1. Development of Islamic Social Finance Standards
Hylmun Izhar
Islamic Research and Training Institute
A Member of Islamic Development Bank Group
Joint Task Force on Islamic Social Finance for Humanitarian Action
International Islamic Microfinance for Poverty Alleviattion
14 May 2016
Bogor, Indonesia

2. Rationale Deficit of trust Credibility of institutions
The need to examine the flow of funds from a macro perspective within the system and to investigate artificial barriers that exist between social fund and profit based fund
Hence the need to establish regulatory frameworks, guidelines and standards
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3. Milestones 30 October 2015 4th ZCP Workshop & Public Hearing on ZCP
28-29 August 2014
1st ZCP Workshop
Jakarta, Indonesia
5 November 2014
2nd ZCP Workshop Surabaya, Indonesia
30-31 March 2015
3rd ZCP Workshop
Aceh, Indonesia
30 October 2015
4th ZCP Workshop & Public Hearing on ZCP
1st Workshop on WCP
11/27/2018

4. Working Group Members and Observers
Pusat Pungutan Zakat Malaysia
Lembaga Zakat Selangor
Department of Zakat and Income Tax, Saudi Arabia
Zakat Foundation of India
Asset Development Islamic Religious Council of Singapore
Pakistan Institute of Development Economics
Islamic Community of Bosnia
South Africa National Zakat Fund
IHH Humanitarian Relief Foundation, Turkey
The Zakat Chamber of Sudan
Institute Kajian Zakat Malaysia
Islamic Banking Department – OJK
Badan Waqaf Indonesia (BWI)
UGM
Airlangga University, Indonesia
Padjajaran University, Indonesia
World Zakat Forum
University College of Bahrain
INCEIF
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5. Proposed Regulatory Standards of Zakat Management
The main objective of the Zakat Core Principles is to strengthen a sound supervisory zakat management and a zakat safety net instrument among Muslim countries.
The Zakat Core Principles are the minimum standards to be applied by all zakat supervisions.
There are 18 Principles, composed of of “essential criteria” and “additional criteria”.

6. Essential criteria are elements that should be present in to assess full compliance with a Zakat Principle
Additional criteria are elements that may be relevant to the countries with advanced zakat system

7. Six Major Areas of Zakat Core Principles
No.
Dimensions
ZCP 1
Legal Foundations
ZCP 1 – ZCP 3 2
Zakat Supervision
ZCP 4 – ZCP 6 3
Zakat Governance
ZCP 7 – ZCP 8 4
Intermediary Function
ZCP 9 – ZCP 10 5
Risk Management
ZCP 11 – ZCP 14 6
Shari’ah Governance
ZCP 15 – ZCP 18

8. Areas of Waqf Core Principles
Prudential Regulations and Requirements
Waqf Core Principles
WCP 8 : Good Waqf governance
WCP 9 : Risk Management,
WCP 10 : Collection management
WCP 11 :Disbursement management
WCP 12 : Problem waqf asset, provision & reserve
WCP 13 : Transaction with related party
WCP 14 :Country and transfer risks
WCP 15 : Reputation and Waqif loss risk
WCP 16 : Revenue/profit loss sharing risk
WCP 17 : Disbursement risk
WCP 18 : Operational risk
WCP 19 : Shari’ah control and internal audit
WCP 20 : Financial reporting and external audit
WCP 21 : Disclosure and transparency
WCP 22 : Abuse of waqf asset usage & financial services
Supervisory Powers, Responsibilities and Functions
Waqf Core Principles
WCP 1 : Responsibilities, Objectives, powers, independence, accountability and collaboration
WCP 2 : Permissible activities
WCP 3 : Licensing criteria
WCP 4 : Waqf supervisory approach
WCP 5 : Waqf supervisory techniques and tools
WCP 6 : Waqf supervisory reporting
WCP 7 : Corrective and sanctioning powers of waqf supervisor
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9. On the Establishment of IIFSB
In order to produce the sound regulatory framework of Zakat and Awqaf systems as well as to increase the quality of Zakat and Awqaf management, an international collaboration in the form of multilateral standard-setting institution is deemed necessary to explore the potential of Islamic social sector development in the future.
IIFSB is expected to govern the effective and efficient Zakat and Awqaf supervision and regulation that would serve as the main reference for the OIC member countries.
Furthermore, the regulatory standards issued may also be used in the international financial sector assessment process (FSAP) where Zakat and Awqaf sectors are unique in the Islamic financial system.

10. What’s next ?
Together We Build a Better Future