120401 issues on corporate waqf
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issues on corporate waqfTRANSCRIPT
ISSUES ON CORPORATE WAQF
Contents
INTRODUCTION.........................................................................................................................................3
Introduction to Waqf..................................................................................................................................4
Waqf as part of Islamic Voluntary Sector (Tohirin, 2010)....................................................................7
Corporate Waqf..........................................................................................................................................8
ISSUES ON CORPORATE WAQF MODELS..........................................................................................11
Awareness on Waqf: How to Motivate People or Organization to Contribute in Waqf.........................11
Proposed Solution to Motivate Participation in Waqf.........................................................................13
Mutawalli.................................................................................................................................................14
Subject Matter of Waqf............................................................................................................................17
Distribution of Waqf................................................................................................................................19
Proposed Solution................................................................................................................................21
CONCLUSION............................................................................................................................................23
Bibliography................................................................................................................................................26
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INTRODUCTION
The nature of the economic system of Islam is determined by following goals and values
(Chapra, 2008):
1. Economic well-being within the framework of the moral norms of Islam;
2. Universal brotherhood and justice;
3. Equitable distribution of income; and
4. Freedom of the individual within the context of social welfare.
All economic activities have to be designed and structured to meet above goals. Those should
also lead society in formulate any types of transactions and organizations to enable them to
operate their economic activities.
The first goal to achieve economic well-being gives simultaneous stress on both the material and
the spiritual aspects of life that make Islamic economy unique from other system.
As to second goal, Islam aims at establishing a social order where all individuals are united by
bonds of brotherhood and affection like members of one single family. This brotherhood is
universal and not parochial or geographical divided. A natural corollary of the concept of
universal brotherhood is mutual co-operation and help, which should be able to be translated into
operation and institution of Islamic economy.
Meanwhile justice should encompass both social justice and economic justice. The essence of
social justice is equal treatment to all without discrimination by the rich and the poor, the high
and the low or the white and black. Economic justice happens when everyone gets his due for
his contribution to society or to the social product and that there is no exploitation of one
individual by another.
The Islamic program for equitable distribution income consists of three parts:
a. Providing gainful employment
b. The payment of zakat for redistributing income from the rich to the poor
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c. Division of the estate of a deceased person in accordance with a given formula.
With regard to fourth goal, to set into a proper perspective the rights of the individual vis-à-vis
other individuals and society, the jurists have agreed upon the following basic principles:
1. The larger interest of society takes precedence over the interest of the individual.
2. Relieving hardship takes precedence over promoting benefit.
3. A bigger loss cannot be inflicted to relieve a smaller loss or a bigger benefit cannot be
sacrificed for a smaller one. Conversely, a smaller harm can be inflicted to avoid a
bigger harm or a smaller benefit can be sacrificed for a larger benefit.
This article discusses introducing and developing corporate waqf concept to be one of
mainstream tools in the effort to achieve Islamic economics goals and values as described above
by Chapra.
Introduction to Waqf
The term waqf literally means to prevent or restrain. In legal terms it means to protect a thing or
to prevent it from becoming the property of a third person. Waqf could be defined as the
permanent dedication by a Muslim of the corpus of a valuable property to the ownership of Allah
SWT with a declaration of dedicating its usufruct perpetually for religious, charitable and or
pious purposes as recognized by Shariah (Saleem, 2012).
Waqf is inalienable or made in perpetuity. The corpus of the property made the subject of waqf
cannot be sold, mortgaged, donated or alienated even by inheritance.
Waqf is considered a juristic person. It is represented by the administrator (mutawalli or nazir)
who is merely a manager of a waqf, but not the owner. The mutawalli represents the waqf both
as a plaintiff and as a defendant. His duty is to do everything necessary and proper for the
protection of the waqf property and for its administration. A mutawalli is appointed to carry on
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management of waqf for the benefit of those in whose favour the waqf has been created. He is
responsible for the distribution of proceeds of the waqf amongst the beneficiaries.
A mutawalli may be appointed by the founder of the waqf (waqif) or by the court. The waqif
may authorize the mutawalli and his successors to take a fixed remuneration out of the income of
the waqf property. If no remuneration has been fixed in the waqf deed, the court may on the
application of the mutawalli fix his remuneration and authorizes him to realize the same out of
the income of the waqf property.
