Small and
states. Medium Enterprises in the city of Ghardaia.

5.1.3 ISLAMIC MICROFINANCE By the end of 2008, FIDES Algérie was

established in cooperation with the Al
INITIATIVES Baraka Bank of Algeria to facilitate the
access of artisans to adequate financing
Non-governmental organizations for the practice of their craft activities.
This institution studies and evaluates
NGOs play a prominent role in
craftsmen’s projects and their access to
microfinance. Some of these organizations
finance. On the basis of this study, the
have recently begun to become
Financial Services Corporation sends
independent financial institutions licensed
these applications to Al Baraka Bank
in accordance with the banking laws in
of Algeria to provide financing for such
force. Founded in 1989, Toussia Algerian
approved projects. The Financial Services
Association11 is one of the most important
Corporation, under the agreement with Al
associations with significant experience
Baraka Bank of Algeria, ensures continuous
in the field of microfinance through the
follow-up of craftsmen who receive
establishment of a program that includes
providing support to small business
owners. It is currently improving its working
methods and procedures in supporting 5.1.4 STRATEGIC ANALYSIS AND
borrower activity and is currently working RECOMMENDATIONS
on becoming a specialized financial
institution in the field. Strengths:

Local Development Bank • 9

8% of the Algerian people are
The Local Development Bank is urging
Islamic finance to be launched through the • 7
5% of the population are in the
Ijārah, Mudaraba and Murabaha modes, youth category.
which have been approved so far and are
• A
pplication of Islamic law in the
widely known among Algerians. These
affairs of citizens.
funds are expected to be directed towards
investment and finance of housing and • V
ariety of approved forms of
real estate projects as well as consumer financing.
finance, which are the most sought after by
citizens. In addition to financing, a savings- • V
alidity of financing modes for all
related product is expected to be launched sectors.
in which the saver will take a profit margin.
Al Baraka Bank • T
he lack of a financial system for
granting Islamic microfinance.
It is part of a development project funded
by the German International Cooperation

Islamic Microfinance

• L
ink with public banks that do Recommendations
not pay sufficient attention to
microfinance because they • S
implify and ease access to the
focus their expertise on other administrative procedures so
activities. that file processing and project
approval becomes more flexible.
• A
bsence of private banks
that encourage competition • E
stablish microfinance
in microcredit, eliminating the institutions focused on financing
incentive to grant such loans. business, craft and service
activities as well as consumer
• D
ifficult administrative and loans.
executive procedures in
processing files and approving • S
et up a retail bank for low
projects. income customers, providing all
kinds of financial instruments for
• L
ack of specialized microfinance.
competencies in Islamic
microfinance. • E
stablish cooperative financial
networks that are in line with the
Opportunities: specific social and economic
realities of Algeria so as to meet
• P
opular demand for funding in the needs of the population in
accordance with the Shari’ah. rural areas and in this context
• G
eneral orientation of the can benefit from the experience
government towards Islamic of the National Fund for
finance in general and Islamic Agricultural Cooperation.
microfinance in particular. • E
stablish independent and
• P
ossibility of positive effects specialized branches in Islamic
on the national economy by microfinance at the level of
financing the real economy. commercial banks.

Threats • C
ancel tripartite funding and
limit bilateral funding and raise
• S
lowdown in finding the the ceiling between agencies
necessary legal and regulatory and banks.
• Strengthen governance in MFIs.
• A
bsence of clear strategy for
• A
lign the MFIs with their social
developing the sector.
• U
nequal competition with
• P
rovide training for specialized
traditional microfinance.
human resources in Islamic

Islamic Social Finance Report 2020

in failure of most of these projects. It

5.2 LIBYA should be noted that in Libya, the focus
is on financing small and medium-sized
5.2.1 OVERVIEW OF THE enterprises, not micro enterprises because
SECTOR 12 of the relatively high average income of
Libyans. Therefore, investors are able to
During the last century, successive Libyan finance micro-family projects from their
governments did not pay any attention to own income or savings, so their interest
small and medium projects, due to political or their need for financing is for small and
reasons, and due to dramatic changes in medium enterprises, however, the Libyan
political administration from a socialist law did not neglect them, and they refer to
economy to the capitalist economy. them in Law 321/2002.
Moreover, the Libyan economy depends on
During this decade, especially after
the oil sector as the sole source of income,
issuance of legislation related to Islamic
and therefore, Libya is not interested
finance, and the abolition of interest-based
in any private economic activities that
banking, attention has been given to this
may help to promote or participate in the
sector. For example, the establishment
economy. Recently, however, the Libyan
of a group of Islamic Finance Funds to
government has changed its strategy, and
finance small and medium enterprises
allowed the private sector to participate
under the supervision of the National
in economic development, and to alleviate
Program for Small and Medium Enterprises
the burden on the state. Accordingly, a
(NPSME), which provides assistance for
series of state-owned investment projects
these projects. Despite this initiative, the
has been privatized, and allowed the
political divisions, security chaos and the
establishment of individual and collective
difficult economic conditions experienced
private enterprises, in the form of joint
by Libya recently have prevented funding or
stock companies. During 2001-2002,
implementation of any project.
approximately USD476 million was
allocated from state budget to finance
small and medium-sized enterprises. The 5.2.2 MICROFINANCE LEGAL &
number of projects that were financed POLICY FRAMEWORK
through banks amounted to 6,329
productive activities and 1419 service For a long time, there was no clear
activities. However, this did not contribute policy in Libya regulating the work of
to economic development due to the lack small and medium-sized enterprises, or
of appropriate environment. For example, cooperative societies, because of the
administrative chaos, conflict of laws and state’s totalitarianism and its reliance
legislation, and political and administrative on oil income in economic development.
confusion of the governments has resulted However, during the last two decades, there
was a new direction towards capitalist
12 Thurya Alwerfally, Requirements for the
economy. It allowed the establishment of
Qualification of Small and Medium Enterprises,
Supervision of the Globalization and North African
individual projects, partnerships or joint
Economies, University of Hassiba Ben Bouali Balchlef - stock companies in all economic fields,
Algeria First International Forum 17-18 / April 2016 including health service, education service,

Islamic Microfinance

financial service, trade sector, industry rights locally and internationally, for
sector, agriculture sector and the tourism the initiatives under the supervision
sector (Figure 6). A number of laws and of the (NPSME), when it is achieved.
regulations have been issued, such as
Law 321 of 2002, which regulates, defines • A
rticle 47 of Law No. 472 of 2009
and classifies microenterprises, and small states that financing of micro-
and medium-sized enterprises. This law enterprises through the Rural Bank
also covers supporting infrastructure and shall be the priority of financing
tools of financing. Law No. 73 of 2011 projects that run by women.
also stipulates that small and medium- In addition, among the policies adopted
sized enterprises are financed by various by Libyan government in accordance with
financing methods (lending, Musharaka, Article 7 of Law No. 472/2009, priority
Murabaha, finance lease, etc.) through: should be given to granting loans to the
following projects:
• D
irect finance: Borrowing from
various financial institutions. • P
rojects established in less
• F
inancing through commercial developed areas such as rural and
banks, and by sponsor of lending remote areas.
guarantee fund, for operating • P
rojects using technology that
purposes, from funds allocated to it will preserve the environment and
from state budget. protect natural resources, which
• F
inancing from funds allocated to develop renewable energies and
SMEs from state budget, and this is work towards food security.
done through specialized banks. • P
rojects that provide job
• F
inancing through funds allocated opportunities for Libyans and
for pilot projects and Funds’ contribute to the development of
innovation. human resources and improve their
It is also within the policy of the
government to encourage SMEs by getting • P
rojects that are established by
the following exemptions and advantages: women and having a positive
impact on the national economy.
• A
n exemption from fees for
• P
rojects that rely on local resources
procurement services and
to be converted into final products.
consumption tax.
In general, micro-enterprises in Libya are
• A
n exemption from production
classified into three types: (1) service
and income taxes for a period of
projects, (2) production projects, and (3)
five years from the date of actual
craft projects. Most of micro-enterprises
operation of the project.
are self-financed because investors do
• S
upport the procedures of the not need external sources of finance. They
conservation of intellectual property rely on their savings to finance this type of

Islamic Social Finance Report 2020

Regarding SMEs, the Libyan legislator exceed LYD 1 million and has from 6 to 25
did not ignore it in Law 321/2002. SMEs employees. (3) Medium-enterprises: for
are financed by borrowing from, or by which the capital does not exceeds LYD 2.5
subscribing to their capital through the million and has from 26 to 250 employees.
financial market. As for the financing of The law also stipulated the establishment
these projects, theoretically, laws and of a Credit Guarantee Fund to guarantee
regulations have been issued regarding
the potential default related to financings
finance of SMEs. However, in practice,
granted for productive purposes.
they have not yet existed for several
reasons: including the political and In 2007, Decision No. 845/2007 was
security instability during last years, and issued to establish the national program
the reluctance of some state institutions
for SMEs (NPSME), followed by the Law
(including Islamic banks) to engage in
No. 73 / 2011 regarding reorganization of
Islamic finance for higher risks in the
the NPSME. Thus, it became an institution
Libyan environment.
independent of the Ministry of Economy,
In the current stage, Islamic finance for with the following aims13:
small and medium enterprises in Libya
• P
lanning and development of
depends on political and security stability,
programs for the development of
providing the appropriate environment and
small and medium enterprises and
providing the necessary support from local
creating a supportive environment
and international institutions for this sector.
for their development.
The financial resources of these projects
are provided from funds allocated in the • A
ddressing difficulties and
state budget under development. Loans obstacles of the implementation of
are granted through specialized banks the policies of the work of small and
(agricultural, industrial and rural banks). medium enterprises.

As for the regulatory framework, the • S

election of proposed projects that
organization of small and medium need to be financed.
enterprises in Libya began during the last
• P
roviding training and development
decade with the issuance of Law No. 321
of workers, equipping them with
of 2002. This was amended by the Law
necessary skills, conducting
No. 205 of 2019 that further identifies and
feasibility studies, and granting
explains micro-enterprises and small and
assistance for the establishment
medium enterprises in Libya, and how they
and management of projects.
will be financed. The latter law classifies
small and medium enterprises into three • D
evelopment of initiatives to
categories: (1) Micro projects: for which become real projects, funding them,
the capital does not exceed LYD 100,000 providing necessary consultations
and has up to 5 employees. (2) Small- at all stages and following up on
enterprises: for which the capital does not their work.

13 the Law No. 73 / 2011

Islamic Microfinance

• C
oncluding agreements with
different financial institutions to
obtain funds for lending of SMEs.

However, as noted above, micro-enterprises

are mostly self-financed by Libyan
investors. They use their personal savings.
This is because of their high incomes
(relatively) compared to neighboring
countries. Funding of small and medium
enterprises is coordinated with the
commercial banks and the specialized
banks, namely Agricultural Bank, Industrial
Bank and Rural Bank. Finance is achieved
by various financing methods, such as
lending, participation, Murāba�ah, finance
leasing and others.

