T H E  W o r l d  B a n k  G R O U P ,  I N C E I F  a n d  I S R A
R e p o r t  o n

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Published in May 2019 by

The World Bank Group & INCEIF & ISRA

www.worldbank.org/en/country/malaysia  |  www. inceif.org  |  www.isra.my

©May 2019 International Bank for Reconstruction and Development (The World Bank), the

International Centre for Education in Islamic Finance (INCEIF), and the International Shariah

Research Academy for Islamic Finance (ISRA)

All rights reserved

This work is a co-publication of The World Bank, INCEIF and ISRA. The findings, interpretations,

and conclusions expressed in this work do not necessarily reflect the views of The World Bank,

INCEIF and ISRA, their Board of Executive Directors, or the governments they represent. The

World Bank, INCEIF and ISRA do not guarantee the accuracy of the data included in this work. The

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imply any judgment on the part of The World Bank, INCEIF and ISRA concerning the legal status

of any territory or the endorsement or acceptance of such boundaries.

Nothing herein shall constitute or be considered to be a limitation upon or waiver of the privileges

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No warranties are given. The license may not give you all of the permissions necessary for your

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All queries on rights and licenses should be addressed to: Ahmad Hafiz Abdul Aziz (aabdulaziz@

worldbank.org), Assoc. Prof. Dr. Baharom Abdul Hamid (baharom@inceif.org) or Assoc. Prof. Dr. Said

Bouheraoua (bsaid@isra.my).

i

TABLE OF CONTENTS

Acknowledgement          ii

List of Tables and Diagrams        iii

List of Abbreviations                    iv

Executive Summary         v

Remarks by The World Bank Group                 viii

Remarks by INCEIF                     x

Remarks by ISRA                    xii

Chapter One:

An Overview of the Waqf Landscape       1

Chapter Two:

An Enabling Legal and Regulatory Framework  for Waqf Institutions   7

Chapter Three:

Actualizing the Potential of Waqf Institutions    23

Chapter Four:

Enhancing Waqf Instruments      37

Chapter Five:

The Way Forward        49

Report Team         52

Appendix         56

Glossary         65

References         67

ii

ACKNOWLEDGEMENT

This report by the World Bank Group Global Knowledge and Research Hub

in Malaysia, International Centre for Education in Islamic Finance (INCEIF)

and the International Shari’ah Research Academy for Islamic Finance (ISRA)

is the outcome of the presentations and discussions from the Roundtable

on Maximizing Social Impact through Waqf Solutions held on 13 September

2018 in Sasana Kijang, Kuala Lumpur, Malaysia.

The authors of this report are: Ahmad Hafiz Abdul Aziz, Wei Zhang (The World

Bank Group); Assoc. Prof. Dr. Baharom Abdul Hamid, Assist. Prof. Dr Ziyaad

Mahomed (INCEIF); Assoc. Prof. Dr. Said Bouheraoua, Dr. Noor Suhaida Kasri

and Mohamed Al-Amine Sano (ISRA). Other technical contributors includes

Dr. Kinan Salim, Dr. Choudhary Wajahat Naeem Azmi (INCEIF); Dr. Mir Riaz

Ansary, Dr. Fares Djafri, Noor Aznir Nizam Noordin, Silmi Mohamed Radzi and

Noor Fuzana Yaakub  (ISRA).

The team worked under the overall guidance of Abayomi A Alawode, Head

of Islamic Finance of The World Bank Group,  Prof. Dato’ Dr. Mohd Azmi Omar,

President and Chief Executive Officer of INCEIF and Prof. Dr. Mohamad Akram

Laldin, Executive Director of ISRA.

This report benefited from the insightful discussions provided by the speakers

and participants of the Roundtable. The Roundtable agenda, photos of

discussion sessions and speakers are in the Appendix.

iii

LIST OF TABLES  AND DIAGRAMS

List of Tables

Table 1:
Assets allocation portfolios of KAPF in 2006    25

Table 2:
Types of Waqf Assets as at 31 Dec 2017     28

Table 3:
 The investment strategy guidelines adopted by Awqaf SA   30

List of Diagram

Diagram 1:
Organizational Structure of Kuwait Awqaf Public Foundation   24

Diagram 2:
Waqf Administration Organizational Chart     26

Diagram 3:
The Organizational Structure of Awqaf SA     29

Diagram 4:
Waqf Fund Received       31

Diagram 5:
Cumulative Investment       31

Diagram 6:
Net Waqf Revenue       32

Diagram 7:
Structure Governance of UK Charity Commission    33

Diagram 8:
The Organizational Structure of the UK Charity Commission   33

Diagram 9:
Structure Organization of Islamic Relief Worldwide    34

Diagram 10:
Distribution of Waqf Projects in 2016     35

iv

LIST OF ABBREVIATIONS

AMLA Administration of Muslim Law Act

APIF Awqaf Properties Investment Fund

Awqaf SA The National Awqaf Foundation of South Africa

BNM Bank Negara Malaysia

BOT Build-Operate-Transfer

CBD Central Business District

CC Charity Commission for England and Wales

CSR Corporate Social Responsibility

DDR Dompet Dhuafa Republika

GDW General Directorate of Waqf

HCE High Council of Endowments

IsDB Islamic Development Bank

IPO Initial Public Offering

IRCICA Research Centre for Islamic History, Art & Culture

IRW Islamic Relief Worldwide

ISF Islamic Social Finance

IWB Indonesian Waqf Board

JAWHAR Department of Awqaf, Zakat and Hajj

KAPF Kuwait Awqaf Public Foundation

LIWF Labuan International Waqf Foundation

MUIS Islamic Religious Council of Singapore

NPO Non-Profit Organization

OIC Organization of Islamic Cooperation

PBO Public Benefit Organization

ROT Rehabilitate, Operate and Transfer

SCE Sub-Council of Endowments

SDGs Sustainable Development Goals

SIRC State Islamic Religious Council

SRI Sustainable Responsible Investment

VAT Value Added Tax

WRS Waqf Revitalisation Scheme

YWM Yayasan Wakaf Malaysia

v

EXECUTIVE SUMMARY

Waqf is a potent tool for mobilizing resources to meet societal needs by the

self-sustaining contributions of private donors rather than by governmental

borrowing or spending of tax money. In waqf the donor declares an asset

inalienable, meaning it cannot be sold or disposed of in any other way.

Meanwhile, the proceeds are periodically spent for the beneficiaries

designated by the waqf founder. Instead of a one-off act of charity, waqf is

the “gift that keeps on giving”. It not only continues to benefit the recipients,

it provides a means for the donor to keep reaping rewards even after their

death.

Waqf played a major historical role in providing infrastructure, education,

medical care and many other essential services in Islamic civilization.

Colonization and cultural stagnation led to the decline of waqf in the 19th

century, but the political independence of Muslim lands in the 20th century

led to efforts to revitalize the waqf institution. Some major problems must be

solved, however, in order for waqf to realize its immense potential.

Although waqf is essentially a type of private charity, administered by private

managers appointed by the waqf founder, governments everywhere have

seen the need to involve themselves in supervising them. One way they do

so is by providing regulatory frameworks to ensure that the management of

awqaf (pl. of waqf) meets certain minimum standards of competence and

integrity. Most of them also set up institutions that, at the very least, monitor

the behavior of waqf administrators. Governmental or quasi-governmental

waqf authorities in some jurisdictions take a much more active role in directly

administering waqf assets.

The lack of a professional management culture among waqf administrators

has been a problem in many jurisdictions. Kuwait and Singapore are notable

exceptions, applying modern management techniques competently and

transparently. Their achievements have provided a powerful incentive for

others to study them and adopt their most effective practices, adapting

them to local conditions as needed. Emulation should not stop at particular

detailed practices but should extend to outlook. A systematic problem-

solving approach is called for that critically re-examines inherited opinions

and procedures in light of the Shariah objectives that waqf was originally

intended to achieve.

vi

One of the problems that confronts waqf throughout Muslim lands is the

very problem of lands. A huge amount of arable land in Muslim countries

has been designated as waqf. No one knows exactly how much because of

haphazard registration and inefficient administration in many countries. The

majority of these lands lie idly unproductive because of the lack of funds

to maintain and develop them. Moreover, the lack of readily accessible

public information about their status makes them vulnerable to corrupt

administrators or unscrupulous third parties taking them over and treating

them as their own.

Another major impediment to unleashing waqf’s potential is a classical fiqh

ruling that cash is an invalid subject matter for waqf. This is based on the

concept that the endowed asset must be of a permanent nature, a concept

that was itself a matter of dispute among classical scholars. Even some of

those who accepted the concept that waqf must be permanent understood

cash waqf as having that intrinsic capacity. One way to realize it is to treat

the cash as capital for investment, with the proceeds being spent on the

designated beneficiaries and the capital being left intact. Another method is

to use part of the endowed cash for qard hasan (interest-free loans) that is

continuously recycled as new loans when old loans are repaid.

Cash waqf opens up opportunities for a much wider pool of donors to

contribute to social good and reap eternal rewards than waqf restricted to

immovable property. Not many people can afford to make waqf of a piece of

land, but almost anyone can contribute to a cash waqf. The marked success

of Turkey’s experience in pioneering cash waqf has attracted the attention

of policy makers in other Muslim countries, who have modified their laws to

accommodate it. Cash waqf has become one of the burgeoning frontiers for

making waqf an effective tool for social finance in the 21st century.

The successful use of cash waqf has opened up thinking on how to make

waqf of financial instruments like corporate shares. Singapore and Saudi

waqf authorities have pioneered the use of sukuk to finance the revitalization

of rundown waqf properties in prime locations for attractive projects that

generate solid income. Sukuk could also be used to finance infrastructure

projects that become awqaf after the investors have been paid off. The

possibilities for the creative use of financial instruments are manifold. The

primary limitations are limitations of imagination.

Many people are reluctant to donate to waqf institutions because they doubt

the honesty of the administrators and do not know how their donations will be

used. Lack of transparency has been a huge problem in waqf administration.

vii

Blockchain, a distributed public ledger that records transactions, is a

technology that has recently begun to make a major impact on the financial

system. It is predicted that its role and applications will continue to increase

in the future. Integrating blockchain with waqf could go a long way to

addressing the problems of transparency and trust that currently hamper

broad-based public participation in waqf. Blockchain is still a developing

technology, however, and there are Shariah issues that need to be resolved

before applying it to waqf and other venues of Islamic finance.

Although many issues and problems must still be solved in order to unlock

the potential of waqf, great advances have been made in the last fifty years or

so. Improved management approaches, enabling legislation and regulatory

frameworks, the willingness to re-examine inherited juristic opinions, creative

thinking and new technology are all converging to provide good reasons to

be optimistic about the future of waqf.

viii

REMARKS BY THE WORLD BANK GROUP

The discussions on waqf are aligned with the World Bank’s twin goals to

end extreme poverty and promote shared prosperity in every country in

a sustainable way. These goals imply a reduction in the number of those

living in extreme poverty (defined as under $1.90 per day) from 10.7 percent

globally in 2013 to 3.0 percent by 2030 and fostering income or consumption

expenditure growth among  the poorest 40 percent of the population in

each country. These two goals are part of a wider international development

agenda and are intimately related to the United Nation’s Sustainable

Development Goals (SDGs) 1 and 10, respectively, which have been adopted

by the global community.

Islamic social finance (ISF) tools including waqf have been instrumental in

socio-economic development and the alleviation of poverty for over 1,400

years. Throughout Islamic history, waqf was a major provider of social

services that are today financed by the state. These services include the

provision of education, healthcare, infrastructure development as well

as social assistance to the poor and vulnerable. Waqf institutions have

also supported improvements in income and wealth equality as wealthy

individuals and families released property into the service of people who

deserved the support of others.

Waqf institutions have the potential to expand available long-term financing

for developmental purposes. Long-term financing is used to fund various

types of projects that can expand the productive capacity of an economy.

There is broad consensus that the world needs to invest more in long-term

sustainable projects to deal with the complex challenges of climate change,

Dr. Firas Raad

Country Manager for Malaysia

East Asia and Pacific, The World Bank Group

ix

growing urbanization, and social imbalances, Although estimates of long-

term investment financing needs vary considerably, available data indicate

that the needs are extremely large. Infrastructure financing gaps alone,

for instance, are estimated at over $1 trillion annually. ISF including waqf

can help bridge this long-term financing gap by capitalizing on important

features such as risk-sharing, asset-backing and financial partnerships.

Despite their social and economic importance, the potential of waqf remains

largely unrealized because of the critical challenges of liquidity management

and the shortage of viable investment opportunities. The portfolio of existing

waqf assets is highly imbalanced in favor of physical assets. Waqf are rich

in one of the important factors of production—land—but are short on other

factors such as capital, labor, and organization. To date, large parcels of

waqf land have remained undeveloped due to lack of sufficient funds and

entrepreneurial initiatives. These issues need to be addressed if this important

segment of the Islamic finance industry is to realize its true potential.

At the World Bank, we are proud to promote the redistributive role of waqf

institutions as part of our broader efforts to achieve the Twin Goals by 2030. I

hope this report can support the institutions and individuals across the world

who are involved in this important and growing development agenda.

x

REMARKS BY INCEIF

Waqf as an institution played a significant role in meeting the socio-economic

needs of Muslim societies throughout Islamic history. Waqf through its

characteristics of irrevocability, perpetuity and inalienability provides

financial support for charitable activities intended for the public including

the provision of healthcare, education, agriculture, infrastructure, loans

to small businessmen, and of course religious institutions. Although waqf

was adopted from earlier civilizations, it was Islam that expanded waqf and

gave its distinguishing feature as a separate body which is neither owned

by the state nor a private individual. This distinguishing feature has enabled

waqf, together with other ISF instruments such as zakat, sadaqah and infaq,

to have been used successfully to alleviate poverty and promote socio-

economic development for centuries. However, in recent times the ever-

increasing income inequality gap and political instability in many majority

Muslim countries have increased the need for social finance and economic

empowerment.

The latest statistics in the United Nation’s Global Issues report show that

almost half the world’s population or over 3 billion people live on less than

US$2.50 a day; 640 million live without adequate shelter; 925 million people

suffer from hunger; 400 million have no access to safe water; 270 million

have no access to health services; 10.6 million die before reaching the

age of 5, and 1 billion are illiterate. Therefore, the urgency in implementing

funding instruments such as waqf that are aligned with the belief system of

contributors and needy communities alike, has not been more pronounced

than now.

Prof. Dato’ Dr. Mohd Azmi Omar

President and Chief Executive Officer

International Centre of Education in Islamic

Finance  (INCEIF)

xi

Already there are a number of innovative waqf projects which were designed

to achieve social goals and economic empowerment, and these can be

replicated and scaled up and adopted in Muslim countries and societies.

A notable example of an innovative financing scheme for waqf property

development was the issuance of sukuk musharakah to help finance the

redevelopment of an old mosque into a mixed complex comprising a

mosque, a commercial complex and 103 service apartments in Singapore.   In

Penang, Malaysia, another model is used whereby a state religious authority

together with a property developer under a profit-sharing agreement jointly

developed a vacant waqf land (Wakaf Seetee Aisah) into terrace houses

and shop offices. The Islamic Development Bank (IsDB) has established

the Awqaf Properties Investment Fund (APIF) and uses leasing and istisna’

for construction of residential buildings, office/commercial buildings and

mixed-use development of waqf lands.

In the area of healthcare, Waqaf An-Noor is another example that can be

emulated by others. It provides healthcare and dialysis services to the less

fortunate segments of the society in Malaysia, both Muslims and non-muslims

alike.  Vehbi Koç Foundation (Vehbi Koç Vakfı) in Turkey is perhaps the first

documented case of corporate waqf. Its numerous philanthropic activities

have focused mainly on three sectors, namely education, healthcare and

culture.

Notwithstanding the success stories of awqaf mentioned earlier, however

there are concerns that must be addressed if waqf is to fully take its

meaningful role in meeting the socio-economic needs of Muslim societies. At

the top is the lack of supervisory and governance standards. Bank Indonesia

and the Islamic Research and Training Institute (IRTI) have developed such

standards and shared them for adoption by Muslim countries. Standardized

reporting of operational and financial activities of waqf bodies should be

developed in order to provide transparencies to all stakeholders. As waqf

becomes more ubiquitous in Muslim societies, performance and impact

assessment measures must be developed in order to evaluate the impact of

waqf in achieving its objectives.

