Islamic finance can play a crucial role in achieving the Sustainable Development Goals, writes Ulrika Modéer of the United Nations Development Program. (Photo courtesy of Rumah Zakat)

How Local Charity Rumah Zakat Helps Eradicate Poverty


APRIL 11, 2018

Jakarta. Established amid the country's political and economic crisis in 1998, local Islamic-tax collector Rumah Zakat has transformed itself as a non-governmental organization focused on helping the poor.

Zakat is an Islamic term denoting the obligation for wealthy Muslims to give charity to the poor.


Rumah Zakat started its activity by informally collecting donations to help orphans around Bandung, West Java, where its headquarters are currently located.

The organization began to formalize itself in 2005 its under first chief executive, Virda Ekaputra, who is now president director of Bandarudara Internasional Jawa Barat.

The organization began hiring full-time employees under Virda's tenure. It now employs more than 400 full-time employees and thousands of volunteers who are available at branches in 18 provinces.

"At that time, we began applying corporate models to our team in running the organization. Employees who came late to the office would have their salaries reduced as punishment, for instance," Rumah Zakat chief marketing officer Irfan Nugraha said during a media visit at the Jakarta Globe's offices last week.

From managing only Rp 800 million ($56,000) in its early formation, Rumah Zakat now manages a Rp 200 billion fund, which is distributed for developing communities through several programs, ranging from health, education, economy to infrastructure.

About 60 percent of the fund comes directly from zakat, while 35 percent is generated from other non-obligatory donations, called infaq and sadaqah in Arabic.

Rumah Zakat also sources around 5 percent of its total income from corporate social responsibility (CSR) of companies like Bank Mandiri, who feel more comfortable with professional charity management offered by the organization.

Focusing on Empowering Villages

When Rumah Zakat was founded in 1998, around 49.5 million people were living in poverty. However, a growing economy and government programs helped improve the livelihoods of millions.

Today, 26.5 million people, or 10 percent of the country's population, live under the poverty line, according to the Central Statistics Agency (BPS).

Rumah Zakat has helped more than 1.2 million people since its inception. As six in 10 impoverished people live outside of major metropolitan areas, the charity focuses its efforts in villages.

Under a program called Desa Berdaya, or "empowered village," Rumah Zakat has so far helped 1,056 villages in 21 provinces, mostly in Java.

"We help people in these villages to sustainably make income from selling agriculture and grocery products. And also by forming a cooperative," Irfan said.

Rumah Zakat expects to help as many as 1,234 villages this year and sets a target of 5,323 empowered villages by 2023.

Rumah Zakat deploys experts to assist beneficiaries in sustaining their businesses.

When a village can sustain itself, then it is deemed as an independent village and Rumah Zakat slows down its support for it.

"By now, we only have more than 20 villages that are already deemed independent," Irfan said.

Rumah Zakat claimed it helped 10,794 people through its economic programs last year and almost two thirds of the beneficiaries were lifted out of poverty.

Big Potential

Muslims are obliged to pay zakat, which accounts for 2.5 percent of income, and is paid either monthly or annually. This system is known as zakat mal.

Zakat al-fitr, on the other hand, is paid by wealthy Muslims once a year during the Eid Al-Fitr with any 2.7-kilogram of staple food, such as rice or wheat.

The government supports Islamic charity activities in the country and offers encouragement for Muslim citizens to fulfill their obligations. Zakat or other religiously-obliged donations to registered charities are tax deductible.

Irfan said that the potential for zakat collection is more than Rp 217 trillion a year, citing an estimation from the Ministry of Religious Affairs.

"But zakat collectors like Rumah Zakat, Baznas and LAZIS-NU currently can only raise Rp 10 trillion, collectively every year," Irfan said, referring respectively to National Zakat Agency and the zakat agency of Nahdlatul Ulama, the country's largest Islamic organization. 

"The room is still there," he added.

Rumah Zakat