The operation of waqf can be described in graph below:
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o Normally limited to charitable/pious activities
Registration/Supervision/Law enforcement/Dispute Resolution
Waqf Deed
Court
o Mainly immovable propertyo Individual
o Individual
o Children/familyo Religious bodyo Philanthropic e.q
poor, orphano Public Services
Benefit
Return
Activities
RemunerationPreserving/
Managing
Appointment/delegation
BeneficiariesWaqif
Mutawalli
Waqf
Sources: proposed by this article authors
The institution of Waqf has played an important role throughout Islamic history, from the time of
the Holy Prophet (pbuh) to the beginning of the 19th century (Mohsen). Although this institution
survived before the coming of Islam, yet, Islam was the first religion to build up its legal
framework and to legalize and regulate it. Thus, it became one of the devices created by the
Muslims to fulfill many services that are today financed by the state or the government, such as
education, health care, national security, transportation facilities, the basic infrastructure, food,
shelter and jobs for many communities. Its role was like a network, which penetrated many
service sectors whenever it found a need to promote that sector.
A.M. Sadeq (2005) stated that Waqf is considered an important institution in an
Islamic Economic System. It plays an important and precious role along the
Islamic history, especially in time of Othoman Khalifate. There were various
institutions, organizations, and even some infrastructure facilities which were
built by use of proceeds from Waqf properties.
Nowadays, the problem that we are facing now, all over the vast Islamic world, from the Atlantic
to the Pacific, magnificent works of architecture as well as myriad of services vitally important
for the society have been financed and maintained for centuries through this system. The
resilience of the system is, indeed, remarkable. It has been shown that many awqaf had survived
for considerably longer than half a millennium and some even for more than a millennium
(Crecelius).
Despite these overwhelming achievements, the history of awqaf is a turbulent one. For centuries
the fate of this institution was closely linked to the fates of the states under which they
functioned. Consequently, they experienced dramatic ups and downs. The period of
establishment and growth was often followed by one of decline and neglect and with a new state
emerging, a renewal and prosperity once against prevailed. Nowhere in this long history of
fluctuations, however, did the awqaf experience the universal and deliberate destruction that was
inflicted upon them during the 19th and 20th centuries, a fact which pinpoints, of course, to
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western imperialism as the culprit. Yet, the greatest destruction took place not in a region
colonized by the great powers, but in Turkey, an Islamic country which was not colonized
(Cizakca, 2011).
Waqf as part of Islamic Voluntary Sector (Tohirin, 2010)
Islamic concept on production instruct every single individual to be able to fulfill his/her needs
in this world by encouraging him/her to work or to produce something which gives benefit to
him/herself or and others, so that he/she might be able to achieve his/her self-fulfilling ability
and not dependent on others. Islamic Teachings have a clear character in this regards, that there
is an injunction that man should be able to manage their wealth and economic resources
endowed by Allah SWT in a just manner to facilitate the improvement of all human welfare. The
wealth and economic resources should not circulate only among a few people. They should be
distributed equitably among all people so that they will enable people to achieve a prosperous
society.
“……In order that wealth or property (merely) may not make a circuit between the
wealthy among you…….” (Qur’an 59:7)
This implies one important question on how to distribute the wealth and economic resources in a
just and more equitable way. In this respect, Islamic Economic System recognizes two
mechanisms in the distribution of income and wealth (AHM Sadeq, 2005), first, functional
distribution of income and wealth and second income (re)distribution through transfer payment
institutions both obligatory and voluntary. The first mechanism conducts the distribution through
market mechanism, while the second one implements the distribution through various
instruments such as Zakah, Infaq, Shadaqah, and Waqf.
The importance of voluntary activities can be understood under the context that Islam is
significantly stressing altruistic aspect in the social life. This is implied from the existence of two
types of obligation attached to every Moslem individual, first is obligation for each individual
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which is irreplaceable or non-transferable, (fardlu ‘ain). Second is communal obligation (fardlu
kifayah). Voluntary activities are conducted by Muslim individuals as a reflection of altruism
characteristic of human being in Islam. These activities might provide many benefits for the
community in the form of public services be made available, such as educational services,
orphanage shelters, medical clinic facilities and so on. These kinds of services basically should
have been provided by government at the basic level, however, there are always plenty of rooms
for members of community to provide similar community’s needs due to the limitation of
government budget to cover the whole package of such public services.
At this point, voluntary sector’s existence being felt very important by community members,
because it helps improving the welfare of the community by providing public services deeply
needed by them. The activities in this sector are highly motivated by Islamic injunctions under
communal obligation for each Muslim individual. As it is believed by Muslim personality, that
the best person would be those who capable of providing benefits and helps to others as much as
possible. This kind of attitude will drive positively to the community welfare.