As a university that strives to be a thought leader on Islamic Finance, INCEIF

intends to lead the progress on research on waqf as an essential pillar of the

Islamic economy, embracing technology in order to enhance efficiency in

endowment acquisition and its long-term management. We believe that it

is our duty to play a significant role in building a sustainable community and

that sharing knowledge of ISF such as waqf is one way to do so.

xii

REMARKS BY ISRA

The last decade has seen positive growth in the types of awqaf properties

and their development in many Muslim countries. One of the most discussed

contemporary measures in waqf development is cash waqf, an innovative

mechanism of varied forms such as deposit cash waqf, corporate waqf, and

waqf of shares. These and other asset investment methods have taken a

leading role in generating income for the benefit of significant sections of

society.  Cash waqf is now actively used in many Muslim countries as an

effective tool for social finance and welfare programs such as promoting

educational scholarships and healthcare facilities. Moreover, these new

instruments have the potential to generate benefits for most or all of society.

Cash waqf collection in Indonesia alone is predicted to reach IDR 188 trillion

(roughly USD 13 billion) per year. Islamic banks have a key role to play in

this regard. There are currently 15 Islamic banks registered as official Islamic

Financial Institution Recipients of Cash Waqf (IFI-RCW).

Similarly, in Malaysia, the 2007 national fatwa permitting cash waqf brought

about diversification of awqaf properties through the introduction of several

cash waqf schemes by local banks, Yayasan Wakaf Malaysia (‘YWM’ or the

Malaysian Waqf Foundation) and the State Islamic Religious Councils (SIRC)

as well as public higher education institutions. A number of Islamic banks in

Malaysia promote and practice cash waqf. For instance, in September 2012,

Bank Muamalat Malaysia Berhad (BMMB) introduced a cash waqf scheme

in collaboration with Perbadanan Wakaf Selangor (PWS) (Selangor Waqf

Corporation). Likewise, Maybank Islamic announced the establishment of a

waqf fund of RM20 Million in collaboration with the Federal Territory Islamic

Prof. Dr. Mohamad Akram Laldin

Executive Director

International Shari’ah Research Academy

for Islamic Finance (ISRA)

xiii

Religious Council. While declaring this donation, Maybank Islamic affirmed

that profits realised from the portfolio will be used to develop education,

health care, infrastructure and the skills of young entrepreneurs.

Another initiative in developing awqaf is to connect waqf with securitization.

In line with this endeavor, the International Shari’ah Research Academy for

Islamic Finance (ISRA) is currently working together with the IsDB on issuing

awqaf sukuk worth USD100million. The funds will be used to set up and

operationalize sheep and dairy farms and renewable energy projects in

selected jurisdictions. The income generated will benefit awqaf beneficiaries

and will be used for charitable and social purposes all over the world. This

is considered an innovative project both from the economic and Shariah

perspectives. If properly realised, it could catapult the development of the

awqaf sector globally.

Despite the widespread presence of waqf institutions and the significant

strides in waqf property management and development, waqf faces a number

of issues and challenges. Prominent among these is the need to create

public awareness and acceptance, to create comprehensive and enabling

regulatory frameworks, and to empower professional waqf management.

Another critical challenge is the collection of cash waqf through online

platforms. There is still no regulatory framework to ensure transparency and

integrity of such collections vis-à-vis the stakeholders. Nevertheless, recent

developments in the digital economy can play a crucial role in addressing

the issue of transparency and trust. These include facilitation of payments

through digital wallets and the possible use of blockchain technology.

This report, which is jointly produced by The World Bank Group, INCEIF

and ISRA, highlights the importance of waqf in mobilizing and maximizing

resources to meet societal needs. The report also emphasizes the legal and

regulatory frameworks that enable the implementation of waqf in selected

countries. The report is expected to raise awareness on the importance of

waqf and its huge potential for public good.

I would like to take this opportunity to express my gratitude to The World

Bank Group and INCEIF for partnering with us in producing this report. My

profound thanks also go to all the contributors to this report.  Congratulations

to the production team from The World Bank Group, INCEIF and ISRA for this

great achievement. This report would not have been possible without your

earnest support.

xiv

Islamic finance continues to grow at a double-digit rate of more than 10%

per annum. During the last five years, ISF, one of the important components

of Islamic finance, has also picked up. The main reason for the renewed

interest in ISF is the emergence of the United Nations’ SDGs. Two of the main

instruments of ISF are zakat and waqf, which are not only apt for fulfilling the

objectives of the Shariah but can also address most of the SDGs. ISF also

makes use of other instruments such as qard hasan, sadaqah and hibah.

All these instruments have the potential to go beyond the normal practice

of Islamic finance, which only caters to a certain class of people. They can

address the financially excluded and thus deal with some of the pressing

socio-economic issues of the modern era. The approach of ISF is holistic in

nature, and more importantly, its benefits are not limited to Muslims alone. It

can also cater to the non-Muslim segments of society.

Waqf, in particular, has a long, outstanding track record in this regard. It is a

Shariah-compliant instrument by which the person who donates their assets

to a waqf institution no longer remains the owner of those assets. When the

ownership has been transferred to a waqf institution, the assets are now

considered to belong to Allah. Meanwhile, the job of the waqf trustee is to

manage the waqf properties honestly.

According to Kuran (2001), trust (similar to waqf) is an institution that can

be dated back to the time of ancient peoples such as the Romans, Jews,

Byzantines and others. However, it can be argued that Islamic civilisation

institutionalised the practice to an unprecedented extent, making it more

widespread and deep-rooted than in any other civilisation. The most authentic

and detailed evidence for waqf can be found in the hadith in which Umar ibn

al-Khattab sought the advice of Prophet Muhammad (peace be upon him)

regarding a piece of land that he had recently acquired. The Messenger told

him, “If you like, you can make an endowment of the land and give [the fruit]

in charity” (Al-Bukhari, 1422H, no. 2737). The practice became so widespread

among the Prophet’s Companions that practically every one of them who

could afford to do so made a charitable endowment of land (Ibn Qudamah,

1968, 6:4).

CHAPTER 1

An Overview of the Waqf Landscape

AN OVERVIEW OF THE WAQF LANDSCAPE2 CHAPTER 1

Throughout Islamic history waqf played an important role in the development

and socio-economic life of Islamic society. Wealthy people used to donate

their assets to waqf institutions, and the benefits were used for purposes

such as building mosques, schools, hospitals and rest houses for travellers.

In the golden era of Islam, waqf institutions played a significant role in the

upliftment of society, especially through poverty alleviation. Crusaders

who observed the operation of waqf in funding various social institutions in

the Middle East took the concept back with them to Europe. Endowments

were established for academic institutions such as Inns Court and Merton’s

College of Oxford University in the United Kingdom (Gaudiosi, 1998).

In the Ottoman Empire, waqf institutions gained importance as they assisted

the government in provision of public goods and services. Waqf services

were so widespread at that time that it was said that a person could

complete their entire life cycle within waqf environments. People were born

in waqf property, educated in waqf schools, worked in waqf enterprises,

received medical treatment in waqf hospitals and were buried in waqf lands.

The benefits of waqf were not only limited to the Muslim and non-Muslim

population of the Islamic state but extended to the wellbeing of animals

too. According to Bremer (2004), “Islamic philanthropy has been able to

play these important and diverse roles in part because it is among the most

transparent, formalised and rule-based segments of Islamic society.” The

praiseworthy services provided by waqf institutions at that time were due to

the continuous dedication of pious Muslims.

During the Ottoman era, there were two types of waqf institutions: public

waqf and family waqf. The family waqf was managed by the people who had

donated their assets to the waqf institutions while, on the other hand, the

Shariah court was the controller of the public awqaf (pl. of waqf). The income

from waqf contributed over one-third of the Ottoman state’s total revenue.

During this period, fatwas allowing waqf of movable properties greatly

expanded the scope of waqf, which had previously been largely confined to

immovable properties (Kuran, 2001).

The golden age of waqf withered away owing to two main factors, namely

greedy and selfish rulers who could not resist the magnitude of profit that

was generated by the waqf institutions; and imperialist colonizers who

suppressed the waqf institution and introduced modes of financing that were

debt-based as opposed to equity-based (Elasrag, 2017). Waqf institutions

reached their nadir in the wake of the Ottoman Empire’s collapse (Abdel

Mohsin 2009: Bremer, 2004).

3AN OVERVIEW OF THE WAQF LANDSCAPE CHAPTER 1

In recent times, discussion of the services and the benefits of waqf was initially

spearheaded by non-Muslim scholars, who organized the first academic

seminar on the topic in Jerusalem back in 1979 (Hoexter, 1988). Bremer

(2004) shed further light on non-Muslim contributions to the process, saying,

“The waqf model is beginning to enjoy a rebirth, although this process is

proceeding more rapidly in non-Islamic democracies, such as the United

States, than in Islamic countries.” However, in the last few years, the discussion

of waqf and the interest in reviving such institutions has also increased in

Islamic countries. The discussion has mainly centred on the applications

and benefits of waqf. Along with conferences and seminars by Muslims in

many countries, the IsDB has also made a concerted effort to rediscover and

catalogue waqf institutions. The recent The World Bank Group, INCEIF and

ISRA Roundtable Discussion on Waqf discussed and deliberated on waqf

success models that can be replicated globally by the relevant stakeholders.

The emergence of SDGs and Corporate Social Responsibility (CSR) has made

people think of waqf as a potential instrument to address these goals, which

has led to more and more non-Muslims becoming aware of the concept.

Nowadays, there is an increasing tendency to analyse financial instruments

not only from the feasibility and applicability perspective but also from the

perspective of whether or not they contribute to society and whether or

not they help achieve SDGs. From this perspective, the waqf institution is

the most flexible and powerful instrument that can be effectively used to

address the concerns raised in SDGs. Estimates of the value of waqf assets

in the world range from USD 100 billion to USD 1 trillion. More importantly,

waqf lands comprise more than one-third of the cultivable lands of Muslim

countries (IDB, 2014). Nazim (2010) concludes that a significant majority of

the waqf assets are in the form of real estate and could be as high as 70 to

80 % of the total sector assets. The remaining money is invested in Shariah-

compliant money markets, mostly with regional financial institutions. Cash

waqf alone is estimated at USD 35billion.

The last few years have witnessed an increase in the number of waqf

properties not only in Muslim-majority countries but also in some Muslim-

minority economies where the legislation is based on western legal models.

The institution of waqf is so flexible that it can easily be incorporated in

western legal systems with little or no tweaking. The modern concept of

cash waqf has also broadened the scope of waqf as it allows the acceptance

of waqf donations in the form of money and other movable assets. One of

the attractive features of the waqf instrument is that it is perpetual in nature

and is not dependent on the life of the donor or the manager.

AN OVERVIEW OF THE WAQF LANDSCAPE4 CHAPTER 1

In recent times, many models have been proposed to maximize the impact

of waqf. Some of these models are waqf-based Islamic microfinance

institutions, independently managed charity organizations, a hybrid model of

Islamic bank and waqf, and an organization based on a combination of takaful

and waqf. The objective of all these models is to address the economic and

social issues of deprived classes and make them economically independent.

Such institutions can help achieve these goals by providing them good

education, offering them health facilities and bringing them into a financially

inclusive society. Access to finance and credit can improve the lives of the

deprived. Waqf institutions can be of great assistance as they can provide

financing to the poor class of society not only for their basic needs but also in

starting small-scale businesses. These small start-ups can provide the poor

permanent sources of income and make them economically sustainable.

As in the golden age of Islam, when waqf played an important role in

providing social and economic services, waqf can help countries in the

modern day by developing infrastructure and thus reducing the cost of doing

business. Waqf properties could also be used as underlying assets for the

issuance of sukuk; the money received could be used on social services like

hospitals, schools, community halls, etc. These sukuk could also be issued

while taking into consideration the Sustainable Responsible Investment (SRI)

perspective, which could further extend the benefits to the society at large.

Waqf institutions also have the capability to address some of the important

SDGs, especially those in line with the objectives of Shariah (maqasid Shariah)

such as eradication of poverty and hunger and provision of education and

health services. A United Nations report of 2016 identified ISF instruments

such as zakat and waqf as capable of addressing the humanitarian crises in

the Muslim world.

Waqf institutions could be made more impactful by bringing them into the

Islamic capital market, which could provide professional services such as

portfolio management that would help manage the assets efficiently. In

Malaysia, waqf-based shares have been issued under the social enterprise

model whereby the money received from the Initial Public Offering (IPO) will

be channelled to improve the Larkin Sentral bus terminal in Malaysia. After

buying the shares, the shareholders can donate their shares to the trustee

and manager of the waqf so the dividends can be used to support the

deprived class of society and single-mother families. Opportunities are also

being provided to small business owners to open shops at the terminal at

discounted rental rates. This initiative can be viewed as consistent with the

United Nations SDG 10: reducing inequality (IFN Asia, 2018).

5AN OVERVIEW OF THE WAQF LANDSCAPE CHAPTER 1

As mentioned by Bank Negara Malaysia (BNM) Assistant Governor Encik

Marzunisham Omar (2018) at the Forum on ‘Waqf: An Economic Perspective’

in Kuala Lumpur, there are three strategies we can explore to unlock waqf’s

full potential as a platform for ISF:

The first is to broaden waqf assets and their applications. Fundamental

to this is the need to correct the perception of waqf. One of the biggest

misconceptions is on its usage. Waqf is to benefit all. While waqf land

has traditionally been used to build mosques, cemeteries or schools

for memorization of the Qur’an, nothing in the Qur’an or Sunnah prohibits

wider use of waqf to meet the needs of the community. In fact, there is

no requirement for a waqf donor or beneficiary to be a Muslim. There are

instances from past Islamic civilisation where the use of waqf extended

beyond matters directly related to the religion and specific needs of the

Muslims. Waqf land and buildings were used to build schools, hospitals

and infrastructure to benefit both Muslims and non-Muslims alike. Al-Azhar

University is an excellent example of a waqf asset. Limiting waqf to land

and immovable property is a misconception. With the emergence of Islamic

finance and contemporary reinterpretations of fiqh  rules, new perspectives

can be injected into the life of waqf.

The potential of applying financial innovation in waqf has proven a success,

as demonstrated by waqf sukuk in countries like Saudi Arabia and Singapore.

The examples in these countries include sukuk issued to raise capital for the

development of waqf land, which led to the revitalisation of an old mosque

and modernisation of shops that were in a rundown condition. The concepts

of replacement, conversion, substitution and exchange, which are allowed

in Islam, provide flexibility in the way waqf assets are invested so that they

can be most productively deployed. This example can be replicated here

as a means to obtain funds to renovate old, neglected or under-developed

real estate properties into highly valued and desirable prime properties. The

process can create value in land or property that would have otherwise been

underutilised and undervalued.

The second strategy is to ensure that we achieve the goals of social equity

and economic efficiency in operationalisation of waqf projects. While

projects developed from waqf proceeds should benefit society at large, it

makes sense from an economic efficiency standpoint to allow the market

mechanism to allocate these scarce resources. As waqf is intended to

generate benefits in perpetuity for all generations to come, operating the

fund on commercial terms allows it to be invested and managed in a manner

that ensures preservation of capital. Prioritising economic efficiency can

AN OVERVIEW OF THE WAQF LANDSCAPE6 CHAPTER 1

help strengthen the position of waqf to carry out its social equity objectives

effectively.

The third imperative is to professionalise and modernise waqf management.

For waqf to progress strongly, it requires a new character and a more modern

image. In this regard, we can identify two priorities, namely professionalising

those who are entrusted to manage waqf and putting in place a proper

governance framework. The management of waqf must be entrusted to

experienced and knowledgeable experts with the highest integrity – that

is, people with the right calibre, right competency and right character. For

example, the USD 37.1 billion Harvard Endowment is run by some of the

best minds in finance, who determine the most optimal asset allocation

strategies that deliver the best sustainable returns for the university. In

2017, the endowment contributed more than a third of Harvard’s operating

revenue. Returns from the fund help to provide scholarships and to fund

ground-breaking research. Another important aspect in professionalising

waqf management is instilling good governance. It is unfortunate that

management of waqf has had some governance challenges.

Waqf authorities should explore partnering or collaborating with experts from

the private sector to commercialise or monetise waqf assets. Partnerships

with Islamic financial institutions can help waqf authorities develop waqf

assets productively with the required financial expertise on board. A good

example is the partnership between Majlis Agama Islam Wilayah Persekutuan

and Lembaga Tabung Haji in developing Menara Bank Islam on a 1.2 acre

piece of waqf land in Kuala Lumpur. The RM151 million project is a milestone

achievement, being the first large-scale commercial development project

on a waqf property in the country.

The reintroduction and revival of waqf concepts in modern times face many

challenges, including:

1- The low credibility of waqf management;

2- The limited scope of research on waqf, training of personnel, and public

awareness of  the huge potential of waqf for public good;

3- The lack of proper waqf legislation;

4- The limited number of well maintained waqf assets/properties;

5- The limited number of modern innovative investment strategies.

