WAQF AND WAQF SYSTEM IN TANZANIA: CAN ISLAMIC BANKS / WINDOWS PLAY A ROLE?

WAQF (Endowment).

Waqf is a voluntary charity which has unique presence in Islam. Scholars have defined it differently. However, these definitions revolve around three basic elements.

1. Voluntary transfer of ownership of property or real estate, revenue, fruits, crops so that the yield, usufruct and other benefits thereof go to intended beneficiary.
2. The sincere purpose of such transfer is to please and seek Allah’s favor.
3. Neither can the property or assets be sold, inherited nor its usufruct used contrary to will of the owner/donor.

Waqf can be viewed as an institution for provision of public goods. Public goods are defined as goods that are non-excludable (not easily denied to un authorized consumers) as well as non rival (capable of being enjoyed by many consumers at once). Kuran argues that from 750 C.E, Waqf was a popular vehicle for provision of public goods as a pious foundation. He defined Waqf as an incorporated trust established under Islamic law by a living man or woman for the provision of a designated social service in perpetuity. This is an earliest definition given which date from a period after the birth of Islam.

The rules for establishing a Waqf is subject to various scholars opinion, however, there is no question that the preferred endowment should be immovable property. This goes hand in hand with the donor aims to have a long lasting entity which shall benefits the society and earn him rewards in the hereafter.

MOTIVES FOR WAQF.

There are five motives for the Waqf founders or donors to donate their properties. One, earning endless rewards in the hereafter as Waqf property is considered ‘Sadaqatun Jariya.’ Second, ensure greater security of property from confiscation by the state and third, enjoy reduced property tax. Fourth, asset laundering i.e. state officials who took government properties or other individuals would transfer them to waqf as a way of legitimatization of their actions. Fifth, to achieve personal status.

TYPES OF WAQF.

There are three main kinds of waqfs. The first kind is the Waqf Khairy or charitable waqf, which means withholding one's property and directing its revenues towards different philanthropic goals. The second kind of waqf is the Waqf Ahli or the family waqf. It means withholding the property to the benefit of the members of the family like the wife, the children, and the relatives. Finally, Waqf Mushtarak, or the joint waqf, which is targeting part of the withheld property towards philanthropy and the other part to the family.

SOCIAL-ECONOMIC SIGNIFICANCE OF WAQF INSTITUTION.

“The Ottoman society left the financing of health, education and welfare entirely to the Waqf system so much so that the following saying does not exaggerate its central importance: “Thanks to the Waqfs that flourished during the Ottoman Empire, a person would have been born into a Waqf house, slept in a Waqf cradle, eaten and drunk from Waqf properties, read Waqf books, been taught in a Waqf school, received his salary from a Waqf administration, and when he died, placed in a Waqf coffin and buried in a Waqf cemetery.”

The above quote is the best explanation of the role and significance of waqf institution in a country. Ottoman Empire enjoyed exclusive benefits of the institution during its reign. Kuran asserts that “At the end of the eighteenth century, it has been estimated, the combined income of the roughly 20,000 Ottoman awqafs in operation equaled one-third of Ottoman state’s total revenue, including the yield from tax farms in the Balkans, Turkey, and the Arab world.” This is due to the fact that taxes were collected from individuals cultivating Waqf land which constituted one third of all economically productive land in the Ottoman Empire. Furthermore, waqf system came to own and control variety of valuable assets such as commercial and residential buildings, shops and production facilities.

On the social aspect, Kuran says “by the end of the eighteenth century, in Istanbul, whose estimated population of 700,000 made it the largest city in Europe, up to 30,000 people a day were being fed by charitable complexes (imarets) established under the waqf system.” Leave alone those who enjoyed service of mosques, cemeteries, libraries, schools and universities, hospitals, orphanages and shelters including animals welfare centers established under waqf system. Due to its relevance, even non Muslims in Muslim countries established Waqf for the benefit of their communities.

These are remarkable achievements of waqf system in provision of public goods. As a result, Imtiaz rightly said, “today, almost every Muslim country has a Ministry that handles Awqaf and Islamic Affairs while Awqaf properties make up a considerable proportion of the social wealth in several Muslim countries.”

WAQF SYSTEM IN TANZANIA.

Waqf system is recognized in the laws of Tanzania mainland and in Zanzibar respectively. In the mainland, Waqf is governed by the provisions of Part XV of Probate and Administration Act, Cap 352 R.E 2002 which incorporates the Waqf Commissioners ordinance, cap 326. In Zanzibar, Waqf matters are governed by the Waqf Validating Decree, Cap 104 and Waqf Property Decree, Cap 103 as amended by the Waqf Property (Amendment) Decree, No. 12 of 1966.

Section 140 of Probate and Administration Act, defined the term "wakf" as “an endowment or dedication in accordance with Islamic law of any property within Tanzania for religious, charitable or benevolent purposes or for the maintenance and support of any member of the family of the person endowing or dedicating such property.”

Section 142 of the Act established Waqf Commission of Tanzania which must consists not less than eight persons appointed by the President whose majority members must be Muslim. Waqf commission duty is to register all property of a registerable Waqf and all trustees of such property, issue certificate of change of trustees, hold an inquiry and take over administration of Wakf when there is no properly constituted trustee of a Waqf or in case where any of the trustees act in an improper, unauthorized or unlawful manner. In any case, if the inquiry finds out the breach happened, the commission may declare the Wakf to be under it or appoint new trustee(s).

Despite good intentions of provisions to ensure intended purpose is met, this author couldn’t establish who is the chairman and the other members of Waqf commission in Tanzania. With prevailing misuse of Waqf properties in Tanzania over the recent years, no doubt the commission neither exists apart from the law books nor its duty performed in an impartial approach.
Just recently, popular Muslim weekly newspaper, An nuur reported on the successful end of the court case involving conman who wanted to confiscate Waqf properties located at Somali and Mchikichi-Kariakoo. If bold measures aren’t taken, many waqf properties will end up in the hand of conman and deprive people everlasting benefits of this public good.

Waqf institution in the country has taken many forms such as residential and commercial buildings, productive land, Mosques, Cemeteries plot, Books and libraries, Water Wells just to mention but a few. However, to the best of my knowledge no research available which shows the magnitude and value of Waqf properties in the country neither its social role has been systematically
studied.

ISLAMIC BANKS ROLE.

The experience of Malaysia shows that Islamic Banks can play development role of Waqf properties such as funding them in order to build or renovate Waqf properties in order to add more value to them. In Tanzania, where there is significant number of undeveloped Waqf land in prime locations, Islamic Banks/Window can raise funds or use its own funds and invest on the Waqf land turning it into productive entity such as residential/commercial apartments or a modernised agriculture farm land.

In Malaysia, Bank Islam has undertaken and performed development role through Cash Waqaf Deposit, Issuance of Sukuk as well as using financing approach to develop Waqf properties.

ISLAMIC FINANCE OFFERS STRONG PROSPECTS FOR PROFESSIONAL GROWTH.

By Cleofe Maceda, Senior Reporter Gulf News.

Finance professionals looking for a change in their career might do well to consider working for an Islamic bank or financial services company. Analysts said there are many vacancies to fill within the industry, while attractive pay packages await the successful candidates.

It is estimated that by 2015, Islamic banks and financial services firms in the UAE will need to hire additional manpower for 8,000 positions, thanks to new products being introduced and the ongoing push to make Dubai the capital of the world’s $8 trillion (Dh29.4 trillion) Islamic economy in three years.
Likewise, the employee population in the sector is forecast to double, from around 10,000 to 20,000 workers. Across the globe, the need for more staff is even bigger, with several companies requiring a total of 50,000 new professionals next year.

Geetu Ahuja, head of GCC at the Chartered Institute of Management Accountants (Cima), which offers Islamic finance programmes, said the popular jobs and positions at the moment are certified Takaful specialists, specialist Sharia scholars and Islamic finance lawyers, among many others. Companies looking to hire new personnel include banks, financial consultancy firms and higher education institutions, such as universities.
His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister and Ruler of Dubai, earlier launched the initiative “Transforming Dubai into a global centre for Islamic sukuk.” Similar to conventional banking, Islamic finance offers products and services to both Muslim and non-Muslim savers, investors or borrowers, but the difference is that it follows the principles of Sharia, the moral code laid out in Quran.

Right skills set.

While more jobs are and will be up for grabs within the industry, making a career change to the Islamic field may prove to be a difficult one, especially for those lacking the right skills sets. Financial institutions are often heard saying there is a serious scarcity of professionals with the required qualifications and experience.

“If you’re looking at this industry growing from over a trillion US dollars and is expected to grow by 2017 to about $2.67 trillion, you can imagine, if that is their vision, that they obviously need the right set of people and I don’t see an organisation having that kind of provision compromising on the skills set that could actually take them to that vision,” Ahuja told Gulf News.
According to the Workplace Planning Study by the Dubai International Academic City, half of the 60 GCC banks surveyed are having difficulty hiring graduates for entry-level positions. Another 23 per cent of the respondents said that filling mid-level roles is a problem, while only a small proportion (5 per cent) struggle to hire for senior roles.
Part of the problem is that there aren’t enough programmes that help groom professionals and fresh graduates into the kind of workers the industry needs.

“Universities and training providers must refine their programmes and courses to support the sector, equipping young talent with the level of specialism and sophistication required by employers,” Rashid Mahboob, senior vice president, customer excellence at Dubai Islamic Bank, earlier said at a forum in Dubai. “Similarly, employers must dedicate themselves to providing genuine on-the-job training.”

Jobseekers can also expect tough competition, as an increasing number of people, both Muslims and non-Muslims, is seeking a career in Islamic finance. “There are a number of professionals which we’re seeing growing by the day in terms of their interest in joining the industry,” said Ahuja.

Every religion.

Looking at the database of students who have pursued Islamic finance qualification with Cima, Ahuja said almost every religion is represented.

“Getting into the industry is not more from a cultural aspect. You’d see a mix of them. When I walked into Islamic banks and institutions myself, I saw a good proportion of a mix of Muslims and non-Muslims,” she added.
The good news for unqualified jobseekers, though, is that they can increase their chances of landing a position by taking up academic certificate programmes designed for professionals seeking to pursue Islamic finance. At Cima, for example, anyone, regardless of their university degree or employment history, can obtain an Islamic finance qualification in less than a year.

“The qualifications are based on your pace. You can finish the qualification from one month to four months. It’s basically quite flexible. There are no time limits as such,” said Ahuja.

NEW BOOK: HOUSE OF DEBT.