Corporate Waqf
Corporate waqf, on the other hand, is a creative and innovative act to use the waqf concept and
apply it to achieve business and corporate objectives. It involves applying modern corporation
mechanism and efficiency to optimize achievement of objectives of waqf (Hashim, 2009).
Just like conventional waqf, corporate waqf can be established through voluntary and pious acts
of Islamic charity, generosity and selflessness involving the endowment of one's property or
asset for the benefit of chosen beneficiaries and the long-term interest of the larger community. It
can also be established by governments transferring their corporate interests, for example, in
government linked companies (GLCs), to a corporate waqf body established for that purpose.
A conventional waqf is more often associated with vesting in waqf the physical assets and
property such as land, buildings, physical infrastructures, public utilities and such. In practice,
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conventional waqf may also involve the waqf of cash, shares, and equity, though these are less
prominent.
Corporate waqf, however, goes beyond the waqf entity being just institutional owners having
passive possession over shares and equity, and using the earnings or dividend payouts from these
shares and equity for the good of the intended beneficiaries. The corporate waqf concept
involves an institutional entity - that is, a waqf corporation - by giving it full Mutawwali status
(or official management-trustee status) by the relevant Islamic religious authorities.
The corporate waqf also has to have the ability to autonomously act (within the provision of the
trust or waqf deed) and exercise discretionary managerial powers. In practice, however, it is wise
to subject these discretionary powers to a corporate decision-making structure. Such a structure
can be adapted from a managerial and decision-making framework normally adopted and
practised by business corporations.
In any event, an effective corporate waqf must successfully move towards a position of corporate
control of its investments, if not across the board, at least in selected, key strategic businesses.
Such controlling ownership or influential voting power will grant the waqf corporation real,
active control over all assets – tangible or intangible - as well as the use of these assets. In this
manner, it can influence the impact created from business to ensure that maximum benefit will
accrue to its targeted beneficiaries as defined by the trust deeds of the waqf. This adapted
version can include, for example, the appointment of CEOs, who are made answerable to a
supervising board of directors.
Following graph explain the concept of corporate waqf.
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Source: proposed by this article authors.
As can be seen on the above graph, corporate waqf differs from conventional waqf in any of
following ways:
1. Under conventional waqf, waqif is mostly individual. In corporate waqf, not only
individual can found the waqf, private corporation or government link companies can be
part of the waqif.
2. The subject matter of conventional waqf normally immovable property. Under corporate
waqf, subject matter can be extended to the other types of property such as cash, equity
and financial asset.
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• Property
Sustainable businesses & corporate activities
Investment
• Financial Asset
• Cash
• Equity
Waqf
Waqif
Individual
Private Corporation
GovernmentGLCs
Registration/Supervision/Law enforcement/Dispute Resolution
Waqf Deed
Court / Regulatory Framework /Shariah Compliance Framework
o Children/familyo Religious bodyo Philanthropic e.g.
poor, orphano Public Services e.g.
transportation, healthcare, education, utilities
o etc
Benefit
Return
Wealth creation/Value add initiative
RemunerationPreserving/
Managing
Appointment/delegation
Beneficiaries
CorporateMutawalli
3. Mutawalli in conventional waqf is mainly individual appointed by the waqif or the court.
Under corporate waqf, mutawalli can be a company.
4. In terms of activites, conventional waqf usually limit itself within charitable or pious
activities or limited businesses. On the other hand, corporate waqf with resources in its
disposal may spread its wing to venture to sustainable business and corporate activities.
5. With effective and efficient corporate-style of management, waqf may have better chance
to produce high and sustainable return to beneficiaries.
In short, corporate waqf is an effort to revive waqf role by inserting the efficiency of corporate
mechanism.
ISSUES ON CORPORATE WAQF MODELS
Issues may arise in reviving waqf as mainstream part of Islamic economy through introduction and development of corporate waqf can be viewed from following perspectives:
1) Awareness on Waqf
2) Management/Mutawalli
3) Subject Matter/Mauquf
4) Distribution
Awareness on Waqf: How to Motivate People or Organization to Contribute in Waqf
Community participation is a key part of the philosophy of many institutions especially
businesses. Charitable donations in particular by way of Waqf are one way that individual,
companies, owners and employees give back. Fundraising brings workers together in support of
a common cause and helps raise a business' community profile. Knowing what motivates people
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and businesses (institution) to contribute in voluntary and charitable activities including Waqf
will help us to set our policy in order to ensure that this idea is successful.
