Verily, Allah requires you to abide by justice, and to treat with grace, and give like the giving of kin to kin; and forbids indecency, and manifest evil, and transgression… (Ch.16: V.91).

The Holy Qur’an is filled with verses that direct believers to serve humanity – feeding the poor, attending to the ill and caring for the less fortunate are fundamental principles we as Muslims are instructed to abide to. In order to attain nearness to God, it is essential that we strive with all faculties to serve His creatures. Zakat in particular is a core pillar of Islam – a 2.5% tax on assets – this encourages the injection of wealth into communities where support is small or absent. Wealth is encouraged to be in constant circulation, either into the business, or into local communities to ensure the poor and sick are consistently attended to (59:8). Money is the lifeblood of the economy so it should always be invested for the benefit of everyone.

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Nonprofits can be a powerful means of mobilising support for a common goal or cause which is why many of us direct our Zakat and alms this way. Unfortunately, many of today’s charities have failed to meet the true Islamic standard.

I’ve spent many years of my life working for a number of charities and nonprofits and I have seen first-hand how inefficient the world’s most “reputable” nonprofit organisations are. The lack of transparency and bureaucracy is alarming and keeps many of these organisations from having the impact they promise to their donors. Most of the funds raised end up lost in governance or administration. Most nonprofits can’t or don’t openly talk about these “hidden costs” because they fail to attract the same level of donations. Another problem is lack of sustainability. Many aid projects require long-term solutions, for as long as aid is dependent on donations, impact is always short-lived.

With the best of intentions, people donate money to those less fortunate in society with the hope that it will reach directly in their hands. We need to work towards sustainable options, this is something that both social entrepreneurship and Islamic Finance encourages. Great examples of companies implementing ethical business models are Jivana Vitality and Thraedable.

Over the last few years, I’ve become more conscientious about my charity and have instead started purchasing from ethical and fair trade businesses.

There are many ways you can improve the effectiveness of your Zakat and Sadaqa – as a starting point, I’ve put together these five tips:

1. Look closer to home

As Muslims we are required to look after our neighbours and family members before extending alms to strangers. Find out if anyone close to you could use some help – sometimes it’s not always apparent so I normally ask my elders if there are any family members or neighbours in need of aid. If by the Grace of God, those close to you are not in need, then try to find people within your circle who you can send a direct transfer to.

2. Ask where your money is going

Have a conversation with organisations and ask how much of your donation ends up directly in the beneficiary’s’ hands and what exactly the capital is used for. I normally only support charities that direct 90 – 100% of funds raised to the cause. There aren’t that many around – Humanity First and Charity: water are the two I regularly support. Besides these, I prefer to give to my Mosque or to individuals who I personally trust will send my entire contribution to the beneficiary. I avoid organisations as much as possible.

3. Data, data and data

Everyone these days wants to change the world – but not many can tell you ‘how’. Check annual reports – the key thing you’re looking for is an understanding of how an individual’s life or a community is being improved. Metrics that track impact pre-funding and post will help you make this decision. Pencils of Promise produce excellent impact reports, the only downside is only 82% of the funds are directed towards the program services but this is relatively higher than most nonprofits.

4. Teach a woman to fish

Don’t just donate money to any organisation so that you can tick off charity from your to-do list. You should ensure you’re truly changing a life. Giving someone money or donating goods will only go so far. If you truly want to lift people out of poverty, you have to go beyond the donation mindset and empower them by helping them become financially independent. This can only be achieved if you’re willing to invest in education and skills training. Someone living in poverty wants dignity – you can help them maintain this by buying their products or services, by creating jobs for them or by offering affordable (not free) education, even if it’s for less than a $1.

5. Work with others

Support businesses doing good in the world – look for positive social, environmental and economic impact engrained in the business model. Islamic tradition dictates that all actions should be focused towards good.

A gentle note – as Zakat is a direct transfer of wealth to the poor, tip number four and five will not apply but can be used for general charitable contributions.

Global poverty is probably the biggest moral crisis of our time, yet in a correctly implemented Islamic economic system, poverty does not exist. We can solve so many of today’s problems if we start using capital in an efficient way. Over the last two centuries, we’ve seen a huge rise in nonprofits, people with good intentions have struggled to find a smart way of lifting people of poverty which is why to this date, after billions of dollars in charitable donations, 3 billion of the world’s population is still in desperate need of aid. It’s time we started asking the right questions and understanding the nature of the organisations that we support.