The university of Chicago Press provides the following description of the book which has been published in May,2014; "The Great American Recession resulted in the loss of eight million jobs between 2007 and 2009. More than four million homes were lost to foreclosures. Is it a coincidence that the United States witnessed a dramatic rise in household debt in the years before the recession—that the total amount of debt for American households doubled between 2000 and 2007 to $14 trillion? Definitely not. Armed with clear and powerful evidence, Atif Mian and Amir Sufi reveal in House of Debt how the Great Recession and Great Depression, as well as the current economic malaise in Europe, were caused by a large run-up in household debt followed by a significantly large drop in household spending.

Though the banking crisis captured the public’s attention, Mian and Sufi argue strongly with actual data that current policy is too heavily biased toward protecting banks and creditors. Increasing the flow of credit, they show, is disastrously counterproductive when the fundamental problem is too much debt. As their research shows, excessive household debt leads to foreclosures, causing individuals to spend less and save more. Less spending means less demand for goods, followed by declines in production and huge job losses. How do we end such a cycle? With a direct attack on debt, say Mian and Sufi.  More aggressive debt forgiveness after the crash helps, but as they illustrate,we can be rid of painful bubble-and-bust episodes only if the financial system moves away from its reliance on inflexible debt contracts. As an example, they propose new mortgage contracts that are built on the principle of risk-sharing, a concept that would have prevented the housing bubble from emerging in the first place.

Thoroughly grounded in compelling economic evidence, House of Debt offers convincing answers to some of the most important questions facing the modern economy today: Why do severe recessions happen? Could we have prevented the Great Recession and its consequences? And what actions are needed to prevent such crises going forward?"

Some Review Quotes.

Lawrence Summers | Financial Times
“The most important economics book of 2014; it could be the most important book to come out of the 2008 financial crisis and subsequent Great Recession. Its arguments deserve careful attention, and its publication provides an opportunity to reconsider policy choices made in 2009 and 2010 regarding mortgage debt.  House of Debt is important because it persuasively demonstrates that the conventional meta-narrative of the crisis and its aftermath, which emphasizes the breakdown of financial intermediation, is inadequate. . . . All future work on financial crises will have to reckon with the household balance sheet effects they stress. After their work, we can still believe in the necessity of financial rescues; however, we can no longer believe in their sufficiency. And after their work, we have an important new agenda of reforms to consider if future crises are to be prevented.”

Wall Street Journal
“A concise and powerful account of how the great recession happened and what should be done to avoid another one. Atif Mian, an economist at Princeton University, and Amir Sufi, a finance professor at the University of Chicago, make a strong circumstantial case that household debt was the recession's main culprit. They also find it skulking in the background of previous downturns, usually loitering in the vicinity of a housing bubble. . . . House of Debt is clear, well-argued and consistently informative. . . . Mian and Sufi's proposal to shift much of the risk of falling home prices to lenders—while rewarding them for their trouble—is a good place to start. If we don't put moralizing aside and analyze dispassionately what caused the last crisis, we areunlikely to prevent the next one.”

Source:http://press.uchicago.edu/ucp/books/book/chicago/H/bo17241623.html.

CONNECTING THE MONTH OF RAMADHAN WITH ISLAMIC FINANCE.

The Holy month of Ramadhan is very close. Muslims all over the world are welcoming this holy month with personal plans, strategies, conferences, seminars among others aiming to re-new, re-affirm and re-energize their faith(imaan). Here in Tanzania, on 22nd June, we shall have the 6th Annual Welcoming Ramadhan Conference with a theme 'Our Youth, Our Future' aiming to share and sensitize parents to take good care of their childrens in line with Islamic teachings as well as sensitize to increase good deeds in the Holy month.

MONTH OF RAMADHAN-A MONTH FOR CHANGE.

Fasting in the holy month of Ramadhan is very hard and annoying for some but it is blissful experience to others. Fasting in the month of Ramadhan together with its blessings takes us to a full month of spiritual rejuvination and rich of lessons to be applied for the remaining eleven months but to others is a month of thirst, hunger and lack of desires. Frankly speaking, it doesnt matter in which category you are, the month of Ramadhan comes with outstanding message to all of us which in three words, change your ways!It tells us to change our behaviours and habits, it tells us to change our daily routines, it tells us to change our understanding, it tells us to change our relationships, it tells us to change our attitudes, it tells us to change our ...towards being a better person, free from the shackle and slavery of desires and attachment to vanishing world towards opening our hearts to live as a full time slave of Almighty alone and alone.

Change is crucial and a must but not easy though. There are those who might fail ( may Allah serve us not to be among them) and their fasting is becoming meaningless in the sight of Allah. It was narrated that Abu Hurayrah (may Allah be pleased with him) said: The Messenger of Allah (peace and blessings of Allah be upon him) said: "Whoever does not give up false statements (i.e. telling lies), and evil deeds, and speaking bad words to others, Allah is not in need of his (fasting) leaving his food and drink." [Bukhari]‘Umar ibn al-Khattab (may Allah be pleased with him) said: “Fasting is not just (giving up) food and drink, rather it is giving up lying, falsehood and idle talk.” Jabir ibn ‘Abd-Allah al-Ansari (may Allah be pleased with him) said: “When you fast, then let your hearing, your sight and your tongue fast from lying and sin, stop abusing servants and be tranquil and dignified on the day when you fast. Do not let the day when you do not fast and the day when you fast be the same.”

While some of us make plans on what to do and change our ways on regards to Salah, Qur'an, Umrah and Hajj, Zakah to mention but few never forget to ponder on how you earn your livelihood and what is your relatioship with banks and insurance companies.

YOUR MEANS OF LIVELIHOOD, BANK AND INSURANCE.

Sayyiduna Abu Hurayrah (radhiallahu anhu) reports that the Prophet (salallahu alaihi wa sallam) said, “A time will come upon the people wherein a man will not bother what he intakes; whether from a halal source or haram.” (Bukhari). The fasting of the stomach implies its avoidance of unlawful things. Apart from the abstinence from food, drink and all that invalidates the fast during the days of Ramadan, it also requires avoidance of the prohibited things after breaking of the fast. Thus he does not eat from the proceeds of interest, for if he does so he will earn the anger of his Lord Most High. Allah says: “O you who attained faith! Do not gorge yourselves on usury, doubling and redoubling it” (3:130). Concerning this matter, the Prophet (SAW) declared: “God has cursed the one who eats the proceeds of interest, the one who gives it, the one who writes it, and the witness thereof; they are all the same.”

How can the stomach be considered fasting when it eats unlawful food gained from the wealth of orphans, interest, indemnity money, cheating and force? It was reported that Abu Bakr al Siddiq was eating one day when he questioned his servant about the origin of the food. The servant said from soothsaying, a practice he used to engage in prior to Islam. Abu Bakr became angry and vomited all that was in his stomach. On the whole, food stays in the stomach of the one who consumed it. Its traces remain with the flesh and blood. Thus any body that is nourished by unlawful food will find its destiny in the fire of hell ( May Allah serve us from the fire). “And devour not one another’s possessions wrongfully, and neither employ legal artifices with a view to devouring sinfully, and knowingly, anything that by right belongs to others” (2:188). “Behold, those who sinfully devour the possessions of orphans but fill their bellies with fire: for [in the life to come] they will have to endure a blazing flame”(4:10).

A muslim must be mindful on his ways to earn livelihood, his ways of banking and his ways of insuring himself or his properties. All of these must be in line with the teaching of Islam and stay away from prohibited dealings. What will your fast do good to you if you fast while your account earns interest, your money on current account used by conventional banks to generate interest, you are having interest based loans or fast while your house or car or business insurance are unislamic, your life insurance is unislamic, while next to your door there is an Islamic Bank or Islamic Insurance companies? What will you loose if your spend your money, time and intellect towards understanding Islamic Finance and to use its products?

WOE UNTO HE/SHE WHO DOESNT CHANGE.

Allah says : Say (O Muhammad SAW): "Not equal are Al-Khabith (all that is evil and bad as regards things, deeds, beliefs, persons, foods, etc.) and At-Taiyib (all that is good as regards things, deeds, beliefs, persons, foods, etc.), even though the abundance of Al-Khabith (evil) may please you." So fear Allah much [(abstain from all kinds of sins and evil deeds which He has forbidden) and love Allah much (perform all kinds of good deeds which He has ordained)], O men of understanding in order that you may be successful.(5:100). Abu Hurairah reported that the Prophet, salla Allahu alaihi wa sallam, climbed upon the mimbar (pulpit) and said: "Aameen [O Allah grant it], aameen, aameen". So it was said, "O Messenger of Allah, you climbed upon the mimbarand said : "aameen, aameen, aameen"? So he said :"Jibraa'eel, `alaihi assalam, came to me and said, 'Whoever reaches the month of Ramadan and does not have [his sins] forgiven and so enters Fire, then may Allah distance him, say aameen". So I said "aameen". [Ibn Khuzaimah, Ahmad and al-Baihaqi: Sahih]

Finally, the Prophet sallallahu alayhi wassallam tell us that " Whoever is deprived of its(Ramadhan) goodness, then he has truly been deprived."

May Allah make it easy to change for good, free us from hellfire and bestow on us its goodness. Ameen.

Serikali Kulipa Riba Sh5 Bilioni Deni la Miezi Sita.

Gazeti la leo na Mwananchi limepambwa na habari ya kuhuzunisha. Gazeti limeandika "Serikali italazimika kulipa hasara ya zaidi ya Sh5.2 bilioni (Dola za Marekani milioni 3.1) ambazo ni riba ya malimbikizo ya malipo ya miezi sita kwa Kampuni ya Jacobsen Elekron AS inayotekeleza awamu ya kwanza ya mradi wa umeme wa Kinyerezi, Dar es Salaam.

Gazeti hili limebaini kuwa kampuni hiyo ya Norway inaidai Serikali Dola 48.8 milioni (Sh80.52 bilioni), yakiwa ni malimbikizo ya malipo kuanzia Novemba mwaka jana na Mei mwaka huu.

Laibuka bungeni

Juzi jioni, suala hilo liliibuliwa na Kiongozi wa Kambi ya Upinzani Bungeni, Freeman Mbowe ambaye alisema Serikali imekuwa ikipata hasara ya mabilioni ya fedha kutokana na kupanga utekelezaji wa miradi mikubwa pasipokuwa na uhakika wa fedha.

Akichangia hoja ya Bajeti ya Serikali, Mbowe ambaye pia ni Mbunge wa Hai (Chadema) alisema: “Wakati Serikali ikitafuta fedha za kutekeleza miradi ya maendeleo, tumekuwa tukiingia kwenye madeni ya ajabu ambayo kama tungekuwa makini yangeweza kuepukwa.

