Sultan Nazrin Muizzuddin Shah

Sultan Nazrin Muizzuddin Shah

Wednesday, 18 July 2018 16:07

The future is ours

The following is the keynote address of Sultan of Perak Sultan Nazrin Muizzuddin Shah at the 5th World Conference on Islamic Thought and Civilisation (WCIT) at Casuarina@Meru, Ipoh, Perak, yesterday.

BISMILLAHI r-Rahmani r-Rahim. Assalamu‘alaykum warahmatullahiWabarakatuh.

Your Excellencies, distinguished scholars, ladies and gentlemen,

It gives me great pleasure to welcome you all to this, the 5th World Conference on Islamic Thought and Civilisation. As ever, I am most delighted to be here to address you all today, at this conference hosted by the university which bears the name of my dear father, the 34th Sultan of Perak, Al-Marhum Sultan Azlan Shah. It is truly an institution which is very dear to my heart, and, returning here for another of these prestigious, international conferences, I am heartened — indeed, proud — to see Jami’ah Azlaniyah, this Islamic university, continue to flourish and thrive in an increasingly global context.

As the WCIT takes place for a fifth time, I must laud the efforts of the organisers on their selection of a theme which is, at once, positive, proactive and cautionary.

This conference gathers together some of the world’s finest thinkers, speakers and scholars, to reflect on the important challenge of “Securing the Future”, and to share ideas about practical strategies for doing so. For, the phrase “Securing the Future” reminds us that the future is, indisputably, not yet secure. The world is beset with many burgeoning crises. Global warming and pollution pose a very real and imminent threat to the planet, not only to plant and animal life, but ultimately to human existence.

Poverty and financial instability continue to devastate the lives of many people the world over, with more than 780 million individuals globally subsisting on less than US$1.90 (RM4.03) per day. Almost every day in the news we hear of discord between nations and peoples, such that, according to the data collected by the World Economic Forum, someone is displaced every three seconds, driven from their home because of war or persecution. As of the end of 2016, the number of people displaced by conflict worldwide was greater than the population of the entire United Kingdom. Indeed, from all of these perspectives, the future seems far from secure.

I am especially heartened to note, therefore, that through its many excellent sub-themes, including “Learners Today, Leaders Tomorrow”, “Economy Matters” and “Cultural Language of Religion”, this conference sets out to address a variety of serious global challenges for the future in discursive and proactive ways. I want to touch upon a number of these related topics this morning, and I am delighted that we can also look forward to papers by eminent researchers from a wide variety of countries, fields and academic institutions, which will explore these themes in greater depth and detail.

Ladies and gentlemen,

Although I have opened on a serious note, I come here today with a message of hope and positivity, a call for action. I come here to tell you, to urge you to believe that “the future is ours”.

The future is ours to safeguard and shape, and ours, I hope, to enjoy. “The future is ours.” It is a short, seemingly simple assertion, and yet one which invites a number of questions — not least, what do I mean by “ours”? To whom, am I suggesting, does the future belong?

As a Muslim, I say that “the future is ours” in that I believe Islam has much to offer the world when it comes to tackling some of the biggest challenges of the future for mankind, particularly in economic and environmental terms. I have spoken in the past about the ways in which Islamic finance could play a vital role in addressing issues of poverty and financial instability on a larger, global scale. It is widely acknowledged, for instance, that Islamic banks generally fared much better during the financial crisis of 2007-2008, demonstrating greater resilience than non-Islamic banks, according to a report by the International Monetary Fund. This, surely, is a sign that Islamic finance models could contribute greatly to the global banking sector as a whole, providing stability and security in the face of future economic uncertainty.

As well as offering the hope of future economic stability, Islamic finance may also hold some of the answers when it comes to addressing the serious problem of widespread poverty. Through the social finance institutions of zakat, waqf and sadaqah, Islam enshrines charitable giving at its core, and there is no doubt that these mechanisms could be better mobilised to provide poor-relief to a greater number of individuals, both Muslims and non-Muslims, worldwide.

We should also note, moreover, the huge potential of sukuk bonds to generate wealth for the common good and for all people.

Although sukuk are Syariah-compliant investments, a number of Socially Responsible Investment or SRI sukuk have been developed in recent years which are designed to raise money to fund socially beneficial projects for everybody. Take, for example, Gavi, the Vaccine Alliance, which launched the first international sukuk intended for a charitable purpose in 2014, raising US$500 million in its first year to help fund immunisation programmes in some of the world’s poorest countries. I am delighted, also, to be able to mention the Khazanah sukuk as an example of an SRI sukuk, which helps to fund schools and education right here in Malaysia. I sincerely hope that more sukuk may be used to such socially responsible ends in the future, and as sukuk issuance continues to increase, spreading to new markets such as the United Kingdom and South Africa, it seems that this hope could very well be realised. Sukuk bonds are emerging as a viable, popular and ethical investment option, and this is a contribution which Islam can make to the future of the economy and to human welfare, on a truly global scale.