One important milestone has been reached

toward the improvement of the Micro,
Small, Medium Enterprises (MSMEs)
financing ecosystem in the beginning
which has negatively affected the revival
of 2020, when the Central Bank of Libya
of various types of economic projects in
issued the Resolution No. 1/2020 dated
Libya, and thus negatively affected the
12/2/2020 urging banks in the country to
Libyan economy in general.
establish administrative units specialized
in financing MSMEs, to conduct feasibility Chart 7 illustrates the institutional
studies for them and to provide them structure of the NPSME. It is an institution
with the required technical and economic affiliated to the Ministry of Economy,
advisory and support. headed by a General Manager assigned
by the Ministry, followed by a group of
It should be noted that after the abolition
advisory and legal departments, and five
of interest-based banking, the Central Bank
major executive departments, including
of Libya can no longer activate monetary
department of strategic development and
policy as it did in the past in terms of
planning, department of human resources,
directing credit to productive projects,
department of incubators and business
including small and medium enterprises,
centers, department of administrative and
through the use of interest rates in directing
financial affairs, department of project
bank credit to certain sectors or certain
monitoring, and technical support. These
investments. The Central Bank of Libya has
departments include group of sections and
not yet developed an alternative monetary
units as shown in chart 7.
instrument instead of interest rates,

Islamic Social Finance Report 2020

Chart 7 Organizational Structure of the NPSMEs

Ministry of Economy

National Program for Small & Medium Enterprises

Executive Manager

Advisory Committee General Manager

Legar Affairs Strategic Parternership

Audit Internal Department of Media

Technical Incubators & Dpt of Strategic

Support Business Centres Planning

Administration & Human

Financial Affairs Resources
Unit of Finance Development Unit
Business General
Gneral Incubators Centre
Technical Research &
Support Studies Unit
Incubators of Special Business
universities Centre

Small Incubators

IT Unit Financial Affairs Unit

Unit of Staff Affairs Building Capability Unit

Service Unit

Islamic Microfinance

The aim of the (NPSMEs) is to establish in Chart 8 include Benghazi University

incubators and business centers. It is Business Incubator, University of Tripoli
the main component of the program for Business Incubator, and business
reducing the failure rate of the emerging incubators of Faculty of Engineering
projects, by supporting projects to start in Misurata, business incubator of the
in early stages, and providing necessary Technical College of Bani Walid, business
technical support and advice. The Incubator of Information Technology
main business incubators described and Communication, and Incubators of
Agricultural Technologies.

Business Incubator (BI)

BI University
of Benghazi

BI of
Technical of BI of IT

BI College of BI University
Technical of Tripoli

BI of

Source: Administration Department of the National Program for Small and Medium Enterprises.

Islamic Social Finance Report 2020

The main business centers shown in Business Center, Business Center for
Chart 9 include Tripoli Business Center, Disabilities, as well as other business
Benghazi Business Center, Sabha Business centers in different Libyan cities that will be
Center, Misurata Business Center, Women’s established soon.

Chart 9: The Established Business Centers and Business Centers under


BC of Tripoli

BC of BC of
Misurata Benghazi

Business Centers (BC)

BC of
Disabilities BC of Sabha

BC of

BC of BC of BC of BC of BC of BC of BC of
Ajilat Gheryan Tubruq Darna Ejdabya Zentan Zawya

BC under Establishment

Source: Administration Department of the National Program for Small and Medium Enterprises

Islamic Microfinance

Chart 10 shows the organizational and It has also seven different departments
administrative structure of Islamic including finance and investment
finance funds for small and medium-sized department, small enterprise department,
enterprises. It is one of the main bodies medium enterprise department, incubator
of the Ministry of Economy, and has an department, financial and administrative
independent Sharī‘ah Supervisory Board. department, and audit department.

Chart 10: Organizational Structure of Islamic Finance for Small and Medium






Dept of Financial Finance and

and Aminsitrative Legal Department Audit Internal Dept
Investment Dept

Dept of Medium Dept of Small

Dept of Incubators Enterprises Enterprises

Source: Administration Department of the National Program for Small and Medium Enterprises.

Islamic Social Finance Report 2020

reduce dependence on the public

5.2.3 ISLAMIC MICROFINANCE treasury, through involvement of
INITIATIVES private sector in small and medium
enterprises. This is proved by
In the context of diversifying sources of allocation of funds in state budget
financing for SMEs in Libya, and the new to finance such projects by granting
trend towards Islamic financing formats, them loans through specialized
four Islamic finance funds were established banks.
in accordance with the Laws No. 515, 516,
517 and 518 of 2013, in order to regulate • E
stablishment of institutional
and finance SMEs. The laws allow the structure, incubators and business
establishment of Islamic finance funds to centers, and creation centers.
finance small and medium-sized projects
according to Islamic law, with a capital of
800,000 LD (640 million dollars) distributed • F
inancing difficulties: Establishment
on four major Libyan cities, each city of difficult conditions for borrowers
granted 200,000 LD (160,000 dollars). by banks to prevent implementation
These four Islamic financial funds are: of these projects.

• F
und of Theqa (Trust) for SMES in • O
rganizational difficulties: Absence
Sabha. of clear administrative and
regulatory structures in Libya, as
• F
und of Mubadara (initiative) for
well as administrative instability of
SMEs in Darna.
supporting institutions.
• F
und of Ebda’a (creation) for SMEs
• F
unctional difficulties: Daily
in Benghazi.
problems faced by projects’
• F
und of Ebtekar (innovation) in owners, which include problems of
Misurata. production and marketing.

• C
ompetition difficulties: High
5.2.4 STRATEGIC ANALYSIS & production costs, lack of quality,
RECOMMENDATIONS as a result, such projects unable to
compete locally or internationally.
• Other difficulties are:
• I ssuing a group of laws and
legalizations that regulate and —— The absence of institutions
organize SMEs since the last supervising these projects in
decade. various stages.

• E
stablishment of Islamic Financial —— Lack of adequate
Funds (IFFs) to finance SMEs. encouragement such as
exemption from taxes and
• T
he intention of government to customs duties, reduction of
diversify Libyan economy, and interest on loans and banking

Islamic Microfinance

facilities and protection from resolution urging the banks

foreign competition. operating in the country to
establish administrative units
—— Lack of infrastructure such specialized in financing MSMEs,
as industrial zones for to conduct feasibility studies
establishment of projects in for them and to provide them
different Libyan cities. with the required technical and
—— Administrative bureaucracy economic advisory and support.
and complex administrative
procedures, both in obtaining
licenses, or import of
• P
olitical and economic
machinery, equipment and
instability in Libya are the most
raw materials.
important obstacles to growth
Opportunities of this sector.

• T
he existence of the intention • A
dministrative and financial
of the government in terms of corruption in many public
interest in the issuance of laws institutions are an obstacle to
and regulations that organize it. the success and development of
the SME sector.
• T
he existence of the supporting
bodies, as well as financial • F
ailure of Islamic finance
institutions. institutions such as Islamic
banks or banks that have
• T
he ability of using Islamic Islamic windows in financing of
Microfinance in financing these small and medium enterprises in
projects, whether in Islamic Libya.
or specialized banks or even
commercial banks. Recommendations

• E
nact legislation and laws
• L
ibya is a rich country, it has
governing the SMEs as
various wealthy sectors include
facilitating the procedures for
oil, agriculture, tourism, fishing, or
obtaining licenses, financing and
human resources.
• P
ossibility to diversify its
• R
egulate human resources of
economy, and allow participation
of the private sector in economic these projects and provide them
development by establishing with legislative cover to preserve
small and medium enterprises and guarantee their rights.
based on this diversity.
• M
otivate private sector to
establish small and medium
• The recent Central Bank

Islamic Social Finance Report 2020

• M
ore interest for providing
training and rehabilitation
programs, and attract
graduates and provide
consultancy and feasibility

• E
stablish a database and
linking it with banks, and
investment funds.

• E
numerate and evaluate
Awqāf assets and

• I dentify the activities and

areas of interest of each bank.

• D
etermine funding ceilings
for projects according to the
number of jobs in each project
and nature.

• P
rovision of land and
industrial zones for the
establishment of projects.

• F
ormation of legitimate bodies
and committees in supporting
institutions for small and
medium enterprises.

• U
tilize Islamic financing tools
to finance such projects.

• C
ooperation with international
support bodies such as
Islamic Development Bank.

• B
enefit from the experiences
of others in the development
of Zakāh funds and Waqf

Islamic Microfinance

advent of political pluralism in Mauritania

5.3 MAURITANIA in 1991. According to the data available
at the Ministry of Interior, there are over
5.3.1 OVERVIEW OF THE SECTOR 8,500 formally registered organizations
according to the law provisions, through the
Microfinance in Mauritania is not approval of the Ministry. We excluded from
exclusively Islamic. The approvals granted this associative networks, cooperatives of
by the Central Bank of Mauritania are agricultural production, artisans, fisheries,
general and universal and allow their oases, and cooperatives of savings and
beneficiaries to finance both conventional credit (microfinance). These types of
and Sharī‘ah-compliant operations. associations are subject to other laws and
The microfinance sector began with the
creation of the Association for Credit Law 64-098 of 9 July 1964 governs
and Small and Medium-Sized Enterprises associations and their supervision is
(ACMPE) and the Mauritania Development entrusted to the Ministry of the Interior. It
Initiative (IDM), two funding structures grants them legal personality (Article 12)
dedicated to the reintegration of and they may be recognized as being of
Repatriated from Senegal in 1989. public utility (Article 20).
The opening of the first Caisse Populaire Acts 73-007 of 23 January 1973 and
d’Epargne et de Crédit (CAPEC) in 1997 73-157 of 2 July 1973, mainly to specify
was the first action to reflect the launch of certain provisions relating to foreign funds
a national policy for the development of a that may be received by associations,
Microfinance sector. amended Law 64-098.
In 1998, a specific law was enacted Draft legislation amending 64-098 and
regulating cooperatives and savings and taking into account its shortcomings,
credit mutual: Law 008/98 of 28 January especially with recent developments of
1998. the sector, has been prepared but not yet
submitted to Parliament for adoption.
After a few years of implementation, it has
been found that this regulatory framework, At the end of 2019, a public mission
although it has allowed some development administration called the General
of microfinance in Mauritania, has Delegation of National Solidarity and the
remained a constraint to the actors of the fight against exclusion “TAAZOUR” was
sector in several fields. created by the Presidency of the Republic.
To this end, a revision of this legal and The delegate was established by a decree
regulatory framework has been initiated: issued by the president that is directly
a new law (Ordinance No. 005/2007) is attached to the presidency of the republic,
promulgated as well as its implementing and includes projects devoted to fighting
texts (4 instructions are enacted). poverty, exclusion and marginalization.
As for the Charitable Associations, the TAAZOUR was established to “achieve
voluntary sector has grown since the social protection, eradicate all forms of

Islamic Social Finance Report 2020

inequality, promote national harmony, and • S

trategic Axe 2: Developing human
coordinate all interventions in the targeted capital and access to basic social
areas.” services,

A financial cover of 200 billion old • S

trategic Axe 3: Strengthening
Ouguiyas will be allocated during the governance in all its dimensions.
next five years to finance the General
The three axes of the SCAPP are articulated
Delegation and enable it to implement
at the level of the first action plan (2016-
an ambitious program for economic
2020) around the 15 strategic projects,
and social promotion for the benefit of
implemented in 59 priority interventions
groups that have suffered from inequality
to be carried out in the form of reforms,
and marginalization by strengthening
programs, projects or significant actions.
production tools and developing the
The development of the microfinance
purchasing power of the poor and enabling
sector was supported in the two strategic
them to access education and health
axes 1 and 2.
services, safe drinking water, decent
housing, and energy. Regarding the charitable sector, and in the
context of the Poverty Reduction Strategy
5.3.2 MICROFINANCE (PRSP), since its adoption in 2001, three
REGULATORY & POLICY PRSP phases have taken place through
three action plans: 2001-2004, 2006-
FRAMEWORK 2010 and 2011-2015. According to the
evaluation of PRSP III, among the main
Following the completion of the PRSP
constraints that caused bottlenecks in
(2001-2015), Mauritania has developed
the implementation of the PRSP during
a Strategy for Accelerated Growth and
the period 2001-2015 is the “low level of
Shared Prosperity (SCAPP) covering
ownership by national, regional and local
the period 2016-2030, corresponding to
actors and associations concerned”.
Agenda 2030 for Sustainable Development.
At present, a new challenge presents itself
The vision of the future, entitled “Mauritania
to civil Society. This is the Strategy for
we want in 2030”, is based on the values of
Accelerated Growth and Shared Prosperity
Sunni Islam, and tolerance, social cohesion
(SCAPP), which covers the period 2016-
and peace. It aims to achieve strong,
2030. The authorities want to involve all
inclusive and sustainable economic growth
networks of organizations at the grass-
in order to meet the basic needs of all
roots level in the economic, cultural and
citizens and ensure their well-being.
social development activities of the
To achieve that, three convergent levers country.
constitute the strategic objectives chosen
For the regulatory framework of
to ensure that growth, in order to achieving
microfinance, there was the ordinance
prosperity that benefits all:
No. 005 /2007 of 12 January 2007,
• S
trategic Axe 1: Promoting Strong, regulating microfinance institutions and its
Sustainable and Inclusive Growth, implementing texts, four (4) instructions

Islamic Microfinance

from the Governor of the BCM, governs the MFIs in category ‘A’ may operate
microfinance sector. Implementing texts in independently or within a network
the form of instructions from the Governor consisting of the establishment of an
of the Central Bank of Mauritania were appropriate structure: either union or
adopted on 02 May 2007: federation.