“Ninao mfano halisi hapa ambao unaonyesha jinsi Serikali itakavyolazimika kulipa riba ya zaidi ya Sh5 bilioni kutokana na kushindwa kulipa fedha za Kampuni ya Jacobsen inayojenga mradi wa Kinyerezi One, hii ni aibu kubwa maana tumelimbikiza madeni ya miezi sita na wanatudai Dola za Marekani 48 milioni.”

Mradi wa awamu ya kwanza Kinyerezi unakusudia kutumia gesi kutoka Mtwara ukiwa na uwezo wa kuzalisha Megawati 150 za umeme.

Mradi huo uliopangwa kukamilika mwishoni mwa mwaka huu, unagharimiwa na Serikali ya Tanzania kwa Sh293.28 billion, lakini gharama hizo tayari zimeongezeka kutokana na riba inayotokana na ucheleweshaji wa malipo.

Hii si mara ya kwanza Jacobsen kulalamikia ucheleweshaji wa malipo, Novemba mwaka jana, Meneja Mkazi wa Mradi, Shaun Moore aliuambia ujumbe wa Serikali na nchi wadau wa maendeleo waliotembelea miradi ya umeme na gesi kwamba: “Ucheleweshaji wa malipo ni tatizo kubwa." Mwisho wa kunukuu.

Riba Kongwe na iliyosambaa.

Aina hii ya riba ni kongwe sana na katika zama zetu imesambaa katika mikataba mingi ya kibiashara na kifedha. Wakati wa Mtume s.a.w, mtu alikuwa anakopeshwa pesa na anatakiwa arejeshe ndani ya muda maalumu. Siku ya malipo ikifika anaambiwa alipe deni au aongezewe muda na kulipa ziyada. Wanazuoni wameiita riba aina hii, Riba Al Jahiliyyah au Riba ya Qur'ani kwa kuwa wakati Qur'ani inateremshwa riba hii ilikuwa imeenea sehemu kubwa ya bara Arab.

Hivi sasa riba aina hii imechukuwa sura ile ile ya kuchelewa kufanya malipo kwa wakati na hivyo mdaiwa analazimishwa kwa mujibu wa mkataba kulipa ziyada. Bila shaka riba hii inaweza kuepukwa iwapo serikali itakuwa makini na vyanzo vyake vya mapato na kusimimia vizuri wajibu wake wa kulipa madeni yake kwa wakati. Ni wazi kuwa serikali haijashindwa kulipa lakini wale waliopewa jukumu la usimamizi wa miradi na malipo yake hawawajibiki ipasavyo. Wakati umefika sasa badala ya kusikia tu kuwa hasara kama hii inajitokeza, wale wote waliohusika na usimamizi mbovu wa miradi na malipo yake wawajibike au wawajibishwe ili liwe funzo kwa watumishi wengine. Wananchi na kodi zao si za kulipiya uzembe unaofanywa na wachache kwa kuwa hasara hii haikubaliki!

Napongeza gazeti la Mwananchi na Bw. Mbowe kwa kuoneshwa kukerwa na uozo huu. Watanzania tuamke na kuishinikiza serikali kwa kupitia wawakilishi wetu suala hili na mengineyo yenye sura hii yakome na tuone wazembe wote wanaosababisha hasara na ubadhirifu wa fedha za umma wanachukuliwa hatua za kisheria.

THIRD PARTY GUARANTORS SHOULD SEEK LEGAL ADVISE.

Last Sunday,i received disturbing news on a house sold at TZS 30million by the bank's auctioners to repay bank's outstanding loan. Those close to the story narrated that the owner of the house bullied by a friend to provide the house title in order to secure the loan taken by the friend. Once the loan was taken, the owner was given TZS 2million as 'positive gesture for his co-operation'. However, house owner was shocked to realise that the friend was not repaying the loan as it should leading the bank to auction the house!

Third Party Guarantors/Security Providers-Seek Legal Advice

It is not first time such event to occur in Tanzanian Banking industry, where by borrowers using other people's title (commonly known as third party securities) to secure the debt default leaving house owners in disgraceful conditions. Whereas some house owners are lucky especially when the bank officials outsmart the borrowers and gets hold of the borrowers before it is too late others dont believe their eyes when they loose their house and kicked out.

This is what happened last Sunday, where by the house owner was given few days to vacate or face forcefull evacuation. A draft Code of Banking Practice alert customers and the general public that, "Binding yourself as a surety for another person’s debt is a risky decision. You must keep in mind that you are effectively undertaking to take on the responsibilities of that other person in the event that he/she/it does not honour his/her/its responsibilities in accordance with the terms and condition agreed to between that person and the bank. You should take independent legal advice before agreeing to be a surety or guarantor."

Banks Should Change Approach.

Most banks have started to review their policies on third party security after realizing that innocent civilians are bullied by conmen or bad borrowers, paid token money to let their house title secure debts/loans. Ultimately, some borrowers disappear or fail to co-operate with banks forcing banks to exercise their right over the mortgaged house. Now banks requires third party security should be from a family member, hoping that it will be hard for one family member to endanger the interest of onother family member. However, more need to be done such as:

1. Reduce dependence over the collateral and focus on the potential of business. Days where by bankers used to be smart and well informed about a variety of business seems to be ending if not non-existent in Tanzania retail banks. As a result, banks rely on the value of the collateral and few details are analysed in regards to customer's business, gowth potentials, risks and how they can be mitigated. This approach needs to be reversed where by much analysis and cross-analysis should be directed towards the business and the customer character and expertise before credit is approved. Banks should be mindful that little information is harmful and capitalise on gathering reliable business intelligence.

2. Employ Robust Portfolio Management Techniques. Before considering customers for business credit, realistic and genuine evaluation must be carried out by skilled bank officials in that line of business or industry, carry out window shopping, and sit in visits for one hour or two to see the 'to and from'. Personal credit must be offered after evaluating the industry in which the employee works, the company performance, employee relationships and performance. After credit is offered, constant monitoring of the account turnover is not enough since this can be dressed to portray positive performance. Sit in visits and window shopping must continue as well as keep in touch with the customer and observe any change in the course of running the business.

3. Someone in the bank must be accountable for default. No accountability, no performance! In event of default, someone must be responsible, accountablee for the default beyond tolerable limits. It could be branch manager or relationship officer/manager, credit analyst, credit manager depending who evaluated the customer, probability of defect on analysis and acts of negligence. Some banks have employed this technique and it works well. For-example, at NMB Branch Managers take ownership of credit booked under the branch and if non-performing loans goes beyond 5% without reasonable justification, he/she is shown the exit door. This should not only aims to protect the bank but also third party guarantors lets they pay the price alone for mistake committed by bankers themselves when offering a credit.

Central Bank and Government should take action.

Default is the credit risk facing banking business for ages. Some banks manage to keep their non-performning loans below 5% while others is above that. So far much focus by the central banks are directed to protect depositors and require banks to demand collateral whatever may be at the expense of borrowers or their surety who are on the verge to loose their houses as collateral.

It is not too late for central banks during their normal reviews of banks to review credit files where a house as collateral was sold or about to be sold and examine the details of the file in order to ensure that business risks were properly identified and mitigated, all possible corrective course of actions were taken, rebust portfolio management techniques are effective among others in order to protect borrowers too from bank's unethical practices, miscalculations and conflict of interest. Any serious breach to the best practice, regulations and internal bank policies should lead to punitive measures to those concerned.

Time to act is now before more innocent civilians suffer for 'crime' they didnot commit.

KITABU: KINGA YA RIBA KATIKA UISLAMU NA PROF. FADHILULLAH.

Mwaka 2011 kilichapwa kitabu chenye maudhui juu ya Riba ambacho hakikupatapo kuwepo kabla yake kwa wasomaji wa lugha ya Kiswahili. Kitabu hicho ni tarjuma ya kitabu ambacho asili yake ni katika lugha ya kiarabu ikiwa ni tasnifu iliyoletwa kwa madhumuni ya kupata shahada ya Uzamivu (PhD) iliyofanywa na mwanazuoni Professa Fadhilullah na kufasiriwa na Sheikh Suleiman Amran Kilemile, mola awajaze kheri.

Nimepata bahati ya kukisoma kitabu hiki mwanzo hadi mwisho katika siku zake za mwanzo baada ya kuarifiwa na msanifu wa kitabu hicho ndugu yangu Bw. Iddi S. Kikong'ona. Leo nimeoneleya nikitaje kitabu hiki na kuwaomba kila mmoja wetu atafute nakala ya kitabu hiki ambacho kimebainisha Riba kikamilifu na kuijadili kwa mapana na kisomi.

Kitabu hiki kina milango miwili; Mlango wa kwanza ni kuhusiana na Riba-Ufahamu wake, Hukumu yake na Madhara yake katika jamii. Mlango wa pili unahusina na taratibu zenye kukinga na Riba.

Naweza kusema kwa kinywa kipana kuwa kwa Mswahili na wengineo,(neno Mswahili si tusi bali ni jina la kila mtu ambaye enzi hizo kabla ya mabomba ya maji alikuwa anenda chooni na kopo la maji na kwa sasa anapojisaidiya haja kubwa au ndogo lazima atumiye maji),kitabu hiki ni chenye kukusanya kila linalopaswa kusemwa juu ya njia halali za kuchuma mali na njia zilizoharamu katika kuchuma mali. Haya mambo mawili, yampasa kila mtu na si muislamu tu ayajue kindaki ndaki na mfasiri ameyabainisha kwa lugha tamu ya kiswahili na kwa njia ambayo mtu wa darja yeyote ya kielimu anaweza kuelewa yaliyomo.

Mwandishi kwa namna ya kipekee amemaliza kitabu chake kwa ombi linalopaswa kuzingatiwa aliposema "Mtafiti anatumia nafasi hii kuomba wanazuoni, walinganiaji wa dini, matajiri Waislamu, wenye haja katika wanaoongoza dola za Kiislamu, wanasaikolojia na watafiti wa Kiislamu kusimamia wajibu wao kwa ajili ya kuokoa watu na janga la Riba ambalo ni kubwa sana."

Kitabu hiki kinapatikana katika maduka ya dini ya kiislamu karibu na Masjid Mtoro, Kariakoo Dar es salaam.

Mola atufanyie wepesi kutimiza wajibu wetu na ombi zuri la ndugu yetu. Ameen.

SAVING MONEY IN ISLAM: ARGUMENTS FOR AND ARGUMENTS AGAINST.

