Based on theoretical advances in financial economics and Islamic finance, there are various innovative instruments and procedures for financing investment in waqf have been introduced (Monzer Kahf, 1998 ).

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TRADITIONAL

MODE INNOVATIVE

MODE

WAQF FINANCING

Financing the Development of Waqf Part 2: The application and issues

1 .Waqf through new property acquisition 2 .Borrowing

3 .Waqf property substitution 4 .Hukr ( long lease with large advance lump sum)

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THE TRADITIONAL MODE OF WAQF FINANCING

SOURCE: MONZER KAHF (2011) HOSSEIN PIRASTEH & HOJJATOULLAH ABDOLMALEKI (2011)

THE NEW MODE OF WAQF FINANCING

1 .Use/ apply muamalat contract and innovative methods to increase the waqf properties and improve the

usufruct or revenues that it can generate for future consumption

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GOVERNMENT FUND

Normally creating new awqaf properties through acquisition by the government are common. The government allocate funds to help acquire more waqf properties . In the old days, there are many waqf mosques, schools, hospitals and universities that established through this method. This is among the common method of financing .

In today’s environment:1 .King Abdul Aziz kingdom waqf the fund for the

development and extension of Masjidil Haram .

2 .Government of Malaysia allocate fund to JAWHAR – The money are used to develop idle waqf land into Orphanage, Hotels, Religious school, Bazaar, Shelter

for Women and etc. .

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Cash waqf

DefinitionCash waqf can be defined as the confinement of an amount of money or cash from the founder and the dedication of its usufruct, according to founders condition in perpetuity to the welfare of society

HistoryFrom the Islamic history, it is difficult to trace the cash waqf in Arabic society because they claimed that this type of endowment is subject to riba. However, on the 15th century the Ottoman courts approved these kind of endowment and the cash waqf growing popular at the end of 16th century. Cash waqf has emerged in later times compared to property waqf and it is a step forward for the Islamic economic. This is because since all those who want to support the social causes most of them may not have property for waqf but instead cash, it is easy for .them to contributed

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Legitimacy of Cash WaqfFrom Hanafi school of thought, Imam Abu Hanifah agreed that all movable properties subject to waqf including the waqf of dirham and dinnar, for instance waqf al-nuqud (cash waqf). In line with that opinion, Imam Zufar stated that jewelry could also be subjected to waqf. Similarly, both Imam Muhammad and al-Sarakhsi agreed that movable items as the subject matter for waqf.

Imam Malik also agreed that both movable and immovable properties considered as subject matter for waqf even if it is cash waqf. In addition, Imam Shafii and Hanbali discussed on the validity of both immovable and movable properties as a subject matter of waqf. In recent time, World Fiqh Council (Majma’ al-Fiqh) issued fatwa on this matter had also agreed on the creation of cash waqf.

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If the purpose of the money/cash been used as the subject for cash waqf does not mislead the cash become depleted, thus, the money/cash can be subject to cash waqf (Baharuddin Sayin, 1994).

According to Baharuddin (2011), the condition for money/cash that might be used as cash waqf is that:1) The cash/money that declared for cash waqf should be exchanged with an asset such as property, stocks, or capital at which only its usufruct, dividend, or revenues that may be used.2)The cash/money that declared as cash waqf should be exchanged with fixed asset such as land or buildings and only its usufruct that might be used3)The cash/money itself should be valid unless the cash waqf is not allowed.

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Practise of Cash waqf in Malaysia

Imam Shafii approved the creation of waqf from non-Muslim even if it is for the purpose of a mosque. His opinion based on hadith: “The Prophet (pbuh) said Allah will not oppress Muslim for their good deeds, as they will be rewarded in this world and in the hereafter. But for non-Muslims they will be rewarded for all their good dedds only in this world”. Thus, based on the hadith, it enable the non-Muslim to participate in cash

waqf creation .

The 77 th. Meeting of Fatwa Committee of the National Council for the Religion of Islam agreed to allow cash waqf practise in Malaysia . “ In Islam, performing waqf in the form of cash is allowed” (www.e-wakafjohor.gov.my and www.mais.net.my)

RECENTLY, GETTING FINANCING FOR WAQF THROUGH CASH WAQF INSTRUMENTS ARE POPULAR IN MALAYSIA

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States Minimum Waqf Price (RM) Penang Waqf Fund Scheme Selangor Waqf Share Pahang Waqf Share Johor Waqf Share Terengganu Waqf Share Malacca Waqf Share

5 10 10 10 10 10

Mechanism of Cash Waqf at MAIS Figure 2. Waqf Collection through Infaq Scheme

Source: Perbadanan Waqf Selangor, MAIS (2013)

3476085862

2384096737

148663

251146

622661

0

100000

200000

300000

400000

500000

600000

700000

2006 2007 2008 2009 2010 2011 2012

Total Waqf Contributions (RM) through Infaq Scheme

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Malaysia Cash Waqf

Initiate by Malaysia Waqf Foundation. All contributions from waqif will be transform into fixed asset as it will give the continuous impact and benefits to the society.

Methods of cash waqf collection1 .Salary deduction.

For government staff they can contribute through code 4474

2 .Counter Malaysia Waqf Foundation

3 .Cheaque or postal order to Malaysia Waqf Foundation

3 .Collaboration with banks i) internet banking

ii) cash deposit machine iii) Auto debit

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Innovation in managing cash waqf instruments 1. Dividends earned for example by individuals, state baitulmal,

corporations are channeled to an Waqf Institution Account as cash waqf. The waqf institution collaborate with bank (Cash Waqf Selangor Muamalat)

2. The associated waqf institution will act as a mutawalli where it manage and invest the accumulated cash-waqf. The revenue generated will then be directed to charitable projects after operational expenses have been deducted. (Badan waqf Indonesia)

3. Transform the cash waqf (Taslim) into fixed asset that can generate revenue or usufruct. The foundation create the “Tawzi’ account to keep the revenue generate by fixed asset. Part of Tawzi’ return for the benefit of ummah and part of it to generate more return (Malaysia Waqf Foundation),

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Continue… Innovation in managing cash waqf instruments Corporate cash waqf modelThis model is a public waqf which had been practiced in Malaysia

specifically in Kumpulan Waqf an-Nur 1998, Turkey in Sabanci Foundation-1974, Pakistan in Hamdard Foundation-1953 and South Africa in the National Waqf Foundation-2000. The founder in this model is not only individual but corporations or organization.

The revenue generated from cash waqf and fixed asset waqf will be directed to charitable projects after operational expenses have been deducted.

(Source: Dr. Magda Ismail Abdel Mohsin- INCEIF)

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Benefits and advantages of using cash waqf instrument compared to real estate.

1 .Easiest way to perform waqf as cash waqf mechanism is more dynamic

2 .Waqf can be perform based on financial ability3 .Provide opportunities to involve with waqf even though

with out real estate like land or buildings

4 .In today’s situation, many real estates not fully owned by the owner as the bank still hold the title. This is because

most of the real estate get the financing from the bank .

Therefore , the cash waqf instrument provide a platform for those

who want to waqf their wealth.

5 .The collections can be used to develop idle waqf real estate

Disadvantages1 .If the collections are small the money cannot be used to

acquire fixed asset (ambulance, shops, mosques) 2 .Lack on knowledge on the legality and availability of this

instrument .