Based on several studies conducted, there are many reasons why people or organization
contributes in charitable activities. For instance, it can be further deliberated as follows (Kooser):
Personal Motivations
A lot of people donate to organizations where they have personal ties. For example,
someone with a family member afflicted by cancer may get involved with a charity such
as Cancer Society and others. Further survey by the Mutawalli can be conducted to
classify which sector of charities they support. These opportunities can be used to
identify such sectors or types of beneficiaries where the people or organization will then
support this Waqf scheme.
Building Morale
Employees of the companies will feel good when they know that their employers care
about giving back to the community especially by way of doing Waqf. Holding an office
charity performance is way to build companionship among workers and boost morale. Set
fundraising goals and turn it into a friendly competition. Matching funds are another way
to get involved with employee charities and allows employees to know that the
organization is care about their lives outside of the office.
Community Involvement
A business is only as strong as the community that surrounds and supports it. Healthy
communities feed into healthy businesses. Your monetary donations can go to causes that
promote better health, fund medical research, stock food banks or support organizations
that fight poverty. Investing in charities is like making an investment towards a better
future for employees and for the business itself. Therefore, today’s Corporate Waqf
should have a very specific target in term of its distribution towards beneficiaries and
charitable activities in order to motivate community involvement.
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Marketing
Promoting the business is a positive side effect of being active in community
organizations and charitable giving especially in Corporate Waqf. Sponsoring events with
banners, t-shirts or other giveaways gets the business name out in the community. In
addition, working with a non-profit allows the organization to promote itself through
press releases or postings on their website. The organization therefore, can consider
focusing part of their marketing budget into charitable giving.
Tax Deductions
The Income Tax Department allows individual and businesses to deduct certain
charitable contributions. These monetary donations need to be made to a registered non-
profit organization. The authorities e.g. Majlis Agama have to find a way to ensure that
the Corporate Waqf’s organizer is registered as one of the institutions that will eligible
for this tax deduction incentive.
Proposed Solution to Motivate Participation in Waqf
Moving forward, in order to solve this awareness issues on Waqf especially Corporate Waqf, we
are suggesting the following:
1. To develop a clear, concise, compelling request for the objectives of introducing this
Corporate Waqf. People and organization will contribute because they believe in the
mission of the institution and also trust that the Waqf Institution to be good stewards of
their gift. It can be done via connecting them with a clearly crafted letter, email, website
or event.
2. To create apparent what is in it for the contribution. Tell them what they will get back
from donating money to this institution. For instance, it could be the satisfaction of
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knowing that a child in charity house will be fed and clothed for a month. It could be that
they will be recognized in the newsletter, with a plaque, or at an event for their gift. It
could be that they will receive some item in return.
3. To give details how the contributors will be able to track what happens to the money they
give to the Waqf institution. Donors want to make the most of their charitable dollars and
need to know that the Mutawalli is transparent, accountable and honest. They especially
want to make sure that the money they give goes to the purpose for which they
designated it. Besides, the law safe-guards the donor's right to designate how the
Mutawalli will use their gift.
4. To thank the contributors within reasonable time frame for example, of receiving their
contribution. When the Mutawalli operates its program of donor relations according to a
regular set of procedures and policies, donors become more motivated to give subsequent
gifts. Many donors test an institution's ‘customer service’ with a very small first gift, so
that they can determine how the institution treats and values its donors. Then, if they feel
embraced, they may become more seriously committed and motivated to donate more.
5. The present corporate Mutawalli have to become more creative such as active in social
network online communities like Twitter, FaceBook and etc. Individual like younger
people tend to respond better to online giving campaigns than to direct mail appeals.
While the first online gift may be small and motivated by impulse and mercy if the
institution services these smaller online donors well, thanking them genuinely, and
providing them with opportunities to join your conversation, you are likely to make
friends. As Hal Colston of Good News Garage in Burlington, Vermont, is fond of saying:
"Friend-raise and the funds will follow." (Barker)
Mutawalli
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One of the key elements in our corporate waqf is Mutawalli. Monzer Kahf (Kahf, 2011) used it
as a waqf manager and his/her responsibility is to administer that waqf property to the best
interest of the beneficiaries and then to maximize the revenues of the beneficiaries. Based on this
definition, a mutawalli will monitor a waqf property in a proper way to ensure the continuity of
the existence of the assets and the beneficiaries will continue gain the ‘manfaah’ of the said
property. The second part of the definition given by Monzer Kahf catered for the latest corporate
waqf concept in which a mutawalli is not only a waqf keeper but he is also responsible to act in a
corporate style in order to increase the value of the assets and to enhance the cash inflow of the
institution and thus will maximize the revenues of the beneficiaries.