• I nstruction No. 07 / GR / 07 on The General Assembly (all members) have

financial cooperatives. a Board of Directors (5 to 9 members), a
Supervisory Board (3 to 5 members) and
• I nstruction No. 08 / GR / 07 on
a Credit Committee (at least 3 members).
prudential ratios.
The latter three bodies shall be elected for
• I nstruction No. 09 / GR / 07 on a period of three years, renewable each
financial transparency. year for one third of the members. They are
managed by a manager for a basic MFI and
• I nstruction No. 10 / GR / 07 on a General Manager for the network.
approval and registration.
This order puts an end to the monopoly
Article 4 of Ordinance No. 005/2007 of of financial cooperatives by opening the
12 January 2007 regulating Microfinance market to public limited companies (plc).
Institutions subdivides the Micro Finance The specific Microfinance Accountability
Institutions (MFIs) into three categories: Plan to complement this regulatory
Category (A) includes the non-profit framework is not yet formally adopted,
and mutual-benefit institutions offering although it has been ready since 2008. The
limited savings and / or credit services to BCM in charge of sector supervision has
their members. They must be set up as set up a Directorate for this purpose. Article
a non-profit association or as a financial 79 of Ordinance 005/2007 establishes
cooperative. Category (B) includes MFIs in that the tax regime for MFIs will be
the form of a public limited company (plc) specified by decree, which has not yet been
that provide credit and / or savings services enacted. An incentive tax regime would
to the public. Category (C) includes greatly contribute to the promotion and
the programs, projects, development development of Microfinance.
associations and units dedicated to
microfinance that offer credit services but As for supervision and governance of
do not collect savings. microfinance, the BCM supervises the MFIs
(Article 3 of the Ordinance). As such, it has
The microfinance institutions (MFIs) may a mission to monitor, supervise and verify
not carry out their activities without prior the regularity of MFIs’ operations, granting
authorization (MFIs of Category A and B) and withdrawing authorization.
or registered (MFIs of category C) by the
BCM; for networks, authorization may be The Department of Professional
granted on a collective basis to the union Development and Microfinance
or federation (Article 20 of Ordinance (DIPM) of the Ministry of Employment,
005/2007). Vocational Training and Information and
Communication Technologies (MEFPTIC)
promotes the microfinance sector in

Islamic Social Finance Report 2020

Mauritania. It includes a Microfinance people or artists in the country had to

Service which deals more specifically with obtain the authorization of the Minister in
the sector. The DIPM is in charge of the Nouakchott.
PRECAMF-PAMFEJ, the main microfinance
project in Mauritania, financed by the The draft law on associations, foundations
African Development Bank (ADB). and networks of associations, repealing
and replacing Act 64-098 of 9 June 1964
Civil society is represented in this on associations, states in its explanatory
institutional framework for microfinance memorandum that “the voluntary sector
governance, through the Professional is growing rapidly. It is an important lever
Association of Microfinance Institutions for the implementation of development
(APROMI), which was set up in 1997. It policies and democracy. However, the legal
represents a framework for consultation framework that governs it does not reflect
and exchange involving all MFIs approved this situation”. The draft, however, only
by the BCM. It records to its credit the brings in three innovations in relation to the
development of a Code of Ethics (with the law which it seeks to repeal, namely:
support of PRECAMF).
DD The proposed provisions regulate
As for the charitable associations, the associations, foundations and networks
relevant regulations are based on Act of associations.
64-098 of 9 July 1964. The central state
feared the emergence of associations with DD The project defines the categories of
tribal, racial or regional connotations. This associations according to the territorial
is why the law has concentrated the power scale to which they relate.
of apprioval of associations, no matter
DD The power to authorize associations
what their nature, size and scope is, at the
has been decentralized to the
central level, in the hands of the Minister
territorial authorities with regard to
of the Interior. Thus, associations of young
those operating in their respective

Islamic Microfinance

constituencies. This last innovation is such as Tamwil Kasb El Halal, Islamic

an effort to bring the administration of Finance Development, El Ibdaa Bank and
the public in this area closer. Tadhamoune for Islamic Finance. The
sector also includes non-accredited MFIs
5.3.4 ISLAMIC MICROFINANCE that carry out their activities for the most
important, supported by government
INITIATIVES projects or programs or technical partners.
EL MAL, supported by the NGO, Research
In 2018, the microfinance sector saw the and Technological Studies Group (GRET).
entry into operation of 6 MFIs including
• F
inancing: At the end of 2018,
5 of category ‘B’ and the termination
Microfinance institutions posted a
activity of 4 under category ‘A’ institutions.
net credit outstanding of MRU 0.4
Thus at the end of 2018, the sector
billion, up 11% compared to 2017,
had 24 microfinance institutions in
in connection with FADES credits
activity including 3 networks: i) les
for CAPEC. CAPEC’s share in loans
Caisses Populaires d’Epargne et de
from microfinance institutions
Crédit (PROCAPEC / CAPEC), ii) Caisse
represented 34%, while the
d’Epargne et de crédit, iii) l’Union Nationale
remaining 66% was shared between
des Mutuelles d’Investissement du
other institutions. Compared to the
Crédit Oasien (UNMICO), 15 Category B
banking system, the outstanding
institutions and one category A. The three
loans distributed by MFIs at
microfinance networks are present in all
12/31/2018 represented 1% of total
regions of the country.
Most newly accredited MFIs want to
• D
eposits: In 2018, deposits from
comply with the Sharī‘ah and sometimes
microfinance institutions increased
display them in their corporate names,

Islamic Social Finance Report 2020

by 13% compared to 2017, following secondary sectors.

the entry into operation of the new
institutions as well as the increase Due to a lack of nationally collected
recorded at the CAPEC level. The resources, these charitable associations
distribution of deposits shows are easily turning to the Gulf countries or
that CAPEC holds more than 68%, donors such as the Islamic Development
compared to 32% for the other Bank, Saudi Fund, Kuwaiti Fund or other
institutions. This deposit volume similar Arab institutions. They derive
represents only 2% of the total almost all of their funding. They focus on
deposits collected by the banking charitable social actions (protection of
system as at 12/31/2018. widows and orphans, health, water supply,
income-generating activities), or the
• P
roducts offered: The Islamic construction of religious infrastructures or
products offered by the MFIs are support for Qur’anic schools of instruction.
for their quasi-totaled transactions
of murabaha with purchase order, These associations have different profiles.
not to say tawarruq, because the Some are well structured with headquarters
unacknowledged purpose of the and permanent staff and also members
clients is often the acquisition of national and international academic
of cash to finance consumption organizations, while others are more akin
expenses or working capital for to informal neighborhood committees,
their sub-projects. The maturity which are not very visible at national
is generally short-term, less than level and are oriented towards private
one year, because the resources international networks of charity. It should
available are also short. The be recalled that international Islamic Non-
average loan is of the order of Governmental Organizations (NGOs) were
MRO 350,000 and the profit margin all forbidden and their offices closed in May
varies between 14% and 20%, with 2003 as part of an anti-Islamist campaign.
a real guarantee (saving, wages or The banning of international NGOs and
income domiciliation) or personal most of the local NGOs that served as
(down payment or solidarity surety). their intermediaries did not put an end
Microfinance institutions have to their activity, but sometimes made
introduced other Islamic products, it quite uncontrollable and clandestine.
such as ijara muntahia bitamlik, but These NGOs often escaped state control,
they are still rare. as they were often informal before being
restricted in the past few years as part CHARITABLE ASSOCIATIONS of the prevention of terrorist acts. This
phenomenon is followed fairly closely by
For organizations that have been
the Mauritanian authorities, through the
accredited, more than 50% of them are
National Directorate of Civil Society.
involved in the social / charitable sector
and some areas such as development, Among the most active structures in the
health and the environment are only field of beneficence and charities, we can

Islamic Microfinance

cite: such as exemption from taxes

and customs duties, reduction
DD The Al Khair Association of interest on loans and banking
DD Association Besma wa Emel facilities and protection from
foreign competition.
DD The El Irada Association
• A
dministrative bureaucracy and
DD Association of mosques and long procedures complex for
mahadras. obtaining licenses.

5.3.5 STRATEGIC ANALYSIS & Opportunities

he launch of Islamic financial
• The underdevelopment of
• A generally adequate regulatory microfinance in Mauritania is likely
and supervisory framework for to attract the interest of donors.
microfinance and civil associations.
• A separation of the promotion
(MEFTIC) and supervision • T
he international financial crisis is
(BCM) functions of the sector of likely to reduce development aid
microfinance. budgets;

• A
n active involvement of the private • T
he awareness needed effort to
sector. encourage the potential clients of
Islamic microfinance services.

• F
inancing difficulties: Stable and
long-term resources are limited. Recommendations

• O
rganizational difficulties: Weak • A
doption of national policies to
organizational and human resource develop microfinance and charitable
capacity. sector.

• F
unctional difficulties: Customers • T
he need of integrated regulatory
of these institutions face the framework to include the Islamic
daily problems of production microfinance.
and marketing, and control of
• D
evelop the institutional structure
and supporting infrastructure for the
• C
ompetition difficulties: High sector.
production costs, lack of quality and
• T
he use of technology to count
result in competitiveness at home
and classify the data and statistics
and abroad.
about the sector.
• Lack of adequate encouragement

Islamic Social Finance Report 2020

6,000 direct and almost 1,000,000 indirect

5.4 MOROCCO jobs. It ranks 14th in the Global Microscope
Index rankings in 2015 and gained a
5.4.1 OVERVIEW OF THE remarkable 30 different positions in 5 years
SECTOR (Rank in 2009: 44th place). The Kingdom
of Morocco is the fourth African country,
The microfinance sector in Morocco behind Tanzania (6th), Ghana (10th) and
can be described in a synthetic way as Kenya (11th).
13 Micro-Credit Associations (AMC);
The sector is covered by recurrent debates
They are “bodies assimilated to the
on its institutional positioning for many
credit institutions” and are governed
years, with three axes of debate:
by Law 18-97 on the regulation of
Microcredit and Law 103-12 on
• T
he expansion of banking
credit institutions and assimilated
operations that can be carried out
institutions. Among these AMCs are 3
on behalf of the financial institution
of the 15 largest NGOs / associations
itself, to the payment and collection
in the world. They have a cumulative
of savings, which raises the
outstanding amount of 6 billion dirhams
question of the type of approval
and 911,856 active borrowers as at 30
September 2015.
• T
he pooling of certain functions and
This is in addition to a good portfolio the network operation of AMC of
quality with a PaR30 at 4.6% as at 30 size small to medium, in particular
September 2015; a penetration rate of with the Solidarity Microfinance
2.7% which suggests a large margin Network (RMS).
for growth; and more than 1,600
outlets distributed throughout the • T
he preservation of the social
country at the end of 2015. The sector dimension of micro-credit and of
emerged strengthened by the crisis “social sustainability” within: (1) a
it experienced in 2007-2010, and of change in the authorization, and (2)
absorption-liquidation of the number a related evolution of the legal form
two of the sector (Zakoura Micro-Credit (towards Public limited company or
Foundation). cooperative company).

