Is he regarded as sponsoring an orphan if he simply pays money to a charity that sponsors orphans?
Firstly: sponsoring an orphan is one of the righteous deeds which Islam encourages us to do and tells us are among the means of entering Paradise, and indeed of attaining the highest positions therein. There is sufficient encouragement for the believer to do these actions in the words of the Prophet (peace and blessings of Allaah be upon him): “I and the one who sponsors an orphan will be in Paradise like these two” – and he gestured with his forefinger and middle finger, holding them apart. Al-Bukhaari, 5304.
Ibn Battaal (may Allaah have mercy on him) said: “It is a duty for the one who hears this hadeeth to act upon it, so that he will be with the Prophet (peace and blessings of Allaah be upon him) in Paradise.” (Quoted by Ibn Hajar in Fath al-Baari, 10/436.
Secondly: spending money on an orphan is something that is encouraged in particular. The Prophet (peace and blessings of Allaah be upon him) said: “This money is fresh and sweet. Blessed is the wealth of the Muslim, from which he gives to the poor, the orphan and the wayfarer” or as the Prophet (peace and blessings of Allaah be upon him) said it. Narrated by al-Bukhaari, 1465; Muslim, 1052.
But this spending is not the be-all and end-all of the sponsorship that is encouraged in Islam, for which a person is promised a high status in Paradise, rather it is just one kind and one aspect of sponsorship and kind treatment of the orphan until he grows up. Rather sponsorship in the complete sense means looking after him, guiding him with regard to his religious and worldly affairs, educating him, and treating him kindly until he is no longer regarded as an orphan (i.e., when he reaches adulthood). Ibn al-Atheer said: “The sponsor is the one who takes care of the orphan’s affairs and brings him up.” Al-Nihaayah, 4/192. In Riyaadh al-Saaliheen, al-Nawawi (may Allaah have mercy on him) defined the sponsor of an orphan as being the one who takes care of his affairs. The commentator on this book said: (that means) his religious and worldly affairs, by spending on him, clothing him, etc. Daleel al-Faaliheen, 3/103. Shaykh Ibn ‘Uthaymeen (may Allaah have mercy on him) said: Sponsoring an orphan means taking care of his religious and worldly interests, teaching him and guiding him etc with regard to religious matters, and taking care of his food, drink, shelter and other worldly concerns. Sharh Riyaadh al-Saaliheen, 5/113.
The religious and educational affairs of the orphan both come under the heading of sponsorship; it is not only the matter of material, worldly interests. Indeed, these (religious and educational interests) are more important, just as a father’s educating and disciplining his children is more important than his simply spending on them. Shaykh Ibn Sa’di said – concerning a man educating his children: When you feed them, clothe them and train them physically, you are fulfilling their rights for which you will be rewarded; by the same token, when you train them spiritually and impart beneficial knowledge to them, and guide them towards good morals and manners and warn them against the opposite, you are also fulfilling rights which are even more important.” Bahjat Quloob al-Abraar, 128.
This is the true sponsorship of an orphan, bringing him up like one's own son, which is not limited to feeling compassion for him and being kind to him, and teaching him and disciplining him and educating him in the best manner. Fayd al-Qadeer by al-Manaawi, 1/108.
Al-‘Iraaqi (may Allaah have mercy on him) wondered whether this was the reason why the one who sponsors an orphan would be close to the Prophet (peace and blessings of Allaah be upon him) in Paradise. He said: “Perhaps the reason why the one who sponsors an orphan will be so close to the Prophet (peace and blessings of Allaah be upon him) in Paradise is because a Prophet (peace and blessings of Allaah be upon him) is usually sent to people who do not know about Allaah and the true religion, so a Prophet is like a sponsor, teacher and guide for them, and the one who sponsors an orphan is taking care of one who does not understand his religion, or even his worldly affairs, so he guides him, teaches him and disciplines him. (Quoted by al-Haafiz in al-Fath, 10/437.
Moreover, limiting it to spending, especially when the orphan is far away, deprives the sponsor of one of the means of softening the heart and meeting needs, which is embracing the orphan and treating him kindly. The Prophet (peace and blessings of Allaah be upon him) said: “Bring the orphan close to you, wipe his head and give him some of your food, for that will soften your heart and fulfil your need.” Al-Silsilah al-Saheehah, 854.
The point is that the best way of sponsoring an orphan is for a man to bring him in with his own children, and raise him as he raises them, and spend on him as he spends on them.
If the sponsor cannot afford to spend on the orphan, or if the orphan has enough wealth to be independent of means, and a man brings him in with his own children, this is good, even if it is lower in status than the first suggestion. This is one of the greatest types of sponsorship, and serves one of its greatest aims. Al-Nawawi (may Allaah have mercy on him) said: “This virtue is attained by the one who sponsors an orphan from his own wealth or from the orphan’s wealth under legitimate shar’i guardianship. Quoted by Ibn ‘Alaan in Daleel al-Faaliheen, 3/104.
If a man has wealth from which he can spend on an orphan, as in the case of the person asking this question, then he is doing something very good in sha Allah, and it will be sufficient to protect him from the fitnah (trial, temptation) of wealth and stinginess. And it will fulfill the condition stipulated by the Prophet (peace and blessings of Allaah be upon him): “… from which he gives to the poor, the orphan and the wayfarer.” But this is not sponsorship in the fullest sense, for which a person is promised closeness to the Prophet (peace and blessings of Allaah be upon him) in Paradise. But if he has a pure and sincere intention he may achieve thereby that which he could not attain by his deeds. It was narrated from Anas (may Allaah be pleased with him) that the Prophet (peace and blessings of Allaah be upon him) was on a campaign and he said: “There are people whom we have left behind in Madeenah, but we did not travel though any mountain pass or valley but they were with us. They were detained by some excuse.” Narrated by al-Bukhaari, 2839.