The Many Problems with Charitable Organizations
As an entity that claims its purpose to collect and distribute financial aid for the deprived individuals, charitable organizations have to deal with many problems that have consequences to both the donors and the beneficiaries. Digitalization might have a role to play.
The COVID-19 pandemic pushes a hundred million people to the brink of poverty, World Bank 2021 data reveals. In Indonesia alone, there is a 1 million increase in the number of people living in poverty from the first quarter of 2020 to the first quarter of 2021. Economic growth also experienced a growth contraction of 0.74% compared to the previous year. The recovery of COVID-19 will be a continuous task for different stakeholders, not only regulators but also Non-Governmental Organizations (NGOs). Alleviating poverty requires hand-to-hand action to bring people into a better life and get out of the poverty line, and there is something that collective voluntary giving can do to address this cause.
People donate to a cause that they care about. But almsgiving has a specific objective – it is aimed towards helping the poor and the needy. Almsgiving could be given directly by an individual to another individual, or it could be from an individual to a charitable organization that will then distribute the funds to the right beneficiaries. In Indonesia, zakat – a form of almsgiving commanded by God to the better-off individuals to give a stipulated portion of their wealth to the eligible recipients including the poor and the needy, has been playing a major role in alleviating poverty. Indonesia’s National Zakat Board data shows that there is about IDR 327.6 trillion potential of zakat collection (BAZNAS, 2020). Yet, the current zakat collection is still around 10 trillion. Collecting social funds certainly requires a lot of management strategies, including how to encourage people to donate.
Charity organizations are not without issues. Existing research shows some challenges faced by different parties. The charitable organizations for instance have to address poor targeting and distribution, lack of transparency, and lack of creative strategies in collecting alms. These issues can make the donors lose trust in the system and as a result back out from donating to existing organizations. On the other hand, the beneficiaries also find it challenging to access the technology which is mainstreamed by charity platforms and organizations in distributing their alms. What is required to address these challenges is a suitable strategy that fits the characteristics of both the donors and the beneficiaries.
Poor targeting and distribution are common issues not only in charitable organizations but also in the delivery of social assistance. As a Muslim-majority country, Indonesia has a National Zakat Agency that is responsible for distributing zakat. And what the Agency does well is the creation of the welfare index that consists of (1) Poverty Line (2) had kifayah – the minimum limit to determine the eligibility of receiving zakat (3) Nisab – the minimum limit of assets that is required in order to be responsible to pay zakat. This method is transferrable to any charity program that wants to ensure correct targeting.
Lack of transparency prevents recurring contributions from donors. But in the digital era, we have more options than ever. E-Banking, crowdfunding platforms, and digital payment system can all help demonstrate transparency in almsgiving collection and distribution. A popular digital charity platform in Indonesia called KitaBisa has distributed 835 billion Rupiah of donations for medical assistance, natural disaster, and other humanitarian causes. What attracts people to donate through KitaBisa is the simplicity of the digital system as well as transparency in their distribution of funds. Donors can easily track the progress of their donations as well as the current condition of the people that they help.
Digital Technology: A Solution with A Thousand Problems
While technology might help charitable organizations, what about the beneficiaries? Technology is being mainstreamed in charity collection and distribution. However, not everyone has the capability to utilize it. People in rural areas, for example, are having trouble with digitalization. Therefore, before mainstreaming technology in charity collection and distribution, there needs to be regional mapping and planning in regards to the technical support that should be provided to communities in the targeted regions. In Indonesia, only 35% of the population uses the internet for communication through short messages like WhatsApp, Line, telegram while about 60% are unfamiliar with financial tools including crowdfunding apps or National Zakat Agency that can offer such donations. In other words, an aggressive and active movement by the agency is highly needed for the poor – they would not be able to understand how to donate or obtain their zakat online unless they are being introduced to its practicalities.
Charitable organizations have the potential to help reduce poverty. However, it is important to ensure equality in access between recipients in all targeted areas. The inequality of access among society is caused by some obstacles such as the inability to purchase a mobile phone and lack of knowledge to operate the gadget, as well as lack of access to the internet. These issues could result in an unfair distribution of charity. It is, therefore, necessary for the regional government to step up and provide assistance in allowing poor individuals to access technology so that they can collect their alms. Furthermore, a partnership between Government and the network provider can accelerate the mission.
In this digital age, it is inevitable that we need to use digital technology as a method to influence the way people think, communicate and even donate (Manivich, 2002). But all parties have to go into consideration when designing the digital alms collection and distribution strategy. If not, digital technology will become a solution that give birth to a thousand problems.
Nuha Qonita earned her degree in Islamic Law from Al Azhar University, Cairo and her Master’s Degree in Islamic Finance from Durham University, UK. She is currently working as a researcher at Bank Syariah Indonesia (BSI).
This article is featured in JUSTIN Development Review (JDR) Vol. 01 Issue 03 — December 2021