Pandemic cuts into Ramazan donations

Updated May 19 2020

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THE raging Covid-19 pandemic has had a major impact on the composition of donations this Ramazan in Pakistan where the crushing economic pressures had already stunted the capacity of the middle class to maintain the scale of its earlier giving.

The ration distribution has spiked this year whereas cash donations for causes and philanthropic institutions moderated, background research revealed. Most businessmen active in the philanthropic circles insist that the plight of the poor amidst the pandemic has motivated the rich and the upper middle class to be more generous.

The hike in their giving in the current difficult times, they maintain, compensated to some extent for the loss of contributions by people who can no longer afford to donate as much as before. They assert that the actual value of the total giving in Ramazan 2020 may be Rs150 billion, a drop of 12 per cent from the last year’s estimate of about Rs170bn.

“Many loyal donors to charitable entities promised to make good on their commitments later as normalcy returns and the liquidity crunch eases,” Haroon Qassim, a businessman associated with the pharmaceutical industry who is active on the philanthropy circuit in Karachi, told Dawn. He mentioned a few charitable entities that are in trouble for insufficient funding.

The share of contribution from the middle class has shrunk. The inclination to hold cash in an uncertain time is one of its reasons

Karachi continues to be the donation capital of Pakistan. “Besides the size of the city, the propensity to support philanthropic causes is higher here than the rest of the country for some reason,” Majyd Aziz, former president of the Employers’ Federation of Pakistan, asserted. “It can’t be an accident that roughly seven of the 10 biggest charities are based in Karachi and even those outside the city depend significantly on funds raised here,” he quipped.

A debate was initiated on the payment of wages from private Zakat funds in failing companies. The idea was dropped as workers were not found eligible. “Some loss-gathering closed firms are financially broke and are incapable of bearing the cost of the wage bill. Even if proprietors wish to retain staff, they simply can’t to keep the company viable through the current lean phase. Yes, in many cases, family owners have private funds that they are willing to use, but there is no legal way to do that and that’s actually why Zakat came under discussion,” a business leader told Dawn in confidence.

Commenting on the absence of verifiable data on charitable giving in Pakistan, experts said a sizable portion of charity comes from funds outside the books. “There is a joke in the elite circles that if Zakat is paid using declared funds, many businessmen would end up being eligible for it,” commented a top gun privately. He was hinting at the astounding wealth of the religiously inclined business families that judiciously calculate and fulfil their religious obligations using undeclared cash stashed in lockers.

The Ramazan giving estimates, which a few marketing executives find understated, are based on the approximation that Rs6 trillion Zakat-liable wealth in private possession in the country. (The figure is based on Rs150bn Zakat that is projected to be 2.5pc of the individuals’ wealth liable for deduction.) It does make sense when the Pakistan Centre for Philanthropy’s 2014 study is referenced.

According to a 2014 study that is cited in recent 2019 study, the estimated magnitude of household giving in Pakistan was Rs239.7bn in 2014, which is three times higher than 1998 estimate of Rs79bn. Most trend watchers believe that over half of this is mobilised in Ramazan. This explains why philanthropic outfits conduct aggressive marketing campaigns during this month. “They compete for a slice of the Zakat pie in the holy month and launch collection drives reaching out to loyal patrons and new potential donors using innovative online platforms,” a marketing professional holding accounts of multiple social welfare entities said.

The share of the middle class in Ramazan donations this year has shrunk. The contraction in family holdings and the inclination to hold cash in the current uncertain environment must have contributed to the trend.

“Either the middle class has liquidated a part of its holdings to cover for the loss in income over the past year or the perception of value of wealth has diminished, leading to lower than last year’s Zakat assessment. They could also be simply short of cash. There is a significant drop in small donations in most popular charitable organisations, such as Edhi, SIUT, Fatimid, Indus Hospital, Shaukat Khanum etc from what I know,” one senior official of a leading charitable organisation explained.

Zakat, a mandatory giving by Muslims at 2.5pc of their accumulated wealth, is not based on running income. So its assessment normally is fairly stable over the short run.

“A dip in the total quantum of Zakat of white-collar Pakistanis, if true, highlights the crushing impact of a slacking economy on urban families even before the pandemic struck,” commented another expert.

The health emergency has shifted the focus of institutional giving towards charitable hospitals and clinics at the cost of other competing causes, such as education. The prolonged lockdown has rattled the economic sustainability of many charitable hospitals as their running income shrank whereas the operational cost hiked on account of safety measures for staff and special arrangements to service coronavirus patients.

Some other businessmen associated with philanthropic causes believe that Pakistanis might be committing as much as they did last year, but are deferring the actual transfer of funds until normalcy is restored after the health threat recedes somehow.

Published in Dawn, The Business and Finance Weekly, May 18th , 2020