INTRODUCTION.

There has been different opinions on either saving is a virtue or not in legal source of Islam i.e Qur'an and Sunnah and the practice of the rightly guided caliphs and Salafu saliheen. In this article, attempts are made to present argument for saving in Islam and those against saving as propounded by different Muslim scholars in our attempt to answer either saving is a virtue or vice from the legal sources of Islam.

WHAT IS SAVING?

According to Professor of Economics, Laurence J. Kotlikoff, "saving means different things to different people. To some, it means putting money in the bank. To others, it means buying stocks or contributing to a pension plan. But to economists, saving means only one thing—consuming less out of a given amount of resources in the present in order to consume more in the future. Saving, therefore, is the decision to defer consumption and to store this deferred consumption in some form of asset."

INDIVIDUAL MOTIVES FOR SAVING.

Research has shown household (individual) saving motives vary from country to country, implying that culture as well as economic environment influences household saving motives. Below can be said to rank high across countries:-

The precautionary motives—that is, the motive to save in order to be prepared for various future risks—is one of the key reasons people save. Besides the risk of living longer than expected, people save against more mundane risks, such as losing their job or incurring large uninsured medical expenses.

Life-cycle (Transaction) motives -that is household or individual save at specific times in life so as to have sufficient funds available to spend on anticipated expenses, for example, when starting a family or nearing retirement. Such expenses may include, saving for education, saving for children's education, saving for purchasing or building a house, saving for purchasing a car or any other durable goods, saving to leave a bequest, saving for holiday or travel for religious reasons such as Hajj or to explore the nature and so on.

Speculative motives-individual save in order to take advantage of good investment opportunities that may arise. This may include saving in order to start a business.

ARGUMENTS FOR SAVING IN ISLAM.

Below are some arguments in favour of saving in Islam.

1. Zakat as a purifier of saving. It is argued that the achiles hill of zakah is to purify saving since Muslims do not pay Zakâh on income. We only pay Zakâh upon our savings and only if those savings have reached a certain level and have remained at or above that level for a full year. `Aishah said: the Prophet (peace be upon him) said: “No Zakâh will be levied on money until a year passes from the time of its possession.”[Sunan Ibn Mâjah (1792) with an authentic chain of transmission as stated by al-Zayla`î in Nasb al-Râyah (2/328), al-Nawawî in al-Khulâsah, and al-Albâni in Irwâ’ al-Ghalîl (3/254)]

It was related by `Ali that the Prophet (peace be upon him) said: “If you have 200 durhams and a year passes then you have to pay five dirhams. You do not have to pay anything for the gold you possess until it reaches twenty dinars. If you possess twenty dinars and a year passes a year then you have to pay half a dinar.” [Related by Abû Dâwûd and authenticated by al-Albânî in Sahîh al-Sunan]

A person without savings will never pay Zakâh on monetary wealth. It is the Zakâh that purifies one's savings, by giving the poor and the needy their due from it. If a person doesnt pay zakah on wealth which has reached a nisaab, that is hoarding of wealth and condemned in Islam. Al-Bukhaari (1404) narrated that Khaalid ibn Aslam said: We went out with ‘Abd-Allaah ibn ‘Umar (may Allaah be pleased with him) and a Bedouin said: Tell me about the words of Allaah, “And those who hoard up gold and silver (Al‑Kanz: the money, the Zakaah of which has not been paid) and spend them not in the way of Allaah”. Ibn ‘Umar (may Allaah be pleased with him) said: The one who hoards them and does not pay Zakaah on them, woe to him. That was before Zakaah was revealed; when it was revealed, Allaah made it a purification of wealth.

Maalik narrated in al-Muwatta’ (595) said that ‘Abd-Allaah ibn Dinar said: I heard ‘Abd-Allaah ibn ‘Umar when he was asked about kanz – what is it? He said: It is wealth on which Zakaah is not paid. Thus it is clear that the kind of wealth that is blameworthy is that on which Zakaah is not paid. As for that which is beneath the threshold (nisaab), or which reaches the threshold and zakaah is paid on it, it is not kanz. Thus it is clear that Islam does not forbid storing up wealth, rather it forbids not paying Zakaah on it.

2. The law of inheritance and wasiyya exists because there is estate and savings. The inheritance laws in Islam are quite detailed and allot percentages of the entire estate to various relatives of the deceased. This pre-assumes that there is an estate which the deceased left behind, which in other words is wealth that he or she had accumulated or saved.

Indeed, due to the importance of leaving behind something to one's needy dependants to provide for them in the event of one's death, the Prophet (peace be upon him) restricted charitable bequests (wasiyya) to no more than a third of one's estate.

The following is related about the steemed Companion, Sa`d b. Abi Waqqas, who wanted to make out a will giving away in charity everything that he owned:He went to the Prophet (peace be upon him) and said to him: "O Messenger of Allah! I have a lot of wealth and only my daughter to inherit it from me. Should I bequeath all of my wealth in charity?" The Prophet (peace be upon him) told him that he should not do so. Then Sa`d suggested bequeathing two-thirds of his wealth to charity. When the prophet again refused, Sa`d then suggested half of his wealth. At this point the Prophet (peace be upon him) replied: "One-third, and that is still too much. It is better for you to leave your heirs wealthy, rather than leaving them dependent and begging from others.” [Sunan al-Tirmidhî (2042), Sunan Abî Dâwûd (2480), Sunan al-Nasâ'î (3567) and Sunan Ibn Mâjah (2699)]

3. The Prophet Muhammad peace be upon him never absolutely abandon saving. Anas narrated: “The Prophet never saved anything for himself for the next day.” [At-Tirmithi] However, the Prophet did not absolutely abandon saving. ‘Umar narrated: “The Prophet used to sell the harvesting of the date-trees of Beni Nadheer (a Jewish tribe) (which he , gained as a war booty) and he would keep for his family what they would suffice them to eat for a whole year.” [Al-Bukhaari and Muslim]

Ibn Daqeeq Al-‘Eed explained the two narrations saying that the first narration refers to saving for himself and the second narration refers to saving for his family even though he is benefitting from that as well. However, if he was lonely and did not have a family he would not have saved for himself at all. The fact that the Prophet did not save for himself reflects a very strong state of faith as this shows the complete reliance on Allaah, but this is something that is not obligatory on every Muslim.

4. The story of Prophet Joseph alayhi salaam shows the virtue of saving. Allah tells us in the Qur'ân: “(Joseph) said: 'For seven years you should cultivate the land as usual, but leave the harvest that you reap in the ear except for a little that you eat. Then after that will come seven difficult years in which you will eat all that you have set aside except for a little of what you have stored. Then will come a year of abundance in which you will press wine and oil'." [Sûrah Yûsuf: 47-49] This is a clear recommendation to save for future need.

5. The law of Hajr. According to Ismail Yurdakok, Hajr is to place the legally incompetent person under the care of a guardian.It isa precaution against much (over)consumption.The majority of the Islamic jurists say:Islamic law can prohibits the deeds of spendthrift (prodigal) and put him/herunder restraint and Islamic judge appoints a man in charge of properties ofspendthrift.This man gives enough money for spendthrift’s living conditions:“Do not give the weak of understanding the property which Allah has given you to maintain,but cloth them from it,and speak kindly to them”(Nisa:5).Also for orphans,there is a precaution against over consumption;“Put orphans to the test until they reach the age of marriage;then,if you find them sound judgement,deliver over to them their property...”(Nisa:6).

7. The story of buried treasure by the righteous parent for his children. Quran has not prohibited to accumulate the savings (also when we give its zakat):“As for the wall,it belonged to two orphan boys in the city.There was beneath it a(buried) treasure belonging to whom,and their father had been righteousman...”(Kahf,82)Fearing the dishonesty of the wicked townsmen,the children’s father had buried their ihheritance so that they could recover it when they came of age.Quran didnot condemned this behaviour even the word “saleh: righteous” was used for this father.

8. Saving as a way to combat severe poverty. Qur'an emphasize to strike a balance in our relationship with money/wealth between consumption and saving, it states " and let not your hands be tied to your neck ( like a miser) nor stretch it forth to its utmost reach, so that you become blameworthy and in severe poverty." 17/32. 17:29.

ARGUMENTS AGAINST SAVING IN ISLAM.

Below are some arguments against saving in Islam.

1. Spending is ordained. Islam emphasizes that its followers spend their wealth. Allah says in Surah Al-Baqarah:

يَا أَيُّهَا الَّذِينَ آمَنُوا أَنفِقُوا مِمَّا رَزَقْنَاكُمْ مِنْ قَبْلِ أَنْ يَأْتِيَ يَوْمٌ لا بَيْعٌ فِيهِ وَلا خُلَّةٌ وَلا شَفَاعَةٌ وَالْكَافِرُونَ هُمْ الظَّالِمُونَ

“O you who believe! Spend of that which We have provided for you, before a Day comes when there will be no bargaining, nor friendship, nor intercession. And it is the disbelievers who are the Zalimun.” (2:254)

الَّذِينَ يُنفِقُونَ أَمْوَالَهُمْ بِاللَّيْلِ وَالنَّهَارِ سِرّاً وَعَلانِيَةً فَلَهُمْ أَجْرُهُمْ عِنْدَ رَبِّهِمْ وَلا خَوْفٌ عَلَيْهِمْ وَلا هُمْ يَحْزَنُونَ

“Those who spend their wealth (in Allah’s Cause) by night and day, in secret and in public, they shall have their reward with their Lord. On them shall be no fear, nor shall they grieve.” (2:274).

According to Dr. Khalid Zaheer, the most forceful condemnation of saving despite the existence of genuine avenues of infaq is offered in the Qur'an thus:

To those who accumulate gold and silver, and do not spend in the way of Allah, announce the news of painful punishment. On the day when heat will be produced out of that (wealth) in the fire of Hell, and with it will be branded their foreheads, their flanks, and their backs (and it will be said): 'This is the (treasure) which you stored up for yourselves, so now taste of what you had stored' (9:34-5)

Dr. Zaheer make it clear that "not all Muslims, however, believe that the above-mentioned verse and others carrying similar messages are condemning unnecessary accumulation of wealth. It is reported that when Ibn 'Umar (raa), the companion of the Prophet (sws), was asked about the meaning of the verse, he said that it referred to a person who accumulates wealth without paying zakah on it. According to him the verse was revealed before payment of zakah was made compulsory. After the introduction of zakah, wealth in possession of an individual is purified even if he accumulates it (Bukhari, Vol. 1, 651). Ibn 'Umar (raa) is also reported to have said that after an individual pays zakah, he cannot be blamed even if he keeps his wealth deep down in the soil. The same is the view of Jabir and Qurtubi, the interpretors of the Qur'an (Qurtubi 1952, Vol. 8, 125)."