In Islam, the function and position of Mutawallis are clearly defined. His role is as a manager to
manage the waqf properties is crystal clear and it is totally different compared to the other
religion’s trustee concept which the role and position are not clear.
While these individuals were the ones who actually preserved the Islamic architectural heritage
through the centuries and enabled many waqf to survive, it was also they who ended up being
accused ruthlessly and held responsible for the demise of the system (Cizakca, 2011). In another
words, Mutawallis are the nucleus in the waqf system, the success of the system is partly
contributed by this center. However, the opponent of the waqf system would propagate that the
failure of the system was due to the failure of the Mutawallis. Since then, the mutawallis can be
considered as a captain of a ship or a pilot of a flight which the destination of a journey will
safely arrive. Hiccups in a journey will first reflecting a pilot skills even it is totally caused by
the weather condition.
In Malaysia, Majlis is a sole trustee or a mutawalli in any waqf arrangement. Majlis refers to the
body constituted under the provisions of the Islamic Administrative legislation of each state 1 as
passed by their respective Legislative Assemblies and for the Federal Territories of Kuala
Lumpur , Labuan and Putrajaya by the Parliament (Mahamood, 2011). Majlis is an authority
body in every state assigned by the Rulers of the states (called as Sultan) respectively to govern a
religious related matters. Since waqf is under religious matter of the states, therefore, for the
1 See for example Section 4, Administration of Islamic Religious Affairs (Terengganu) Enactment 1422H/2001M (No. 2 of 2001) and Section 4, Administration of the Religion of Islam (State of Malacca) (No. 7 of 2002)
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purpose of standardization and uniformity of the operation, the role of trustee or Mutawallis is
totally parked under the custodian of the Majlis.
Based on earlier identify function for mutawalli which is relatively related to the business
function, therefore a mutawalli needs to have a creative and business skill. Generally, a religious
body likes Majlis consists of parties who have a meticulous understanding of Islamic religious
but lack in business and administrative soft skill. It is directly reflected into the performance of
the waqf assets. It is proven that the continuity and permanence of the waqf assets are being
materialized but not in growing and developing the said assets in order to boost up the value and
increase the ‘manfaah’ and thus distributable to the beneficiaries. This trigger a point which the
right of the mutawalli should not be restricted to the Majlis only but need to be closely monitored
by them.
Under the State of Selangor, Part IVof the Administration of Muslim Law Enactment, 1952, No.
3 of 1952 (Mahamood, 2011) stated that Majlis has a power to appoint officers and servants in
helping them in properly manage and administer these assets. The same provision has being
made available in Wakaf (Negeri Sembilan) Enactment 2005 under Part VII : Management of
Wakaf, item 34 : Majlis shall ensure person or agent performs obligations. Based on these
provisions, it shows that the authority has identified the above problem and proposed this
mechanism as a tool to curb it.
The writer would propose within the restriction of Majlis as a sole trustee, a list of requirements
which will guide the selection of the agents. These requirements will work as a guideline toward
corporate identity which later will translate in management quality and appreciation of waqf
assets value.
The suggested requirements for a competent person to be a corporate mutawalli are:-
(a) An expert Muslims with a good business sense and a well understanding of Islamic
principles.
(b) He must be well understanding of local ‘uruf’ and customs, and have a good relation with
local societies and related parties to waqf.
(c) He must possess at least a Bachelor Degree in a business related study.
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(d) He must have a minimum of 10 – 15 years experience in related industry.
The above lists are the basic requirements need to be satisfied and the other corporate
requirements in hiring the top management need to be maintained. Furthermore any additional or
modification to the requirements in order to fit the situation and condition are allowed.
These suggestions are very difficult to be implemented especially in Malaysia since there are a
lot of conflicts between state and federal authorities in term of power sharing, standardization of
laws, the problems of squabble among Islamic jurists and scholars and boundaries problem. In
order to satisfy this problem, a suggestion in standardizing the laws of waqf needs to be
materialized. In order to do this, the same implementation which has being done for Islamic
Banking in Malaysia in almost three decades ago i.e. the establishment of Islamic Banking Act
1983, could be proposed. Waqf Act should be established using the same mechanism and thus a
single act across all the states in Malaysia which will standardize the waqf laws can be happened.
The last part to be discussed under the corporate mutawalli is the governance issue. A waqf
property will be managed by mutawalli who will act as an agent. In this arrangement, the same
agency problem may arise since an agent is a human in nature and will normally act at least not
to jeopardize his own benefit. In order to control this problem, a modified corporate governance 2
concept needs to be implemented in bridging the asymmetry gap between the contributors,
agents and beneficiaries.
