Islamic Relief set out our financial performance in 2022 and the review of our position at the end of the year, but our charitable activities do not end at the financial year end: we continue our programmes to support vulnerable people. In the final month of 2022, we secured significant contributions for the 2023 pipeline of funding projects, achieving a high level of liquidity, boosting our cash held.
Earlier sections of this report illustrate Islamic Relief’s response to humanitarian disasters, delivering ongoing support to families suffering in the aftermath of the Pakistan floods and the displacement and hunger crisis in Afghanistan. Our financial position also enabled us to respond swiftly when earthquakes devastated communities in Türkiye and Syria.
Islamic Relief continually manages our financial risk and reserves, including assessing going concern, to achieve our mission.
Financial performance
Income and fundraising
Islamic Relief generates income primarily from three sources:
donations, legacies and other fundraising activities (raising restricted and unrestricted income) generated by Islamic Relief member offices
grants secured from institutions and other significant donors from across the globe to fund specific projects (restricted funding can range from short-term humanitarian interventions to longer-term development programmes)
earned income through our trading subsidiaries (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.
Thanks to the generosity of our donors and funders, in 2022, our total income increased by 28 per cent to £234 million (2021: £183 million).
Islamic Relief is grateful for the donors and funders in the UK and globally, who contribute to Islamic Relief member offices, enabling them to fund an increasing number of vital projects. The growth areas for income generation have been across the UK, North America and Europe.
Grants from institutions and other major donors have increased compared to prior years and reflect Islamic Relief’s enhanced engagement with institutions and other significant donors, and our efforts to empower poorer communities. We continue to monitor the ongoing global economic impact of the Ukraine crisis, the rising cost of living and the Covid-19 pandemic.
Funding from Islamic Relief member offices remained the most significant stream, at £145 million (2021: £123 million). This included income to fund critical projects from Islamic Relief offices across North America and the UK, which includes support for our Pakistan flood response.
Our UK donors continue to demonstrate their generosity, with committed giving and responses to appeals increasing despite the economic impacts of the cost-of-living crisis. The 2022 financial year ended with Islamic Relief collaborating with the DEC and fellow member agencies in a joint appeal for the humanitarian crisis in Afghanistan and Pakistan, and starting 2023 by partnering on the humanitarian response to the Türkiye – Syria earthquakes.
Expenditure
Islamic Relief’s expenditure falls into three main categories:
charitable activities: the costs associated with implementing programmes across Asia, Africa, the Middle East, Europe and elsewhere.
fundraising and advocacy (communication) costs. As well as directly supporting vulnerable people, Islamic Relief seeks to support change and achieve the wider United Nations Sustainable Development Goals 2030 by amplifying the voices of those we serve.
support costs, which include ensuring effective governance, people, policies and systems to support frontline delivery to vulnerable people and other stakeholders, and the efficiency and effectiveness with which we honour the donations entrusted to us.
Total charitable expenditure increased to £174 million from £157 million in 2021, which has allowed us to reach 17.3 million vulnerable people globally. Our most significant spend was on humanitarian programmes, with £113 million (2021: £84 million) spent responding to many prolonged and complex humanitarian disasters, including in Afghanistan, Pakistan, Yemen and East Africa.
Beyond humanitarian response, Islamic Relief brings about long-term change, empowering communities and individuals to be self-sufficient. A flagship programme continues to be our ‘Caring for Children and Orphans,’ with Islamic Relief investing £33 million (2021: £34 million) to achieve longterm and short-term benefits for vulnerable families.
Other long-term programmes aimed at achieving social change include spending £12 million (2021: £18 million) to give communities access to healthcare and water and £4 million (2021: £4 million) on supporting education.
‘Sustainable livelihoods’ programming builds financial inclusion in low-income countries, so poorer people can become financially self-sufficient. In 2022 our microfinance programmes supported 43,500 people living in poverty, with £10 million (2021: £13 million) invested into this programme.
As always, the expenditure detailed above has been in accordance with our donors’ wishes as per the campaigns they have supported. Further details are available in notes 9 and 10.
Trading activities
TIC
TIC International Ltd (TIC) is a wholly owned subsidiary that undertakes the trading activities of clothes recycling and manages a network of charity shops.
TIC’s key role is generating income for Islamic Relief to support our programmes and our journey towards Net-Zero by performing a valuable environmental service in recycling clothing that may otherwise end up in landfills and harming the environment.
Beyond TIC’s business activities, over the past decades it has played a crucial role in the Midlands, UK in employing local communities and support networks across its workforce. This has resulted in the longterm impact of economic progress for its workforce, as their children achieve further education and enhanced employment.