Although waqf institutions face many challenges, measures and solutions

that overcome the challenges can help to revive waqf institutions and

introduce new forms so that they can play a pivotal role in fulfilling socio-

economic needs of communities in modern times.

INTRODUCTION

The institution of waqf has witnessed tremendous growth in terms of its

asset classes, governance structure and legal and regulatory framework.

Innovative waqf models and instruments are visible in emerging markets,

along with diverse regulatory approaches and strategies. Some countries

such as Indonesia and India have opted to regulate waqf through a unified

statute while others like Malaysia have allowed separate enactments to

govern waqf in each of its states. While waqf is a concept that originates

in the teachings of Islam, the design of waqf governance is greatly shaped

by local historical and social factors like colonization, school of Islamic

jurisprudence, and societal norms and needs. These factors form the basis

for choices in the design of a country’s legal and regulatory framework.

The ramification of such choices on the growth of waqf is captured by the

stories of the countries selected in this chapter. The chapter analyzes the

legal and regulatory frameworks that enable the implementation of waqf

in the selected countries, highlighting the relevant laws and policies that

govern waqf institutions in the countries chosen. Thereafter, the relevant

issues and challenges surrounding waqf implementation in these respective

jurisdictions are briefly discussed. The chapter ends with the way forward

based on the lessons learnt, especially for policy makers who are looking for

an effective enabling waqf regulatory framework for their nation’s economic

and social development.

I- The Enabling Waqf Regulatory Framework

We currently find diverse approaches in waqf legal and regulatory frameworks

from one country to another. The frameworks of some countries have led

to stagnancy in their development of waqf practice while other frameworks

have enabled greater advancement. This section describes some key laws

and policies affecting waqf in Saudi Arabia, Malaysia, Nigeria, Turkey and

Indonesia.

CHAPTER 2

An Enabling Legal and Regulatory
Framework for Waqf Institutions

AN ENABLING LEGAL AND REGULATORY FRAMEWORK
FOR WAQF INSTITUTIONS8 CHAPTER 2

a)  Saudi Arabia

Saudi Arabia has been chosen as it is where the concept of waqf originated

in the era of Prophet Muhammad (peace be upon him). Waqf is an important

source of revenue for the Kingdom. Prior to December 2015, public revenues

like waqf and zakat as well as royal revenue in Saudi provinces such as Hijaz,

Asir and Al-Hasa were collectively governed by the Royal Diwan1, the Ministry

of Finance and the Ministry of Religious Affairs. However, in some areas such

as Najd there were no specific laws that governed the locals in their affairs;

hence they were all indirectly dealt with by the King through his appointed

‘governor-emirs’ (Vassiliev, 1998).

However, since December 2015, all waqf institutions in the Kingdom have

been governed by Royal Decree No. 35/M. This law comprises sections

that outline the job scope and responsibilities of the two waqf governing

bodies, namely, the High Council of Endowments (HCE) and the Sub-Council

of Endowments (SCE). In the event of conflict between these two bodies,

the decision of the HCE will prevail. The centralization of governing bodies

to supervise and monitor waqf implementation throughout the Kingdom

signals a positive development. Among the key provisions in the said law is

that it empowers the HCE to register, restrict and supervise waqf institutions,

to decide on applications to change the purpose of waqf, and to monitor

the compliance of waqf institutions with the relevant laws and regulations.

Supervision includes assessing, on an annual basis, the profitability of waqf

institutions to ensure their effectiveness. The way waqf institutions make their

profits is by investing the waqf funds in ventures that have a high chance

of success (Ahmad, 2015). In addition, the HCE is also required to conduct

meetings annually and to consult experts in order to foster the growth of

waqf institutions.

b)  Malaysia

Malaysia is a developing country with a mature Islamic finance industry.

However, its waqf sector has yet to match that advanced development. The

thirteen states of the country govern their waqf institutions independently

under their respective state enactments while waqf in the three federal

territories is governed by one federal law. Out of the thirteen states, five have

enacted specific waqf laws: Johor, Selangor, Negeri Sembilan, Terengganu

and Malacca. The remaining states and the federal territories have enacted

waqf provisions in their general administrative laws (Kader, 2015).

1.  For more details on the Royal
Diwan of Saudi Arabia please
refer to: http://countrystudies.
us/saudi-arabia/48.htm

9CHAPTER 2
AN ENABLING LEGAL AND REGULATORY FRAMEWORK
FOR WAQF INSTITUTIONS

One point of commonality between the state enactments is that each

has appointed its respective SIRC as the sole trustee (mutawalli) of all

waqf properties declared in the state. This provision means that all waqf

properties (movable and immovable) will be registered under the name of

the respective SIRC. This happens either through an application by a waqf

founder to the respective SIRC for the land to be registered as a waqf or by

an application made by the SIRC to the court for the court to declare the land

as waqf property (Kader, 2015).

Regarding fund management, generally, the waqf institution of the SIRC of

the respective state will manage the waqf funds. However, a distinction needs

to be made between a waqf for general purpose and one for a specified

purpose. When the waqf funds are collected for a general—i.e., unspecified—

purpose, then the funds are entirely managed by the waqf institution of the

particular state. However, if the waqf is for a specified purpose, then the fund

could be managed by other than the SIRC’s waqf institution. This allows for

any competent and qualified entity with an interest in the development of

the waqf project to manage it, although the SIRC of the respective state will

still act as the ultimate supervisor (Mohsin and Mohammad, 2015). This is

seen as a positive development in ‘modernising’ the waqf fund management

by the states’ SIRCs.

To coordinate the waqf development in every state, in 2004 the Malaysian

government established the Department of Awqaf, Zakat and Hajj (JAWHAR).

Among the roles and responsibilities of JAWHAR are: to recommend standard

practices for waqf to be adopted by the SIRCs;  to monitor waqf development

projects throughout Malaysia; and to act as a bridge between the SIRCs

and the federal government. A government-backed waqf foundation was

formed in July 2008 known as YWM. It was set up under the Trustees

Incorporation Act 1952 as the national waqf entity. YWM’s functions include

the collection of waqf funds, development of existing and new waqf assets,

implementation of welfare and social programs honoring the intentions of

waqf donors, undertaking investment programs to sustain disbursements

to waqf beneficiaries, and promotion of YWM’s activities (Alias & Alina, 2011).

Waqf appeared in the Islamic capital market regulatory framework in 2015

when the Malaysian Securities Commission issued Guidelines on Unlisted

Capital Market Products under the Lodge and Launch Framework. Chapter

7 of these Guidelines incorporates provisions, including tax incentives,

pertaining to sustainable and responsible investment (SRI) sukuk. Waqf

properties and assets as well as any projects that undertake the development

of waqf properties or assets are deemed part of the SRI-eligible sector. The

AN ENABLING LEGAL AND REGULATORY FRAMEWORK
FOR WAQF INSTITUTIONS10 CHAPTER 2

Guidelines thus promote the issuance of sukuk for the development of waqf

properties and assets. Later in 2017, the Malaysian Securities Commission

issued the Islamic Fund and Wealth Management Blueprint. The Blueprint

caters to potential waqf vehicles for social development, public good and

wealth distribution as well as increasing the level of sustainable waqf assets

through fund management or capital raising.

Another development took place in Labuan, the Malaysian offshore financial

center, where the Labuan International Waqf Foundation (LIWF) was

established. LIWF is an Islamic foundation established under the Labuan

Islamic Financial Services and Securities Act 2010. Its purpose is to hold

waqf properties on trust with the objective of managing them for identified

beneficiaries in accordance with the Shariah principles of waqf.

In the latest development in 2018, the Central Bank of Malaysia along

with six participating Islamic banks introduced the MyWakaf Initiative. The

collaborative initiative between the SIRCs and these participating Islamic

banks aims to effectively drive the collection, management and distribution of

funds donated by banks as well as the general public for waqf development

purposes (myWakaf, 2019). The uniqueness of this MyWakaf Initiative is

that, unlike the previous practice, the funds are now being managed by the

expert, reputable and trusted banks in Malaysia as opposed to the former

practice that saw the SIRC of the respective state as the sole manager of the

waqf funds.

c)  Nigeria

Nigeria is one of the few African countries apart from South Africa and the

Republic of Guinea that has waqf institutions. This is perhaps due to the fact

that Islam reached Nigeria as early as the 11th century. However it was only

in 1979 that Islamic law was officially recognized in the country’s constitution

as one of the three main governing laws in the country. The application of

Islamic law in Nigeria is limited to personal matters such as matrimonial

matters and waqf. Another statutory development took place in 1986 with

the passage of Decree 26. The effect of this law was to place all Islamic civil

matters, including waqf, under the jurisdiction of the Shariah Court of Appeal.

The jurisdiction of the Shariah court is, however, confined to Muslims (Sodiq,

1992).

It is interesting to note that the constitution names the Maliki School as the

applicable school of jurisprudence for Islamic personal matters. A salient

feature in the Maliki School is that a waqf can be revocable. This means

11CHAPTER 2
AN ENABLING LEGAL AND REGULATORY FRAMEWORK
FOR WAQF INSTITUTIONS

that a waqf founder (known as waqif) could set up a waqf for a particular

objective (i.e., temporarily) and once that objective is achieved the waqf asset

would go back to the waqif. In addition, it disallows a waqif to benefit from

the proceeds of the waqf as he only holds the legal rights to the property

whereas the beneficial rights are exclusively reserved for the beneficiaries

(Oseni, 2012).

Unlike Malaysia, waqf funds in Nigeria are managed by the trustees/

mutawallis themselves. The waqf governance in Nigeria is, however, not

regulated by any statutes or by-laws. This could breed abusive practices in

the waqf fund management and hence lead to a trust deficit toward waqf

institutions in the society.

d)  Turkey

Turkey has inherited the illustrious waqf legacy of the Ottomans. Despite the

collapse of the Ottoman Empire after World War I and its falling into the hands

of Mustapha Kemal Ataturk, the secular founder of the Turkish Republic,

the institution of waqf continued to make great contributions to the socio-

economic welfare of the people of Turkey (Fanani, 2011). The first provisions

governing waqf were introduced in the 1967 Civil Law of the Republic of

Turkey. The idea to officially regulate waqf was propelled by one Vehbi Koc,

a businessman who was well acquainted with the benefits of waqf. It is said

that he obtained the inspiration from the American foundations and the 1935

French Waqf Law (Çizakça, 2014).

Key amendments pertaining to waqf were incorporated into the Civil Law,

amongst them:

1- It prohibited the revoking of a waqf after its establishment; however it

reaffirmed the legality of exchange (istibdal) of a waqf in cases where the

waqf asset or business has not been operating at its full potential.

2- It made it possible for waqf institutions to be tax exempt, upon the

approval of the Council of Ministries, when 80% of their revenues are for

public purposes.

3- It allowed waqf entities to establish companies and account their

revenues under the waqf; likewise, companies could also establish their

own waqf.

The statutory provision that allowed waqf to be corporatized and enjoy

AN ENABLING LEGAL AND REGULATORY FRAMEWORK
FOR WAQF INSTITUTIONS12 CHAPTER 2

revenues from the waqf ventures has spurred another important milestone

in the development of waqf in Turkey. It is arguably the most significant

development as the prevailing practice during the Ottoman Empire restricted

waqf institutions to interest they would charge on the money they gave out.

This later amendment has enabled waqf entities to enjoy the profit of their

investments, in the form of mudarabah, with other corporate waqf institutions

or companies they establish (Çizakça, 2000).

The introduction of such innovative and modernized waqf provisions ensued

from numerous discussions and engagements between waqf sector players

and policy makers. Such provisions were based on the observation that

investing only in real estate does not guarantee a return in investments as

real properties are still subject to natural disasters and economic downturns.

To address this, the waqf asset class was then extended to corporate shares.

The impact and effectiveness of the 1967 amendments on waqf were

tremendous. The result is evidenced by the significant increase in the creation

of awqaf before them and after. A mere 73 awqaf were created from 1923 to

1967 while the number climbed to well over 1,000 between 1967 and 1985

(Çizakça, 2014).  Further innovative developments were implemented via the

Act of the General Directorate of Awqaf 1999. This Act allowed waqf entities

to purchase shares in a company that has yet to be declared to the public, a

move that has enhanced the cash waqf-venture capital (mudarabah) model

(Çizakça, 1998).

The waqf laws went through a drastic change in the late 1980s when the

government learnt that a number of waqf institutions were engaged in funding

fundamentalist groups in the country. To address this, the government

redrafted the entire Turkish Civil Code. The effect of the redrafting exercise

made it harder for individuals or entities to establish waqf corporations unless

they could prove that the waqf had a corpus sufficient for its maintenance.

In addition to that, the government empowered the Ministry of the Interior

to shut down any waqf institution suspected of engaging in unauthorized

activities. The drastic change to the law prompted a huge public backlash.

Due to this, the President of the Republic decided to review the 1998 bill and

resolved the matter by deciding to leave waqf-related matters to the Prime

Minister and maintain the tax exemption on waqf institutions that have 80%

of their revenues devoted for public purposes (Çizakça, 2000).

Another regulatory evolution of waqf in the Republic of Turkey has been the

shift of authority from the Ministry of Awqaf to the General Directorate of

Waqf (GDW). The GDW made it a requirement for every waqf institution to

set up a management board. In addition, in 1992 the GDW made it obligatory

13CHAPTER 2
AN ENABLING LEGAL AND REGULATORY FRAMEWORK
FOR WAQF INSTITUTIONS

for all waqf institutions to pay it certain fees to carry out its auditing and

supervisory duties. Even branches of these waqf institutions were required

to bear this responsibility (Çizakça, 2011).

In the latest developments, in 2008 a number of regulatory changes

were introduced under the Foundation Law affecting the waqf governing

framework. Among the changes:

1- It created a Council of Awqaf and vested in it the power to appoint waqf

trustees.

2- It reduced the amount needed to establish a waqf to a decent 50,000YTL,

which is equivalent to 9,316USD2, and thereafter gave the Council of

Awqaf the authority to set the minimum amount required to establish a

waqf.

3- It further removed the prior requirement of approval and resolved that

prior notification should suffice.

4- It allowed foreigners to be both founders and board members of waqf

institutions as long as the country the foreigners come from has amicable

relations with Turkey.

5- It also allowed waqf entities to engage in international activities.

6- It no longer imposes gift and inheritance tax on donations made to

foundations.

7- Contributions made to foundations for the purpose of maintaining,

repairing or restoring waqf are now fully deductible from income taxes

as opposed to the former law, which had set a 5% limit on the tax

deduction3. Corporate contributions are tax exempt unless 50% or more

of the company’s shares are owned by the founding waqf institution or

the GDW, in which case 10% of the total revenue would have to go to

GDW, which shall use it to develop and restore the waqf asset (Article 28).

e) Indonesia

Indonesia is the largest Muslim country in the world with its Muslim population

of 225 million. Waqf permeates the society and economy of Indonesia and has

played an instrumental role in the development of its socio-economic sector.

Since its independence, the Indonesian government has enacted a number

of laws related to the governance of waqf lands; for example, Government

Regulation No. 10 of 1961 relating to Land Registration, and Government

Regulation No. 28 of 1977 relating to Endowing Privately Owned Land. The

2.  The price exchange is as of
16/1/2019 from XE Currency
Converter https://www.
xe.com/currencyconverter/
convert/?Amount=50000
&From=TRY&To=USD

3.  For more details on the
Foundations Law in Turkey
please see: https://www.
tusev.org.tr/en/civil-society-
law-reform/foundations/the-
new-law-on-foundations-is-
in-effect

AN ENABLING LEGAL AND REGULATORY FRAMEWORK
FOR WAQF INSTITUTIONS14 CHAPTER 2

preamble of the 1945 Indonesian Constitution requires that the government

promote “public welfare”. Although it is a generic term, the meaning would

include institutions like waqf that have proven to bring extensive benefit to

the society over the years.

Waqf in Indonesia is governed by an independent body: the Indonesian

Waqf Board (Badan Wakaf Indonesia - IWB), established in 2004. Its mandate

is to develop the institution of waqf in Indonesia. It supervises, regulates and

guides the trustee administrators (nazirs) in managing and developing waqf

assets, and it can also dismiss and replace nazirs. In addition, it manages and

develops waqf properties at the national and international level as well as

providing policy advice to the government.

Members of the IWB are appointed and dismissed by the President. The

length of service is three years, and a member can be reappointed for one

more term.  The total number of IWB members are between 20 to 30 persons,

chosen from various elements of society. The members of the first period

were proposed to the President by the Minister of Religious Affairs. For the

next period, the members were proposed by a select committee formed by

the IWB. Meanwhile, IWB representatives are appointed and dismissed by

the IWB. The IWB management structure consists of the Advisory Council

and the Executive Agency. Each of them is led by a chairman, who is one of

the members whom the others have elected to lead them.