However, Dr. Zaheer opines that the above view "does not seem to be consistent with the teachings of the Qur'an. The message these verses are conveying clearly suggests that wealth is not meant to be accumulated, but to be spent in Allah's way."

2. Saving cause Bukhl (miserliness). A Muslim is ought to spend whole-heartedly for the sake of Allah. One should not be a niggard (a miser), for Allah does not likes a niggard. Allah says:

هَاأَنْتُمْ هَؤُلاءِ تُدْعَوْنَ لِتُنفِقُوا فِي سَبِيلِ اللَّهِ فَمِنْكُمْ مَنْ يَبْخَلُ وَمَنْ يَبْخَلْ فَإِنَّمَا يَبْخَلُ عَنْ نَفْسِهِ وَاللَّهُ الْغَنِيُّ وَأَنْتُمْ الْفُقَرَاءُ

“Behold! You are those who are called to spend in the Cause of Allah, yet among you are some who are niggardly. And whoever is niggardly, it is only at the expense of his own self. But Allah is Rich and you are poor.” (47:38).

Bakheel is a person who keeps his wealth close to his heart and does not spend (on others). Whenever he comes across any needy person, he will ignore him; the love and attachment to his wealth does not let him spend it on the needy or on any noble cause. This characteristic is called Bukhl.


3. Islam condemns a massing wealth. Attachmentto wealth lead to fisq and Shirk. The beautiful verse below is absolutely clear about its message. This is how wealth may lead a person towards Fisq. Love for wealth also leads to a type of ‘Shirk‘, known as ‘Shirk-fil-Mahabbah‘.

قُلْ إِنْ كَانَ آبَاؤُكُمْ وَأَبْنَاؤُكُمْ وَإِخْوَانُكُمْ وَأَزْوَاجُكُمْ وَعَشِيرَتُكُمْ وَأَمْوَالٌ اقْتَرَفْتُمُوهَا وَتِجَارَةٌ تَخْشَوْنَ كَسَادَهَا وَمَسَاكِنُ تَرْضَوْنَهَا أَحَبَّ إِلَيْكُمْ مِنْ اللَّهِ وَرَسُولِهِ وَجِهَادٍ فِي سَبِيلِهِ فَتَرَبَّصُوا حَتَّى يَأْتِيَ اللَّهُ بِأَمْرِهِ وَاللَّهُ لا يَهْدِي الْقَوْمَ الْفَاسِقِينَ

“Say: If your fathers (i.e. parents), your sons (i.e. kids), your brothers (i.e. siblings), your wives (i.e. spouses), your kindred, the wealth that you have gained, the commerce (business) in which you fear a decline and the dwellings in which you delight are dearer to you more than Allah, His Messenger and Striving hard & fighting in His Cause, then wait until Allah brings about His Decision. And Allah guides not the people who are Al-Fasiqun.” (9:24).

4. No concept of saving in Islam. Islam promotes a balance; do not waste the wealth mindlessly, save it for genuine expenditure. In fact, the problem starts when the sole ambition becomes saving money. We earn and accumulate wealth with a sole criterion of saving for future; keeping the money idle in bank accounts, gold and silver beautifying the vaults; and soothing his/her nafs regularly by enjoying the gradual growth in accumulated wealth.

وَيْلٌ لِكُلِّ هُمَزَةٍ لُمَزَةٍ “Woe to every slanderer and backbiter;

الَّذِي جَمَعَ مَالاً وَعَدَّدَهُ “Who has gathered wealth and counted it.”

CONCLUSION.

In this article, i highlighted the fact that the concept of saving has divided Muslims into two opinions; those who support and those who oppose. In the effort to gather the two opising views, it appears to me that those opposing are few(doesnt mean wrong), compared to those who accepts saving as permissible and virtue in Islam. Furthermore, i have not come accros a Sharia scholar who condemn saving per se, but rather niggardness and failure to spend money where it matters mosts. It is my opinion that this subject needs Muslim scholars to research and review both arguments in order to establish the matter in clear terms for English readers and common man who doesnt have tools to analyse this issue in detail. Hence, i leave it to you, to review both arguments and come up with the stronger case for the public or at least for yourself.

May Allah guide us! Ameen.

ZAKAT- IGNORED TOOL OF POVERTY ERADICATION IN TANZANIA.

INTRODUCTION.

Zakah or Zakat ul Maal (Alms) can be defined as compulsory contribution payable at once in a year from the wealth which has reached prescribed level (Nisaab). This is a command of Allah which must be fulfilled by every Muslim, male and female. Allah says in the Holy Qur’an “And they have been commanded no more than this: to worship Allah, offering Him sincere devotion, being true in faith. To establish regular prayer, and to give zakat. And that is the religion right and straight." (Qur'an98:5) Abu Al Hasan Sadeq says, “Zakah is not only lbadah, its role is significant in the development of a healthy and peaceful social environment, which is full of mutual cooperation and sympathy.” Every Muslim who owns wealth, more than a certain amount to meet his or her needs, must pay a fixed rate of Zakat to eight different categories mentioned in the Qur’an (9:60).

Institution of Zakah plays crucial role in alleviating poverty in the society if it is administered properly and professionally as several empirical evidence has shown. It is impact is directly felt and reach to the concerned people which in turns help the state in equitable distribution of wealth. In Dr. Mohammed N. Ghazali words, “The economic analysis of zakah is no doubt as 14/20th Century development and discovery of its economic significance may be considered no less than a scientific miracle.”

The Importance of Zakat and its objective:

Zakat is a third pillar of Islam. There is a consensus of Islamic scholars that the highest priority in Zakat disbursement is for the eradication of poverty. God has obligated Zakat and mentioned it in 82 verses in the holy Qur’an which signifies its importance. He obliged all free Muslims either male or female who have the nisab (own specified amount of money-prescribed limit) for one year to pay zakat. Zakat has been met with a lot of challenge in the early years of Islam, specifically after the Prophet Muhammad's death (PBUH), where some people refused to pay it. The prophet's companions have fought such phenomena during the rule of Abu Bakr since they believed that those who refused to pay Zakat were becoming non-believers. This historical account again stresses the importance and significance of Zakat. Besides, we can analyse the role of Zakat at individual, society and economic level.

The role of Zakat in the Development of an Individual:

Zakat plays a vital and deep role in self improvement and the development of the manners and attitudes. Cutting out a part of the Muslim's money to please God makes the person more submissive to Allah and his contribution as zakat is considered a financial way of worship. Since Allah has given so much to the segment of people consequently these people should show their thankfulness to Allah through giving out to the less fortunate, a share in their money (in the wealthy of the rich there is other people’s rights). At the same time, giving away a part of one's money which is something dear to a person requires patience. As a result of giving, zakat giver achieves two parts of believing. The same applies for the poor who is patient with his poverty and at the same time is thankful to Allah when he receives zakat money.

Moreover, zakat is a way of purifying one's soul from being a money lover or a miser and makes giving for the sake of Allah a habit made easier. On the other side, feeling of hatred and despise disappears when less fortunate feel the compassion and the assistance of the rest of the society and are replaced by feelings of love, satisfaction and the belief in Allah.

Finally, the Prophet Mohammad s.a.w said, if your leaders are evil mongers among you, and your fortunate ones are the miser among you then to be in the grave is better than to be on earth and the vice versa is true.


The role of Zakat in Social Development:

Zakat plays very important role in the achievement of social security and cooperation as it is an aid in the time of crisis including sickness, accidents, debt repayment and so forth. Zakat ensures cooperation between members of the same community because anyone is subject to emergency needs and those who are in need will not be left alone during their hardships. Zakat represents the first social security institution in the past Muslim communities as the state was responsible for the collection of zakat money and redistributing it to cover needs of the poor and create jobs for the unemployed. Jobs created were instrumental and enable unemployed become valuable productive people in their society. The institution of Zakah creates the spirit of sharing and helping others, contrary to the inherent selfish behavior, and thus creates a healthy and congenial social environment.

The role of Zakat in Economic Development:

Zakat plays a vital role in economic development. This is mainly due to three interlinked factors: it discourages hoarding of money and encourages investment and consumption. One of the most important goals of zakat is to stop the hoarding of money and encourage investing it to have a return on the owner and on the community as a whole. This principle is even more important when we consider liquid money which should not be kept without a use. This idea goes in line with the understandings of the modern economy, which points out that hoarding money without use is a serious impediment to growth of the economy. This is because resources hoarded don’t go into the wheel of the economy and therefore diminish the amount of local wealth. Moreover, this results in a rate of growth much lesser than the one that can be achieved if all resources were fully utilized. In addition, understanding of zakat encourages investment of the savings because if the original zakat money isn’t invested it will demolish throughout the year by zakat payment. Therefore, it is important that money is invested to be able to pay zakat from the profits and not from the original capital.

Zakat as a Means of Social Security:

The Zakah-based social security system does not imply "letting the common people lead a life of dependence", but it is a compulsory social security system to be enforced for the upliftment of the disadvantaged people so that they will not need such a help eventually.

Zakat is described by many Islamic thinkers as the 'Institution of social security'. In the old Islamic era, Zakat has succeeded as an institution through the 'House of Money (Baytul Maal)' in achieving its goals of developing a rich and prosperous society. According to Dr. Nasseh Elwan, "zakat when applied in the previous Islamic era succeeded in defeating poverty, and removing envious feelings from the poor towards the rich … It trained Muslims to give and donate and facilitated working opportunities to those who didn't find jobs." This means that Zakat was not only used to provide charitable assistance to the poor, but it was also a practical means to create job opportunities like providing a man with a capital to start a business.

Both Caliphs Omar Ibn el Khattab and Omar Ibn Abdel Aziz played perfect examples of how good rulers are able to achieve social justice and prosperity to their society. One of the says of Omar Ibn el Khattab reveals his conscience and justice in collecting and distributing Zakat money was in the famine year, when he said, "I swear to God, whom there is no God but Him, I will give every person who has a right in this money [money in the house of money], and nobody has a right more than the other, and my right is not more than the right of anyone of you." As for the era of the Caliph Omar Ibn Abdel Aziz, poverty was totally eradicated from the Islamic community and prosperity reached every member, either Muslim or non-Muslim.

Islam is also greatly concerned about the necessity of keeping an ethical, just, and equal relation between the ruler and the ruled. This principle is clearly manifested in the prophet's say, "Each ruler comes tied on the day of resurrection, and nothing would free him except his justice."