The micro-credit sector shows a It is noteworthy that the new Banking

high level of social inclusion, as Law No. 103-12 on credit institutions and
beneficiaries attribute positive impacts assimilated institutions that include a
in 93% of cases. The customer chapter for participatory “Islamic” banks
satisfaction rate is much higher than offers important advances in microfinance
that of the commercial banks. The sector by laying down the principle of
tool is recognized by all as a tool the possibility for a credit institution to
for combating poverty and financial be approved with a form of cooperative
inclusion. It is one of the Kingdom’s society. Therefore, the microfinance
leading employers and has created institutions can provide Islamic products to
their customers.

Islamic Microfinance

the public limited company, cooperative

5.4.2 MICROFINANCE society, and non-profit organization.
REGULATORY & POLICY Indeed, the law specific to micro-credit only
allows the associative form, unlike other
FRAMEWORK legislation (including those focusing on
The adopted policies for microfinance in micro-credit).
Morocco can be analyzed at micro, macro
However, this does not constitute a
and meso Levels.
fundamental obstacle to the development AT MICRO LEVEL of a diversified microfinance landscape if
any technical bottlenecks to the exercise
At this level, we can distinguish between 4 as a credit institution are lifted. On
axes: different continents and in very different
socioeconomic contexts, microfinance
• C
ategories of financial institutions and often takes on a cooperative form.
authorized transactions:
Lastly, although the presence of
Banking and microfinance law in Morocco public limited companies is clear and
offer a variety of legal approvals and forms uncontested, and could serve both new
for carrying out banking transactions. players and AMCs who have subsidized
their businesses, it is possible to detect
The minimum capital for obtaining an
a discrepancy between the company
authorization is no longer an obstacle for
law in Morocco and the aspirations of
the three largest Moroccan AMCs, nor
certain actors in the social and solidarity
indeed for a major investor. Some banks
economy. However, this does not call
aim to offer savings and money transfer
into question the very essence of public
services to AMC’s target clientele, and have
limited companies but their main purpose
even launched products dedicated to low-
(maximizing the realization of profit or
income clientele.
purpose in the general interest), and the
However, the distribution of micro- relationship of shareholders to the profits
credits by banks or finance companies of the company.
remains marginal. The reason for this
• P
rudential and financial regulation by
non-involvement of banks and companies
institution category
financing in credit to income-generating
activities, for non-wage earners, is mainly The prudential and financial regulation
due to the significant differences in the applicable to credit institutions reveals
law of market practices, in particular to the a major distinction between the two
restrictions on maximum interest rates. categories of credit institutions (banks
and finance companies) included in
• Comments on possible legal forms
Banking Law No. 103-12, and Micro-credit
In the three categories of financial associations.
institutions described above, the essential
The former is subject to full prudential
legal forms that can be envisaged, or
regulation, while the latter is subject to
at least be useful in microfinance, are
accounting and financial regulations

Islamic Social Finance Report 2020

adapted to the activities authorized by ¾¾ Or to more decentralized prudential

their authorization, supplemented by the supervision arrangements (and based
microcredit crisis, by additional standards on the financial health of each).
- essentially prudential - in matters
of governance and classification and • P
articipatory finance: banks, financing
provisioning of receivables. companies and microfinance

In terms of institutional choices on the Law 103.12 on credit institutions and

part of the actors, there are three main assimilated institutions introduces
possibilities: participatory banks in the banking
code through the establishment of new
¾¾ Cooperative, alone or in a network. In foundations based on the principles
almost all cases, these are cooperatives of sharing of gains and losses, using
held by customers alone, but the exclusively the Conseil Supérieur des
opening of the capital of the network Oulémas to give its notices of compliance.
(formed as a public limited company) The text lays down the regulatory
is sometimes found in large structures. framework for the creation, operation and
We note that the term “Microfinance” is activities of participating banks and defines
often refuted in financial cooperatives the points concerning the scope, deposits
that more readily talk about financial and products marketed by the participating
services to their members. banks. It also provides for the setting up
of an audit committee to, inter alia, identify
¾¾ Joint-stock corporation under common and prevent the risk of non-compliance
law but with variable shareholding of their operations with the advice of
structures, ranging from the domination the Upper Board of Ulemas. Law 103.12
of private commercial investors applies to credit institutions and similar
(commercial banks, investment bodies: banks, finance companies, payment
funds, etc.) to structures sometimes institutions, microcredit associations,
subsidiaries of international NGOs. offshore banks, financial companies,
Caisse de dépôt et de gestion (CDG) and
¾¾ Association and other assimilated
Caisse centrale de Garantie.
forms (NGOs), but in almost all cases,
without collecting savings. In July 2017, participatory banks
became operational in Morocco. The
The regulation of financial cooperatives
first establishments can welcome
usually involves a specific prudential
customers and open accounts. However,
approach, integrating the concept of a
the ecosystem is not yet complete, which
network, and according to the following
limits the activity of these new banks.
In an optimistic view, the completion
¾¾ Conducting prudential and financial of this ecosystem and the validation of
regulations requiring great technical and other participatory instruments especially
financial solidarity, with the possibility Musharakah and Mudarabah can boost
of consolidating certain standards. forward the Islamic Microfinance sector in

Islamic Microfinance AT MACRO LEVEL inclusion and is generally of an entity

emanating from the Ministry of Finance.
At this level, we can distinguish between The promotion of the sector is articulated
two main axes: generally through a national strategy or a
sectoral policy letter, at the highest levels
• R
egulation and supervision of the of government.
In Morocco, the sector has been heavily
The Ministry of Finance is responsible for involved in promoting its development
the drafting and presentation of drafts for through various initiatives and publications,
banking laws in Parliament. It also adopts notably from the CMS and Jaïda (sectoral
certain texts of a regulatory scope (decree, studies, sectoral meetings, the White Paper,
bill). The supervision of the banking sector etc.). The Moroccan Government, on the
(in the economic sense of the term), Bank other hand, has focused on expansion of
Al Maghrib (“BAM”) by various laws, first the scope of AMCs; the introduction of tax
for credit institutions, then for micro-credit incentives; the mobilization of financial
(“AMC”). Thus, AMCs are, under the new resources for the sector; and strengthening
Banking Law No. 103-12, assimilated to the sector supervision framework.
credit institutions, and fully integrated
in the perimeter of BAM’s intervention in Regarding the institutional, support and
terms of both accreditation, regulation and advocacy framework addressing issues
penalties. at the macro level, the Central Bank
(BAM) has become the central actor of
In charge of supervision and sectoral supervision and this has no reason to be
monitoring until 2006, the government, called into question for microfinance.
through the Ministry of Finance, sees
microfinance as an important lever for The Ministry of Finance, through its role as
the role it plays in financial inclusion, the bearer of the financial inclusion strategy,
fight against poverty and the integration of should also naturally carry the microfinance
economically weak, through the creation strategy, the pillar of financial inclusion.
of jobs and activities generating income. The development of a microfinance
The support for the development of the strategy is the first step in strengthening
sector focused on broadening the scope of the sector’s representation and support
AMCs; the introduction of tax incentives; framework and should be developed in
mobilization of financial resources for the consultation with all stakeholders in the
sector; and strengthening the regulatory sector. This approach will thus ensure that
framework for the sector. all expectations are taken into account,
ensuring the relevance and appropriateness
• Promotion of the sector of the whole sector of this strategy.

Promoting the microfinance sector is AT MESO LEVEL

mainly to facilitate the creation of an
environment conducive to the emergence On the other hand, the meso level of the
and development of microfinance. It microfinance sector includes all market and
thus contributes to greater financial locally available services, which will enable

Islamic Social Finance Report 2020

the sector to support its development Ministry for Finance for approval.
in particular to reduce the transaction
costs of MFIs and increase their horizons * E
nsure the implementation by
(reach more beneficiaries), build capacity its members of the provisions of
and encourage greater transparency. the law on microcredit and the
Although the structure of the Meso level texts adopted for its application,
varies considerably from one country as well as ethics, and refer
to another according to several criteria the matter to the Minister for
such as regulation, market maturity or the Finance.
sector strategy, we usually find at least
one professional association (PA). This * P
ropose to the Minister for
association is usually in charge of the Finance any action likely to
sector representation and often capacity promote the development of
building programs. The more mature a micro-credit.
sector of microfinance, the stronger the
market infrastructure and the streamlined * A
ct as an intermediary
services offered. between its members and
the administration and
However, Brigitte Hems of the CGAP avoid exclusion of any other
reminds us in her book, ‘Finance for All, groupings.
Building Inclusive Financial Systems’, that
different markets have need for different * D
esignate its representatives on
types of actors at this level. The Moroccan the micro-credit advisory board.
sector, by its maturity, has a solid meso
level and different organizations with * E
stablish and manage any
complementary missions, thus fulfilling common service that will foster
most of the needs of the sector. the development of microcredit.

The most important actors in the sector The FNAM has 13 member CMAs, including
3 major CMAs, which represent about 90%
• T
he FNAM: In Morocco, the of market shares, and 10 small CMAs.
National Federation of Micro-Credit There are, therefore, two groups of CMAs
Associations (FNAM) created within the FNAM, each with different
on 4 October 2001 under Law needs. The FNAM has historically suffered
18/97 governing micro-credit in from internal problems mainly related
Morocco, is the legal representative to these differences in needs. It has
of the AMCs in Morocco. The some ineffective governance within the
responsibilities of FNAM, as set out organization, where the principle of one
in its statutes (2008), are assigned vote per governing member implies that the
to it By Article 23 of Law 18-97 on needs of large MFIs are underrepresented
Micro-Credit as follows: in order to better respond to the needs and
expectations of small CMAs, the Central
* E
stablish the rules of ethics Bank encouraged the creation of Solidarity
relating to the micro-credit Microfinance Network (RMS). The objective
activity and submit to the of this network is to provide a number of

Islamic Microfinance

services to its 8 members, starting with international references, enabling

the use of a shared GIS, but also to be the it to renew and diversify its offer of
voice of small industries and governments. services.
However, this initiative was not held in view
of the small number of meetings, but due to • O
ther actors at the meso level:
the lack of an office operational efficiency A micro-credit advisory board
and the still scattered use of GIS by all has also been set up under the
members of the network. legal framework which governs
the sector. It brings together
• T
he Jaïda Fund: Regarding support representatives of the Ministry
for the refinancing of the sector, the of Finance, Central Bank, FNAM,
Jaïda Fund was a major player in and Moroccan banks in charge of
the Microfinance sector in Morocco examining the maximum amount of
and plays a key role in supporting micro-credits granted, the maximum
small CMAs, particularly in terms interest rate than the solvency
of refinancing and technical ratios of MFIs. It seems that this
support. Jaïda has had a role board is no longer active today.
during the period of crisis that the The Moroccan Centre for Banking
sector experienced between 2008 Mediation was established in June
and 2010 in the refinancing of 2013 and has started operations in
the sector, in particular the AMC. March 2014 with the appointment
Since then, Jaïda has sought to of its Director. Its role is to facilitate
diversify its service offer in the dispute resolution between clients
margins of its mission to provide and financial institutions. Its action
the sector with new perspectives recently, as well as at international
for interventions. Initially created to level, is still unknown to customers,
ensure the refinancing of the sector both banking and microfinance.
and contribute to the structural Thus, when most of the clients
development of the sector through receiving micro-credit are not aware
coordination and harmonization of of its existence, the number of
activities of international donors. applications of microfinance clients
would remain very low.
• T
he CMS: In terms of capacity
building, the sector relies on the Regarding the institutional, support and
CMS which plays a leading role advocacy framework addressing issues
through its training center, the at the Meso level, the target infrastructure
only one dedicated to the sector in of the microfinance sector (meso level)
the kingdom. Beyond this primary should include the following functions:
mission, the center is also as a representation, training, financing, and
microfinance observatory and observatory. There is no standard model of
supports micro entrepreneurs, representation in the sector in the world.
notably through financial education The representation of the sector can be
but also marketing of their done through one or more associations,
products. The CMS has developed be legislated or not, with compulsory or
relationships with local and voluntary memberships.