In 2022, 1,931 tonnes of unwanted clothing (2021: 1,518 tonnes) were converted into either income through re-selling quality clothing through Islamic Relief shops or recycling to generate profits to fund Islamic Relief humanitarian projects. This raised £242,000 (2021: £78,000), thanks to TIC’s dedicated staff, who rose to the economic outlook challenges in the UK.
International Waqf Fund
We established the International Waqf Fund (IWF) to support Islamic Relief investments’ long-term financial sustainability in generating social impact returns. This is known as waqf in Islamic terminology. Impact investments such as waqf reduce the dependency on donations and grants by generating an annual yield that is used to fund our programming.
IWF seeks to raise contributions to its waqf fund towards the goal set by the donor, with the donation achieving ongoing impact, year after year, into perpetuity.
The IWF Board of Trustees recognises that with all investments, it is crucial to manage risks and ensure that investment management capability, the purpose of deployment and impact, and effective administration and investment readiness are in place. The IWF endowments fund is at £1.7 million in 2022 (2021: £1.1 million).
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 the donors. Due to ongoing waqf donations and investment returns, the endowment fund grew to £8.4 million (2021: £8.3 million).
Financial results and closing reserves
Islamic Relief reported a surplus of £40.9 million in 2022 (2021: £9.4 million). This is made up of unrestricted reserves of £4.9 million (2021: £1.6 million) and restricted funds of £35.9 million (2021: £7 million) with an endowment fund of £0.5 million (2021: £0.7million).
Restricted reserves include funds secured for ongoing programmes into 2023 and beyond, and those secured for the 2023 pipeline of programmes.
Unrestricted funds include income generated from our general income generation activities through general fundraising activities and income earned by our trading subsidiaries. This funds Islamic Relief’s operating and programme support costs.
Reserves policy
Islamic Relief’s unrestricted reserves on 31 December 2022 were £19.2 million (2021: £14.4 million). This includes funds designated to fund Islamic Relief’s ongoing programmes. The free reserves are £17 million (2021: £8.7 million), representing eight months of operational budget. Total reserves are £110 million (2021: £69m), representing £82 million in restricted funds – the increase is funding for pipeline projects that will continue in 2023, and funds expensed. Endowment funds of £8.4 million (2021: £8.3 million) are invested in our property portfolio that generates a return.
We hold free reserves to:
provide continuity to the people we help by protecting against unforeseen project expenditure due to the inherent risk of the VUCA (volatile, uncertain, complex and ambiguous) environment in which we operate, to manage economic and foreign exchange volatility as well as income fluctuations.
provide working capital and manage the seasonality of income generation for the effective running of the charity.
enable Islamic Relief to invest in unforeseen funding and growth opportunities for the benefit of our stakeholders and the vulnerable people we serve, subject to the Board of Trustees’ approval.
The Board of Trustees and the Audit and Finance Committee annually review the reserves policy and the target for unrestricted reserves. The Board of Trustees and Audit and Finance Committee reviews the effectiveness of holding these funds by considering liquidity, security and investment risk.
The Board considers the level of free reserves remains an appropriate target considering Islamic Relief’s size, operations and the financial risks to which it is exposed. The Board has reviewed the Reserves Policy post-financial year-end and considered future activities.
Going concern
The Board of Trustees has assessed Islamic Relief Worldwide’s ability to continue as a going concern. The trustees have considered numerous factors when concluding whether the organisation continues to be a going concern and have also considered the key risks, including the ongoing cost of delivery, rising costs and inflation, and the cost-ofliving crisis that could negatively impact the charity.
The critical risk in our financial model is a fall in income and our ability to deliver charitable activities, leading to the lower recovery of core costs. We are mitigating the risk of lower core costs through a revised business model agreed upon with Islamic Relief family members and are identifying forward-thinking initiatives to mitigate further. The Islamic Relief Family Council has set up a multi-stakeholder Business Model Committee, which oversees the business model.
Our unrestricted core income is funded by fundraising and income-generation activities. Despite the ongoing geo-political and economic impacts, our financial results continue to see signs of generous giving by our donors, who continue to support generously across the UK, North America and Europe. This has led to a further record £234 million raised in total income.
Our pipeline for 2023 projects is already secured. It continues to be very healthy, with an influx of £68 million of cash into our bank accounts in December 2022 for 2023, enabling us to plan for the coming year with more certainty. We have repaid our bank loan, and no bank borrowings are required. Scenario planning has taken place, and worst-case scenarios have been considered, with a headroom reduction of 40 per cent factored in.
We have begun our new 10-year strategy, supported by a financial plan and our work to positively impact climate change and NetZero initiatives.
After considering these factors, the Board of Trustees has concluded that the charity remains a robust going concern and has adequate resources to continue delivering for the foreseeable future. The Board has therefore prepared the financial statements on a going concern basis.
Dr Ihab M. H. Saad
Chair of the Board of Trustees,
Islamic Relief Worldwide
31 May 2023