Zakat Funds in Tanzania.

Muslims in Tanzania constitute msignificant portion of the country's 48 million people, whereby more than a half engages in farming, fishing, livestock keeping as well as running business as their main economic activity. Other are employed and contribute significant amount of their salary to social security/pension funds available in the country as required by law. Employees’ retirement funds and the income or produce generated from these sectors are subject to payment of Zakat if their wealth or possession has reached nisab level.

Due to absence of the Zakat laws, Zakat has been given on a voluntary, covertly and on decentralized basis which effects effective distribution of Zakat funds. Russell observes that “voluntary giving to local groups or individuals favors certain categories of beneficiaries, for example, those with the relationship to the giver and that this pattern of giving tends not to provide for sufficient redistribution of wealth to alleviate systematic poverty.” In other words, real beneficiaries don’t benefit from this sacred tool of poverty reduction in the society and its objectives are far to be realized. For this reason, some nations established government supported entities to receive and distribute voluntary Zakat contributions. This has proven to be efficient as it ensures zakat is administered consistent with its religious goals with adequate transparency and accountability to satisfy zakat payers.

Currently, there are sixteen Muslim countries which have institutionalized Zakat. However, Tanzania being a secular state hasn’t institutionalized Zakat and chose to ignore it like other twenty four predominant Muslim countries. Despite of not having a law that enforces Zakat payments in Tanzania and other countries, Muslims have been paying Zakat to those who deserve it. For instance, Turkey which doesn’t have the law, 69% of Turks gave Zakat in 2004. Wealthy Muslims in Tanzania pays and distribute Zakat either by themselves or through Zakat Funds established by TAMPRO (it is called Baitul Maal under the leadership of Sheikh Basalleh.) and the other one under DYCCC based in Dar es Salaam. Perhaps, there are other Zakat funds in predominantly Muslim regions of Tanzania. However, the impact of these funds on poverty eradication has not been adequately researched and documented despite known fact that there has been a number of beneficiaries to date.

Challenges Faced by Zakat Collectors.

Challenges faced by zakat collectors either as an agency, Islamic bank or charitable foundations are numerous. The first challenge is to bridge information gap caused by lack of knowledge and information about sharia provision on zakat matters affects its successful administration. To address this issue, a lot of media publicity, public lectures and articles in the news papers will have to be delivered and written respectively. Second, storage and transportation for collection of zakat in kind as well as catering for the livestock daily needs like food, shelter, medication and other kind of care. Third, outreach to deserving beneficiary by developing a distributive mechanism to reach the poor in descending order of poverty where by the worst sufferers of poverty are taken care first among those who deserve it.


What need to be done?

First, raise awareness and show the life changes to those who benefitted. Funds managers needs not to shy away from promoting Zakat payments through them since this is a preferred way to manage Zakat and have database of beneficiaries. In this way, research can be carried to assess the impact of Zakat if there is a place where records of beneficiaries can be found and traced to assess their economic development from time to time. Furthermore, success story of Zakah needs to be told especially to those who contribute to the fund despite Zakat being an obligation it is always a defeating tools against whispers of devils to withhold buur also a motivating story to see changes that can be brought by their funds. Muslim can organise ZAKAT DAY in a year to sensitize people to pay Zakat and to make people know where they can get Zakat. Much can also be learn if we laise with prominent Zakat Funds around the world such as Lebanon Zakat Fund, Kuwait Zakat House, Zakat Fund in Qatar, Zakat Fund Malawi, Zakat Fund South Africa among others not just by physical visit of offices but what they do starting from their website information/content to other necessary levels.

Second, strengthen credibility of administrators. One on the ignored dimension of Zakat management in Tanzania, is lack of credibility and professionalism of administrators. There is a need to ensure person serving in these funds are honest, pious, knowledgeable, with reputable social standing and hard working. This shall bar and extinguish unreasonable fears that the funds will be mismanaged. This fear has in many aspects came into being based on historical account of affairs of lost properties and money mobilised and ended in few pockets. With right persons and transparent governance on the wheel, trust can be won and goals attained.

Finally, rather than the government to rely from banks, MFI and saccos to eradicate poverty, the government must be engaged to allow and make Zakat payment a Tax deductable in our Income Tax Act in order private enterprises to have an incentive to fulfill their religious and social duty provided there is clean records that funds are really given for Zakat purposes. This is not a new thing as we know religious institution are exempted from Taxes and so it should be for person fulfilling religious duty with evidence to prove as such in order to curb tax evasion.

M-PAWA OR M-PATWA (CAPTURED)?

According to Vodacom website on M-Pawa, this is a banking service offered to M-Pesa registered customers through their mobile phones in partnership with CBA. Customers can save and borrow money while earning interest on money saved. Daily news of 11th June 2014 reports,over 250,000 had so far registered for M-Pawa and has raked in 1.2 billion in three weeks after it was launched. That money is savings from 50,000 people who had registered.

This service marks the latest innovative saving product offered in 2014 in the Tanzania banking industry and supplements greatly mobile money services offered by Vodacom Limited known as M-Pesa since through it, you can have M-PAWA. This article examines this new service in the light of either mobile money customer's are powered or captured (patwa)from Islamic perspective.

SAVING AT M-PESA VERSUS SAVING AT M-PAWA.

Currently, customers who keep their money on their M-pesa are not earning any return or interest, however saving from M-PESA to M-Pawa provides you a room to earn interest from 1% up to 5% depending on the amount you save. This is the selling point for this product besides removal of charges such as ledger fees among others and hence it is put categorically clear that'you will be paid interest on your savings balance (Interest will be calculated daily but paid out after 3 months).'

M-PAWA HAS MICRO-LOAN WITH FACILITATION FEE.

Besides interest paid on saving, this service has another selling point which is access to micro-loan from TZS 1,000 to TZS 500,000 subject to fulfillment of eligibility criterias and upon your choice. Is this loan charged interest? They answer as "There is no interest charged. There is only facilitation fee of 9% of the loan amount requested charged only once for each loan taken in 30 days.If you have requested a loan of Tsh. 100,000, you will pay back Tsh. 109,000 within 30 days." If you pay early same amount will apply however if you delay to pay in 30 days, you pay extra as they say "Repayment period will be extended for an additional 30 days at a roll over fee of additional 9%. Roll over can only be done once."

SHARIA PERSPECTIVE ON SAVING AND BORROWING.

Islam abhors transaction which involves Interest. In the holy Qur'an, Almighty states " O you who believe! Eat not Riba (interest or usury) doubled and multiplied, but fear Allah that you may be successful. And fear the Fire, which is prepared for the unbelievers." (3: 130-131). The prophetic hadith peace be upon him said "any loan that renders benefit (to creditor), that benefit is Riba (Interest).

On saving, it is very clear that putting your money at M-Pawa weather you want interest or not is to get yourself involved in interest since whoever participate in M-PAWA agree to that feature of receiving interest.

On borrowing, they say 9% is not interest it is facilitation fee, this may confuse those who have not studied Sharia i.e fiqh muamalat and may not know the difference between facilitation fee and interest. From the hadith above, interest is any benefit that the lender gets directly linked with the loan. This is to say, despite calling it facilitation fee the truth of the matter it is interest since in Islam a loan is not returned with any pre-determined extra amount. It isnot facilitation fee either since it is revolving, if you delay to pay the same amount the 9% applies for the next period until repayed.

Islam requires her followers to lend or borrow free of any return tangible or intangible since this is an act of worship rewarded by the almighty ten fold the reward of charity (sadaqa). The rationale is to support one another as brothers and to curb the rich from exploiting the poor or needy using the wealth granted by the will of Allah. The way you are allowed to make money in Islam is clear; do honest trade, do a permissiblework, participate in joint venture, lease useful property with intrinsic value among others but dont treat money as a commodity to resale or buy at a certain price like rice or wheat. Because money doesnt have intrinsic value while rice and wheat has.

Finally, from the above discussion it appears that the service has great potential to move the unbanked as well as those who save through M-Pesa to have M-Pawa Saving Account not because of interest on saving but because of the perceived opportunity to borrow. However, from Islamic perspective, this service operate with fundamental prohibited element of interest on both sides ( saving and borrowing) in which Muslims and other are not supposed to participate. Hence, the decision rests with the customer-to be powered on the earth or captured to hellfire in the hereafter or as Jesus on matthew 16:26 asked "For what will it profit a man if he gains the whole world and forfeits his soul?"

HOUSE TEAM FAULTS BANKS HIGH RATES.

The CITIZEN of 06th June 2014 on page 4, decorated with the above heading. The newspaper reporter (with slight editorial changes made by me in brackets) wrote: "High interest rates that local commercial banks impose on borrowers were yesterday blamed (on) the central bank's move to increase Treasury Bill rates. The Parliamentary Committee on Economy, Industry and Trade asked government through the Bank of Tanzania to consider decreasing Treasury Bill rate from 12.58 per cent to 7.58 per cent. The committee said regular fluctuation of (foreign) exchange, inflation and interest rates affected the running of local commercial banks negatively. The committee chairman, Mr. Luhaga Mpina said when tabling a report on 2014/2015 budget estimates of the Finance ministry that the treasury bill rates rise compelled banks to lend at exorbitant interest rates, leading borrower to default on loans."

BANKS HAVE DEFENDERS, BANK'S CUSTOMERS HAVE TO PICK THEIRS.

The perspective in which Parliamentary Committee on Economy, Industry and Trade chairman argues it is clear that he speaks to protect the interest of banks which are faced with potential losses from defaulting customers. Defending commecial banks high interest rates on Treasury Bills rates as if TB rates are compulsory benchmark for pricing of loans to customers from the law/regulator (the fact is: it matter of each bank credit and investment policy)was uncalled for and misleading. Even pension funds are not required by their respective Acts to place their funds based on the TB rates plus something if they are to deposit on fixed terms to banking institutions but it is an internal policy matter. If so happens, it would have been argued that since banks get large portion of funds (deposits) at high interest rate from pension funds then it is logical for the committee to request BOT to decrease the TB rates. Unfortunately, this is not or not always the case, because majority of bank's sources of funds (deposits) are saving and current account holders where by banks pays less than 7.58% interest rates on saving and nothing on majority of their current accounts.