Another key establishment in managing waqf asset is the Dompet Dhuafa

Republika (DDR). Though DDR is a national zakat collection and distribution

institution, it is also active in waqf asset management. The DDR started

to collect waqf assets in 1999 before it was formally registered as a waqf

foundation in 2001. To ensure efficiency in both zakat and waqf management,

the DDR established a separate division, known as the Indonesian Waqf

Fund (IWF) in 2005. The IWF offers a platform for investment of waqf corpus

for risky yet desirable avenues (microenterprise development) such as in the

tofu industry, livestock business and Islamic microfinance (Siswanto et al.,

2014).

The emergence of cash waqf globally, particularly in the Republic of Turkey,

has attracted the interest and attention of the government of Indonesia.

Prior to 2001, cash waqf was not recognized as an effective tool for waqf

enhancement. However, due to the growing appetite for, and application of,

cash waqf globally, the government of Indonesia realized that cash waqf is

a relevant mechanism to augment and sustain waqf institutions. Upon this

realization, the religious authorities issued a fatwa allowing the application

15CHAPTER 2
AN ENABLING LEGAL AND REGULATORY FRAMEWORK
FOR WAQF INSTITUTIONS

of cash waqf. This development was followed by the introduction of the

Act of Republika Indonesia No. 41 of 2004 that paved the way for a broader

implementation of waqf (Indonesian Waqf Board, 2012).

Numerous initiatives have been introduced under this new Act, particularly

regarding waqf management and securitization of waqf assets. In relation

to waqf management, the law has introduced standards regarding the

qualification and efficacy of waqf managers. Whether they are individuals,

organizations or corporations, they are required to demonstrate a certain

level of competence and faithfulness. In terms of waqf asset securitization,

the law requires that all waqf entities be certified before being able to monitor

and govern the waqf assets. It also mandates the appointment of qualified

legal personnel to attend to disputes that may arise involving waqf assets.

The role of appointing waqf personnel has been assigned to the Directorate

General of the Islamic Guidance Society (Prakasa, 2017).

Further developments took place in 2006 with the introduction of Government

Regulation 42/2006, which extended the waqf asset class to include

moveable assets other than cash, such as capital market instruments. In 2009,

the BWI Regulation 1/2009 came into being which further divided cash waqf

into two categories. The first category is cash flows or gain from investment

activities, while the second category is cash contributed by the waqif to be

used to invest in real estate. In addition, the 2009 regulation mandates that

the first type of cash waqf be done through the recognized Islamic financial

institutions (LKSPWU) whereas it would suffice for the second type to occur

through any duly certified nazir (Prakasa, 2017).

 In the latest development, in 2018 the Bank of Indonesia, IWB, and Islamic

Research and Training Institute, together with a selected number of waqf

bodies’ representatives, launched the Core Principles for Effective Waqf

Operation and Supervision. The said Core Principles are to ensure sound

supervisory waqf management that reinforces confidence and trust;

innovative and sustainable waqf structures; and impactful waqf projects for

the community, environment and economy.

II- Legal Issues Affecting the Development of Waqf

As shown by the experiences reviewed above, the structure and design

of a country’s legal and regulatory framework impact the growth and

development of its waqf sector. This section briefly discusses the relevant

issues and challenges surrounding waqf implementation in these selected

AN ENABLING LEGAL AND REGULATORY FRAMEWORK
FOR WAQF INSTITUTIONS16 CHAPTER 2

countries, namely, Saudi Arabia, Malaysia, Nigeria Turkey and Indonesia. The

issues discussed relate to the key legal areas of jurisdiction, governance,

dispute resolution, registration and taxation.

a)  Saudi Arabia

The Issues of Jurisdiction and Governance

The first article of the Kingdom’s Constitution, as adopted by a Royal Decree

in March 1992, stipulates that God’s Book (the Quran) and the Sunnah of

His Prophet are its constitution. As such, it affirms all practices approved

by Prophet Muhammad (peace be upon him), which includes the practice

of waqf. Having said that, it is common for disputes to arise from the waqf

implementation. To have an effective dispute resolution mechanism, there

is a need for a centralized authoritative body or court which has the final

say in resolving matters relating to waqf institutions. As it is now, different

Shariah courts throughout the country’s history have implemented different

waqf rulings and standards based on their understanding and interpretation

of the Quranic texts and Prophetic teachings.4

The Issue of Dispute Resolution

Royal Decree No. 35/M, Article 11, makes it mandatory for the HCE to appoint

experts in economics and finance to render their expertise to it on matters

pertaining to waqf. This provision does not seem to have been able to solve

the issue of contradictory judgments being passed by the various Shariah

courts. This inconsistency and lack of precedence in law creates more

confusion and serves as an impediment to individuals and institutions that

are looking to establish a waqf.

The Issue of Registration

Non-registration of waqf is a common phenomenon in the Kingdom.

According to Arab News, the Waqf Minister indicated that the great majority

of the total 124,000 waqf assets in the country are undocumented. This

leaves room for abuses and/or unlawful encroachments on these waqf

lands which, again, would result in a major decline in waqf assets, as was

recorded by the Waqf Ministry back in 2015 (Habtor, 2015).

4.  This is due to their lack of
expertise in matters relating
to real estate assets and/or
finance.

17CHAPTER 2
AN ENABLING LEGAL AND REGULATORY FRAMEWORK
FOR WAQF INSTITUTIONS

 b)  Malaysia

The Issues of Jurisdiction and Dispute Resolution

The issue of which court shall decide waqf disputes continues to embroil

the civil and Shariah courts in Malaysia. In terms of jurisdiction, the Federal

Constitution stipulates that the respective states (Shariah Courts) shall have

jurisdiction to deal with matters listed in the State List of the Ninth Schedule

of the Federal Constitution. Among the matters listed are ‘Wakaf and the

definition and regulation of charitable and religious trust’ (Kader, 2013). In

addition to that, Article 121(1A) of the Constitution also stipulates that civil

courts are not allowed to deal with matters that fall within the jurisdiction of

Shariah courts. This basically means that waqf is to be governed by the state

(Shariah court) and not the federal government (civil court).

Despite these provisions, the civil courts have continued to deal with cases

involving waqf. The arguments that have been put forth by these civil courts

is that the Shariah courts have no authority to grant reliefs such as damages,

injunctions or estoppels as those are powers conferred to the Civil High

Court by default.

The Issue of Governance

Each respective SIRC is given the power to govern and administer the assets

of waqf. There have been concerns over the incapability and incompetency

of the SIRCs in enhancing the commercial value of the waqf assets. The lack

of expertise hampers the development and growth of waqf institutions. As

mentioned earlier, joint efforts have been undertaken lately by some Islamic

banks and SIRCs to commercially develop waqf properties.

The Issue of Taxation

The tax facilitative regime for the waqf sector has yet to develop to the

scale as experienced by the zakat (tithes) sector. In Malaysia, by paying

zakat to the authorized zakat bodies, the Muslims enjoy tax rebate which

provide the Muslims the needed tax relief. In other words, the income tax

on the chargeable income is reduced by the rebate. However in the case of

waqf, to benefit from the tax deduction under the Income Tax Act 1967, the

waqf institution or organization or fund must be approved as tax exempted

institution by the income tax authority. The effect of this approval is that it

will allow individual and corporate donors to get tax deduction of only 7% for

individuals and 10% for corporation from their aggregate income.

AN ENABLING LEGAL AND REGULATORY FRAMEWORK
FOR WAQF INSTITUTIONS18 CHAPTER 2

c)  Nigeria

The Issues of Jurisdiction and Dispute Resolution

Similar to Malaysia, there is a battle over jurisdiction in Nigeria. Although

the Constitution of the Federal Republic of Nigeria provides for all Islamic

personal matters such as marriage, divorce, waqf, gifts, etc. to be under the

jurisdiction of the Shariah Court of Appeal, it is not sufficient. The reason

is that the Land Use Act, the highest law relating to land matters in the

country, gives the High Court the absolute authority to deal with all land

matters. It does not exclude waqf or endowed lands from the High Court’s

jurisdiction. In addition to this, there is no specific legislation that governs

waqf as an institution. The absence of exclusive legislation to govern waqf

leaves room for the civil court to intervene and deal with disputes involving

waqf properties. In addition, the structure of hierarchy of courts in Nigeria

is organized in a way that allows an appeal by Muslim parties regarding

matters of personal law from a lower court to a higher court to be handled

by the Shariah Court of Appeal. However, when the dispute relates to land

matters, the jurisdiction is shifted to the High Court and not the Shariah Court

of Appeal (Oseni, 2012).

The Issue of Registration

Waqf registration in Nigeria, as in the Kingdom of Saudi Arabia, is plagued by

a large number of waqf assets that are not registered according to the law

and are therefore susceptible to violations, such as trespass and forefeiture

(Abubakar, 2015).

The Issue of Governance

As mentioned earlier, there is no legislation specifically dedicated to waqf

governance. The Nigerian Constitution has merely placed all personal

matters involving Muslims under the jurisdiction of the Shariah Court of

Appeal. The Shariah courts, as a way to govern their waqf institutions, have

opted to solely implement the Maliki views pertaining to waqf. This includes

the view that waqf is capable of being revoked. The implication of this has

led to instances in which a mosque, founded as a waqf, was later revoked by

the heirs of the waqif (Abubakar, 2015).

19CHAPTER 2
AN ENABLING LEGAL AND REGULATORY FRAMEWORK
FOR WAQF INSTITUTIONS

d)  Turkey

The Issue of Taxation

Turkey has adopted measures that have enabled the development of its

waqf institutions. However, taxation remains an issue. A basic economic

principle states that an increase of tax on a certain asset decreases the

amount of consumer spending on the said asset. This applies to waqf assets.

According to Çizakça (2014), waqf entities are not automatically entitled to tax

exemption. Instead, the decision is subject to the discretion of the General

Directorate. This privilege is only enjoyed by about 0.05% of waqf institutions

in the country. He further adds that despite statistics indicating an increase

in the number of awqaf created between 2008 and 2014 of around 70% per

annum, this seems to be a deceleration from the previous 100% per annum

from 1986 to 1996. In addition, there has been a decline in the amount of

donations since 2009.

The Foundations Law 2008 has imposed further tax burdens and does

not seem to attract market players or provide them with the autonomy to

experiment with new things. Though waqf institutions are qualified to be

exempted from the corporate tax, capital gain tax and property tax, the

imposition of a whole lot of other taxes has deterred the progress of waqf

institutions. This resulted in the decline in the amount of donations from

382,568 YTLs in 2009 to 158,224 YTLs in 2013 as well as a reduction in the

number of mulhak awqaf5  created from 287 awqaf in 2009 to 277 awqaf in

2013 (Çizakça, 2014).

Some examples of taxes that have been imposed on waqf-related assets by

the 2008 Law are:

1- 20% of the gross revenue of awqaf is to be transferred to the GDW.

2- The benefits received by beneficiaries of a waqf are subject to income

tax.

3- A waqf institution’s purchases are subject to a 5% tax while its sales are

subject to a 10% tax.

4- The rent income received by all mulhak awqaf is subject to a 20% tax.

5- Tenants of mulhak awqaf are not exempted from paying the value added

tax (VAT).

6- The profit share (debt financing) of entities that contribute to awqaf

without interest is subject to a 15% tax.

5.  In terms of management, a
mulhak waqf is a waqf that is
managed by its own board of
trustees whereas a mazbut
waqf is managed by the GDW.
Both have legal personalities.

AN ENABLING LEGAL AND REGULATORY FRAMEWORK
FOR WAQF INSTITUTIONS20 CHAPTER 2

7- Commercial enterprises established by awqaf are subject to corporate

tax regardless of whether they are profit, non-profit or charitable

organizations.

8- The associated units of waqf entities that engage in continuous6

commercial activities are subject to corporate tax.

The same article goes on to highlight the fact that a survey conducted

amongst 1,500 participants indicated that well over 50% of them were of

the view that the imposition of tax had an effect on their contributions to

waqf institutions. This is in addition to the current legal framework and the

excessive interference of the GDW when it comes to assessing these assets

(Çizakça, 2014).

e)  Indonesia

The Issue of Registration

Law No. 41 of 2004 attempted to address a number of key areas in order

for effective development to take place in the field of waqf. Its provisions

include expansion of the subject matter of waqf to include movable assets

and introduction of BWI to govern all waqf institutions. However, despite

these developments, there have been shortcomings in the registration of

awqaf. According to the data collected by the Waqf Empowerment Directory

of the Indonesian government, only about 66% of awqaf throughout the

country are registered or legally recognized as waqf. The remaining 34% are

not. The gravity of this number can be compared with the total land size of

waqf property, which has reached up to 4,142,464,287 square meters in 2014

(Hardinawati & Mughnisari, 2015). The reason given was that the state did not

allocate any budget for the certification of waqf assets (Huda et al., 2017).

The effect of the non-registration is that it leads to numerous false claims on

waqf lands. It has also triggered disputes between waqf managers and waqf

beneficiaries.

The Issue of Governance

Although Article 40(1) of the 2004 Act enhanced the responsibility of BWI

to include holding waqf assets on trust, there still seems to be a lack of

competence and expertise among the appointed nazirs/trustees. The

rationale given was that limited funds had been allocated in the government

budget for the management of waqf, particularly to remunerate the trustees

6.  Due to the vagueness in
defining the word ‘continuous’,
the engaging of a waqf entity
in a similar trade more than
once would qualify its series
of similar trades as continuous
and subject it to paying tax.

21CHAPTER 2
AN ENABLING LEGAL AND REGULATORY FRAMEWORK
FOR WAQF INSTITUTIONS

of waqf (Huda et al., 2017). This inadequacy of the state budget has served as

a disincentive for the trustees/mutawallis, resulting in their lack of dedication

towards the development of waqf in the country. Therefore, trustees are not

motivated to innovate or develop movable waqf assets such as cash beyond

the typical immovable awqaf such as masjids and religious centers.

The Issue of Taxation

Currently, the government has yet to introduce any form of tax incentive for

the purpose of promoting waqf among the masses. The lack of transparency

and data reporting by BWI on the existing waqf institutions is another

challenge that hinders potential waqf contributors from contributing to waqf

institutions (Nasir & Ihsan, 2017; Indonesian Waqf Board, 2009-2012).

The Way Forward

The waqf institution is a proven tool that is capable of enhancing a country’s

social and economic development. What it requires is an effective legal and

regulatory system that enables and facilitates the required development. To

groom the waqf institutions to be more effective in meeting the objectives

desired of them, there are a few suggestions that policy makers could

consider. A specific law on waqf must be enacted that deals with all waqf

institutions in a country. The law must be comprehensive; i.e., neither vague

nor restrictive, and it should address all aspects of waqf governance, from

the requirements of creating a waqf to the mode of settling disputes.

Furthermore, the significance of allowing waqf institutions to invest in, buy

and sell non-waqf assets cannot be stressed enough as it equips waqf

institutions with the means to become independent, self-sufficient and

sustainable. At the same time, however, it is mandatory for waqf governors

or authorities to ensure that the guidelines that they set out are effective but,

again, not restrictive.

The waqf governing body must be a body that is properly regulated and

administered. This would include the creation of specialized entities within

the governing body that deal with the specific aspects relating to waqf, such

as the establishment of a Shariah board to cater to matters related to Shariah;

a risk management board that deals with matters related to financial risks

and investments; and a tribunal to deal with disputes and transgressions

that occur in relation to waqf assets (Rashid, 2011). This could be done by

way of mandating a consistent reporting system. Furthermore, every waqf

institution must be subject to an external, professional and independent

AN ENABLING LEGAL AND REGULATORY FRAMEWORK
FOR WAQF INSTITUTIONS22 CHAPTER 2

body that conducts auditing and supervisory inspection. The external body

would also monitor the operations and projects of waqf institutions to ensure

their productivity and report any shady transactions.

Finally, the waqf governing body, with the help of the government, must

implement or introduce creative methods to promote waqf throughout the

country. This can be done through tax incentives, Friday sermons, talks/

lectures, public events by qualified individuals and many other forms of

awareness campaigns. With the adoption of the abovementioned regulations

and best practices, waqf institutions throughout the world would be bound

to flourish and, hopefully, in due time surpass previous nations that greatly

benefitted from the noble institution.

CHAPTER 3

Actualizing the Potential of Waqf
Institutions

INTRODUCTION

The regulatory framework for waqf in a country will determine the

business model of waqf institutions there (Ahmed, 2004). A combination

of governmental and private entities for managing waqf assets has been

adopted in Kuwait and Singapore. While in South Africa and the United

Kingdom, waqf are run by community-based trust and charitable institutions.