A shariah advisory board needs to be appointed in order to ensure, that the operation will be in a
correct lane at all time. This board will review all the reports, procedures and policies of the
operation periodically and will take corrective and preventive action in their efforts. Finally, a
standardized reporting and auditing statements which can cater the Islamic and waqf perspective
need to be established and at the same time the performance of waqf is ‘evaluate-able’.
2 So called ‘modified corporate governance’ means corporate governance which has being
modified in integrating Islamic value and perspective in its guidelines.
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Subject Matter of Waqf
In traditional practice, the subject matter of waqf is in certain form of assets which normally
have a characteristic of immovable property. There is ulama’ who opine that the mauquf needs to
be in immovable property only. At the same time, In Indonesia for example , the constraint in
introducing cash waqf and making it acceptable by Muslim in Indonesia is that they still believe
that waqf must be in the form fixed assets, not in the form of money (Dewi, 2011). This
condition leads to the controversy of a few mauquf types which suitable to be implemented in a
corporate waqf structure.
On the other hand, Murat Cizakca (2011) discussed in thorough about cash waqf which has being
implemented in earlier century. He stated that ‘the earliest origins of the cash waqf may be traced
back to eight century, when Imam Zufar was asked how such waqf should function. He had
replied that the corpus (mauquf) of the waqf should be entrusted to the entrepreneur in the form
of mudarabah (Cizakca, 2011)’. This statement shows that, the mauquf should not be limited to
immovable property only.
The allowable of this mauquf gives a wider prospect for all parties to involve in waqf
endowment. For the contributor, it will attract many parties to create waqf because an initial
capital outlay is not in a big lump sum amount compared to the waqf immovable properties. The
more the parties involve the bigger the size of the fund. As the size of the fund increasing, it will
create a pool of cash which later will create flexibility for the mutawallis to manage this fund but
with the stated and given instruction of the fund contributor. A mutawalli needs to grab this
flexibility and liquidity in generating extra revenue for the benefits of the beneficiaries. This
implementation can be done in a proper way through a corporate structure and business
operation.
A second mauquf for corporate waqf is stock. A founder may purchase or allocate a certain units
of shares for the purpose of waqf. The proceeds or dividends from these shares are directed to the
beneficiaries (after deducting the operational cost).
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Part VI of the Administration of Muslim Law Enactment, 1952, State of Selangor (ammended
23rd December 1999) (Mahamood, 2011) discussed about Istibdal and development of mawquf.
In istibdal, the mauquf is allowable to be replaced by another property provided the replacement
is at the equivalent value. This condition will cater the issues of liquidity when the dealing is
related to the traded stock.
On the other hand, property investments or any business related investment can be used as a
mauquf in generating more inflow for the waqf which later to be channeled to the beneficiaries.
However this situation needs new ijtihad and fatwa which can be based on the doctrine of
permissibility i.e. everything related to muamalah is allowable except those mentioned and
categorized under haram transactions. Hossein Pirasteh and Hojjatoullah Abdolmaleki have
listed down a few principles which known as prohibitive principles which regulate trade and
economic activity to be mentioned as follows (Abdolmaleki, 2011):-
(i) Act of Batil
The first kind of prohibition is doing some act as Batil. According to ayah 29 of Surah
An-Nisa; : “Do not consume your wealth among yourselves unduly (bil-batil) except by
trade and mutual agreement”. Batil is anything which violates the rights of Allah, and
transacting parties as well as third parties
(ii) Illegal Act
The second acts of prohibition are those activities which are declared ‘illegal’ by the
Islamic State.
(iii) Wealth Accumulation by Violating Other’s Rights
The third acts of prohibition are ways of creating wealth that violates the right of third
parties. This covers all negative externalities.
All of the above prohibitive principles can be used as a general guideline in determining the
‘allow-ability’ of the mauquf and thus will open a big floodgate which later will flourish the
evolvement of waqf.
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Distribution of Waqf
The importance of Waqf relies on the form of property being donated and it can be distributed to
the various types of interest or necessities (i.e. public or ummah interests) (Tohirin, 2010).
Meanwhile, in Bangladesh Education Sector recorded merely more than 8,000 educational
institutions established based on Waqf. In addition, 123,000 mosques were built based on Waqf,
most of which have education institutions (A.M. Sadeq, 2005). The following illustrations also
indicate the important roles played by Waqf institutions for the countries (M. Boudjellal, 2005):
1. Three-quarters (3/4) of all Arab land in the former Ottoman Empire belonged to
‘awqaf.