The reasons as to why banks charge higher interest rates beyond Treasury bills rates are two fold; one is the opportunity cost concept and second the greedy nature of our bankers to get high pay and bonuses every year because of massive profits they generate. On the opportunity cost, no banker will opt to lend to customers and take percentage of credit risk at lower rate and leave Treasury Bills with almost zero credit risk and high interest rate returns. In order to balance return versus risk,the only option is to lend to customer at TB rate plus something to cover for the credit risk posed by customers. On the greedy nature, banker's are pressurized to maximize profits for shareholders and secure their jobs so they have to make more money each quarter and each year.

As a matter of facts, majority of banks are not affected by exchange, inflation and TB interest rates. For example, out of 30 banks, only 3 banks made loss on foreign exchange trading in the forth quarter 2013 most likely due to mismanagement, where as banks like CRDB, NMB, STANBIC, NBC, CITIBANK, EXIM made billions. On the cost of funds, in the same quarter of 2013, NMB cost of funds (interest expenses-TZS 6.7 Billion) was only 7% of interest income (TZS 97.6 Billion); on profit side, out of 30 banks, only 8 banks made losses because some are at an infancy stage of operations while others due to mismanagement or strategic risks. The rest made profits in billions and millions(the highest being NMB TZS 36 billion the lowest being BARCLAYS TZS 117 Millions).

Bank customers are not defended by words nor by practice by the committee from the greedy nature of our bankers in their pursuit of making massive profits at the expense of customers but rather carry the blame of defaulting! And so it goes, banks will be bailed out when they fail while customer's might get high tax on their hard earn money to pay for the banks!

DEFAULTING BECAUSE OF HIGH INTEREST RATES-MYTH OR REALITY?

Theoretically, it can easily make sense to claim that due to high interest rates, customers are defaulting. Hardly, can any serious banker prove this except on isolated cases. On reality, bankers and researchers know customer dont take loans because of interest rates or high interest rates rather than defaulting just because of it. There are numerous reasons including but not limited to bankers mistakes on evaluating customers and businesses for credit as a result money end up to incredible customers, bankers negligence to execute proper customer monitoring strategies leading into diversion of funds by customers as well as over lending and underlending to customers, customers low or absence of money and debt management skills just to mention a few.

Having said that, i dont rule out completely the possible negative relatioship between interest rate and loan repayment.There is a relationship, however, the reason is not just high interest rate but it is compounded interest rate and the way it is computed by employing actuarial method and collected on interest first and principal next. On compound interest rate former President of Nigeria, Obasanjo said, "All that we had borrowed up to 1985 or 1986 was around $5bln and we have paid about $16billion yet we are still being told that we owe about $28 bln. That $ 28 bln came about because of the injustice of the foreign creditors interest rates. If you ask me what is the worst thing in the world, I will say it is compound interest.” According to Professor Stephen G. Kellison author of a book titled The Theory of Interest, the word compound refers to the process of interest being reinvested to earn additional interest. With compound interest, the total of investment of principal and interest earned to date is kept invested at all times. For example, consider an investment of $ 100 for two years at 10% interest rate. Under simple interest, the investor will receive $ 10 at end of each of the two years totaling $20 in interest. Those against simple interest argues that is not a fair return to investor. Why? Because in reality at the beginning of the second year the investor has $110 which could have been invested at 10%. To solve this problem, compound interest assume the interest earned is automaticall reinvested. Using our example in the second year amount invested is $110 at 10%, since the investor would then receive $ 11 in interest for the second year totaling $21 in interest instead of $20 under simple interest.

Prof. Kellison says the actuarial method is defined on the basis compatible with compound interest theory. This method subdivide payments between principal and interest which is consitent with the widely used loan amortization schedule but inconsistent with what is known as United States Rule. Under U.S rule, payments by borrower should first be applied to pay any accrued interest, with any excess being applied to reduce the outstanding loan balance. If the payment fall short of interest the balance of interest is not to be added to the principal so as to produce interest. However, under actuarial method, which is consitent with compound interest theory, any such deficiency must be capitalized, i.e. added to the outstanding loan balance to accrue additional interest. Hence, the way compound interest rate works in addition to above mentioned reasons, customer forced to default.

Finally, Treasury Bills as a tool of monetary policy is not the only to blame, but compound interest mechanism, bankers, policy makers and members of parliament who are making financial and banking laws just to mention a few. Our members of parliament, key government economists, central bank officials and policy makers should devote time to learn what is in stock from Islamic Banking and Finance to protect our people and economy from maliase of compound interest mechanism. Hereby, worthy to quote Mr. James Robertson, author of Future Wealth:A New Economics for the 21st Century, “The pervasive role of interest in the economic system results in the systematic transfer of money from those who have less to those who have more. Again, this transfer of resources from poor to rich has been made shockingly clear by the Third World debt crisis..... When we look at the money system that way and when we begin to think about how it should be redesigned to carry out its functions fairly and efficiently as part of an enabling and conserving economy, the arguments for an interest-free, inflation-free money system for the twenty-first century seems to be very strong.”

Moreover, customers are not defaulting because of high interest rate per se but a combination of factors some are not expected to exists!

LENDER OF LAST RESORT FACILITY- SHORT RUN OPTIONS FOR BANK OF TANZANIA.

INTRODUCTION.

The recent economic and financial crisis has highlighted the need for a well-designed financial safety net comprising a number of crisis prevention strategies as part of a comprehensive regulatory and supervisory framework to ensure the soundness and stability of the financial system. The lender of last resort (LOLR) is one such preventive strategy. LOLR is taken to mean the discretionary provision of liquidity to a financial institution (or the market as a whole) by the central bank in reaction to an adverse shock that has caused an abnormal increase in demand for liquidity which cannot be met from an alternative source (Freixas et al., 1999.)

The characteristic nature of banking operations fundamentally makes banks more susceptible to the liquidity problem. This is because a bank’s assets are dominated by illiquid (long-term) receivables, while its liabilities predominantly comprise liquid (short-term) deposits. This condition potentially creates a liquidity problem if depositors unexpectedly withdraw their deposits (known as a bank run), leaving the bank in a condition of insolvency. In such difficult circumstances, a bank may request emergency liquidity from the central bank, which is usually assigned as the lender of last resort.

Chapra (1983) suggests that Islamic banks should also have such liquidity support. This emergency liquidity should take into account Islamic banks’ vulnerability to unscheduled withdrawals as well as systemic liquidity crunches. Similar with conventional banks, the unavailability of emergency liquidity may potentially change liquidity pressure in Islamic banks into a solvency problem unless the banks sell their assets with a substantial haircut on their price. Without an LOLR facility, Islamic banks are even more vulnerable to liquidity problems, and thus to a banking crisis, since they often have a shallow interbank market and limited liquidity instruments. Hence, a report from the IDB-IFSB Taskforce on Islamic Finance and Global Financial Stability (2010) has acknowledged the LOLR facility as an important element for the liquidity management of Islamic financial institutions.

BASIC MECHANISM OF LOLR.

Both the "classic" and other type of liquidity run highlight the need for a LOLR facility. In general, there are two types of last resort facilities: temporary capital injection and collateralised lending. An emergency capital injection will expose the central bank to all the risks of the bank, while collateralised lending is perhaps less risky to the central bank as the loan is backed by good collateral (normally, central bank or government paper, valued at a high rate relative to the pre-crisis period). In such lending, the central bank can manage its risk through various measures – for example, by limiting the proportion of loan to value, levelling of the haircut of the collateral and maximising the amount of loan, in addition to establishing collateral eligibility and solvency criteria. In an extremely stressed condition, though, these parameters may need to be relaxed to avoid a time consistency problem in the implementation of a last resort policy or regulation.

Nevertheless, in practice, the risks associated with providing a last resort facility may not be avoided at all. The central bank often has only a very short time to decide whether to extend a loan to an illiquid but solvent bank. A loan provided to an insolvent bank will incur a financial loss to the central bank. Moreover, in the case of a systemic liquidity run, the potential losses from providing the last resort facility may be significant, given that the central bank may not be in a position to independently absorb that risk due to its budget limitations. In such an exceptional case, the central bank may ask for assistance from the government's guarantee scheme. The rationale for this form of joint crisis management is the high cost to society of a systemic bank failure. For example, a systemic bank failure may result in a cutback in the supply of credit, which may be the only source of funds for small firms and households – that is, the vast majority of society.

ISLAMIC PERSPECTIVE ON LOLR.

One of the important roles of the state in Islam is to work towards securing the public interest and promoting the general (including material) welfare of society. In implementing this role, government intervention may in certain cases be inevitable,
although in general Islam does not prescribe anything like a state with huge control over or intervention in the private sector, other than taking control or intervening to preserve the basic needs of society. This important role can also be seen as a function of Bait al-Māl (Baitulmāl), or the house of wealth – in this case, the state. This function has been around since the era of Rasullullah SAW and rightly guided caliphate, when Muslims were the recipients of large amounts of treasure handed out to them and were distributed to deserving receipient including those in difficulty situations due to immense size of debts.

From the Islamic perspective, pertaining to this role as a representative of the state, the central bank has at least three main tasks, namely: (i) maintaining the stability of money;(ii) fostering economic growth with full employment; and (iii)distributing justice. With regards to banking activities, the central bank is responsible for the robust performance of the banking operations, part of which involves anticipating banks' liquidity problems requiring the LOLR facility and be prepared to solve the problem in conjuction with Sharia rules and principles.

BANK OF TANZANIA AS LENDER OF LAST RESORT TO ISLAMIC BANKS.

As per the Bank of Tanzania Act,2006 part IV clause 41 states " the Bank shall be a lender of last resort and shall in that respect at penal interest rates published each year, grant advances or contigent commitments on an exceptional basis to banks and financial institutions in Tanzania that are deemed to be solvent but illiquid if (a) in the opinion of the Board such advance or commitment is necessary having regard to the financial condition of the bank or the financial institution and to its systemic significance to the stability in the financial markets and (b) in the opinion of the Bank, the bank is solvent and provides adequate collateral and the request for financial assistance is based on the need to improve liquidity;..."

As per the BOT regulation, it appears that Islamic banks operating in the country can hardly qualify due to lack of accceptable collateral required on one hand ( Clause 40 (1)) and on the other hand Islamic banks are restricted not to take advance on interest basis. Is there a way to defeat the obstacles? Yes, of course, the central bank can offer money on Mudaraba basis on fixed deposit account maintained by Islamic Banks just like individual or institutions which opens an FDR on Islamic Banks expecting a return equivalent to penal interest rate published each year as per the BOT Act and collateral issue may be solved if we treat such money as protected by Deposit Insurance Fund after the Minister of Finance in consultation with the Insurance Fund Board and BOT reviewed mandatory protection ceiling in regards to money provided by BOT to Islamic Banks.