Islamic Social Finance Report 2020

The professional association representing the “traditional banking sector”,

its members at the level of the whether for savings services or for
supervisory authorities is responsible the provision of credit; in Morocco, it
for advocating the sector in order to seems that many AMC clients have
ensure the development and promotion a bank account, but that they are
of an environment favorable to the good not interested or able to give them
development of its members. In this credit for their income-generating
context, and according to the expectations activities.
of the various AMCs and even different
types of MFIs (assuming that the sector is —— Specific operating procedures, not
open to new MFI statuses), MFIs could be only in terms of the “standing” of the
represented through several professional agencies but also in the method of
associations (which is widely the case instruction of credits. The analysis
throughout the world in the flagship is carried out preferably by the
markets of microfinance). The important client, less in terms of his books
thing is that all MFIs are represented of account than the appreciation
according to their expectations and that all of his entrepreneurial activity. This
the actors contribute to the development of is particularly true for individual
the sector. credit for small businesses (20,000
to 50,000 Dh) and partly for small
We note positively that the meso level in business credit (from 50,000 Dh).
Morocco is already endowed with a rich
—— A social vision often more
diversity of actors who contribute to the
developed than in banking. This
accompaniment and development of the
must, however, be qualified. On the
sector (training organization, refinancing,
one hand, because the banking
risk centre, observatory, financial education,
sector in the world (and in Morocco)
etc.). All the needs are thus covered and
is known as a cooperative bank, it
the related actions can be coordinated
is not intended to distribute profits
within the framework of a financial
to shareholders / members, or to
inclusion strategy including microfinance.
enable them to realize a capital
Finally, and regarding the target legislative gain on the resale of their shares.
and regulatory framework for MFISs, On the other hand, because of this
microfinance consists of bank operations undeniable social dimension, it
and a few ancillary operations but for does not detract from the obligation
the benefit of specific populations, with to be structurally profitable, for an
specific operating methods and often with obvious reason of financial viability.
a more developed social vision than in the
—— These characteristics show that
banking sector:
microfinance is not an isolated
—— Banking operations - the profession compartment of the financial
of assuming lucrativeness and sector, but that it is part of financial
habit. inclusion, that it is a “pre-banking”
(a term used by certain actors in
—— Special populations, namely a Morocco) that could contribute to
clientele of persons excluded from “mass banking”.

Islamic Microfinance

• B
abrizk Morocco was also an
5.4.3 ISLAMIC MICROFINANCE initiative which came very close
INITIATIVES to being an Islamic microfinance
institution. The loans provided by
The microfinance sector in Morocco does Babrizk were at 0% which resemble
not yet have a single Islamic microfinance Qar� �asan. However, the loan fee
institution. However, initiatives have was considerably high close to 25%
been taken in the past decade to start a of the value of the loan. Although
Sharī‘ah compliant microfinance institution. the fee was quite heavy, these loans
Although this has not been achieved yet, were very popular especially among
we will briefly discuss what we consider the population who carried at heart
to be some important initiatives on three Sharī‘ah compliance.
different levels of programs, funds and
simple MFI. • O
n the other hand, the Jaidi Fund
had been a very important actor
Over the years many financial whose name appears in many
entrepreneurs saw the great potential in Islamic microfinance initiatives.
Islamic microfinance institutions. However, However, many of those initiatives
the legislation few years ago only allowed seem to have reached an impasse.
them to operate as association. Since In 2014, a memorandum between
then they were integrated in the banking Jaidi and the Islamic Development
and microcredit law greatly increasing the Bank was signed to create a fund
potential. of 70 million aiming at investing
and encouraging the creation of
• K
ahsb is one of the examples of microfinance institutions. The most
Islamic microfinance institutions recent information on the project
conceived but that never is that it has been on standby
materialized. In 2013 with a strong for couple of years now in the
business plan and a multitude of Ministry of Finance. Lastly, 4US
meetings scheduled during an and Jaida worked very closely on
entire year to gather investors and developing a strategy to create an
promote the MFI, Moroccans were economic empowerment program
looking forward to starting the first aiming at converting a number of
Islamic microfinance institution in microfinance institutions to work
Morocco. Sixty million dirhams were on an economic empowerment
going to be the investment for the approach. Both actors were involved
first year with an objective to raise in the creation of the only economic
the capital of the second year. The empowerment institution in North
business plan stated that 90% of the Africa, ZitounaTamkeen.
turnover was going to be through
Murabaha and a share of 10% of the
market was going to be aimed at.
The reason behind giving up on the OR COLLABORATIVE FINANCING
project remains unclear.
Crowdfunding platforms started to appear
in the Moroccan market in 2014. The

Islamic Social Finance Report 2020

platforms include Afineety, Smala & Co, On 2 March 2018, the Ministry of Economy
Cotizi and Atadamoune. Out of these four and Finance issued the presentation
platforms, only two are exclusively focusing note No. 15-18 to present a draft law on
on Moroccan projects: Smala & Co (located Collaborative Financing or Crowdfunding.
in France) and Cotizi14. The Cotizi platform Recently, on 22 August 2019, the draft
published some studies on innovative law was approved by the government
practices, such as the crowdfunding council, provided that its observation and
barometer for Morocco 2014 and on comments are taken into consideration by
developing innovative solutions and apps the general secretariat of the government
in order to boost the rise of crowdfinance. and the ministry of finance and economy16.
In 2015, the same platform, besides On 22 February 2020, the former draft law
crowdfunding services, launched an online was adopted by the parliament.
petition feature to be the 1st platform
offering that in Morocco15. To shed light on some of the provisions
of the law, the first article defined
These platforms were working in the crowfunding or “collaborative financing”
absence of legal framework related to as fund collection operations via an
crowdfunding. In April 2016, Wali Bank electronic platform called collaborative
Al Maghreb announced a plan to prepare financing platform (PFC) managed by
a specific law and regulation regarding collaborative financing company (SFC).
crowdfunding. Today, Morocco is a country The first chapter (section 1) defined and
with great potential just waiting to be presented the providers of crowdfunding
tapped. In this sense, the crowdfunding and distinguished between three categories
represents an incredible opportunity for of crowdfunding: 1) Investment operations,
financing diversification. 2) Loans operations with or without interest
14 conseil_gouvernement/CR/2019/CR_CG_22.8.2019_
maroc fr.pdf?ver=2019-08-28-125641-703

Islamic Microfinance

and 3) donation operations. Article 5

clarified the nature of these operations and 5.4.4 STRATEGIC ANALYSIS &
mentioned that they are not included in the RECOMMENDATIONS
framework of the new banking law 103-02
or Law 44-12 or 004-71 related to call for Strengths:
public savings and generosity.
• A
strong and popular demand for Sharī‘ah-
Article 9 (chapter 2) specifies that the compliant products in Morocco.
collaborative financing company (SFC)
• T
he market represents a potential of 2
must obtain agreement from Bank Al
million beneficiaries.
Maghrib for loans and donation category
and from the Moroccan Capital Market • T
he existence of a very strong
Authority (AMMC) for the investment background of microfinance and well-
category. Article 48 stipulates that the developed experience in the sector is a
collection of funds can be for profit or non- positive aspect.
profit activities. Section 1 describes the
investment category operations, while the • T
he network of microfinance institutions
loans category operations are described in around the kingdom will facilitate the
section 2 and donation category in section. integration of Islamic microfinance.

• T
he institutions no longer operate as
The draft law project reserves section
associations but as MFIs under the
5 (Articles 57 to 63) to describe the
supervision and jurisdiction of the central
participatory or Islamic crowdfunding
operation or participatory collaborative
financing, which stipulates that the contract • T
he microfinance sector is considered
characteristics will be determined by Bank by highly ranked officials and the elected
Al Maghrib and the high council of Ulemas. institutions of the kingdom as a very
In this regard the SFC must send an annual important axe that can contribute
report to the high council to assure the significantly to the development of the
compliance to their opinions and guidance. national economy
The participatory banks in Morocco
considered as account contributors for Weaknesses:
this category and will handle the SFC bank
• T
he implementation of microfinance
accounts and use the Takaful operators to
institutions remains quite recent in
ensure their operations.
Morocco and thus still has a long way to
This new legal framework may offer a huge promote and encourage on joining the
opportunity to integrate crowdfunding sector.
in Islamic finance in general and Islamic
• A
lot of time has been spent on
Microfinance in particular, facilitate
developing a single product rather than
the operations of Islamic Microfinance
focusing on the entire sector.
institutions and enhance their role
in financial inclusion and economic • E
ndowment remains poorly developed
empowerment. in Morocco although this could be an
important source of investment for the
Islamic Social Finance Report 2020

Opportunities: Recommendations:

• T
he opening of participative banks in • T
he creation and the
Morocco opened a vast horizon for development of a network
Islamic microfinance institutions as in the MENA region to
windows of the banks. promote and assist Islamic
microfinance institutions,
• T
he existing law on microfinance in but also to facilitate their
Morocco allows the MFIs to include integration in the economy of
Islamic microfinance products. each country of the region.
• T
he interest of many foreign funds • A
close cooperation and the
and entities to invest in Morocco is a development of partnerships
great opportunity to focus on Islamic between the different
microfinance. institutions operating in other
• T
he existence of some consultancy countries in the region to
firms which showed a high level of benefit from every experience.
experience and readiness to work on
• F
ocus on the development of
this sector.
waqf empowerment which is a
• S
ome Moroccan companies worked new approach to waqf and can
for years on developing Management be one of the main sources to
Information Systems to closely assist financing Islamic microfinance
MFIs in achieving their goals. or economic empowerment
• T
he presence of Jaida, a very strong
actor of the sector in Morocco, which • R
aise the awareness of all
holds shares in Zitouna Tamkeen, the involved actors to focus on
only economic empowerment MFI providing the infrastructure for
using Islamic business models in the social and economic inclusion
Maghreb region and using a Moroccan rather than financial inclusion
MIS known as 4US. only.

Threats: • F
inally, differentiate between
Islamic microfinance and
• C
onfusing the potential clients economic empowerment as
between Islamic and conventional two different approaches to
microfinance. poverty alleviation both using
Islamic finance products. The
• A
doption of Islamic microfinance objective is to identify the more
products by some existing MFI might significant impact of economic
focus just on the form and neglect the empowerment on fighting
spirit of the Sharī‘ah. poverty.
• A
dopt single products that will focus
on giving loans rather than on an
economic empowerment approach
and objective.
Islamic Microfinance

The Tunisian experience has two basic
stages in microcredit and microfinance.
The political changes that took place in
2011 played a pivotal role in the change of
the state policies.

The first phase17 started in 1960, through

the creation of “Caisses Locales du Crédit
Mutuel” as part of the implementation
of development programs funded by
international organizations such as
International Fund for Agricultural
Development (IFAD) and the World
Food Program (WFP), which made the
experience one of the leading experiences
in the Arab world.

In 1979, some development cooperatives18

KEF and UTSS introduced the microcredit
component to their development
projects to contribute to the reduction of
unemployment and job creation. These
efforts were supported in the early 1980s
by the Fonds de Promotion de l’Artisanat
et des Petits Métiers19. In 1995, Enda Inter-
Arabe20 was founded and since then, it has
disbursed 2 million micro loans, totaling
TND 1.9 billion. Since its inception, the
organization has been able to introduce
microfinance in Tunisia in accordance with
international standards, thus creating an
opportunity to penetrate the market that
is currently estimated at 1.5 million and
potential project promoters.