2. In Algeria, under French occupation, Waqf comprised half (1/2) of the lands of the
country in the middle of the nineteenth century.
3. For the same period, Waqf comprised one third (1/3) of the land in Tunisia.
4. In Egypt in 1949, about one eighth (1/8) of the agricultural land belonged to this
category.
Further historical notes stated that in this Waqf sector, there was interesting record on the
proportion of Waqf forms being donated by Muslim Ummah as revealed in a study by Ruth
Roded during six centuries period (1340-1947). It covered 104 Waqf institutions (endowment
foundations) in Egypt, Syria, Palestine, Turkey, and Anatolia, and resulted in the following (M.
Boudjellal, 2005):
1. Fifty eight (58) percent properties were concentrated in big cities and were
comprised of commercial shops, roadhouses, flat and houses.
2. Thirty five (35) percent were concentrated in small villages and countryside and
comprised of agricultural lands, farms and gardens.
3. Other types of ‘awqaf represented seven (7) percent where five point five (5.5)
percent were in the form of money.
Based on the above explanation, it can be concluded that Waqf has significant potential to
contribute to community development. It might play very crucial role in alleviating poverty as it
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can be targeted to low income groups. Managing whatever types of Waqf especially this
Corporate Waqf requires many important aspects to take into account. Corporate Waqf might
play an important role as a mode of transferring wealth. The issues arise today is that, it has been
seen that the distribution of currently practiced Waqf is redundant with the targeted groups which
can handled by Zakah which was mainly distributed to eight (8) categories of the beneficiaries
(Asnaf) listed in the Qur'an. This kind of redundancy is to be resolved swiftly as Waqf can be
extensively distributed for religious and charitable activities. It is then expected that the Waqf
should do better in term of distribution.
Proposed Solution on Distribution of Waqf
Related to this distribution, it is crucial to understand what are the main objectives in proposing
this Corporate Waqf then to follow the purposes of its targeted distribution program. Therefore,
it is strongly recommended that the distribution of generated income from Waqf might be
targeted for the following purposes:
1. Reduction in Government Expenditure
We are looking forward that the Corporate Waqf system would be confused by the
fact that a numerous of essential services such as health, education, municipal, etc.,
were provided in history at no cost whatsoever to the government. Therefore,
assuming that the efficiency problems are solved, the Waqf system can significantly
contribute towards that ultimate goal of every modern economist; massive reduction
in government expenditure, which leads to a reduction in the budget deficit, which
lowers the need for government borrowing thus curbing the “crowding-out effect”
and leads to a reduction in the rate of interest consequently reining a basic
obstruction for private investment and growth.
2. Reduction in the Rate of Interest
From the point of view of Islamic economics, the most important item in the above
mentioned agenda is, obviously, the reduction in the rate of interest. The Waqf can,
indeed, lower the interest rate by providing the most essential social services without
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any cost to the government. This important contribution of the Waqf system towards
the gradual elimination of riba is not yet recognized by the Islamic economists. 3 It
will be proposed here that it should be. Put differently, are-establishment and
revitalization of the Waqf system should be considered as a vital step in the struggle
to eliminate riba.
3. Social Service Function
Distribution of this type is aimed to fulfill the needs of those who are unprivileged.
Waqf is a foundation, which aims at social service by various services provided by
it. But when the historical process is taken into consideration, this social service
fulfils a duty beyond the struggle of poverty to help to poor people. It will then
contributes to upliftment of humanity and betterment of life and provides a life level
which is proper with human dignity.
4. Empowerment
Segment of this target is persons or group of people who have prospective business
ventures but having difficulties to access financial capital. Empowerment here is
aimed to provide means of production, i.e. financial capital so that this group of
small business enterprise for example, might enhance their business ventures further.
In assisting this group, various types of contracts in line with Shariah might be
utilized, such as mudharabah, musharakah or murabahah, etc.
5. Human Investment
This type of human investment is targeted to provide education, through scholarship
program, or training to improve the quality of human being by enhancing the level of
skills of labor or entrepreneurs. In the end, it is expected that productivity of this
group of people will improve and positive effect on the level of output might be
resulted.
3 The most recent survey of Islamic economics is totally unaware of the importance or even the existence of endowments. See Mohamed Aslam Haneef, (1995). The linkage with riba was also not raised in the proceedings of the Jeddah conference of Islamic economists on awqaf. See IRTI, (1987), Management and Development of Awqaf Properties, Jeddah: IRTI/IDB.
