40.2 FINANCIAL MANAGEMENT, idaaral maal

By Professor Omar Hasan Kasule Sr.


Fund raising campaigns have the objectives of obtaining money, changing opinions, providing information, and getting new friends. The organization should rely on small contributions from many individual to maintain independence and to avoid control by special interest groups. The fundraiser must understand the psychology of donors who are of different types and characteristics. They must be cultivated, their interest must be maintained, and they should not be taken for granted. Potential donor must be won over by giving them a lofty objective and challenge. The method of fund-raising has to be customized to the organization, the contributor, the project, and the socio-economic environment. Mass media and volunteers can be used in fund raising campaigns. The following give the fund raiser high credibility: good reputation, serious and professional management, transparency and accounting for funds, successes in field work, and building and nurturing supporters & sympathizers. The following are types of solicitations: special events, direct mail, products and publications, and grass-roots fund-raising may be door to door.



Zakat is a major source of funds. It is not a tax but a form of worship. The giver of zakat is grateful to the receiver for accepting his zakat. Zakat is not a voluntary charity. The purposes of zakat, maqasid al zakat are: tazkiyat al nafs, taubah, helping the poor, helping muallafat qulubuhum, jihad, helping the traveler, and tazkiyat al maal. The sources of zakat are crops, monetary instruments, trade goods, and animals. The beneficiaries of zakat are mentioned in taubah as faqir, miskin, zakat workers, muallafat al qulub, prisoners, the indebted, those struggling in nthe way of Allah, and the travelers. The following cannot get zakat: the rich, those capable of working, the family of payor of zakat , non-Muslims, and  relatives of the Prophet.



Waqf is giving up part of wealth and endowing it for a particular charitable contribution in order to gain Allah's blessings. Waqf endowments cannot be sold, donated or inherited. It is either used for the purpose stated if it is real estate or is invested such that the profit is used for charitable purposes and the principal remains untouched. Waqf can be for a dead person. Examples of awqaf include: mosques, land, well, school, inns for travelers, homes for the poor, drinking water, pantries for feed the poor, arms and provisions for jihad, cemeteries, kafn for the dead In general the principal is not touched. The return from the waqf is what is spent. There are several instances of awqaf in the early history of Islam.  The Banu Najjar gave site of prophet's mosque as endowment. Othman bought a well in Madina as waqf. Omar made his land in Khaybar as a waqf. Return is designated as charity while the principal remains. Waqf can be made on behalf of the dead.



Viable organizations with long-term projects cannot rely on ad hoc financing. They need long-term investments to ensure regular operating income. Investment decisions must conform to the shari’at, balance resource allocation between today's needs and future needs, be low-risk, and be diversified. Investrments can be subsidiary businesses, partnerships, real estate, and halal stocks. Halal investments are limited especially in non-Muslim countries. The profits of trading companies are used to support the organization. Even if the profit margin is small these companies provide a service that the mother organization would have had to provide. When such a company is set up it should be run on strictly business lines and its management must be separated from that of the mother organization.



Financial management are fund-raising, investment, planning and forecasting, coordination and control of financial resources. All organizational decisions have financial implications. Necessary financial controls are writing all financial transactions, maintaining financial records, issuing regular financial reports, and analysis of financial statements. Financial records should be audited on a regular basis both internal auditing and external auditing. A budget is an estimate of revenues and expenditures and reflects the organization's purposes and plans. The advantages of budgeting are control, coordination, and resource allocation. The disadvantages of budgeting is stifling creativity and innovation. Budgets can be described as master budgets, revenue and expenditure budgets, capital expenditure budgets, cash budgets, and non-monetary input budgets, and performance budgets. Zero budgeting involves new decisions are made in each budgetary cycle. It enables the organization to focus and eliminate waste  however long-term commitments cannot be made. Incremental budgeting is easy but not creative. It is modification of the last budget with no drastic changes from year to year. Capital budgeting deals with fixed income-generating assets such as real estate. Common problems in organizations are poor cash-flow management, deficits due lack of budgeting or budgetary control, lack of records that guide decision-making and evaluation, failure to collect receivables, poor purchase procedures, and lack of transparency and accountability.

(c) Professor Omar Hasan Kasule Sr. 2004