On 21 May 1997, the Tunisian Solidarity

17 The site of the supervisory authority for
Microfinance in Tunisia
18 Known in Tunisia as development NGOs
19 A fund to promote crafts and small crafts
20 Enda Finance is a small credit institution that

Islamic Social Finance Report 2020

Bank (BTS) was established by a a distinctive leap in the field of Islamic

presidential decree with the objective to microfinance and microcredit. In 2011,
achieve the maximum social and economic Taysir Microfinance22 was established
impact for the economic and financial with the assistance of the French ADIE
integration of the poor. On 22 December Association and was granted the Ministry
1997, the BTS held its constituent meeting of Finance’s license to operate on 28 March
to open its doors in March 1998 to finance 2014. In the same year, Microcred-Tunisia23
micro projects up to 90% of their value. was established and started its activities
In 1999, the system was strengthened by on 3 November. In 2013, ADVANS24 was
specialized development cooperatives established in Tunis with the support
that provide micro-loans aiming to assist of international and Tunisian investors.
the economic and social integration of the Following the authorization of the Tunisian
entrepreneurs by financing the purchase Ministry of Finance, the company opened
of small production equipment or working its first branch on 13 March 2015. On 21
capital. It can also be granted to improve April 2015, CFE25 received the Ministry of
living conditions. BTS loans have been Finance’s approval for its official launch
limited to TND 5,000 at 5% interest rate on 2 June 2015. Following the changes in
and a repayment period of up to 3 years. the Tunisian scene, Enda organization was
Target beneficiaries of these loans are transformed by establishing an entity fully
individuals belonging to needy families dedicated to microfinance services that
and vulnerable groups who can exercise obtained the approval of the Ministry of
continuous or qualified activity and conduct Finance on 31 December 2015.
business as well as unemployed people.
In the framework of the State Regional With an environment disposed to opening
Development Program, Qar� �asan21 and more to Islamic financial products, Zitouna
small grants were granted in the light of Tamkeen was granted its operating license
a proposal by the State Council and for in May 2015 and started its activities
the benefit of unemployed young people in August 2016. It is the first Islamic
from poor families whose income does Microfinance institution in Tunisia and the
not exceed TND 1,500 per year. The State first adopting the Economic Empowerment
supported these projects, which must not approach in North Africa. Moreover, the
exceed TND 3, 000, corresponds to a grant products of the BTS were supported by
from the state equal to 10% of the value of the Mourabaha product in partnership
the project. The loan is amortized over 4 with the Islamic Development Bank, which
years without surplus and after a two-year was concluded in 2012 and the projects
grace period. funding started by the end of 2015. Since
2011, the situation witnessed the birth of
The second phase was triggered by the some development associations26 that
radical political changes that took place
22 Company’s website
in Tunisia in 2011, which is considered 23 Company’s website
promotes the Tunisian financial scene, an article by the 24 Company’s website
Princess of Fishing on 07 January 2016 published on the 25 Company’s website
website of Wajjahni 26 As part of the guidebook for creating projects
21 Women and Children’s Rights Support through from zakah funds, many associations have been contacted
Information Technology in an official and informal manner. Most cooperatives

Islamic Microfinance

used primarily the mechanism of material and promoting mechanisms of finance and
donation and Qar� �asan coming from the guarantee. Dozens of programs, structures
funds of Zakāh and charity. and funds were created, at the time, mainly
by a presidential decree and laws were
5.5.2 MICROFINANCE POLICY & introduced afterwards. However, there was
absence of a leading and coordinating
REGULATORY FRAMEWORK structure to avoid programs and initiatives
overlapping. At this first phase, the
The Tunisian government has defined
actors of the sector were governed by the
many financing policies pertaining to
following regulatory and legal framework:
microfinance. These policies have targeted
different sectors and different social • B
TS: Since its inception, it has been
groups. subject to the presidential decree
issued on 21 May 1997.
In the first phase27 28 , the Tunisian State
went on to stimulate the formation of • E
nda: Since its establishment, it was
institutions within an integrated strategy governed by Law No. 25 of 1992,
based on several mechanisms aimed at dated 20 April 1992 and a special
further developing the culture of initiative, exemption delivered by the Ministry
attracting and enlightening young people of Finance in May 2005 to apply a
work according to their programs to fight poverty and
higher interest rate than the one
unemployment without these programs being subject to
sufficient conditions and guarantees for success. used in the market29 .
27 Mechanisms of creating projects funded by 29 According the “Market study of Microfinance
Islamic Microfinance “Ali Said” in Tunisia” that have been prepared by IBM Belguim
28 Since starting the application of the Tenth in 1431/2010 on behalf of EUROPEAID, quoting the
Development Plan (1422/2002-1426/2006) “Authorization No. 139 of the Ministry of Finance” for
Enda-Inter Arabe microcredits granting, that allow it to
Islamic Social Finance Report 2020

• D
evelopment cooperatives providing • I nvolving the private financial sector
micro-credits: Subject to Law No. 67 in Microfinance operations.
of 1999 of 15/7/1999
• P
romoting and supporting the
In the second phase30 31 , there was much growth of the Microfinance industry
talk about the need to prepare a vision for the through the establishment of an
future to strengthen the microfinance sector. institutional infrastructure.
In October 2011, a document was prepared
In the second phase, microfinance actors
by the Ministry of Finance containing32 “The
start to be subject to the following legal
concerted vision of the Microfinance sector
and regulatory framework :
in Tunisia”. In that period, the government
sought to establish this approach as a basic • All types of microfinance
solution in fighting against poverty and institutions are subject to the Law
unemployment, mainly aiming at reaching No. 117-2011, which provides the
out to the various segments and changing possibility of establishing private
their reality. The ultimate purpose of this financial institutions (limited
approach was the financial inclusion of companies) to finance micro-
excluded populations, achieving harmonious enterprises, provided that their
development and strengthening the capital is not less than TND 3
economic fabric. Among the pillars of this million.
approach are the following:
• Development cooperatives are
• Setting the basic regulatory subject to the provisions of Chapter
framework33 to oversee the 58 of Law 117-2011, which was
development of the sector. revised by another Law No. 46-
2014 of 24 July 2014, to enable
• Contributing to the development
development cooperatives to
of regions and priority sectors,
continue their financing if the capital
supervising a detailed market study,
is not less than TND 50,000
better understanding of the needs
of target clients and developing • The BTS has been restructured
the appropriate framework for into an integrated bank providing
Microfinance development. additional services such as bank
• Structuring the sector and the various
structures and restructuring the BTS. • The BTS was entrusted to offer
murāba�ah product in accordance
apply “an interest rate which takes account of the actual with the refinancing agreement
expenditure necessary for the microcredits granting and between the Tunisian Government
especially and the BTS on 27 November 2012.
The cost of resources, management and training operations
The new laws also provide for the
and operating fees”
possibility of providing conventional
30 The site the supervisory authority for Microfinance and Takaful34 Micro-insurance
in Tunisia products35 ;
31 After 2011’s major political changes 34 Insurance Journal Revised by Law No. 2011 -117
32 It is the result of consultations a range of of 5 November 2011
stakeholders of the sector 35 i.e Microfinance institution could only market
33 Microfinance Gateway, www.microfinancegateway. insurance/Takaful products that have been issued by an
org established insurance company.
Islamic Microfinance

• E
stablishment of a supervisory
authority for the Microfinance sector 5.5.3 ISLAMIC MICROFINANCE
under the Ministry of Finance36. INITIATIVES
These laws and revisions led to: Knowing that the Islamic microfinance
sector is in its beginning phase, we
• S
etting the ceiling of financing
may treat what appears to us the most
amount at TND 20 for microfinance
significate experiences which are those of
limited companies37 .
the BTS and Zitouna Tamkeen MFI.
• S
etting the ceiling of financing
amount at TND 5,000 for QAR� �ASAN PINANCING PROGRAM
• S
etting loans granted to improve
living conditions at TND 3,000 The BTS financings could reach TND
for MFIs and TND 1,000 for 150,000 and are mainly aimed at university
Development Associations. graduates to support them in creating
SMEs. Therefore, its activity belongs to
• D
evelopment Associations can meso-financing rather than micro one. In
obtain loans from the BTS to the last decade, the BTS was entrusted
strengthen their budget. However, to implement an IsDB program based on
they should not exceed an annual Qarḍ Ḥasan financing. We do not have
interest rate of 5% in addition to detailed information about the program
a 2.5% commission paid by the characteristics and outcomes. A few years
beneficiary by loan. later, the BTS was entrusted to implement
the YES-Tu program. This program is based
All the current MFIs and Development
on a Muḍārabah agreement between the
Associations are under the supervision
IsDB and the Tunisian Government on
of the Microfinance Supervision Authority
28 February 2012 with a value of USD 50
(ACM), the governmental institution
million. The program aims at economic
that have been created by the Ministry
and financial empowerment of young
of Finance and which is entrusted to
people, especially university and vocational
supervise the Microfinance sector. It is
training graduates40 , by financing the
expected that the supervisory function
launch of small projects. It is expected that
will be entrusted, at least partially, to the
this program contributes to improving the
Central Bank of Tunisia (BCT) at a later
living conditions of the various targeted
stage. The Supervision Authority was
beneficiaries. The granted institutional
established in 2012 and it is composed of
support for the program implementation
9 officials and its board is composed of 8
amounted to USD 320,000. The kick-off
members meeting periodically.
workshop was done on 6 and 7 May 2013
36 For more information, see the law number 2128- and the first financing was granted in
2012 dated 28 September 2012 December 2015.
37 Order of the Minister of Finance of 18 January
2012 fixing the ceiling amount of the microcredit and the 39 Bank Brochures
conditions of its grant by the microfinance institutions 40 As well as small farmers, artisans, people with
38 Ibid special needs and skilled workers

Islamic Social Finance Report 2020

The Bank has witnessed major challenges • Q

uality Assurance Committee: Its
in strengthening its Islamic products main tasks are to ensure the Project
offer. This required the creation of several Implementation Unit complies
committees and structures to ensure with the policies and procedures
the effective implementation and good approved by the Board of Trustees
governance of the project: and to monitor and follow up on
the implementation of the detailed
• B
oard of Trustees: Its main project plan in terms of quality and
functions are strategic decision- compliance with the timetable.
making, development and approval
of general implementation policies The program partners are the supporting
and adoption and amendment of structures of the Bank, Development
internal regulations. It has also been Associations delivering microcredits,
entrusted with approving financial universities, higher education institutes and
reports, budgets and various technical training centers.
administrative reports, monitoring
the work of the committees, To properly structure a murabaha product
coordinating them and following up and implement the program, the Bank has
the work of the Project Management contracted a Tunisian expert in the field
Unit. of Islamic banking. In addition, a Sharī‘ah
Board has been established to ensure
• A
dvisory committee: Its main the Shari’ah compliance of the program
tasks are to assist the Board of operations. Also, an internal Sharī‘ah
Trustees in developing a strategy for auditor has been appointed reporting to the
implementing the program, studying Sharī‘ah Board.
the needs of the target groups and
identifying project opportunities Although the financing started almost
in cooperation with the Technical 2 years ago, the Bank has achieved
Committee and the Program several positive results41 42 . A total 1,091
Implementation Unit, coordinating entrepreneurs were financed with a value of
with the advisory structures, TND 38,332,153, which created 2128 jobs
technical structures, civil society divided as follows:
and university experts, and ensuring
effective project implementation These funds enabled the creation /
and facilitating the exchange of expansion of projects and targeted
experiences. different segments and different
• T
echnical Committee: This is
composed of experts from the An information system module was
sectoral ministries and the BTS developed to manage the murabaha
to assist in the implementation of product. Training and several workshops
the program. Its main tasks are to have been organized for concerned
assist the Program Implementation employees to ensure the full control of
Unit to adhere to the policies and the new component. It is expected that
procedures approved by the Board 41 Tunisian Solidarity Bank
42 This was explained by the appropriate number
of Trustees and to reach project of branches and the Tunisian citizen’s thirst for Islamic
goals. financial products.
Islamic Microfinance