This discussion of sukuk, moreover, leads me into another area in which I believe Islam has an important role to play in securing the future of the planet: that of protecting and preserving the natural environment. As well as SRI sukuk bonds, recent years have also witnessed the inception of the so-called “green” sukuk,

and I am very pleased to be able to say that Malaysia has been an innovator, promoting bid’ah hasanah, in this respect. Just last year, in 2017, Malaysia launched the world’s first ever Green sukuk as a collaboration between Malaysia’s Central Bank and Securities Commission, together with the World Bank. The proceeds from this sukuk will finance environmentally beneficial projects such as the development of renewable energy sources here in Malaysia.

But, there is much more still to be done when it comes to tackling the ever-growing problem of climate change. This conforms to Islam’s philosophy of the Adamic man’s mandate as God’s khalifah, to act as stewards of the planet.

Allah subhanahu wa-ta‘ala reminds us of our God-given honour in the Quran with the words, “We appointed you as stewards (khalifah) in the earth — so that We might see how you behave!”

With this God-given honour, we are entrusted also with a grave responsibility.

At present, humanity is damaging, not nurturing the planet, and this ultimately means damaging the future. Carbon dioxide pollution, generated particularly by the burning of fossil fuels, has resulted in rapidly rising global temperatures, leading to the melting of glaciers and ice caps, and to dramatic rises in sea levels.

To give a tangible sense of the rate at which this crisis is developing, researchers predict that most central and eastern Himalayan glaciers will have entirely disappeared by 2035. This is a stark indication of the speed with which we must act if we are to address the escalating problem of global warming. Climate change and human activities such as deforestation are also having a devastating effect on the earth’s biodiversity, leading to the extinction of the other living creatures with which we share this planet. According to the World Wildlife Fund, the rate of species extinction is somewhere between 1,000 and 10,000 times higher than the natural extinction rate. The preventable loss of a species is truly a loss for our future. It is a God-given duty of Muslims to strive to reverse or, at the very least, to halt this environmental damage. The future of the planet is our divine responsibility.

When I say that “the future is ours”, however, I do not speak only as a Muslim. I speak also as a human, as a citizen of the world, as belonging to that Adamic family: for I believe that the future belongs to each and every one of us, irrespective of our religion, our race, and even our nationality.

Indeed, if we are to take on the major challenges like climate change, which pose a serious and imminent threat to our future, we must think and work beyond our modern borders and identity boundaries, and we must also, moreover, empower each and every individual to feel that their actions can make a difference.

The former First Lady of the United States of America, Eleanor Roosevelt, once wrote in an inspirational phrase, that “the future belongs to those who believe in the beauty of their dreams”, and although it might sound like something of a cliché, it is a notion that I would like all of us to hold on to today. The future belongs to those who believe that they have the power to shape it, to effect real, decisive change, and to have their voices heard.

Ladies and gentlemen,

We have just witnessed our 14th general election two months ago here, where the citizens of Malaysia, the voters, brought about substantial, even unprecedented political transformation through the ballot box. From this defining moment in our country’s relatively young history, I do hope that the citizens of Malaysia feel empowered to make their mark, and to influence their nation’s future.

As I stressed a little over a decade ago, “Malaysians of all races, religions and geographic locations need to believe beyond a shadow of a doubt that they have a place under the Malaysian sun”. It will require what our ulama call both tajdid as well as islah, to breathe new life into and to rejuvenate our institutions, and where necessary to improve upon them.

There is no denying, however, that there will be “growing pains” in our journey to make Malaysia a mature democracy to join the rest of the community of nations already in that Premier League of democracies, so to speak. That is why I believe that we should not leave anyone behind in this process, including those with whom we may disagree. We must avoid the unhealthy practice made in some countries where, following an important victory, “the winner takes all”. Everyone under the Malaysian sun should be part of this journey, and we should be mindful to involve all of the nation’s stakeholders in this historic journey.

Ladies and gentlemen,

I have spoken at this conference several times in the past about the vital importance of investing in and empowering the world’s youth. Young people, after all, really do represent our planet’s future. To reiterate a hugely pertinent quotation which I cited two years ago, by the director of the United Nations Population Fund, “Young people are the innovators, creators, builders and leaders of the future. But, they can transform the future only if they have skills, health, decision-making and real choices in life”. Of course, investment in education and healthcare is absolutely vital, as I have emphasised in the past, but it is this notion of involving young people in decision-making and empowering them to feel that they do have “real choices in life” which I wish to dwell on before closing. We often talk about young people being the leaders and policymakers of tomorrow, but I suggest that we also need to do more to make young people feel actively consulted and engaged in decision-making today. Indeed, there are numerous case studies which demonstrate that mobilising youth populations, for example, in national peace building and community cohesion projects can be hugely effective, significantly improving the overall success of such efforts. Following the end of the Nepalese civil war a little over a decade ago, the thorough involvement of young people in peace consultations resulted in an 80 per cent reduction in violent protests. Meanwhile, earlier this year, UNESCO reaffirmed its commitment to continue and to reinforce its work with young people in community development in South Sudan, ensuring, “that their voices are not only heard, but that they actually become drivers of change in their respective communities”.

