At the end of the financial year Islamic Relief sets out its financial performance in 2021 and the review of its position but our charitable activities do not end when the year does. We continue our ongoing programmes to support current and future rightsholders, having in the final month of 2021 secured significant contributions for the 2022 pipeline of funding for projects, achieving a high level of liquidity that has boosted our cash held.
Islamic Relief continually manages its financial risk and reserves, including assessment of going concern, to achieve its mission.
Financial performance
Income and fundraising
Islamic Relief generates income primarily from three sources:
Donations, legacies and fundraising activities by members of the Islamic Relief family, resulting in restricted and unrestricted income.
Grants from institutions and other major donors from across the globe to fund specific projects. This is known as restricted funding, which can range from short-term humanitarian interventions to longer-term development programmes.
Earned income through trading subsidiaries such as TIC International, whose primary activity is generating income through clothes recycling, and investment returns generated through investments and our investment vehicle, the International Waqf Fund.
Total income in 2021 increased by 23 per cent to ÂĢ183 million (2020: ÂĢ149 million). This is mainly due to the generosity of our donors in the UK and globally, donating to Islamic Relief family members who in turn funded our extensive support for lifesaving and life-changing projects this year. The main growth areas for income generation have been across the UK, North America, and Europe.
Grants from institutions and other major donors were consistent with prior years. This partly reflects a continuing trend towards localisation by major donors, with more direct funding going to the global south. Another major factor has been the uncertainty created by the Covid-19 pandemic, with grant makers reflecting on the number of new grants they award as the ongoing impacts of the pandemic are monitored.
Funding from Islamic Relief family members remained the largest funding stream at ÂĢ123 million (2020: ÂĢ91 million), with Islamic Relief member entities in North America and Islamic Relief UK the biggest contributors.
Our UK donors continued to demonstrate their generosity in supporting vulnerable people, with committed giving and responses to appeals increasing despite the economic impacts of the pandemic. The 2021 financial year ended with Islamic Relief collaborating with fellow members of the Disasters Emergency Committee (DEC) in a joint appeal for the unfolding humanitarian crisis in Afghanistan.
Expenditure
Islamic Reliefâs expenditure falls into three main categories:
Charitable activities: the costs associated with implementing programmes across Asia, Africa, Middle East, Europe and other geographical regions.
Fundraising, advocacy, and communications costs: in addition to our direct support for vulnerable people, Islamic Relief invests in fundraising to support further income generation for the communities we serve and seeks to address the root causes of poverty and suffering by campaigning for positive change in alignment with the United Nations Sustainable Development Goals.
Support costs: this includes investment in ensuring that effective governance, people, policies and systems are in place to support the frontline delivery of our projects, and so we honour the donations entrusted to us with efficient and effective operations.
This year our total charitable expenditure increased to ÂĢ157 million, up from ÂĢ115 million in 2020. This has allowed us to reach 12.5 million vulnerable people globally. With many prolonged, complex and ongoing humanitarian disasters across the globe this year, our greatest spend was for emergency relief projects under the banner in our strategy of âprotecting lives and dignityâ. Altogether, we spent ÂĢ84 million on humanitarian programming (2020: ÂĢ58 million), including responses to crises in Afghanistan, Myanmar, Syria and Yemen.
Islamic Relief also works for long-term change that empowers vulnerable people to be self-sufficient. A key priority continues to be âcaring for children and orphansâ, with Islamic Relief investing ÂĢ34 million (2020: ÂĢ27 million) in the flagship sponsorship programme aiming to meet the immediate and longer-term needs of vulnerable families.
Other long-term programmes aimed at achieving long-term and short-term social change included spending ÂĢ18 million (2020: ÂĢ14 million) to give communities âaccess to healthcare and waterâ, and investing ÂĢ5 million (2020: ÂĢ4 million) in âsupporting educationâ.
Our sustainable livelihoods work builds financial inclusion in low-income countries, enabling people to become self-sufficient. This year our microfinance programmes alone have supported 15,000 people in 10 countries, with ÂĢ13 million (2020: ÂĢ9 million) invested into this programme.
The expenditure detailed above has, as always, been in accordance with our donorsâ wishes as per the appeals they have supported. Further details are available in notes 9 and 10.
Trading activities
TIC International Ltd (TIC)
TIC International Ltd (TIC) is a wholly owned subsidiary that undertakes the trading activities of clothes recycling and managing a network of charity shops.
TICâs key role is in generating income to support Islamic Reliefâs programmes, and supporting our journey towards ânet zeroâ by providing the valuable service of recycling clothing that might otherwise be disposed of in landfill or in other ways that harm the environment.
Beyond TICâs business activities, it has played a crucial role in the Midlands region of the UK, over the past decades. As well as providing employment to local communities, it offers a support network across its workforce, resulting in long-term economic progress for whole families involved in the business â including enhanced opportunities for young people in education and employment.