Below are the snapshot of waqf institutions in these respective jurisdictions in

particular their achievements and mandate in empowering communities by

investing endowment funds for various community development programs.

It may be noted that other models exist besides these; some of them are

discussed in other articles in this Report.

a)  Kuwait

Kuwait has a population of roughly 4.13 million people, of which 1.27 million

are local and the remaining 2.86 million are expatriates (World Bank, 2019).

Kuwait is a constitutional monarchy. It can be categorized as a high-income

country with the GNI per capita at $31,430. The Ministry of Awqaf was

established in 1962 when Kuwait gained its independence. Between 1949

and 1961, most of the awqaf assets were used for health care services.

Kuwait Awqaf Public Foundation (KAPF) was established in 1993. All awqaf

affairs formerly under the Ministry of Awqaf have been transferred to KAPF.

KAPF is an independent governmental body which administers all aspects of

awqaf in Kuwait including investing and managing the assets, administering

the deeds, training waqf personnel, and raising public awareness about waqf

(Abdul Karim, 2010).

KAPF’s main responsibilities include encouraging people to establish new

awqaf, managing existing awqaf, and allocating funds for activities and for

investment of the assets. In addition, KAPF coordinates with governmental

and non-governmental bodies for the establishment of Shariah-compliant

awqaf projects to achieve waqf objectives (Ahmad et al., 2015). Awqaf funds

in Kuwait have independent management teams that contribute to their

development with integrated vision aimed at achieving the community’s

needs (Ahmed Khalil et al., 2014).

ACTUALIZING THE POTENTIAL OF WAQF INSTITUTIONS24 CHAPTER 3

Ahmed Khalil et al. (2014) observed that proper corporate governance has

been established and that KAPF has also engaged a professional fund

manager. The revenues of its investments between 1994 and 2010 increased

from $30.13 million to $110.82 million. During the same period its capital

assets increased from $373.1 million to $759.2 million, and the market value

of its investments in securities increased from $46.58 million to $975.93

million.

KAPF operates at a high level of transparency, with all its activities viewable

by all awqaf stakeholders. The Awqaf Affairs Council oversees the operations

and investments of KAPF. The Council is chaired by the Minister of Awqaf and

Islamic Affairs, and its members include the Director-General of the Social

Insurance Institutions, the Director-General of Zakat House, a representative

from Ministry of Finance, an officer for investment, and three experts in

various fields appointed by the Council.  Additionally, one important aspect

of its corporate governance is the division of the board into three permanent

committees assigned with various duties:

(i)- Committee on Shariah issues;

(ii)-  Committee on policies for investment of awqaf resources;

(iii)- Committee on policies and strategy for execution of projects with awqaf

resources. (Ahmed et al., 2015)

Below is KAPF’s organizational structure:7

Secretary General of General
Secretariat of Awqaf

Legal & Legitimate

Real Estate Investment Jaafari Waqf Admin

Technical Office

Investment OperationInvestment Operation Private Waqf Channels Finance

Planning & Technical

Consultation
Secretary General Office Control & Audit Admin Dev & Training

Deputy Secretary General for
Resource Development & Investment

Investment Waqf Peojects Information System

Information & Waqf Dev

Maintenance & Real

Estate Development

Maintenance & Real

Estate Development
Waqf Fund Information & Doc

Studies & Foreign

Relations

Deputy Secretary General
of Waqf

Deputy Secretary General
of Waqf Charity Channels

Source: Presentation by Dr. Abdul Mohssen Al-Kharafi former Secretary-General of Awqaf General Secretariat at the
WB-INCEIF-ISRA Waqf Roundtable 2018

Diagram 1: Organizational Structure of Kuwait Awqaf Public Foundation

7.  http://ww2.awqaf.
o r g . k w / E N G L I S H /
ABOUTMUNICIPALITY/
GENERALSECRETARIAT
O F A W Q A F / P a g e s /
AwqafAffairsBoard.aspx

25ACTUALIZING THE POTENTIAL OF WAQF INSTITUTIONS CHAPTER 3

KAPF’s Special Investment Unit is responsible for investment in real estate,

direct long-term investment in non-governmental educational institutions

and Shariah-compliant equities including medium- and long-term mutual

funds locally, regionally and in the global markets. KAPF adopts the following

strategies in its investment:

(i)- minimize risk and protect capital;

(ii)-  diversify investment instruments with different portfolios;

(iii)- diversify sectors including financial, real estate and services;

(iv)-diversify based on geographical locations; and

(v)- set investment ceilings for each sector (Karem, 2010).

According to Karem (2010) KAPF investments in 2006 were distributed as

follows: 41% in the financial sector, 52.6% in the real estate sector and 6.4% in

the services sector. Geographical diversification is reflected in the fact that

13% of its investments in the same year were outside Kuwait. Hence, it can

be observed that the awqaf are not heavily focused in the traditional real

estate sector. She observed that KAPF’s diversification in asset allocation

and its focus on capital preservation in its awqaf investment objectives have

brought success to its overall investment portfolio of awqaf assets.

Table 1: Assets Allocation Portfolios of KAPF in 2006

Asset Allocation KAPF

Equities 47%

Commodities and Real Estate 53%

Total 100%

b)  Singapore

The population of Singapore is roughly 5.6 million people, of whom 45.4% are

international migrants (World Bank, 2019) and 13.4% are Muslims (IndexMundi,

2018). Singapore, with GNI per capita at $54,530, is in the top ten of high-

income countries.

The Islamic Religious Council of Singapore (MUIS), under the Administration of

Muslim Law Act (AMLA), governs the religious affairs of Muslims in Singapore,

including the administration of zakat, halal certification, management and

ACTUALIZING THE POTENTIAL OF WAQF INSTITUTIONS26 CHAPTER 3

administration of awqaf, hajj, mosques and madrasahs (MUIS, 2017). AMLA

also states that any persons can be appointed to administer a waqf, subject

to the approval of MUIS. MUIS provides internal guidelines and ISO processes

for the appointment of mutawallis. These processes include statutory

screening for criminal and bankruptcy records. Other criteria include age and

educational background. Where there are no private trustees for a particular

waqf, MUIS becomes the trustee.

The organizational structure is depicted in the diagram below, which shows

that Council members, who comprise representatives from the private

sector, play a role in monitoring the operations and investments by all types

of mutawallis.

Council Member

Diagram 2: Waqf Administration Organizational Chart

Fatwa Committee

Zakat and Waqf Strategic Unit
(supported by Finance Strategic Unit)

Trustee - Private and Corporate
Trustees

Mutawalli - Individual and Corporate
Mutawalli (Warees)

The zakat and waqf strategic unit of MUIS oversees the awqaf administration

and overall compliance with regards to the three types of waqf administrators:

(i) publicly listed company – British and Malayan Trustee  and BMT is a publicly

listed trust company which manages some awqaf; (ii) private trustees, who

manage and run awqaf set up for particular families; and (iii) a wholly owned

subsidiary of MUIS, Warees Investments Pte Ltd., which manages the rest

of the awqaf. MUIS plays the regulatory role and improves the corporate

governance of awqaf while the trustees and mutawallis play the managerial

role and need to report and seek approval for the sale and purchase of

assets. Annually, without fail, they must submit a full set of accounts to MUIS

within a stipulated time in accordance with the Act.

27ACTUALIZING THE POTENTIAL OF WAQF INSTITUTIONS CHAPTER 3

MUIS has also established a Waqf Dispute Resolution Committee. Existing

mutawallis and trustees can choose to resolve internal disputes through

mediation and, if needed, an inquiry process, without resorting to litigation.

In terms of administrative striving for excellence, MUIS has achieved an

ISO 9001 rating for its management and administration of awqaf. MUIS is

constantly striving to improve its excellent management systems. It has

achieved certification by the Singapore Quality Institute, which marks

the commitment of the organization to meeting standards of excellence

in its result-oriented processes, leadership, attitude to customers and

achievements.

Warees Investments Pte Ltd was established in 2002 by MUIS to manage all

awqaf assets including tenancy matters, development, sales and purchases,

and maintenance of properties. Warees receives commissions for the

services it renders based on the gross income of a waqf. This incentivizes

Warees to maximize returns for the awqaf as its income is based on the

returns (Warees, 2017).

Since its establishment, Warees has successfully transformed a number

of unproductive awqaf lands into huge commercial/residential areas. The

source of financing is mainly cash waqf contributed monthly by Muslims in

Singapore. All awqaf are vested under the Singapore Islamic Religious Council

(MUIS). Currently there are 140 waqf properties and 84 waqf accounts, of

which 64 waqf properties and 60 waqf accounts are managed by MUIS while

another 76 waqf properties and 24 waqf accounts are managed by other

mutawallis respectively.8 MUIS appoints mutawallis for privately managed

awqaf and approves any development or redevelopment or purchases by

them. It holds the title deeds of all, including the privately managed awqaf.

The progressive regulatory changes taken by MUIS have provided a

conducive environment for financial innovation. These include allowing the

leasing of waqf property for up to 99 years without transferring the ownership

to the lessee and also permitting the sale of waqf properties completely

and replacing them with new, higher-yielding freehold properties (istibdal). A

prime example is the sukuk musharakah issued by MUIS in 2002 to finance

the redevelopment of an old mosque on Bencoolen Street into a multi-use

complex comprising a modern mosque, a three-story commercial building,

and fully-serviced 12-story apartment block with 84 units. Sukuk musharakah

have allowed investors in Singapore and abroad to participate directly in

developing various waqf assets. Between 2001 and 2002, Warees raised

$SGD 60 million through the issuances of sukuk musharakah to develop two

8.  Presentation by Warees at
the WB-INCEIF-ISRA Waqf
Roundtable 2018

ACTUALIZING THE POTENTIAL OF WAQF INSTITUTIONS28 CHAPTER 3

waqf lands in Singapore (KFHR, 2012). Additionally, the amendment of AMLA

to establish a sinking fund for waqf will allow better budgetary planning for

the upkeep and development of waqf properties.

Source: Presentation by Warees at the WB-INCEIF-ISRA Waqf Roundtable 2018

The waqf assets in Singapore are primarily real estate, valued at SGD 750

million, and the total assets under management for all the waqf funds as at

December 2017 were $SGD 947 million. The breakdown of waqf assets is as

follows:

Table 2: Types of Waqf Assets as at 31 Dec 2017

2017 2018

Assets

Non-current assets
Property, plant and equipment; Investment properties;
Investment in a subsidiary; Available-for-sale financial
assets; Trade and other receivables

852,895 748,641

Current assets
Trade and other receivables; Advances to subsidiary;
Investment properties held for sale; Other assets; Cash and
cash equivalents

94,309 78,012

Total assets 947,204 826,653

Total Liabilities  90,763 89,574

Total Waqf Funds 856,441 737,079

Source: MUIS FY2017 Annual Report

2002: Sukuk Musharakah
(SGD35m)

51 Bencoolen Street

2005: Sukuk Musharakah
(SGD25m)

11 Beach Road

29ACTUALIZING THE POTENTIAL OF WAQF INSTITUTIONS CHAPTER 3

c)  South Africa

As a non-Muslim country, zakat and awqaf institutions in South Africa have

been established under the Non-Profit Organization (NPO) Act of 1997.

The Act provides an administrative and regulatory framework for NPOs.

According to the Act, each NPO must have a constitution that outlines

the objectives and the various issues related to the membership and

operations of the organization. An NPO must also specify the organizational

structures and mechanism for its governance, keep accounting records of

its income, expenditure, assets and liabilities in accordance with generally

accepted accounting practices, and prepare annual financial statements.

The Act encourages NPOs to maintain adequate standards of governance,

transparency, and accountability (Ahmed, 2004).

The National Awqaf Foundation of South Africa (Awqaf SA) was established in

2000 as an NPO. This community-based charitable organization is aimed at

investing endowment funds for various community development programs.

Though Awqaf SA was informally initiated in 2000, it was registered as a trust

in 2003 under the Trust Property Control Act 57 of 1988. Subsequently, it was

registered as an NPO in 2004 and as a Public Benefit Organization (PBO)

in terms of the Income Tax Act in 2005. Prior to registration as a trust, the

organization operated as an “association not for gain”. Awqaf SA was involved in

the development of the widely adopted NGO Corporate Governance Charter.

It also drafted its own Corporate Governance and Ethics Charter. Awqaf SA

is governed and managed by a volunteer Council of Mutawallees (Trustees)

and a Board of Management. These structures are currently being expanded

to become more representative of the community. The organization is also

governed by a constitution and various pieces of legislation.

Diagram 3: The Organizational Structure of Awqaf SA

Council of Mutawallees

CEO

Management Board

Sub-committee

Project Committee Sub-committee

Project Committee

Source: Awqaf SA9

9  https://awqafsa.org.za/
about-awqaf-sa/corporate-
profile/

ACTUALIZING THE POTENTIAL OF WAQF INSTITUTIONS30 CHAPTER 3

People, Projects and Paisa (PPP) are the three pillars that have guided Awqaf

SA in its operations. “People” refers to the resources they provide for waqf by

either their wealth or their efforts. They help the organization in structures,

funding, advising, and broadly in community service. “Projects” means the

delivery instruments and leadership incubators of community development.

Through projects, Awqaf SA ensures that the organization achieves its

mission and goals. “Paisa” (money) is the core business of the organization:

the mobilization of funds in the form of waqf, lillah10, and zakat. Without a

sustainable means of funding projects, Awqaf SA community development

projects would cease to exist.

Since inception, the organization has been growing its waqf funds and

corresponding investments. It follows a principle of “no capital usage”, which

means one hundred percent investment of capital and utilization of returns

alone, keeping the waqf corpus intact. It raises waqf resources through the

following products: (i) monthly debit orders (a given percentage of monthly

earnings); (ii) lump sum payments; (iii) al-tijarah (giving a percentage of profits

or equity in a business or transaction); (iv) al-mal (donations of property); and

(v) al-wasiyyah (bequests through wills).

Current investments of Awqaf SA are focused on Shariah-compliant

properties. The investment strategy guidelines adopted by Awqaf SA are as

follows:11 11  https://awqafsa.org.za/
about-awqaf-sa/corporate-
profile/

10  Lillah (for Allah) comprises
any form of charity given in
the cause of Allah on a pure
voluntary basis.

Table 3: The Investment Strategy Guidelines Adopted by Awqaf SA

Strategy Remarks

Location Combination of community, provincial, national and offshore

Returns Balance of social and financial returns within constraints of
strategy with a bias to maximization of financial returns

Diversification/Risk Spread risk with bias at low risk, diversified portfolio

Investment portfolio Combination of property, equity (musharakah, mudarabah)
and financial (ijarah, murabahah, takaful)

Equity participation Public/awqaf/institutional partnership possibilities

Currency & Inflation Hedge/factor into strategy

Restrictions Awqaf SA may not invest in unethical or Islamically
unacceptable projects

31ACTUALIZING THE POTENTIAL OF WAQF INSTITUTIONS CHAPTER 3

Awqaf SA ensures that 100% of the donated waqf funds are invested and

always remains capital. Only the income derived from the underlying

investments is spent. As a registered PBO, Awqaf SA enjoys various tax

benefits. Donations to Awqaf SA, subject to certain limits, are also tax

deductible. Awqaf SA is associated with several international organizations

such as the Organization of Islamic Cooperation (OIC); Research Centre for

Islamic History, Art & Culture (IRCICA); Islamic Research & Training Institute

(member of the IsDB); Muslim Religious Council of Singapore; IHH (Istanbul);

Deniz Feneri (Istanbul) and the KAPF.