Second, Bank of Tanzania should reduce statutory minimum reserve (SMR) for Islamic banks during the liquidity crisis. Currently, all banks are required to maintain SMR not less than 10% of total deposit with the Bank of Tanzania and shall have to seek LOLR facility in case of emergency. While for conventional banks this is possible, for Islamic banks it cannot work and thus depending on the level of liquidity problem, SMR can be reduced as deem fit in order for Islamic banks to address her liquidity problem.

Third, open special account with Islamic Bank as an official depository where in money of the government entity or public authority shall be deposited to provide liquidity to Islamic Banks. According to BOT ACT clause 32 (2) ..the Bank may after consultation with the governments or the public authority and the bank concerned, select any other bank to be the official depository of the governments or the public authority and shall in respect therewith (a) maintain and operate special official accounts in accordance with arrangements made between the Bank and the governments or public authority concerned.

Fourth, the central bank may consider the recent initiative of the International Islamic Liquidity Management Corporation (IILM) to develop a liquidity Sukūk that can be traded across borders by both Islamic banks and conventional banks.From the perspective of LOLR provider this particular Sukūk may potentially reduce the tendency of banks to ask for last resort support, as its cross-border feature will provide an alternative line for liquidity not impacted by idiosyncratic shock in the domestic market.

Nevertheless, a more fundamental solution – that is, an approach to improve the liquidity risk management of the bank – should also be part of the strategy. There are at least four alternative solutions: (i) institutional deepening – meaning to deepen public understanding of the operations of Islamic banks; (ii) restructuring liquidity management on both the asset and liability sides – for example, matching the tenor of the deposits on the liability side and financing on the asset side; (iii)implementing a profit-sharing scheme both on the asset and liability sides; and (iv) revitalising the liquid instruments by utilising a variety of Sukūk instruments (short- and long-term tenor).

CONCLUSION.

The central bank or supervisory authorities, despite their strong regulatory and supervisory provision to the banking system, cannot guarantee that any particular bank will be saved from the liquidity problem. Therefore, it is important to develop an effective arrangement of the LOLR that not only limits the inherent risk of the facility, but also minimises the distortion to the market signals as this may otherwise spur the moral hazard problems inherent in such a guarantee scheme.In any particular situation, the central bank or supervisory authority should not take full charge of the LOLR role; rather, a broader crisis management protocol should be developed with the government.

In terms of LOLR facility, Bank of Tanzania should have LOLR framework for Islamic Banks. An Islamic bank may ask for a Sharī`ah compliant LOLR facility or even a capital injection from a provider of LOLR and expect to be served in conformity with specific features pertinent to the Islamic contract, or `Aqd. As Islamic finance continues to become an integral part of the global financial system,it is essential to have an integrated initiative for both conventional and Islamic finance that includes,among other initiatives, the development of a more effective LOLR and crisis management framework.

THE MEANING OF INTEREST AND INTEREST BASED INSTITUTIONS IN TANZANIA-FINAL

STRATEGIC WAY FORWARD.

Verily never will God change the condition of a people until they change it themselves (with their own soul). (Holy Qur’an, Ra’d: 11).

The government of Tanzania put many efforts to conventional methods of poverty alleviations and economic growth shown in previous articles. This is evident through widening the size of the financial and non financial institutions in the country with aim to bring better life to people based on pure interest as the catalyst of sharing risks and rewards. However, these efforts have failed to achieve their objectives because of ignoring the multi-culture and multi religious aspect of the people who are the intended beneficiary of the devised strategies especially Muslims.

As a result of such structural design of the economic system, devout Muslims in Tanzania are only left with one option of doing business by their own means and with all resources they have without expecting anything from the financial system or the government. This trend shouldn’t be left to continue if the government needs to maintain a just and fair society with opportunities for all. On political perspective, such a loophole is likely to pose a threat to the political stability and social cohesion of the people. I believe, unbiased government cannot let the situation prevails in front of ugly end and acquit itself from systematic discrimination which breed the seed of discord and threatens national unity among her people.

A PROGRAMME OF ACTION.

It always pleases the ear when you hear CCM political leadership wants to follow Malaysian path of economic development to take the country from a low to a middle-income economy, starting with the 2013/2014 Financial Year. So we have witnessed the President Kikwete unveil Big Results Now initiative in Feb 2013 and the boastful reports in that we are on track. However,when you go deep on the focus areas of the initiative,there is no financial inclusion or empowerment leave alone Islamization of the economy as it focus on six priority areas;energy and natural gas, agriculture, water, education, transport and mobilization of resources. Even before going deep to examine initiatives in each of these areas, it is clear that this initiative shall move the country step ahead but not reaching the aim-from low to middle-income economy. Though we know Malaysia as country only, let us ask our Malaysian experts; does their financial system like ours? Why they have dual financial system where conventional financial institutions works in parallel with Islamic Financial institutions? Would Malaysia be able to reach where it is without strong yet enabling policy towards Islamic Financial Institutions? We need evidence based answers on these questions unless we open ourself to learn partially and act partially and so the results will be partial.

So what needs to be done? First, it is my humble view that Muslim economists and Sharia scholars must analyse various economic policies and implications on Islamic perspective and provide viable alternative in order to engage the government policy makers, regulators and legislators through a diverse channels to address this deplorable interest based financial system.Since Malaysia is our economic aspirant model, we can draw examples from Malaysia as well as other countries. This approach has been taken in the on going constitution making where by Muslim jurists met in Tanga to analyse critically the current constitution and the leading to small but insighful book called ' MAKOSA YA MSINGI YALIYOMO KATIKA KATIBA YA JAMHURI YA MUUNGANO WA TANZANIA KWA MTAZAMO WA UISLAMU.' compiled by Sheikh Salim Barahiyaan. Besides, JUKWAA LA WAISLAMU LA KATIBA under BARAZA KUU compiled Muslim opinion for the draft constitution in the making. This efforts despite not yielding results bear witness to the fact that muslims have never beeng silent in the making of better country that respect freedom of religion and promotion of justice for all. Let us not forget wise words of Professor Hamza Njozi, "It is socially and morally wrong to acquiesce to injustice. Muslims have the moral and political responsibility to expose and to fight against all forms of social injustice and discrimination even if their efforts would always end in failure. Heroic failure in fighting injustice is far better than success in entrenching an unjust order."

Second, Muslim leaders should embark on a countrywide campaign to sensitize Muslims students in the country to know the objective of education in Islam and study in Islamic/Muslim Universities which offers Islamized courses in various professions so as to become future leaders who can incorporate Islamic teachings in various policies, legislations and practice. Parents and Muslim Youth councillors in our Islamic schools should also spearhead this initiative and urge students to understand islamic perspective on the field in which they want to speacialize. I remember one time, a relative was admitted at the Institute of Tax Administration (ITA) in Dar es Salaam and sought my opinion should he take it or opt out? I categorically asked him to pursue the course but to know from the beginning that whatever he is going to study has no reference to Sharia and hence have a duty to undertake jointly a study on Islamic Public Finance Management specifically on permissible ways for the government to raise revenue. Second, never to aim with such knowledge to work on the government to impose those taxes without challenging what he learned but aim to work in order to reform practices which violate Sharia rules and incorporate practices which pleases the Almighty. Understanding the challenge ahead, he opted accountancy with IT whose challenge seems manageable for him. Again i met a friend who is teaching Taxation at IFM, and reminded him that he has a duty to expose the flaws of our taxation theories, laws and practices and provide an alternate ways to raise and administer public revenue in a ways pleased by the Almighty. People dont know that there are ways to raise revenue apart from countless taxes imported from the west without being questioned and examined. I once said, PAYE is a burden to workers, unjust and unislamic, a student asked me how can a government run the government without it and if there is country that doesnt have it? As to the later part of the question there is no PAYE in Oman, UAE, KSA, Qatar, Yemen, Kuwait among others as to the former part in short can be answered if we examine how these countries run their affairs. We need as Muslims to understand our religion rules of the show in every field of study- take what is compatible and reject all that contradict our rules and principles.

Third, lobby groups. Muslim must focus on economic and financial empowerment of the people by forming lobby groups to lobby the government towards Muslim inclusive policy decisions and lobby parliamentarians towards Islamic oriented legislations.

Fourth, establishment of vibrant Islamic financial institutions such as Islamic banks, Islamic Funds, Islamic MFI, Zakat Funds, Islamic Insurance among others and push the government towards positive recognition and enabling, fair-play legal and regulatory
environment for them to succeed.

Fifth, external links and support must be well used and sought towards realization of above mentioned action points where necessary. Hence, there is a need to form cordial relationship with foreign representative organs such international governmental and non-governmental organizations outside the country to assist towards realization of this .

TANZANIA AS A SECULAR STATE.

The programme of action will face challenges during implementations. One of them is the old argument that our government is secular state hence cannot adopt religious oriented solutions which promote a certain faith. The Achilles' heel of the claim isn’t emanating from the theory but from the practice.Brother Abu Aziz wrote the following words in his letter to Attorney General after Mwembechai saga on Tanzania as a secular state:

"Tanzania is, constitutionally, a secular state however repugnant that secularism may be to some of us for being a Freemasonic concept which seeks to ‘remove’ God from all aspects of public matters and confine religion to personal matters only. It has been said that “The secular state is a state which guarantees individual and corporate freedom of religion, deals with the individual as a citizen irrespective of his religion, is not constitutionally connected to a particular religion nor does it seek either to promote or interfere with religion” (Smith, 1963).

Secularism therefore implies a range of factors – no intrusion of religion into politics or state patronage of any religious organization; no parochial and sectarian tendencies; no alienation or marginalization of people on religious grounds; no discrimination in education, commerce or employment on religious grounds and so on. Basically, a secular state perceives the society as multi-religious and multi-cultural and constantly strives for national unity and consensus. It is not enough for the government to merely say, “it has no religion”. It must earnestly work for those goals and must be seen to be truly secular."

If we reach consensus on above understanding of secular state, i believe there is no other barrier except our intentions.From this point,I reiterate that Islam professes the oneness of God and demands its followers to abide by Sharia in very aspect of their life. Tanzania constitutions guarantee freedom of worship as a fundamental human right. It is the obligation and responsibility of the government to protect and ensure inviolability is preserved without bias or prejudice. Taking all discussed matters into considerations, the government has a role to play to ensure no side of its population is left without economic upliftment or financially included hence it should set effective procedure of mutual consultation with Muslim scholars on economic and financial matters. Doing this will open the door for Muslims Scholars to assist the government in this issue of national interest which affects all citizens of this nation.