Sector Total financing Jobs created Number of loans

Agriculture 529 072 24 15

Traditional industries 1 139 255 81 30

Small jobs 14 553 280 897 422

Services 22 110 547 1 126 624

Total 38 332 153 2 128 1091

the Bank would start to provide refinancing for the Development Associations under this

Number of
Classification per Total Jobs
education level financing created

Higher educations 457 19 443 177 927

Other levels 634 18 888 976 1 201

Classification per Gender

Female 305 10 450 053 611

Male 786 27 882 100 1 517

Classification per project stage

Creation 876 30 731 479 1 695

Expansion 215 7 600 674 433 ZITOUNA TAMKEEN (ZT)43 2016 and its actual operations started
in August 2016. It currently provides
It is the first Islamic microfinance financing not exceeding TND 20,000. The
institution in Tunisia, adopting the institution enables customers to acquire
Economic Empowerment approach in equipment, raw materials and commodities
accordance with Islamic finance principles. at a competitive cost. The Islamic MFI is
It obtained its operations license in May trying to widely introduce the concept of
economic empowerment throughout media
43 Interview with Dr. Nabil Ghallab (ZT President
& CEO), published on the website of Wajahni at http://
presence and a series of partnerships with various sectors stakeholders. These

Islamic Social Finance Report 2020

efforts made some actors understand the • T

he correlation of many activities
importance of this approach, adopt it and with the tourism sector, which is a
become real partners in the execution of sector that proved in the first phase
projects. to be useful in bringing adequate
economic activity. After the 2011
5.5.5 STRATEGIC ANALYSIS AND dramatic changes, the sector
became fragile, especially due to
RECOMMENDATIONS the terrorist attacks and protest
movements, which negatively
affected the other sectors.
• T
argeting various sectors:
• A
dopting only the murabaha
traditional industries, small
product and using it in all fields is
businesses, agriculture and
• S
mall projects are facing fierce
• T
argeting various social groups:
competition by bigger institutions,
ages 18 to 50+ years and the level
in addition to administrative and
of education including Analphabet,
bureaucratic complications. This
Primary, Secondary and Higher
made them experimenting very
difficult44 .
• T
he responsiveness of the
• H
igh cost of microfinancing, which
supervisory authorities, the
negatively affects the profitability of
Microfinance Control Authority
(ACM), to Islamic Microfinance
actors with respect to providing • L
ack of a vision facilitating rural
them with the necessary regulatory investment for investors that will
ground to provide new Islamic enable them to reach markets in the
finance products. best conditions and at the lowest
• S
everal incentives have been
approved. • L
ack of a strategic vision to
accelerate the development of the
Microfinance sector (facilitating
• M
icrofinance programs targeting the opening of branches, product
rural areas have not managed to development, micro-insurance,
reduce rural exodus towards coastal refinancing mechanisms, etc.).
states, which has particularly
• L
ack of training for workers in
weakened the agricultural sector.
the field of Islamic microfinance
• A
lthough the state seeks to develop whether in associations or for-profit
rural infrastructure to ensure that companies.
projects could be developed and to
44 A study belonging to Ayda Azza, published in the
create incentive areas, the overall book “Mechanisms of the project launch through Islamic
situation remains unpromising. Financing”, Ali Saeed 2014 Mayara for publication and

Islamic Microfinance

• W
eak knowledge of the financial, • A
large group of entrepreneurs are
administrative and accounting excluded from the financial sector
essentials by the owners of small given the scarcity of adequate
projects or those wishing to invest. Islamic finance institutions and
• F
ailure to apply one of the safety
standards in Islamic microfinance, Threats
which is the necessity of ensuring
the eligibility of the beneficiary. • F
requent political disputes and the
disruption of many laws regulating
• R
igidity of the current legal the various fields of Islamic
framework, being not flexible Economy.
enough to fit the specific regional or
sectorial needs. • P
oor demand for Tunisian made
products due to fierce competition
Opportunities by imported products that have a
better quality and lower prices.
• T
he large number of potential
microfinance clients to satisfy: from • C
ontinuity of export volatility
400,000 to 1,400,000 clients45. towards Libya and Algeria.

45 Tunisia Islamic Finance Country Report, IRTI / IsDB Group, CIBAFI, Thomson Reuters, Zawya, 2013

Islamic Social Finance Report 2020

financial resources through viable
• W
ork on financing the economic
opportunities of small investors
and entrepreneurs, especially the • I mplementation of reforms that
poorest rural populations, through promote access to financial
the provision of integrated Shari’ah- services.
compliant financial services in the
form of grants, loans, financing, • E
nhancing the concept of
deposits and savings accounts, etc. Microfinance and empowering
the target groups according to
• E
stablishment of a fund to cover best practices, achieving financial
the lack of guarantees for the most sustainability and developing
vulnerable ones. income generating activities in
these areas, as well as actualizing
• Simplifying documentary
the process of expanding these
procedures for microfinance
important sectors, whether in
clients according to the nature and
grazing, handicraft, agriculture or
potential of these clients.
other economic activities.
• C
ontributing effectively to reach
• I ntegration of the rural poor into the
the largest number of beneficiaries
main financial services to acquire
in rural areas, by encouraging the
saving and repayment habits.
opening of branches in the interior
• R
edrawing the industrial map in
• M
obilizing large new investments
such a way as to ensure that micro-
in rural infrastructure, agricultural
enterprises and large enterprises
research and agricultural guidance
play complementary roles. It can
be modeled according to the Indian
• F
acilitating the spread of low-cost experience, which adopted a system
financial services through Internet that forces large companies to
and mobile phones. leave more than 1,200 products
for smaller enterprises. This has
• U
pdating legislations and laws forced them to adopt handling as a
to ensure transparent and clear platform.
execution of contracts.
• P
roviding suitable ground for these
• T
he need for complementarity projects, especially regarding
between donors for Microfinance competition, administrative routine
and private capital, rather than and instability of prices of raw
competition. materials.
• T
he need to ensure that the poor • A
mending the current accounting
and the unemployed have access to standard (or issuing a new one) to
46 Based on a study of Hussein Al-Asraj fit the needs of Islamic microfinance

Islamic Microfinance

strengthens the various links in the value

5.6 SUCCESS STORIES & chains and promotes synergy between
GOOD PRACTICES the various players in it. A fundamental
pillar of the EE approach is to ensure the
5.6.1 ZITOUNA TAMKEEN, sustainability of micro-projects.

TUNISIA To achieve its vision, the institution

created “Tamkeen for Development
Key ideas: Economic Empowerment (T4D)”, an NGO specialised in delivering
through Islamic Microfinance trainings and capacity building to the
beneficiaries, and it is currently creating
the “International Center for Economic
Zitouna Tamkeen is the first Islamic Empowerment (ICEE)”, specialised in
microfinance institution in Tunisia conducting studies and structuring
adopting the approach of Economic Economic Empowerment projects and
Empowerment (EE) in North Africa. The products.
institution was founded by Zitouna Bank47
The Model
, IsDB and some important local and
regional actors, such as Zitouna Takaful48, The Economic Empowerment model
Poulina Group Holding, Delice Holding adopted by Zitouna Tamkeen lays on
and Jaida Fund for Microfinance. The six fundamental pillars that aim to
institution’s mission is “to participate in remove the 6 barriers of entry to the
the financial and economic inclusion of entrepreneurial world:
disadvantaged populations by adopting
an innovative Economic Empowerment 1. Finding investment opportunities.
(EE) approach via the tools of Islamic
microfinance”. Zitouna Tamkeen has 2. Access to strong partners
the vision of “becoming a major pillar of supporting their projects.
Islamic microfinance at a national and
international levels”. 3. Access to markets through
business partnerships.
The EE approach, adopted by Zitouna
Tamkeen, is an innovative approach 4. Valorisation of the skills and
formulated by IsDB, to achieve high socio- competencies of the micro-
economic impact in its member countries. entrepreneur.
The approach considers the poor as
a partner and not as a burden. The EE 5. Access to an adequate support
institution, such as Zitouna Tamkeen, infrastructure.
acts as a link between the upstream
6. Providing the appropriate
(production) and the downstream
(marketing) in a value chain. The financing
of EE and capacity building projects
The following chart illustrates the
47 The largest Islamic bank in the country Business Model of Zitouna Tamkeen:
48 The first Takaful company in the country

Islamic Social Finance Report 2020

Chart 1: The Business Model.


Business Relation/

Economic &
Strategic Partner

Zitouna Tamkeen
Business partnerships
Projects study,
for Economic
Training, Financing

of Economic

Social Impact
resources and infrastructure
Zitouna Tamkeen does not only
necessary to navigate, produce and
measure its performance through
financial indicators but most
importantly through social and • E
nabling them to obtain necessary
economic impacts which are financial resources and increase
demonstrated by: them;

• D
eveloping economic abilities • E
nabling them to obtain adequate
so that they can manage their income; and
daily lives;
• S
upport them until they
• E
nabling them to effectively can independently manage
participate in economic administration and make
projects; appropriate economic decisions.

• Enabling them to obtain The following chart illustrates the Business

Model of Zitouna Tamkeen:

Islamic Microfinance


Business Relation/

Economic &
Strategic Partner

Zitouna Tamkeen
Business partnerships
Projects study,
for Economic
Training, Financing,
Empowerment Projects
Assistance and (2)
of Economic
Business Model

Social Impact • S
upporting them until they
can independently manage
Zitouna Tamkeen does not only measure its administration and make
performance through financial indicators appropriate economic decisions.
but most importantly through social and
economic impacts which are demonstrated Halib ElKheir Project
In partnership with the Tunisian leader of
• D
eveloping economic abilities so the dairy industry, Delice Holding (DH),
that they can manage their daily Zitouna Tamkeen has launched a major
lives; project in the north-western and central
regions of Tunisia, 2500 small-scale
• E
nabling them to effectively breeders will benefit from the project that
participate in economic projects; will include the financing of purebred herds,
• E
nabling them to obtain resources milking equipment and securing an outlet
and infrastructure necessary to for their productions by DH. This project
navigate, produce and market; includes a training and technical assistance
program provided by livestock advisers. To
• E
nabling them to obtain necessary ensure the sustainability of this business
financial resources and increase model, DH also acts as an off-taker and will
them; ensure the purchase of all the production
from the small farmers.
• E
nabling them to obtain adequate
income; and
Islamic Social Finance Report 2020

(5) (7)
Payment Payment
Farmers and
Delice Holding

Milk Centers (1)
Zitouna partnership for
(8) Tamkeen EE project
Deduct (2)
Training, instalments
financing, on behalf Engineering of
assistance and of Zitouna EE Project
follow-up Tamkeen

Business Model of “Halib ElKhir” Project

Bee.preneur Project

Zitouna Tamkeen also built

a project based on the EE
approach to provide small
traditional beekeepers with
modern technology to improve
the quality of honey and increase
its production in a partnership
with the first innovative tech
start-up in the beekeeping sector
in Tunisia, IRIS Technologies.
As part of this partnership,
IRIS Technologies will provide
beekeepers with electronic cards
dedicated to the extraction
of internal data from hives,
thus determining their yields
by ensuring the maximum
traceability of the different links
in the beekeeping value chain to
further enhance the production of
the hives.

Islamic Microfinance

Honey (5)

Beekeepers IRIS (1)

Technologies Business
for EE Project
financing, Local market
assistance Zitouna
in the first
and follow-up Tamkeen
stage and the
(2) market in the
Engineering (6) second stage
of EE project Payment

The Business Model, Bee.preneur Project.