Diagram 4: Waqf Fund Received

Diagram 5: Cumulative Investment

0

2000

4000

6000

8000

10000

12000

14000

2007 2008 2009 2010 2011 2012 2013 14-15 2016 2017

Waqf Funds Received 2007-2017 (in SA Rands '000)

0

10000

20000

30000

40000

50000

60000

2007 2008 2009 2010 2011 2012 2013 14-15 2016 2017

Cumulative Investment 2007-2017 (in SA Rands '000)

ACTUALIZING THE POTENTIAL OF WAQF INSTITUTIONS32 CHAPTER 3

12  http://www.awqafsa.org.
za/waqfs-and-us/reports-2/

Awqaf SA’s performance in managing the waqf assets can be seen from

the data above. During the last four years, waqf funds received have grown

more than quadrupled, reaching almost 12 million South African Rands (ZAR)

in 2017 (Diagram 4), thanks to the effective awareness campaigns over the

years. Waqf revenues have also increased steadily and in tandem. It seems

2012 was a particularly good year for Awqaf SA. The waqf products offered by

Awqaf SA are Education Waqf; Health Waqf; Youth Waqf; Masjid & Madressah

Waqf; Micro Finance/Investment; Trade, & Skills Waqf; Media & Publications

Waqf; Dawah Waqf; Arts, Culture & Heritage Waqf; Food, Trees & Water

Waqf; Ramadaan Iftaar Waqf; Capacity Building Waqf; Hajj & Umrah Waqf;

Qur’an Waqf; Family Waqf; Palestine Solidarity Waqf Fund; Corporate Staff

Waqf Fund; Discretionary Waqf; and Designated Waqf (Obaidullah, 2014).

d)  United Kingdom

Charity Commission for England and Wales (CC) acts as a regulator to

register and supervise charities there to ensure that the public can support

charities with confidence (gov.uk, n.d.). The Commission is an independent,

non-ministerial government department accountable to Parliament. The

Commission is also accountable to the First-tier (Charity) Tribunal and the

High Court for the exercise of its quasi-judicial powers. The Commission has

five statutory objectives:

(i)- increase public trust and confidence in charities;

(ii)- promote awareness and understanding of the operation of the public

benefit requirement;

(iii)- promote compliance by charity trustees with their legal obligations in

exercising control and management of their charities;

Source: Awqaf South Africa12

Diagram 6: Net Waqf Revenue

0

500

1000

1500

2000

2500

3000

2007 2008 2009 2010 2011 2012 2013 14-15 2016 2017

Net Waqf Revenue 2007-2017 (in SA Rands '000)

33ACTUALIZING THE POTENTIAL OF WAQF INSTITUTIONS CHAPTER 3

(iv)- promote the effective use of charitable resources; and

(v)- enhance the accountability of charities to donors, beneficiaries and the

general public (UK Charity Commission, 2017/2018)

The Commission’s Board is responsible for strategic oversight of the

Commission. In particular it is responsible for developing strategy, monitoring

progress, overseeing legal matters, providing corporate governance and

assurance, and managing corporate risks. It comprises a Chair, two members

with legal qualifications, one member with knowledge of the conditions

in Wales and four additional members with relevant skills and expertise in

technology, accountancy, risk, security and the charity sector. The Board

is currently supported by five committees. The commission’s governance

structure is shown below:

Diagram 7: Structure Governance of UK Charity Commission

Board

overall strategy and future
direction

Governance and
Remuneration

Governance and
 senior civil service

pay issues

Public Interest Litigation &
High Risk Cases

Oversight of
ongoing public

 litigation cases and
 high risk cases

Transform Program Oversight

Strategic oversight
of the transform

program

Audit, Risk and Technology

Internal and external
assurance, corporate

 risk management.
Oversight of IT and

digital strategy

Policy and Guidance

Ensures published
guidance focuses on

our regulatory priorities
and risk framework
oversight of policy

making

Source: UK Charity Commission13 13  https://www.gov.uk/
government/organisations/
charity-commission

Diagram 8: The Organizational Structure of the UK Charity Commission

Board

Investigations, Monitoring &
Enforcement

Investigations;
Outreach; Monitoring

and enforcement;
Compliance, visits
and inspections;

Accountancy services;
Development and

operational intelligence

Legal Services

Legal compliance;
Legal policy advice;
Charities legislation;
High risk registration;

Litigation and decision
review;

Information Law

Corporate Services

Finance and
procurement; HR;

Change management
and internal

communication; Record
information governance
and assurance: Estates

and Security

Operation

Charity services;
infrastructure services

(IT and Digital);
Registrar and assurance;

Registration;
Regulatory compliance

Policy, Planning & Comm.

Strategy and insight;
Guidance and practice;
External affairs; Digital

communications
and engagement;
Governance and
corporate office

Source: UK Charity Commission14 14  https://www.gov.uk/
government/organisations/
charity-commission

ACTUALIZING THE POTENTIAL OF WAQF INSTITUTIONS34 CHAPTER 3

At 31 March 2018, there were over 168,000 charities on the register. During

the year, the Commission regulated £76 billion of charity income (2016-17:

£74.7 billion) and over £73.5 billion (2016-17: £71 billion) of charity spent.

Islamic Relief Worldwide (IRW) is one of the charity organizations registered

under the UK law. IRW started its work in 1984 and has expanded to many

parts of the world. Inspired by Islamic humanitarian principles, it seeks

to help people in need in any part of the world irrespective of their color,

creed or race. IRW has aligned its five-year strategy (2017-2021) with the

United Nations’ SDGs, especially in addressing the root causes of poverty

and improving lives in a sustainable way. In 2017, IRW supported 4.3 million

people in 34 countries, many of them through integrated programs that help

communities become self-sufficient by tackling multiple issues. IRW improved

livelihoods through microfinance loans and provided better access to clean

water, sanitation, healthcare and education. It delivered projects for climate

adaptation and food security to reduce vulnerability, which—in line with its

strategic objectives—empowered women, promoted inclusion, and built the

capacity of faith institutions to contribute to community development.

Board of Trustees of IRW

Chief Executive Officer (CEO)

External Relations and
Advocacy Director

UK Director
Network and Resource
Development Director

International
Programmes Director

Interim Finance and
Services Director

Diagram 9: Structure Organization of Islamic Relief Worldwide

Source: IRW15 15  https://www.islamic-
r e l i e f . o r g / w p - c o n t e n t /
uploads/2018/10/Islamic-
Relief-Worldwide-Annual-
R e p o r t - a n d - F i n a n c i a l -
Statements-2017.pdf

* The Board of Trustees monitors management directly or through board sub-committees.

Waqf Funds is one of the financial instruments established by IRW to support

its humanitarian projects. In 2017, Islamic Relief Waqf Fund (IRWF) generated

income of £687,786 which supported seven humanitarian projects in six

countries. Of the total income, £255,496 came from waqf shares, sadaqah

jariyah and Waqf Support Fund donors, while £432,290 came from returns

generated by investments. (IRW, 2016). Waqf funds created by Islamic Relief

Waqf will offer donors an option to invest in waqf shares of a fixed value

35ACTUALIZING THE POTENTIAL OF WAQF INSTITUTIONS CHAPTER 3

or to contribute smaller amounts towards the Waqf Support Fund for the

following areas: (i) emergency relief and disaster preparedness; (ii) water

and sanitation; (iii) orphan and child welfare; (iv) education; (v) health and

nutrition; (vi) livelihood support; (vii) qurbani; and (viii) general. Over the past

15 years, the return on investment from Islamic Relief Waqf has funded 118

humanitarian relief and development programs around the world. Money

spent on waqf projects in 2016 is as follows:

Diagram 10: Distribution of Waqf Projects in 2016

Source: IRW Annual Report 2017

CONCLUSION

Several business models for waqf institutions have been discussed in this

chapter. KAPF, Warees, which runs as an investment asset management

company, and Awqaf SA, registered as a nonprofit institution, have shown

the importance of waqf institutions being managed by a professional

manager with good corporate governance. Additionally, the approaches

taken by governmental religious agencies will also have an impact on the

development of waqf assets. They can play the limited role of a regulator

only for trustees, as does the Charity Commission in the United Kingdom.

Alternatively, they can act as the mutawalli while at the same time allowing

other entities to participate as waqf trustees, as does MUIS.

Outsourcing to an external fund manager and property management

company can be another option in developing the waqf assets efficiently

while at the same building the capability and skills of trustee (mutawalli)

Qurban

Health and Nutrition

Sustainable
Livelihoods

Orphan and Child
Welfare

Emergency and Disaster
Preparedness

Education

Water and Sanitation

3%

14%

26%

18%

8%

7%

24%

$410,427

ACTUALIZING THE POTENTIAL OF WAQF INSTITUTIONS36 CHAPTER 3

through knowledge transfer programs. Mohammad Faiz Azmi emphasized

that waqf properties should be managed solely by qualified Muslims in order

to ensure that the objectives of the waqf system are upheld (SC-OCIS, 2014).

Performance measurement mechanisms for waqf institutions need to be

developed to assess the efficiency and effectiveness of mutawallis and to

rectify issues of accountability and transparency (Obaidullah and Muhamed,

2016).

CHAPTER 4

Enhancing Waqf Instruments

INTRODUCTION

Islamic law (Shariah) may not have invented the concept of charitable

endowment or waqf, but it did provide a legal framework and practice that

has impressed the world for centuries. Enhancement of the concept and

rules of waqf was provided at the advent of Islam and the formation of the

Shariah. There are, however, very few Shariah texts that provide specific rules

for waqf; thus, jurists extrapolated on them to respond to detailed issues that

arose over time. In this chapter, we consider some of these enhancements

in practice and consider what the future may hold for more sophisticated

application and packaging of waqf instruments without veering from waqf’s

accepted underlying principles. Rising interest in concepts like sustainable

development and value-based intermediation, as well as awareness that

many nations are over-reliant on taxation, have provided new impetus for

the emergence of enhanced waqf applications to meet the needs of modern

society.

Retaining Islamic Civilisation through Waqf

The case for waqf revival has already been made, and the process has even

been initiated in some jurisdictions. Before reviewing the potential for current

enhancement, we will briefly review some advancements over the centuries.

As a key contributor to the economic success and expansion of the Islamic

civilization, waqf developed into a network of social institutions supporting

the basic needs of communities without dependency on government.

History attests to the fact that waqf was the main provider for a plethora of

social services for both Muslims and non-Muslims that included education,

health services and municipal services.

The success of the waqf institution in Turkey has contributed a viable model

for waqf perpetuity. A recurring feature is a combination of functions; for

example, a masjid coupled with a school, coupled with healthcare and

other social services, and supported perpetually with rentals from business

premises owned by the waqf. The waqf as an entity managed by trustees

receives sufficient revenue to not only maintain its own infrastructure but

also expand its asset base in order to increase the impact for the designated

beneficiaries.

ENHANCING WAQF INSTRUMENTS38 CHAPTER 4

Retaining Islamic Civilisation through Waqf

In the case of Malaysia, there are more than 13,000 hectares of old waqf

properties that require funds for the restoration process.16 This is not

restricted to Malaysia; since the 20th century, much of the stagnation in

the development of waqf land and property globally has been due to

poor governance and narrow interpretations of waqf law. For example,

certain jurisdictions and opinions recognise only land or property as valid

contributions to waqf and exclude cash. This may be due to the perceived

requirement of perpetuity for waqf assets and the perception that cash may

be consumed by inflation over time. However, cash waqf, when competently

managed, enables virtually every Muslim to contribute to the value of waqf

for the benefit of societal development whereas very few people have the

means to make endowments of real estate.

Some of the specific challenges in the development of productive waqf

assets may be expressed as follows:

 � Underdeveloped waqf property and land

Most waqf founders tend to opt for the most convenient and indisputable

mandate for waqf property in the form of mosques, schools and cemeteries.

Unfortunately, very few properties end up generating revenue for their

management, maintenance and potential enhancement. As a result, many

lie idle in disrepair or are taken over by unscrupulous landlords or derelicts.

Land that is endowed in Malaysia often remains underdeveloped; current

statistics show that Malaysia has approximately 13,400 hectares that are left

idle and unproductive. A mere 2% of the total acreage has been developed.

A 2004 study by the IsDB revealed the same state of affairs across the nation.

For example, in Perak, Malaysia,78% of waqf land was reserved as cemeteries

at that time, while the rest was used for mosques and schools.

One of the main reasons for underdevelopment may be their locations.

Although some are in strategic locations in the middle of the city, others are

scattered across rural areas with limited potential for development.

 � Limited Islamic financial sector participation

This may be due to a number of reasons, including issues of legality of

ownership in waqf land, lack of expertise in understanding the legal and/

16  https://www.nst.
c o m . m y / o p i n i o n /
columnists/2018/02/338153/
waqf-gaining-trust-social-
economic-susta inab i l i ty,
accessed 31 January 2019.

39ENHANCING WAQF INSTRUMENTS CHAPTER 4

or shar‘i (Islamic legal) implications of waqf development, and inadequate

cash-flow plans and revenue forecasting, among others. Also, Islamic

financial institutions must ensure the protection of their deposits and value

generation for their shareholders, all whilst managing risk. It is possible that

the risk of financing such projects may simply be too high.

 � Perceived inadequacy in transparency and governance of waqf

The high financial risk is often supported by a perceived lack of transparency

and governance in the management of waqf assets. Waqf founders, for

example, tend to create waqf assets informally, driven by the intention to

do good and reap the rewards in the hereafter. They frequently have little

to no knowledge of waqf requirements and potential. In Malaysia, SIRCs act

as waqf administrators. They face problems in the registration of waqf land

titles as properties sometimes cannot be identified and registered. Without

the land title, it becomes difficult for the SIRCs to develop waqf land.

As the realisation dawns regarding the need for an upgraded approach

to waqf instruments and for the redevelopment of old waqf properties to

maximise social impact, we may consider the following:

1- Enhancing the structures of traditional modes of waqf,

2- Garnering the support of Islamic financial institutions for the rejuvenation

and/or development of waqf assets,

3- Using innovative technology for efficiency, transparency and expansion.

Traditional modes of finance such as ijarah, hikr and istisna’ are being utilised

in redeveloping old waqf properties in, for example, the United Arab Emirates,

Malaysia and Singapore. Innovative financing for waqf is also underway

through Islamic banks such as the IsDB, APIF, Bank Muamalat Malaysia

Berhad, and Bank Islam Malaysia Berhad, using instruments such as sukuk

al-intifa‘, musharakah mutanaqisah, BOT (Build-Operate-Transfer) and sukuk

musharakah. The use of innovative technology such as blockchain and

smart contracts is expected to reduce the challenges in transparency and

disclosure. For larger and more complex waqf projects, BOT or even ROT

(Rehabilitate, Operate and Transfer) may be coupled with Islamic finance

solutions that utilize more sophisticated capital market approaches such as

hybrid waqf-sukuk as a source of funding.

ENHANCING WAQF INSTRUMENTS40 CHAPTER 4

Advances in Moveable Waqf

Waqf of moveable properties, most typically in the form of cash waqf

structures, has led the innovation and enhancement of the waqf institution

globally. Versions of the concept have emerged in different countries,

providing credible evidence of the opportunities that lay ahead in waqf

innovation. Some examples include direct cash waqf, deposit cash waqf,

waqf shares, and corporate waqf. These will be explained briefly.

1- Direct Cash Waqf

This is the most popular form of cash waqf. A noteworthy example

in practice is what has been done in Singapore for the purpose of

assisting orphans, Islamic schools, charity, and burial of poor Muslims.

Another example is the practice in New Zealand for similar groups of

beneficiaries. Dividends of cash waqf are utilized for Islamic schools,

marriage guidance, orphans and other social services for the expat

Muslim communities living there. In India, cash waqf is used for those

with disabilities, distribution of food during Ramadhan and general

support of Muslim communities.

2- Waqf Shares

Waqf shares have been issued by KAPF, Islamic Relief Waqf in the United

Kingdom and Perbadanan Wakaf Selangor in Malaysia, among others.

The purpose of this type of waqf is to support the needy through an easily

understood share purchase. The dividends arising from the investing

activities of the waqf institution that is tasked with managing the shares

become the benefit to be distributed to the needy and destitute. The

benefits of these waqf shares would be for global distribution, wherever a

need may arise. Since the designated beneficiaries are assigned through

the waqf deed, there is no restriction to spend locally before considering

global needs, as in the case of zakat. Islamic Relief in the UK has applied

the purchase of waqf shares by donors for many of the projects and

initiatives they manage such as an education waqf scheme, water and

sanitation waqf scheme, orphans waqf scheme, and others.

3- Deposit Cash Waqf

Selected Islamic banks in Malaysia provide a product facility for the

collection of cash waqf through a deposit scheme. Bank Islam Malaysia

Berhad, Bank Muamalat Malaysia Berhad and Maybank Islamic Berhad

all provide a deposit service for the collection of funds to redevelop

old waqf property. In Malaysia, a significant amount of old waqf assets

41ENHANCING WAQF INSTRUMENTS CHAPTER 4

comprise undeveloped land. There is an urgency for the provision of

financing from Islamic banks that would support the development of

these assets so that they may finally provide benefit as intended by the

waqif (founder). An Islamic bank in Bangladesh also has similar schemes,

utilising returns for socially responsible initiatives.

4- Corporate waqf

This is a very successful model adopted by corporates that would like to

manage their social responsibility initiatives in a way that will extend even

beyond the lifespan of their own companies if the need arises. Although

different versions exist, it is most widely practiced in Turkey, Malaysia,

India, Pakistan and Oman. In Oman, for example, some private property

developers assign a portion of the property, say 20%, for the purpose

of waqf. This means that all rental from the assigned waqf would be

channelled to the beneficiaries for education scholarships, microfinance

programs and other initiatives. Another example is Waqf An-Nur in

Malaysia that focusses on health services. It also provides microfinance

funding through qard hasan (benevolent interest-free loans).

