FINANCIAL REVIEW

Islamic Relief presents the financial review for 2023 – a period of positive revenue growth in which we have expanded our charitable activities.

Islamic Relief focuses on key intersecting areas to address in order to meet need. These include humanitarian assistance, community empowerment, healthcare, water provision, caring for children and orphans, and livelihood projects.

With robust financial reserves, the charity is well positioned to continue its support in the coming year, aiming for lasting change for the communities and individuals we support.

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 subsidiary (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, our income increased by 17 per cent to £274 million in 2023 (£234 million in 2022).

One key driver behind Islamic Relief’s success has been the collaboration of the Islamic Relief global family. By collaborating synergistically, the family has achieved a more significant impact and driven positive change more effectively. The intricate coordination and cooperation among family members has allowed them to pool resources, leverage collective expertise, and optimise operations to enhance Islamic Relief’s reach and scale of impact.

Funding from Islamic Relief member offices remained the most significant stream of income in 2023, at £163 million (2022: £145 million). This increase has enabled Islamic Relief to allocate resources further and amplify our efforts to address pressing humanitarian and development issues to support the people we serve, ultimately creating a positive and sustainable impact.

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 more comprehensive 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, as well as the efficiency and effectiveness with which we honour the donations entrusted to us.

Charitable activities:

Islamic Relief’s operations and outreach have demonstrated a commendable upward trend. In alignment with our purpose, Islamic Relief has significantly increased our charitable activities in various domains. The expenditure dedicated to humanitarian aid, community empowerment, healthcare provision, water projects, caring for children and orphans, and livelihood initiatives has risen from £190 million to £230 million. This substantial increase showcases our commitment to addressing critical social issues and making a positive difference in the lives of those in need.

Total charitable expenditure increased to £213 million from £174 million in 2022, which has allowed us to reach 16.8 million vulnerable people globally.
Islamic Relief has made substantial progress in supporting our chosen themes. We have extended our support and relief efforts to affected regions through humanitarian assistance, helping communities recover from natural disasters, conflicts, and other crises. Our most significant spend in 2023 was on humanitarian programmes, with £133 million (2022: £113 million) spent responding to many prolonged and complex humanitarian disasters, including in Gaza, Sudan, Türkiye, Syria and Yemen.

Beyond humanitarian response, empowering communities has been a central focus, as Islamic Relief recognises the importance of supporting individuals and groups to uplift themselves and create sustainable change. By investing in health projects, we have worked towards improving access to quality healthcare services, contributing to enhanced wellbeing within vulnerable populations. Water provision, caring for children and orphans, and livelihood projects have also received significant attention, reaffirming our commitment to holistic development and addressing multidimensional challenges faced by those we serve.

A flagship programme continues to be our ‘Orphan Sponsorship Programme,’ with Islamic Relief investing £35 million (2022: £33 million) to achieve long-term and short-term benefits for vulnerable families.

Other long-term programmes aimed at achieving social change include spending £21 million (2022: £12 million) to give communities access to healthcare and water and £5 million (2022: £4 million) on supporting education.

Sustainable livelihoods programming builds financial inclusion in low-income countries, helping poorer people become financially self-sufficient. In 2023, our microfinance programmes supported 43,500 impoverished people, with £10 million (2022: £10 million) invested in them.

As always, the expenditures detailed above have been in accordance with our donors’ wishes per the campaigns they have supported. Further details are available in notes 9 and 10.

TIC International Ltd is a wholly owned subsidiary specialising in clothes recycling and managing a network of charity shops.
TIC’s primary objective is to generate income for Islamic Relief to support our programmes and journey towards Net-Zero. TIC also provides an essential environmental service by recycling clothing that may otherwise end up in landfills and harm the environment. The company has also played a crucial role in the Midlands, UK, by employing local communities and supporting economic progress.

Business activities and environmental impact

TIC’s core business activities involve collecting, sorting, and recycling unwanted clothing. In 2023, TIC successfully converted 2,362 tonnes of unwanted clothing (compared to 1,931 tonnes in 2022) into income through various channels. High-quality clothing was resold through Islamic Relief shops, directly contributing to our revenue streams, while low-quality clothing was recycled, generating profits to fund charitable initiatives. Through these activities, TIC has created economic value and significantly contributed to environmental sustainability by diverting clothing from landfills.

Financial performance

TIC’s financial performance has remained steady throughout the reporting period. The company’s revenue from clothes recycling and charity shop operations has supported Islamic Relief’s programmes. TIC-audited financial statements provide a comprehensive overview of the company’s financial position and performance, highlighting its commitment to financial transparency and accountability. In 2023, 2,362 tonnes of unwanted clothing (2022: 1,931 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 £25,000 (2022: £242,000).

TIC’s strong financial performance reflects its dedication to its mission and emphasises its commitment to creating a positive impact socially, economically, and environmentally.

We established the International Waqf Fund (IWF) to support the long-term financial sustainability of Islamic Relief investments through waqf contributions. The fund aims to generate social impact returns, reducing dependency on donations and grants by utilising the annual yield to fund programming. The IWF operates to achieve ongoing impact year after year into perpetuity.

Waqf contributions and fund size:

IWF seeks to raise contributions to its waqf fund based on the donors’ goals. These contributions are purposefully managed to ensure the fund’s ongoing impact. The fund’s size has increased steadily, reaching £2.3 million in 2023 compared to £1.7 million in 2022.