Financing Methods training is provided by Zitouna Tamkeen

staff and its partners. Assistance
Zitouna Tamkeen aims to offer a wide and support during the lifetime of the
range of financing products adopting the microprojects are an essential component
instruments of Islamic Finance. Currently, of the services offered by Zitouna
the main products are the Murabaha to the Tamkeen.
Purchase Orderer and Qar� �asan. The
authorization of other Islamic financing Engineering of Economic Empowerment
instruments is under approval by the Projects
supervisory authority.
Zitouna Tamkeen is the only microfinance
Non-Financial Services institution in the country that has a project
engineering department. It focuses on
A fundamental pillar for the success of creating projects taking into consideration
microprojects is capacity building through the value chain of the business area, with
access to training adapted to the skills the objective to contribute significantly
required for the microproject success. to job creation and to reach the greatest
This includes technical training (in the number of beneficiaries.
specific field of the microproject), and
managerial training (soft skills training, Risk Management
sales techniques, marketing, etc.) related
to the project finance and operations At this stage, the most crucial risk that
management of the microproject. This Zitouna Tamkeen faces is the default risk.

Islamic Social Finance Report 2020

Its risk management strategy includes • T

he law does not authorize the
establishing smart partnerships with development of a range of micro-
different partners to guarantee the best insurance services (sickness, travel,
quality and prices of goods when financing project, livestock mortality, etc.)
with Murabaha, and to ensure a market and although the law authorizes MFIs
buyers (off-takers) for the beneficiaries. to commercialize them on behalf of
Also, the monitoring and evaluation unit insurance companies;
is responsible for ensuring the financing
is directed towards the growth of the • The absence of tax incentives
project and not used in other ways for for microfinance institutions to
personal consumption. In addition, staff intervene in regional development
refer to the Credit Bureau to assess the areas through economic
beneficiaries loan history and whether empowerment projects;
they can be granted more financing. A • T
he funding threshold for
credibility check is also made along with microfinance institutions (currently
the beneficiaries’ qualifications and skills TND 20,000) does not permit
set. Weekly meetings are made to check the institution to reach more
default cases to identify the causes and beneficiaries and projects;
find appropriate solutions. Moreover, as
part of the financing, beneficiaries are • T
he current law does not permit the
provided with the necessary training financing of small enterprises in the
and the skills required to manage their form of companies; and
projects financially. In addition, Zitouna
• Crowdfunding is not regulated.
Tamkeen offers micro-takaful services for
its beneficiaries through existing Takaful
companies in the market. 5.6.2 AL-BARAKA BANK OF
As of today, Zitouna Tamkeen faces several
challenges operating as a microfinance Key Ideas: Financing micro-projects and
institution in Tunisia: women doing domestics IGAs.

• T
he absence of a national guarantee Introduction
fund dedicated to the microfinance
Al-Baraka Bank of Algeria is a member of Al
Baraka Banking Group. It was incorporated
• T
he lack of local solutions for in May 1991 as the first Islamic Bank in the
the refinancing of microfinance country and operates under a commercial
institutions and social investment banking license issued by the Bank of
funds; Algeria. The main activities of the bank are
retail and commercial banking. The Bank
• M
icro-savings are not authorized by operates 30 branches.
the law; 49 Paper “The Algerian experience in Shariah
compliant Microfinance’, Nacer Hideur, presented during
the Kick-off Workshop of the “Islamic Social Finance
Report”, held in Tunis on 10 June 2017 and co-organized
by IRTI (IsDBG) and Zitouna Tamkeen MFI
Islamic Microfinance

The experience of Al-Baraka Bank of management party, with the objective

Algeria in Islamic Microfinance was to launch the Microfinance activity as a
initiated in the framework of development banking product but with the management
project in the city of Ghardaia, funded by and supervision of a specialized entity.
the German International Cooperation
Program (DEVED-GTZ) with the Advantages of the Model
participation of the Ministry of Small and
• H
armony with the cultural and
Medium Enterprises. Ghardaia city has
social specificities.
special cultural character and commercial
traditions, which are among the important • I nvolvement of relevant population
factors of the project’s success. representatives in product design.

The Model • P
aying more attention to individuals
themselves rather than to the
The project can be illustrated as bellow: submitted documents.

Distribution of the roles between involved • A

ppointment of Financing Officer
parties: The Algerian banking law does with the ability to communicate well

German Corporation for International Cooperation GIZ: Financing the technical assistance under
the Small Enterprise Financing Development Program (The third component of the Sustainable
Development Program)

DZ Bank: As a guarantor of 100% of Technical Support Services institution (FIDES)

financing to be decreased to 25% as the with experience in establishing MFIs (Namibia
project progresses - Albania - Moldova - and Northern Mali))

Bank of Algeria
(Financing through

not allow the establishment of financing in the Ghardaia environment.

institutions with less than a capital of
USD 35 million USD. Therefore, it was • Q
uick decision making regarding the
necessary to divide the roles between the grant of financing.
funding party and the follow-up and field • T
he use a moral guarantee instead
of material one.

Islamic Social Finance Report 2020

Guarantee Fund from DZ BANK

guarantee 100
% decreasing
progressively to

Al-Baraka Bank of Algeria FIDES Algeria

(3) (2)
Provide (4) Bringing projects,
(5) Accompaniment,
Musharakah evaluating them and
Payment follow up and
Financing after selecting those ready
approval of FIDES disputes resolutions to be financed


Financing Methods Mushārakah capital

Al Baraka Bank of Algeria provides • M

oral guarantee of a notorious
Mushārakah financing to well-chosen person.
Micro-enterprises. Current statistics
• H
igh-level jury to resolve potential
indicate that during the first year of activity,
only 2 of the financed 45 Micro-enterprises
did not meet payment deadlines. As for the financing of women domestic
IGAs, they were granted Qar� �asan &
• N
ature of financed projects:
Murāba�ah financing. To guarantee the
Expansion phase (not start-up
financing payment, they were organized in
the form of solidarity groups (between 3
• A
mount of Mushārakah financing: and 15).
For small equipment and working
• N
ature of the financed projects:
capital, the amount is from USD 500
Crafts or commercial projects that
to 3000; and for large equipment,
are independent of each other and
the amount is from USD 2,000 to
have solidarity in payment and
• Duration: 12 to 36 months
• T
ype of Financing: Starting with
• M
andatory savings of at least Qar� �asan followed by a mini
5 monthly installments of Murāba�ah upon renewal.

Islamic Microfinance

• A
mount of financing: Between USD funds (coming from non-Shari’ah
100 and 500 per IGA. compliant sources).

• Duration: 3 to 12 months. Risk Management

• M
andatory savings equal to 2 • O
rganizing Women in solidarity
to 4 monthly installments of the groups.
• Mandatory savings.
• C
ontract of accompaniment
• M
oral guarantee of a notorious
between FIDES and the Group of
Women for a fixed commission, not
linked to the financing amount or • H
igh-level jury to resolve potential
duration. disputes.

• F
IDES to pay administrative • D
istribution of roles between
expenses to the bank for financing different parties.
management (excluding wages). • Guarantee fund.
Project Phases Achievements
• F
rom 2008 to 2012: The financial • T
he choice of Mushārakah mode
product was managed by FIDES, the of financing was adequate to the
specialized entity. irregular nature of micro-enterprises
revenues generation.
• S
tarting from 2012: The financing is
fully managed by the Bank. • R
eaching acceptable recovery rates
due to professional accompaniment
• I n 2017: Creation of a Microfinance
and proximity to the beneficiaries.
fund from the “disregarded”

Islamic Social Finance Report 2020

• C
ontributing significantly in assignments, especially in Islamic
increasing the size of the financed Development Bank member countries50, a
Micro-enterprises and in expanding Moroccan team of experts was behind the
their activities. conception of a Management Information
System “4US” dedicated to managing
• Creating additional jobs. Economic Empowerment operations. The
• I mproving significantly the development of the MIS started in 2009.
management of the financed Micro-
The Model
Economic Empowerment approach, which
• Promoting entrepreneurship
the MIS adopted, is a comprehensive
development among small
approach for doing business with
disadvantaged population by considering
Challenges them as real qualified partners, rather than
burdens. It offers successful solutions to
• A
bsence of an appropriate legal defeat almost all development challenges:
framework. access to opportunities, access to
support investments, establishing smart
• U
nbalanced or unfair competition
partnerships and access to suitable
for government programs that have
financing and markets.
preferential terms.

• W
eak geographic expansion of the Advantages of the Model
The particularity of 4US is that it was
• F
ailure to transfer expertise to the designed to suitably fulfill the field
local team resulting in the lack of needs; the MIS was not adapted from a
control of the portfolio after the conventional microfinance nor an Islamic
withdrawal of the technical support finance system. The system is gradually
of the specialized entity. gaining in efficiency due to its deployment
and utilization in different countries such
• T
he difficulty of integrating as Sudan, Yemen and Tunisia, and is still
Microfinance activity into the Bank’s on a permanent adaptation based on
activities. multiple local challenges. 4US targets four
categories of beneficiaries: Individuals
5.6.3 “4US” MANAGEMENT and families, solidarity groups, productive
INFORMATION SYSTEM (MIS), unions and sustainable development
The system has the ability to manage large-
Key ideas: Customization to Economic scale projects for hundreds of beneficiaries’
Empowerment specificities groups, and handles most Islamic financing
50 ited Arab Emirates, Qatar, Bahrain, Saudi Arabia,
After more than 30 years of field Kuwait, Yemen, Egypt, Palestine, Sudan, Algeria, Tunisia,
experience in Islamic Social Finance Libya, Mauritania, Guinea, Chad, Cameroon, Mali, Djibouti,
Benin and Nigeria
Islamic Microfinance

Its strength resides in containing three Observatory enables the access

important modules, namely Program, to a database containing any
Financing and Business Intelligence. It also information needed to assess
offers an observatory on the beneficiaries’ the poverty level in any given
needs and the potential of the Income country, such as: identification
Generating Activities (IGAs) promotion: of IGAs, micro-projects, income
source of the poor, capacities
• P
rogram module: With all the of populations and key success
aspects that a program demands, factors. In addition, it gives access
starting from the launch of to various reports on the study
operations, to the stage of of the needs’ assessment of the
monitoring and evaluation, and to program target beneficiaries. The
profit sharing at the end. It can also reports are as follows: 1. Reports
manage several funds, in the same on IGAs including the scoring, 2.
program, at the same time and in a Reports on micro-projects with their
completely sealed way. scoring, 3. Reports on population
• F
inancing module to monitor the and opportunities, potential assets,
beneficiaries’ applications through threats and territorial, and 4.
three major phases: Establishing Data sheets on the couples IGA/
a feasibility study of the project Beneficiary and Micro-project/
based on the economic and the Promoter available in the database.
social dimensions, the approval by a Challenges
financing committee and financing
the project along with monitoring The above-mentioned Moroccan team was
the work progress and the payments the first to initiate a product with similar
of the contract’s terms. characteristics. However, it did not attribute
enough importance to copyright protection.
• B
usiness Intelligence module
Therefore, many other companies are
with indicators that are relevant
bringing into existence some systems
to Islamic microfinance field and
operating in the Islamic microfinance area
ensuring a balance between the
with similar characteristics. Then, the MIS
SEEP51 financial performance
holder’s company adopted a strategy on
and the CERISE SPI452 social
keeping the software updated with the
performance. It is important to note
latest functions and modules that are
that this module gives the real-time
inspired from the continuous evolvement of
the field reality.
• The implementation of the
51 The Small Enterprise Education and Promotion
(SEEP) Network is a non-profit organization that acts as
a network for practitioners working in microenterprise
development and microfinance fields. More details on
52 is a social performance assessment tool for
financial service providers that was created by CERISE,
in collaboration with the Social Performance Task Force
and several actors in the field of development and poverty