The application of cash waqf is constantly evolving and improving. However,

these developments have not been without challenges. Typical obstacles to

its progress include lack of knowledge and awareness of the concept, low

levels of collection for cash waqf, and lack of transparency in channelling

the funds to the specified beneficiaries. This may be overcome through

workshops, awareness programs and the use of technology to provide

adequate disclosure, thereby enhancing the trust and confidence of the

public.

Waqf Sukuk

A more recent innovation in raising finance for waqf development is the

waqf sukuk. The applications are boundless as funds may be raised for

public sector projects such as highways, hospitals and schools. Sukuk

refer to investment certificates that represent ownership in underlying

projects. This ownership may be directly linked to the underlying asset or

to the securitised cash flows of the underlying project. The advantages of

applying a sukuk structure include the fact that sukuk are generally rated,

have significantly reduced risk and provide consistent returns to investors,

similar to conventional bonds. Revenue-generating, public service projects

may require initial funding before cash flows offset the financing acquired

ENHANCING WAQF INSTRUMENTS42 CHAPTER 4

over a specified period. For example, a toll highway may require funding

for construction in a BOT structure. At the time of transfer (usually back to

government), the project would have fully paid the initial funding required

together with an annual or semi-annual return. Whilst the initial structure is

sukuk, at handover or transfer, the highway is converted to a waqf for the

benefit of the public. Revenue generated from the highway may continue

and this may be used for maintenance or expansion of the waqf, etc.

A similar structure, referred to as a temporary cash waqf, may also be

a consideration. Simply, the founder (waqif) provides a loan for a specific

duration. The justification for temporary cash waqf is based on the view of

some Muslim jurists that it is permissible to make a conditional waqf. It may

be argued, however, that in order to avoid the controversy around temporary

cash waqf, the structure of a waqf sukuk may apply the standard structure

of investment until maturity, followed by conversion of the underlying

project into waqf. In this case, no temporary cash waqf is required as initial

contributions would be treated as investments.

Mini Case Study - MUIS

The successful example of Majlis Ugama Islam Singapura (MUIS) in the

rejuvenation and enhancement of waqf assets provides a model for possible

emulation. MUIS established a subsidiary in 2001 that became operational

in 2002 with the objective of accelerating waqf development throughout

Singapore. The subsidiary is managed by qualified professionals from the

industry and operates with an asset management approach, focusing on

building a portfolio of waqf properties in strategic locations that provide high

rental returns.

Waqf assets in Singapore are valued at approximately SGD 750 million.17

Annual valuation amounted to SGD 370 million; gross income was SGD 7.8

million, which resulted in a gross yield of approximately 2.1%. More than SGD

3.1 million was disbursed per annum across various beneficiaries: 49% to

masjids, 13% to madrasahs, and 22% to organisations.

The potential of waqf in Singapore is immense as existing waqf assets are in

prime locations including the Central Business District (CBD), property prices

have been on the increase for over a decade, and there are high returns on

rentals.

However, this progress requires support from government, religious bodies

and a visionary board of trustees.

17  Osman, Z (2018):
Presentation at World Bank-
INCEIF-ISRA Roundtable on
Waqf, 13 September 2018,
Sasana Kijang, Kuala Lumpur,
Malaysia.

43ENHANCING WAQF INSTRUMENTS CHAPTER 4

As for the government, a legal framework to safeguard and support waqf

management have been in place since 1968, with an amendment in 2017. The

AMLA gives autonomy to MUIS as the waqf regulatory body for Singapore.

This allows for better management and efficiency as MUIS is able to advise on

the appointment of trustees, ensure that enough sinking funds are available,

etc. Such an arrangement is, however, a double-edged sword; if MUIS was

inefficient and/or negligent, it would negatively impact all waqf assets in

the country. Regular reviews and amendments are needed to ensure AMLA

stays relevant in meeting the changing needs of society.

The Fatwa Committee of Singapore has also been supportive. In 1988, the

Committee issued a ruling that allowed for the implementation of istibdal

(asset migration or substitution). With this permission, higher value assets

were acquired by selling off poorly performing assets, assets in danger

of acquisition, or those in unsuitable locations. The waqf management,

therefore, is consistently supported by firm religious foundations.

As part of MUIS’s initiatives, Warees is implementing a 3-year Waqf

Revitalisation Scheme (WRS). The plan intends to enhance asset value,

rejuvenate the characteristics of waqf properties and create more waqf

assets. Some examples of innovative instruments used by MUIS include:

 � 2002: Sukuk Musharakah (SGD35 million) at 51 Bencoolen Street,

 � 2005: Sukuk Musharakah (SGD25 million) at 11 Beach Road,

 � 2012: Hibah financing (SGD5 million) for The Red House, District 15,18

 � 2018: Mini Property fund (SGD1.5 million) at 600 Geylang Road,

 � 2019: Hybrid of equity and cash waqf contributions (SGD24million) at

Mosque Street, CBD Chinatown.

Warees has applied a three-pronged strategy in promoting waqf

enhancement:

1- Allowing community institutions to benefit from the hibah returns for

programs and services,

2- Mobilising surplus funds from institutions to fund waqf developments,

3- Providing opportunities to participate in revenue-generating waqf

development projects.

18  The Red House was
rejuvenated from a
dilapidated property
to a mixed heritage
development with 42
residential units in three
different classes with five
retail shop-houses and
one historic bakery.

ENHANCING WAQF INSTRUMENTS44 CHAPTER 4

The success of MUIS’s approach has provided an example for professional

asset management of all waqf property. With ISO 9001 accreditation, MUIS

is one of the pioneers in setting the standard for efficient, reliable waqf asset

management.

Using Technology for Waqf Efficiency

The use of technology to manage waqf assets has become less gimmicky

as the need for trust deed management, monitoring, supervision and overall

governance have become crucial to waqf success. Digital platforms are very

much fit for purpose as the diverse needs of users are considered. They have

their origins in a 1991 concept paper by Haber and Stornetta called “How

to Time-Stamp a Digital Document”. The most famous practical application

of the idea was Bitcoin, proposed by a pseudonymous author, Satoshi

Nakamoto, in 2008 as a peer-to-peer electronic cash system based on the

now-famous blockchain.

What is Blockchain?

Blockchain is an open, decentralised ledger that serves as a record of

transactions between parties in a manner that is immutable (at present)

across a peer-to-peer network. The separation of Bitcoin from its platform–

blockchain–has spawned disruption in almost all sectors of the economy,

beginning with the finance industry. In fact, by the end of 2018 more than

15% of all banks were applying blockchain in some form. The most significant

advantage provided by blockchain is the element of trust. Since the record

cannot be changed, it can confirm ownership, provide transparency in

transactions and safeguard the sanctity of contracts – a fundamental

requirement in Shariah – without the need for a central regulator or certifying

authority.

However, blockchain technology is on the road to maturity and requires

significant application before it can become mainstream. The integrity of

the data the technology protects is positively correlated to the trust of its

users. For waqf users, specific needs should be met before selecting the

appropriate technology. Al Razouki (2018)19 explains that the integration of

blockchain with the basic components of waqf enables the most crucial

element of public perception: Trust. He further explains that the building

blocks of waqf may have both similarities and conflicts with blockchain.

In the case of conflict, further effort would be required for more seamless

integration. In summary, these components include:

19  Available at: https://
medium.com/@
Mussaad/ crypto-waqf-
building-a
-sustainable-islamic-
blockchain-6adb2fab9f1f
(accessed 12 February
2019).

45ENHANCING WAQF INSTRUMENTS CHAPTER 4

1- The Founder or Waqif

The Shariah requirements for the waqif include ahliyyah (legal capacity),

which includes being a sane, mature adult who is not bankrupt.

Since one of the purposes of blockchain tech is to keep the parties

anonymous in a decentralized system, it would be unknown whether or

not the founder has legal capacity from a Shariah perspective.

2- Endowment or Waqf Deed

This is a declaration by the founder that identifies the purpose of the

waqf and designates its beneficiaries. It is permitted by the majority of

the Islamic juristic schools for the waqf deed to be amended and/or

revoked before final endowment (usually at death). Waqf deeds may be

loaded onto smart contracts that would carry the necessary code for the

digital deeds. An automatic ledger entry would be created that would be

easy to audit if funds are moved in and out. This will also protect the rules

of the specified waqf as the smart contract may be digitally protected,

provided a perpetual reference point. Any amendments would also be

possible in an updated contract, with all historical changes documented

and transparent for all users.

3- The Waqf Asset

This refers to the estate or asset that has been ring-fenced for endowment.

The asset would need to be permissible from a Shariah perspective and

free from any encumbrance as well. Thus, it cannot be public property

or pledged to someone else. We have already established that it can be

movable or immovable, so the conversion of the value of the asset as

tokens, for example, would only be a representation of the underlying

waqf asset. The challenge, however, is ensuring the ‘perpetuity’ principle

is upheld as waqf assets can generally not be owned or traded.

4- Beneficiaries

The recipients of the waqf are significantly broad without the restrictions

that apply to zakat. Hence, waqf proceeds may be used for public

purposes or limited solely to designated beneficiaries (for example, the

community the asset exists in), and may be for both Muslims and non-

Muslims. Of course, the basic Shariah requirements would still apply:

(a) Beneficiaries must be identifiable.

(b) Beneficiaries must not be at war with Muslims.

(c) Beneficiaries may not use the waqf in an impermissible manner.

ENHANCING WAQF INSTRUMENTS46 CHAPTER 4

This may be difficult to manage on a blockchain platform since the users

are largely unknown. However, as the technology advances, different

variations of the platform are becoming available, with unique uses that

may soon be compatible with the Shariah requirements.

5- Administration

As the portfolio of waqf assets increases, the need for administration,

supervision, monitoring and auditing become more pertinent. Similar to

the case of inheritance, where an executor is appointed for the deceased’s

estate, an administrator is required as the complexity and value of the

underlying waqf assets increase.

Blockchain can be used effectively here to minimize abuse or

misappropriation of funds by administrators as the assets can be managed

through a smart contract verification process, like mining verification.

This is an independent, anonymous process of verification by peers

in the network, ensuring that there is little room for fraud or any other

laundering attempts by those in charge. Since governance is seen as one

of the key factors in the failure of waqf to realize its full potential, we may

contend that it is a secure smart contract application that will reduce

the issues around compliance. Furthermore, any exorbitant charges that

administrators may pay themselves can be restricted through adequate

protocols.

6- Termination or Dissolution of the Waqf

The legitimacy of the waqf is based on its perpetuity. However, there are

acceptable instances in the Shariah that would allow for termination; for

example, if the waqf asset is no longer able to provide any benefit to the

intended beneficiaries. Another example of dissolution would be when

it is included as a stipulation in the waqf deed. For example, in the case

of family waqf, it may be stipulated that the waqf would be discontinued

after the last family member dies as there would be no more qualifying

beneficiaries. This may be easily integrated with a rules-based smart

contract structure to fit within the protocol of the application.

47ENHANCING WAQF INSTRUMENTS CHAPTER 4

SUMMARY

The recent revival of waqf is based on its historically successful contribution to

socio-economic development. The success of this revival will be dependent

upon the advances made in enhancing waqf instruments whilst maintaining

the sanctity of the Islamic legal requirements of the waqf institution.

Current progress in enhancement practice, as exemplified by MUIS, for

example, may be replicated as an outcomes-based model for managing

waqf assets professionally and effectively. Awareness and understanding of

the endless possibilities of waqf assets and their contribution are essential

components of the institution’s success. Opportunities abound.

A clear strategy for the use of technology to improve waqf management

and enhance its efficiency has the potential to reduce the burden placed on

governments the world over.  However, this requires a societal paradigm shift

towards awareness and application of the more sophisticated approaches in

waqf management. This may also require organisations, private companies

and financial institutions to provide expertise and support for waqf

administrations, particularly through the use of cutting-edge technology.

Digital platforms based on decentralised databases provide a level of

transparency that waqf administration is in desperate need of. Incorporation

of these applications would build trust and enhance the credibility of waqf

institutions, thereby encouraging more contributions from the public. The

use of technology is not in the recording of the waqf asset alone. It is also

in the collection of waqf contributions and the disbursement of dividends

to the beneficiaries. Therefore, a more comprehensive approach to waqf

enhancement that constantly evolves with more efficient and credible

modalities will play a significant role in raising the waqf institution to its

former glory.

CHAPTER 5

The Way Forward

It is an established fact that waqf is one of the most important components

of ISF and a clear manifestation of maqasid al-Shariah (the higher objectives

of Islamic law). The waqf concept serves well the United Nations’ SDGs as

well as CSR and SRI objectives. It is a powerful instrument that makes it

easier for ISF to address the modern socio-economic issues of society for

the benefit of both Muslims and non-Muslims. It helps redistribute wealth

and can systematically address the entire life cycle of the society.

Notwithstanding all this, enhancing the role of waqf and sustainably

realizing its potential in all needed areas require further elaborations and

enhancements as follows:

First, there is a need to enhance the awareness of its macro dimension and

core fundamentals. Misconceptions must be overcome regarding waqf

subject matter, instruments and time frame as these are all impediments

to widening its implementation. Its subject matter needs to be expanded to

include intangible assets, cash money and services. Its instruments need

to be expanded to include financial instruments that cover banking, takaful

and the Islamic capital market. Also, flexibility needs to be allowed in its time

frame to enable the wide usage of temporary waqf.

Second, there is a need for proper waqf legislation in the form of a specific

law on waqf, and sound management policies should be adopted that

benefit from the best global practices. Key issues the law should address

include jurisdiction, registration, taxation and dispute resolution. It should

also be supported by a sound governance framework with special emphasis

on the mutawalli (trustee administrator). Eligibility for this role should

be extended to private corporate entities, and the authorities should be

allowed to partner and collaborate with experts from the private sector

to commercialise and monetise waqf assets.  A good example of such

collaboration is the successful partnership between Majlis Agama Islam

Wilayah Persekutuan and Lembaga Tabung Haji in developing the RM151

million Menara Bank Islam project in Kuala Lumpur. Another important

element of sound governance is to put in place strategies to have the waqf

assets managed by highly qualified professional experts implementing the

latest modern innovative investment strategies. Furthermore, an imperative

THE WAY FORWARD50 CHAPTER 5

governance requirement is to expose the waqf business and institutions to

an external, professional and independent body that conducts audits and

supervisory inspection.

Third, there is a need to enhance the existing waqf models and instruments

and innovate new ones to maximize the impact of waqf on society. New waqf

models such as waqf-based Islamic microfinance, waqf-based takaful and

banking models and hybrid models are evidence of such innovation. However,

further enhancement of the existing models and further innovation of new

models is needed, especially in strategic sectors such as health, education

and transportation. These are the key sectors for addressing economic and

social issues and thereby contributing to the sustainable development of

the society. Excellent initiatives involving financial instruments include waqf

shares as issued by KAPF, Islamic Relief Waqf in the UK and Perbadanan

Waqaf Selangor in Malaysia. Other creative innovations include the cash

waqf instrument implemented in deposit cash waqf as provided in some

Islamic banks in Malaysia, and waqf sukuk to support the public sector, which

are gaining momentum. All these are good manifestations of the efforts

exerted by these financial institutions; however, the existing instruments

need some enhancements in terms of expanding their perspectives. There

is a need to go beyond considerations of feasibility and applicability to

include consideration of how these instruments contribute to maqasid al-

Shariah and the SDGs. Equally important is the innovation of new financial

instruments that fit in the new modes of financing and embrace the financial

technologies. Temporary cash waqf is a good example of this possibility.

Fourth, there is a need to create an enabling environment for technological

innovation to attain the highest level of waqf efficiency. Fintech provides huge

opportunities to make waqf more inclusive, cost-saving and transparent

while still being Shariah compliant. Blockchain technology can play a great

role in unlocking the potential of waqf in the digital area as it can seamlessly

incorporate the founder (waqif), the endowment (waqf deed), the waqf

asset, the beneficiaries and the administration within its distributed ledger.

However, the use of technological innovation in all aspects of governance,

models and instruments is still at an early stage. More efforts are required

to ensure the maximum integration of this technological innovation as it

establishes trust, the most crucial element of public perception.

Fifth, a proper research and development engine should be established to

bring real advancement and innovations to waqf and it essential elements. It

is true that considerable efforts have been exerted to promote research and

development. In fact, some leading research entities have been established

51THE WAY FORWARD CHAPTER 5

based on waqf contributions; for example, IRTI of the IsDB, and INCEIF and

ISRA of BNM. There have also been excellent contributions by bodies that

provide support for Islamic finance by issuing fatwas and setting standards

such as the International Fiqh Academy, AAOIFI and the national fatwa

councils. All these entities, and others besides, have made intellectual

contributions of various types: setting standards and guidelines for waqf,

organising conferences and conducting research related to waqf issues.