This growth reflects the continuous inflow of waqf donations and investment returns, further enhancing the fund’s resources to support impactful programs. Due to ongoing waqf donations and investment returns, the endowment fund grew to £8.6 million (2022: £8.4 million).

Financial performance:

IWF aims to achieve sustainable and positive financial outcomes that align with its mission and objectives through prudent financial management and robust investment strategies.

Long-term sustainability:

IWF operates on the principle of long-term sustainability and perpetuity. By leveraging waqf donations and effective investment management, the fund aims to generate continuous income streams to support Islamic Relief’s programming. This approach reduces dependency on external funding sources and grants, ensuring a more stable and sustainable financial base for the organisation’s charitable activities.

IWF is committed to achieving long-term financial sustainability and generating social impact returns. The fund’s growth and prudent management of waqf contributions demonstrate its dedication to ongoing impact year after year. The IWF Board of Trustees focuses on robust risk management and effective administration, ensuring investments align with the fund’s purpose and objectives. As the fund grows, it contributes to the long-term sustainability of Islamic Relief’s programming, reducing reliance on external funding sources and fostering a more self-sufficient approach to creating positive change.

Islamic Relief Worldwide continues to hold endowments invested in UK property. As specified by the donors, the returns from these investments are used for our humanitarian and development social impact programmes. Due to ongoing waqf donations and investment returns, the endowment fund grew to £8.6 million in 2023. (2022: £8.4 million).

One of the notable strengths of Islamic Relief is our healthy financial reserves. These reserves serve as a safeguard, allowing us to continue our support in the upcoming year and ensuring long-term sustainability. With prudent financial planning and management, Islamic Relief has created a solid foundation to weather uncertainties and fulfil our mission of facilitating lasting change. Islamic Relief reported a surplus of £40 million in 2023 (2022: £40 million). This is made up of unrestricted reserves of £23.1 million (2022: £4.9 million), restricted funds of £16.5 million (2022: £35.9 million), and an endowment fund of £0.2 million (2022: £0.5 million).

Restricted reserves include funds secured for ongoing programmes into 2024 and beyond and those secured for the 2024 pipeline of programmes.

Unrestricted funds include income generated from our general income generation activities through general fundraising activities and income earned by our trading subsidiary.. This funds Islamic Relief’s operating and programme support costs.

Islamic Relief’s reserved funds are there to help ensure that we can keep our vital programmes running year round. The funds are carefully managed and overseen by our Audit and Finance Committee and our Board of Trustees. They are held in our account for a specific period of time, in line with any project guidelines and then spent accordingly. Reserve funds are spent continuously, in line with the project guidelines and are replenished each year. They’re essential for our organisation to keep our programmes running smoothly and without disruption.

As with all charities our external reporting is done on an annual basis, which means that our accounts may show funds coming into the account towards the end of this period, which are then spent in the next period, once the project’s due diligence has been completed. Guidance from the Charity Commission recommends that all charities secure reserve funds to ensure that donors have confidence in the charity and its ability to carry out its operations effectively and without disruption.

Reserve funds are not held in perpetuity and are always spent in line with our Reserves Policy and any project stipulations.

Islamic Relief’s unrestricted reserves on 31 December 2023 were £42.4 million (2022: £19.2 million). This includes funds designated to fund Islamic Relief’s ongoing programmes. The free reserves are £18 million (2022: £17 million), representing 12 months of operational budget. Total reserves are £150 million (2022: £110m), representing £99 million in restricted funds – the increase is funding for pipeline projects that will continue in 2023, and funds expensed. Endowment funds of £8.6 million (2022: £8.4 million) are invested in our property portfolio, which 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 volatile, uncertain, complex and ambiguous (VUCA) environments in which we operate and 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 to benefit 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. They also review the effectiveness of holding these funds by considering liquidity, security, and investment risk.

The Board considers the level of free reserves to remain an appropriate target, considering Islamic Relief’s size, operations, and the financial risks it is exposed to. The Board has reviewed the Reserves Policy post-financial year-end and considered future activities.

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 programme delivery, rising costs and inflation, and the cost-of-living 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 further reduce risk. 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 geopolitical and economic impacts, our financial results show 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 £274 million raised in total income.

Our pipeline for 2024 projects is already secured. It continues to be very healthy, with an influx of £68 million of cash into our bank accounts in December 2023, enabling us to plan for the coming year with more certainty. We have no bank borrowings or loans. Scenario planning has taken place, and worst-case scenarios have been considered, with a headroom reduction of 40 per cent factored in.

Our 10-year strategy is supported by a financial plan and our work to impact climate change and Net-Zero initiatives positively.

After considering these factors, the Board of Trustees has concluded that the charity remains a robust going concern with adequate resources to continue delivering for the foreseeable future. Therefore, the Board has prepared the financial statements on a going concern basis.

In conclusion, the year 2023 has been exceptional for Islamic Relief, experiencing remarkable growth in revenue and expanding our charitable activities across multiple thematic areas. Through our increased financial resources, Islamic Relief has extended our impact and supported communities in dire need.

The organisation’s health reserves provide a robust basis to continue our vital humanitarian work in the coming year, aiming for sustainable and lasting change across diverse communities.