In 2021, TIC converted 1,518 tonnes of unwanted clothing (2020: 1,387 tonnes) either into either income through re-selling high-quality clothing in our charity shops or through recycling to generate profits. Altogether this year TIC contributed ÂĢ422k (2020: ÂĢ241k) to fund our vital projects. In a challenging year in which our network of shops remained closed for long periods because of the pandemic, TICâs net contribution fell but continued to be a plus.
TIC staff have been crucial to its success this year, as they continue to rise to the economic outlook challenges in the UK, and the subsidiary looks forward to furthering achievements in 2022.
International Waqf Fund
We established the International Waqf Fund (IWF) to boost the long-term financial sustainability of Islamic Relief investments to generate returns for social impact, known as waqf in Islamic terminology. Waqf enables Islamic Relief to decrease its dependency on donations and grants, as the annual yield from waqf investments provides income that funds social impact programmes.
IWF seeks to generate contributions to its waqf fund towards a variety of goals set by donors and to have a continual sustainable impact into perpetuity.
The IWF Board of Trustees recognise that with all investments, there are risks that must be managed. They therefore ensure that the investment management capability, purpose of deployment and impact, alongside effective administration and investment readiness, are in place. The IWF endowments fund was ÂĢ692k in 2021, (2020: ÂĢ616k).
Endowments
Islamic Relief Worldwide continues to hold endowments that are invested in UK property. Returns from these investments are used for our humanitarian and development social impact programmes, as specified by our donors. The endowment fund remained constant at ÂĢ8 million (2020: ÂĢ8 million) due to ongoing waqf donations and investment returns.
Financial results and closing reserves
Islamic Relief reported a surplus of ÂĢ9.3 million in 2021. This is made up of unrestricted reserves of ÂĢ1.6 million (2020: ÂĢ2.7 million) and restricted funds of ÂĢ7 million (2020: ÂĢ15 million), with endowment fund of ÂĢ0.7 million.
Restricted reserves include funds secured for ongoing programmes into 2022 and beyond, as well as funds secured for the 2022 pipeline of programmes.
Unrestricted funds include income from our general income generation activities such as fundraising and income earned by our trading subsidiaries. This funds Islamic Reliefâs operating and programme support costs.
Reserves policy
Islamic Reliefâs unrestricted reserves on 31 December 2021 were ÂĢ14.4 million (2020: ÂĢ12.4 million). These included funds that are designated to fund Islamic Reliefâs ongoing programes. Our free reserves are ÂĢ8.7 million (2020: ÂĢ7.4 million), representing eight months of operational budget.
The purpose of holding free reserves is:
To provide for the continuation of projects, by protecting against unforeseen project expenditure due to the inherent risk of the VUCA (volatile uncertain, complex, and ambiguous) environment in which Islamic Relief operates, managing economic and foreign exchange volatility as well as income fluctuations
To provide working capital and manage the uneven pattern of seasonal income generation for the effective running of the charity throughout the year.
To enable Islamic Relief to invest in emerging funding and growth opportunities should the Board of Trustees approve.
The reserves policy and the target for unrestricted reserves is regularly reviewed by the Board of Trustees. Our Investment Committee is reviewing the effectiveness of how these funds are held considering liquidity, security and investment risk in 2022.
The Board considers the level of free reserves remains an appropriate target considering Islamic Reliefâs size, operation and the financial risks to which we are exposed.
Going concern
The Board of Trustees has assessed Islamic Relief Worldwideâs ability to continue as a going concern. In forming their conclusion the trustees have considered numerous factors and key risks â including the possible negative impacts of the ongoing Covid-19 pandemic.
The key risk in our financial model is from a fall in income, which negatively affects our ability to deliver charitable activities and results in lower recovery of core costs. We are mitigating the risk of lower core cost recovery through our ongoing review of our global business model with our Islamic Relief family members, and identifying initiatives to mitigate against this risk.
Core unrestricted income is funded by fundraising income and income generation activities. Despite the ongoing pandemic, our financial results do not indicate that our donors are giving cautiously. Instead, they continue to support us generously across the UK, North America and Europe. This has led to a further record ÂĢ183 million raised in total income this year.
Much of our pipeline for 2022 projects is already secured and continues to be very healthy with an influx of ÂĢ55 million of cash into our bank accounts from October to December 2021 for 2022. This has enabled us to plan for the coming year with more certainty and transition smoothly in sustaining project funding from one year to the next.
2022 is the year in which we embark on our new long-term strategy, supported by a financial plan to ensure that we continue to expand and increase our effectiveness while also delivering positive impact for climate change and net-zero initiatives.
After considering these factors, the Board of Trustees have concluded that the charity remains a robust going concern and has adequate resources to continue delivering its vital work for the foreseeable future. The Board has therefore prepared the financial statements on the going concern basis.
Dr Ihab M. H. Saad
Chair of the Board of Trustees,
Islamic Relief Worldwide
25 May 2022