Despite all this, academic research on waqf issues is still below the standards

needed to expand its scope and deepen its examination. There is a strong

need to establish academic programs and training and to enhance public

awareness of the importance of waqf and its huge potential for public good.

In a nutshell, waqf offers a huge opportunity for all of humanity to reduce

poverty and address the current pressing socio-economic issues in a more

equitable manner and, hence, help people live with dignity. However, the

collaboration of all concerned parties and employment of the most advanced

and sophisticated strategies and means are the keys to achieving success.

52

Ahmad Hafiz Abdul Aziz is a Financial Sector Specialist with the World

Bank Group Global Knowledge and Research Hub in Malaysia. Mr. Abdul

Aziz brings with him ten years of relevant experiences in financial sector

development, particularly in the area of Islamic capital markets, green

and sustainable finance, financial inclusion and SME finance. He has

worked as a Principal Assistant Director at the Ministry of International

Trade and and Industry and as Manager of teh Islamic Capital market

at the Securities Commission Malaysia. He holds a Master’s degree in

Islamic Banking and Finance from Bangor University, United Kingdom

which he completed under the Chevening scholarship, and a Master of

Arts in Islamic Revealed Knowledge and Heritage (Fiqh and Usul Fiqh)

(Honors) from the International Islamic University Malaysia.

Wei Zhang is a Senior Financial Sector Specialist in the Finance,

Competitiveness and Innovation Global Practice of The World Bank

Group based in Malaysia Office. She joined The World Bank Group

in 2001 and worked on financial sector knowledge program in World

Bank Institute and Financial Sector programs in East Asia and Pacific

countries. She has mainly worked financial sector development advisory

and lending projects in SME finance, capital markets development,

financial inclusion and consumer protection, sustainable finance in

China, Mongolia, Vietnam, Laos, Pakistan, Papua New Guinea and

now in Malaysia.  Prior to joining The World Bank Group, Wei worked

in telecommunications industry and agriculture technology transfer

programs in China and US.  She holds MBA on International Business

Strategy and MA on International Trade Policy from George Washington

University.

REPORT TEAM

The World Bank Group

53

International Centre for Education in Islamic Finance (INCEIF)

Assoc. Prof.  Dr. Baharom is currently heading the Research Management

Centre.  His current areas of research are applied macroeconomics,

especially those in relations with Shadow Economy, Crime and Natural

Disaster. He taught Quantitative Method to the Masters students at

INCEIF. He is also aggressively involved in applied research funded by

industries and government agencies, having led and co-researched in

applied researches with a total fund of almost RM4 million. He also

publishes article in peer reviewed and high impact journals apart of

chapter in books and books. Have delivered quite number of keynotes,

among them in World Halal Conference 2017 and 2018. Dr Baharom

has been the editor of IF Hub, a quarterly magazine for the last 3 years.

Asst. Prof. Dr. Ziyaad Mahomed is currently the Associate DEAN of

Online Programs and Director of Executive Education at INCEIF. He

is Chairman of the Shariah Committee of HSBC Amanah, Malaysia.

He also serves on Shariah Boards in South Africa, Central Russia,

Maldives and Malaysia amongst others. He has trained and advised

financial institutions in more than 15 countries in Europe, Asia, Africa

and the Middle East with participants exceeding 9,000 for his training

programs. He is the recipient of numerous global awards for his unique

ISF – Fintech modelling techniques being tested in the UK, South East

Asia and Africa. Dr. Ziyaad holds qualifications from Malaysia (PhD in

Islamic Finance; Professional Master’s in Islamic Finance CIFP), the UK

(BA (Hons) Business Finance), South Africa (MBA; Cert Islamic Law) and

Jordan (Adv Dip Arabic).

54

Assoc. Prof. Dr. Said Bouheraoua is currently Director of Research

Development and Innovation Department at ISRA as well as editor-in-

chief of ISRA International Journal of Islamic Finance for Islamic Finance.

He is also a lecturer at the Global University of Islamic Finance (INCEIF).

He is member of the Board of Directors of Affin Islamic Bank, Shariah

member of the Central Bank of Oman, Chairman of Affin Islamic Shariah

committee, Chairman of Trust Bank Amana Surinam, Shariah member

of MNRB Takaful & Retakaful. He has published several books, book

chapters and articles in refereed journals. He has presented papers

at international conferences including the International Fiqh Academy

of the OIC. He was a Shariah consultant for the conversion of several

conventional banks and has conducted several trainings in Islamic

finance in Malaysia and abroad.

Dr. Noor Suhaida binti Kasri is currently the Head of ISRA’s Islamic

Capital Market Unit. Prior to joining ISRA, she was an advocate and

solicitors as well as a Syarie lawyer. During her legal practice, she

was appointed as one of the members of the Malaysia’s Investigating

Tribunal Panel, Advocates & Solicitors Disciplinary Board and headed

the Shariah Legal Clinic of Kuala Lumpur Bar Legal Aid Centre.  She

received her PhD in Islamic Banking Finance and Management from the

University of Gloucestershire (in collaboration with Markfield Institute of

Higher Education), United Kingdom.  Her Master in Laws was from King’s

College of London. Her Bachelor of Laws and Diploma in Shariah Legal

Practice were from the International Islamic University of Malaysia. She

has written a number of research papers, textbook chapter and articles

and presented in conferences globally.

International Shari’ah Research Academy for Islamic Finance (ISRA)

55

Mohamed Al- Amine Sano is currently a student at the International

Islamic University of Malaysia (IIUM), completing his Masters program

in Islamic Banking and Finance (iIBF). After completing his double

degree program in Law and Shariah, he decided to venture into the

field of Islamic Finance, where he was instantly inspired by the values

of the subject that are based on justice and equity.  Apart from studies,

Mohamed Sano has also partaken in organizing and emceeing

numerous international conferences and workshops on Finance

and youth development, such as the Global Islamic Fintech Summit

(GIFS), International Shariah Scholar Forum (ISSF) and Al-Sharq Youth

Annual Conference as he strongly believes that public discourse and

community integration are key factors to genuine societal impact.

56

APPENDIX

Roundtable Agenda

Islamic social finance tools have been
instrumental in the alleviation of poverty
and socio-economic development for
over 1,400 years. Some of these
instruments have been adopted and
applied even outside the Islamic world.
One instrument in particular - Waqf
(endowment) – has been utilised even at
the establishment of the Oxford
University’s Merton College in 1264.
Throughout Islamic history, waqf was the
main provider for many of the social
services that today are financed by the
state. These include the provisions of
education and healthcare, infrastructure
development and maintenance as well as
social welfare provisions for the poor and
destitute. Waqf institutions have also
supported a more equitable distribution of
income and wealth as wealthy individuals
and families released property into the
service of the people for ‘doing good’.

Although a significant number of waqf
institutions exist globally, the success of
these institutions rely on efficient
governance, regulation, supervision
mechanisms and effective management.
Since most countries and regions do not
have enabling waqf regulations or
monitoring processes, the value and
output of awqaf assets are mostly on the
decline. The potential however, is
enormous. For example, Malaysia has
almost RM1.2 billion in waqf land value
(Yayasan Waqf, 2016), with research
suggesting that only 2% of total acreage
has actually been developed.

Organised by

W
O

R
LD

BANK- INCEIF-ISR
A

Roundtable
on Waqf

W
O

R
LD

BANK- INCEIF-ISR
A

Roundtable
on Waqf

MAXIMISING SOCIAL
IMPACT THROUGH WAQF
SOLUTIONS

1 3  S E P T E M B E R  2 0 1 8 ,  T H U R S D AY
T R A I N I N G  R O O M  3 . 1 ,  3 . 2  &  3 . 3
S A S A N A  K I J A N G ,  B A N K  N E G A R A  M A L AY S I A

AGENDA
8.00 am –
8.30 am

Event Registration and Information Station / Refreshment

8.30 am –
8.35 am

Doa Recitation by Dr Said Adekunle Mikail, ISRA

8.35 am –
9.30 am

Welcoming Remarks:
Dr. Firas Raad, Country Manager for Malaysia, East Asia and Pacific, the World
Bank Group

Keynote Address:
Prof. Dato’ Dr. Azmi Omar, President & Chief Executive Officer, INCEIF

9.30 am –
10.30 am

Session 1: Overview of the Global Waqf Landscape
Moderator:      Assoc. Prof. Dr. Said Bouheraoua, Director of Research, ISRA
Speaker:         1. Dr. Mohammed Obaidullah, IRTI, IsDB

2. Mr. Aamir A. Rehman, United Nations Development Programme (UNDP)
3. Assoc. Prof. Dr. Magda Ismail Abdel Mohsin, INCEIF

10.30 am –
11.00 am

Coffee Break

11.00 am –
12.30 pm

Session 2: Development Potential of Waqf Institutions
Moderator:       Asst. Prof. Dr. Adam Ng Boon Ka, INCEIF
Speaker:         1.  Dr. Abdul Mohsen Al-Kharafi, Former Secretary-General of Awqaf

General Secretariat
2. Mr. Syauqi Mujahid Robbani, Rumah Zakat Indonesia
3. Mr. Husein Benyounis, Awqaf New Zealand

2.00 pm –
3.00 pm

Session 3: Enhancing Waqf Instruments
Moderator:       Asst. Prof. Dr. Ziyaad Mahomed, INCEIF
Speaker:         1. Prof. Dr. Ashraf Md Hashim, ISRA

2. Mr. Zaini Osman, Islamic Religious Council of Singapore
3. Mr. Hamid Rashid, Founder of FINTERRA

12.30 pm –
2.00 pm

Lunch Break

3.15 pm –
4.30 pm

Session 4: Panel Discussion: Towards an Enabling Framework for Waqf
Institutions
Moderator:       Prof. Dato’ Dr. Azmi Omar, INCEIF
Panelist:          1. Dr. Nurdin Ngadimon, Securities Commission Malaysia

2. Dr. Yono Haryono, Bank Indonesia
3. Mr. Aderi Adnan, Labuan IBFC

Closing Remarks:
Assoc. Prof. Dr. Said Bouheraoua, Director of Research, ISRA

3.00 pm –
3.15 pm

Tea Break

4.30 pm End of Programme

57

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58

SESSION 1

Overview of the Global Waqf Landscape

Assoc. Prof. Dr. Said
Bouheraoua

Director, Research and
Innovation, ISRA

(Moderator)

Assoc. Prof. Dr. Magda Ismail
Abdel Mohsin

INCEIF

Mr. Aamir A Rahman
Senior Advisor,

UNDP

Dr. Mohammed Obaidullah
Lead Research Economist,

IRTI IsDB

“Waqf was one of the
backbones of Islamic

civilization. Its role was like a
network, which penetrated all
economic and social sectors
whenever it found a need to
promote that sector without
any cost to the government.
However, towards the end

of Ottoman empire this role
was destroyed for various

social and policies reasons.
Even though these institutions
have been revived in the past

decades, but there are still
some challenges.”

- Dr. Magda Ismail Abdel
Mohsin

59

SESSION 2

Development Potential of Waqf Institutions

Mr. Syauqi Mujahid Rabbani
Independent Director,

Rumah Zakat Indonesia

Mr. Husein Benyounis
Secretary General,

Awqaf New Zealand

Assist. Prof. Dr. Adam
Ng Boon Ka,

INCEIF
(Moderator)

Dr. Abdul Mohsen Al-Kharafi
Former Secretary General,

Awqaf Kuwait

“Once you master the
structure of waqf, then the
model automatically will
start developing. All you
need is to be innovative.
To be honest, the biggest

lack in awqaf is the
leadership.”

- Mr. Husein Benyounis

60

SESSION 3

Enhancing Waqf Instruments

Mr. Hamid Rashid
Founder,
Finterra

Prof. Dr. Ashraf Md Hashim
Chief Executive Officer,

ISRA Consultancy Sdn Bhd

Mr. Zaini Osman
Chief Executive Officer,

Warees Investments

Assist. Prof. Dr. Ziyaad
Mahomed

Associate Dean of Online
Program and Director,

Executive Education. INCEIF
(Moderator)

In philanthropy work, we
have a trust deficit… so we

want to overcome this trust
deficit through sukuk. Other

channels are possible, yet the
disclosure will not be enough;

from where the money you
are getting from, to whom

you are spending the money.
Or if you enter into projects,
there will be insufficient due
diligence on the project. It
is also not rated because

nobody will be obliged if it is
normal raise fund, nobody will

ask you to rate the project.
Lastly, it is not regulated and
no trustee- not accountable.

- Prof Dr. Ashraf Md Hashim

61

SESSION 4

Towards an Enabling Framework for Waqf Institutions

Prof. Dato’ Dr. Mohd Azmi
Omar

President and
Chief Executive Officer, INCEIF

(Moderator)

Mr. Aderi Adnan
Director

Business Development,
Labuan IBFC

Dr. Nurdin Ngadimon
Deputy Director. Shariah

Development and Capital
Market, SC Malaysia

Dr. Yono Haryono
Analyst, Islamic Ecocomics and

Finance Department,
Bank Indonesia

“What is the main difference
between the Waqf trustee

and foundation? The trustee
manages and become the

mutawalli of that asset and
the Waqif cannot intervene
in it. There are some cases

come to the point where
Waqif want to become part
of the management in the
project because they feel

that they can do more due to
their knowledge on the asset

management. ”

- Mr. Aderi Adnan

62

63

64

65

GLOSSARY

Terms Descriptions

Hibah Gift; transfer of a certain property without any consideration during the
lifetime of the donor.

Hikr Long term leasing of waqf properties.

Ijarah Leasing; sale of usufruct of an asset.

Istibdal Substitution; e.g. exchanging an item of tangible property for its cost
value in zakat, exchanging prices in a sale, to provide a substitute for a
leased item when it is damaged, and to exchange endowed property in
an endowment.

Istisna' An exchange contract for manufactured goods, allowing cash payment
in advance and future delivery, or future payment and future delivery.
Payment can also be made in instalments upon mutual agreement
between parties.

Mudarabah An investment partnership with profit-sharing implications. One or more
partners as investors provide capital to a mudarib (the partner who pro-
vides entrepreneurship) to undertake a business activity. Profit is shared
between partners on a pre-agreed ratio; any loss is borne solely by the
investors.

Murabahah Markup sale; a contract of sale in which the seller declares his cost and
the profit.

Musharakah A partnership contract with profit and loss sharing. In a typical
musharakah contract, two or more parties provide capital to venture
into a business, share profits according to a pre agreed ratio, and share
losses based on the equity participation.

Musharakah
Mutanaqisah

A hybrid contract consisting of an initial contract of partnership and a
sale contract; a type of partnership in which one of the partners under-
takes to gradually buy the share of the other until the buyer completely
owns the property that had been jointly owned.

Mutawalli The custodian of an endowment; undertakes responsibility for manage-
ment of its affairs, safeguarding it, making it flourish, and carrying out the
stipulations of the person who created it. He is not allowed to deal with
the subject matter of the waqf except to ensure that its benefits ac-crue
to the intended purpose. Among the duties of the waqf custodian are
collecting its yield, distributing it to its rightful recipients, and evaluating
properly the applications for its proceeds.

Nazir Synonym to Mutawalli, the custodian of an endowment.

66

Terms Descriptions

Qard Hasan Benevolent loan; an interest-free loan extended on a goodwill basis,
primarily for welfare purposes, i.e., the borrower pays back only the
amount borrowed.

Sadaqah Charity.

Sukuk Certificates of equal value representing undivided shares in ownership
of tangible assets, usufruct and services, assets of particular projects or
special investment activity.

Sukuk Al-
Intifa’

Certificates of equal value representing undivided shares in the limited
rights to the real estate being utilized associated with a limited period
(tenure).

Sukuk
Musharakah

Certificates of equal value evidencing the certificate holder’s undivided
ownership in the musharakah venture; certificates of equal value issued
with the aim of using the mobilized funds for establishing a new project,
developing an existing project or financing a business activity on the ba-
sis of any partnership contract so that the certificate holders become
the owners of the project or assets of the activity per their respective
shares, with the musharakah certificates being managed on the basis of
partici-pation or mudarabah or an investment agency.

Takaful Mutual guaranteeing through mutual support and shared responsibility
whereby a group of people agree to jointly guarantee one another
against a defined loss. Takaful is an alternative to contemporary
insurance.

Waqf An endowment of charitable trust whereby a certain property is held and
preserved for the exclusive benefit of a certain charitable objective, and
any use or disposition of it outside that specific objective is prohibited.

Waqif One who initiates a waqf.

Zakat Religious tax; an obligatory contribution which every wealthy Muslim is
required to distribute directly to the poor or to pay to the Islamic state,
or another agent, to distribute on their behalf.

67

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