International grant-making policy within philanthropy in the UK Muslim context

The research focused on UK grantmakers in the Muslim context because of the potential to learn from the experience of organisations which have strong cultural links and relationships with vulnerable global communities. It built on earlier mapping work 3, using a definition of Muslim philanthropy which is geographic, cultural and not only faith-based but faith-expressive 4. Data were gathered from research literature, analysis of 24 international grant-makers’ annual reports, websites and six in-depth interviews with senior staff.

International grant-giving involves a constant balance between the demands of regulatory and financial compliance and considerations of regional risk and need. The Charity Commission’s guidance on risk management when working overseas runs to five pages5, covering risk assessment in unstable countries, local employment rules, protection of staff and beneficiaries, terrorism, auditable track of finances, fraud and financial crime, risks of money transfers and due diligence on local organisations. Additional guidance covers safeguarding.

The frustrations that can arise when trying to build compliant stable systems in difficult international contexts are illustrated vividly in one grant-maker’s annual report: “(We work) in difficult circumstances where both social and political factors may give rise to security or access problems that frustrate our ability to put in place the infrastructure and long-term initiatives necessary to alleviate poverty and suffering.”

Operational challenges have been compounded by an increasingly harsh regulatory environment and growing scrutiny over recent years. This has been globally recognised, including by the Organisation for Economic Co-operation and Development (OECD) 6 and the UK Charities Tax Group (CTG):

“… global activities are not without risk, and charities making grants globally must be mindful of the restrictions that charity law and taxation impose ... (they) will need to consider the risk profile of their activities in the round” 7

1 hummedia.manchester.ac.uk/institutes/gdi/publications/workingpapers/GDI/GDI-working-paper-2019035-banksbrockington.pdf

2 bayes.city.ac.uk/faculties-and-research/centres/cgap/research/_nocache

3 Pharoah, C. (2020) Building a picture of Muslim philanthropy in the UK foundation context: The scope of existing data. cass.city.ac.uk/__data/assets/pdf_file/0004/543721/Pharoah-Muslim-philanthropy-in-UK-context.pdf

4 El Taraboulsi,S. The Muslim Philanthropy Digital Library Case 5 gov.uk/guidance/charities-how-to-manage-risks-when-working-internationally

6 See for example globalindices.iupui.edu/environment-2022/themes/index.html and oecd.org/dac/private-philanthropy-for-development-9789264085190-en.htm

7 Charities Tax Group CTG | 31 May 2019 Making grants overseas: a refresher on HMRC rules for charities

In this context, the research found considerable policy-making was devoted to internal financial controls, protocols and special arrangements for compliant finance distribution in overseas locations with weak or non-existent banking systems. The need to adapt, coupled with regulatory penalties if things go wrong, gives rise to ongoing anxieties, and the difficulties have been taken up by the UK Muslim Charities Forum (MCF). Compliance issues are resourceintensive and lead to more exclusive and risk-averse grant-making. One interviewee wryly observed:

“There is a German proverb that ‘trust is good, but control is better’. We do not trust anybody: we trust our systems, procedures, and processes … We never have one partner in one country, but a minimum of three, as part of our policy to minimise potential risks in handling the grants money.”

A major risk to systems, however, as another interviewee said, is the volatility in many developing regions:

“Sometimes urgent needs do determine interventions and decisions on grant-making, because emergencies are exceptions and … you cannot do strategy exercises.”

The research found that partnership is fundamental to international grant-making, but that identifying and managing suitable partners can be challenging, resourceintensive and a source of anxiety. To ensure capacity to meet UK regulatory and governance requirements, there is considerable policy-making around partner recruitment, with stringent upfront selection criteria. For example, one interviewee noted:

“(Overseas partners) must ... pass our selection criteria with 95% on a score card covering law, compliance, governance, financial robustness and organisational capacity ...”

They also said that these demonstrate synergies in constitution and mission, clearance checks on trustees and key managers (such as on fraud and terrorism), and a good track record. Further policies cover standards, good practice, finance management and recordkeeping, sometimes individually tailored to local capacity.

Sadly, finding and managing partners is most difficult in risky and needy areas, as two interviewees commented:

“In those countries which are wartorn half-broken countries, we don’t have much choice … it’s not like going to the supermarket and buying bread … Finding partners in those countries is hard.”

While cultural links give access and ‘mileage’, they don’t automatically solve everything. One interviewee felt shared faith and values were not enough to build trust, saying: “Trust comes with time and how we communicate … transparency is essential.” Power imbalances remain, and funders must prove ‘added value’ through expertise, collaboration and empowerment.

• Grant-making foundations and charities are ever more vital to overseas aid as government funding cuts back.

• Policy-making towards international giving is increasingly complex, resource-intensive and demanding.

• Higher donor expectations, harsher regulatory environments and the growth of partnership are driving greater pressure on policy.