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6. Infrastructure Investment
It is meant to assist providing physical facilities such as buildings for schools,
medical facilities, and so on, which will help improving community’s welfare. Waqf
plays an important role in protection environment and improvement of city and
villages, has underlying role in transportations between cities (road, bridge, castle,
caravansary, trade road, channel); plays an important role in municipality, agriculture
and development such as road, water channel, bridge, school, hospital, library etc.
As a conclusion, Corporate Waqf as a relatively new method in Islamic voluntary activities
might be considered as an important avenue to contribute to the development of a more
productive Waqf property’s management, which ultimately capable of producing various public
services needed by community. It can be implemented side by side to assist other types of Waqf
properties, especially buildings or lands, to enhance their productivity. It also can be
implemented separately as independent Waqf property directed to achieve similar purposes in the
area of public services. In short, its public benefit or maslahah that being taken care of most.
CONCLUSION
Traditionally waqf revenues are most frequently spent on mosques. This includes salaries of the
Imam, teachers of Islamic studies, and maintenance of the mosque properties. Since the
beginning of Islam, education has been financed by waqf and through voluntary contributions.
Waqf financing of education usually covers libraries, books, salaries of teachers and other staff.
Another section that receives waqf financing or the third largest beneficiary of waqf is the needy
those with very low income, needy orphans, person with disabilities and the elderly.
However, the present situations of waqf institutions generally, are undoubtedly unsatisfactory.
They can be fairly said that in many areas there has been a calamitous collapse of waqf. The
institutions are not given proper attention and therefore, vast waqf properties are ill-managed.
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Since deteriorating situation of the institution of waqf needs urgent attention and should not be
left to go further backward, therefore, it makes sense to look in the opposite direction forward
and to rethink the situation particularly in respect of the use of existing waqf assets. Indeed the
current reappraisal of the role of the waqf offers opportunities to learn from the mistakes of the
past and to move for managing the waqf assets in the professional way within a modern
administrative framework.
Expressing its economics contents the waqf can be explained as diverting resources from
consumptions and investing them in productive assets that provide either usufruct or revenues for
future consumption by individuals or groups of individuals. The surplus income of waqf can be
put into operation that combines the act of saving with the act of investment together. It consists
of taking certain resources off consumption and simultaneously putting them in the form of
productive assets that increase the accumulation of capital in the economy for the purposes of
increasing future output of services and incomes.
A waqf asset is considered a trust asset, where the role of the trustee is to look after the asset and
ensure is perpetuity for the beneficiaries. All the fixed waqf assets have the potential to generate
benefits for the public and contribute towards wealth and prosperity. Furthermore, the
establishment of an Islamic waqf is very close to the establishment of a business corporation
whose life span is unlimited. Therefore the waqf is a developmental process by virtue of its
definition as it involves the accumulation of productive wealth through present investment that
favours future generations since the waqf gives its beneficiaries future benefits in cash or kind
without any fee or charge.
The waqf need to be privatised by returning their assets to private management by creating waqf
boards of trustees. They will help managing the assets of waqf in a professional manner. Apart
from that, there is also a need a complete revitalization of the management of waqf especially,
immovable assets of waqf, in order to fulfil two objectives: (i) to increase the efficiency and
productivity of the waqf properties; and (ii) to minimize fraudulous practices and corruption by
the mutawalli/waqf managers. Furhermore, there is also a need to provide a new style of
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management that suits the waqf instututions, keeping in mind that their properties are not owned
by those who manage them.
On the aspect of solving today unemployment problems, if the waqf institutions are managed
professionally by implementing the revitalization schemes, establishments like waqf will provide
employment opportunities for the people and will contribute to the economy. Improving the waqf
institution by adopting modern business management techniques will make the waqf institutions
into transparent and responsive institution.
For professionalising the management of the waqf, there is a need to introduce stakeholders’
principles into the body of the waqf institutions. Introducing stakeholders’ theory into system of
waqf will undoubtedly create many positive opportunities for quality improvement of the waqf
institutions and internal delegation of responsibility.
Corporate waqf is an innovative adaptation of the Islamic waqf institution that can be made a key
organisational strategy to translate the business jihad energy into real and sustainable business
and economic success. It is a creative and innovative act to use the waqf concept and apply it to
achieve business and corporate objectives.
A corporate waqf is therefore envisioned to have a distint and unique advantage compared with a
conventional waqf, in that it allows access to and thus can benefit from all the dynamics of
corporate driven businesses.
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