At the same time, there is also evidence to suggest that when young people feel disempowered, disaffected and ignored, they will inevitably seek to bring about change in other, less constructive, collaborative, democratic and even peaceful ways. Analysis of the Arab Spring of 2011 has suggested that youth unemployment was one of the underlying causes of the uprising, with unemployment rates at almost 30 per cent in Tunisia, where the protests began. Notably, reports indicate that jobs were high on the demand lists of these early protestors. What is especially tragic about this fact is that, despite youth unemployment being a root cause and driver of the uprising, very little has changed in the aftermath of these events in the Arab world. Indeed, World Bank statistics indicate that youth unemployment rates are actually even higher now than they were in 2010-11. The message, it seems, is only too clear.

When young people are consulted and actively involved in political and diplomatic processes, they can help to effect change which is significant, peaceful and positive for all. When young people feel overlooked and disenfranchised, the routes they may take in their attempts to get their voices heard can actually result in a worsening of their already compromised situation.

In Malaysia, it would seem, but also around the world, we need to do more to enable young people to “become drivers of change”, to empower them to believe that the future really is theirs to influence and build. As leaders, scholars, and people with a platform, we need not only to champion those issues which we believe matter to today’s youth, but also to invite young people to speak and to be heard, to share their ideas in their own words, within democratic and diplomatic forums, and not outside of them. To underline the vital importance of this, I would emphasise that young people currently make up nearly half of the world’s population: as of 2017, 42 per cent of the global population was under the age of 25, and that number is set to grow. We must, I think, do more to engage these many millions of people in shaping their tomorrow, today.

Ladies and gentlemen,

My thoughts today have not shied away from the many difficult challenges facing our world in the future. Youth disempowerment, financial uncertainty, political turmoil, global warming: these are just some of the serious issues which we must address, and quickly, indeed, if our world is to have a future at all. But my message is ultimately, I hope, one of optimism. It will undoubtedly take the efforts of us all, young and old, men and women, of every faith, nationality, race and creed, to secure our planet’s future. The future is our collective responsibility; and, if we take up that responsibility now, the future will also, I believe, be our reward, in this life and in the next.

Thank you.

Published in: The New Straits Times, Wednesday 18 July 2018

Source: https://www.nst.com.my/news/government-public-policy/2018/07/391875/future-ours

It gives me great pleasure to be here this morning, and to address this gathering of experts and proponents of waqf and Muslim endowments, which is a fascinating subject of real interest and importance to me.

I would like to begin by applauding the Ministry of Higher Education and the University of Malaya on the establishment of a Chair devoted to waqf studies, which draws attention to the many facets of endowments in the Islamic tradition that can be explored and optimised for the advancement of society as a whole.

My hope is that this positive development for waqf in Malaysia will encourage other government ministries, religious authorities, corporate bodies and individuals to consider this social finance instrument as a viable, sustainable funding option for socially beneficial projects, thereby reducing dependency on public funds.

Indeed, I look forward to the day when endowment-funded universities become the norm rather than the exception here in Malaysia, and I hope that the various state Islamic councils and universities can work hand in hand to make this vision a reality.

The general concept of waqf should be familiar to us as a predecessor of modern trusts and endowments. A donor endows a waqf with an asset and, in doing so, makes an irrevocable transfer of that asset, while also stipulating the intended charitable use of the funds it generates.

A waqf institution then spends its revenue in perpetuity on the fulfillment of public needs, according to the wishes and conditions established by the donor.

Once the asset is registered as waqf under Islamic law, it can no longer be inherited, sold or given as a gift. It is placed under three key restrictions: irrevocability, perpetuity and inalienability. In fact, the asset now belongs to the divine Almighty, Allah Subhanahu wa-Ta‘ala (SWT), and remains intact or permanent.

This permanence points to the original sense of the Arabic word for waqf, which literally means “to freeze” or “to stop”; in other words, as the original asset is now “frozen”, only its generated revenue can be channelled to the stipulated beneficiaries.

Although some have argued that the practice of waqf may have existed well before the advent of the Islamic religion, Islam was, in fact, the first religion to develop a comprehensive legal framework that promotes, guides and fosters the development of the institution of endowments and charitable trusts.

In a famous Hadith invoked by the Muslim ulama to legitimise the practice of waqf, the Prophet Muhammad Sallallahu ‘alayhi Wassalam (SAW) said:

“When a human being dies, his or her good deeds also come to an end, save three things (that they leave behind): (first) a perpetual charity (sadaqa jariyah), (second) any beneficial knowledge, and (third) a pious child praying for him or her.”

A notable example of a waqf property is the Well of Sayyidina Uthman Radiyallahu ‘anhu (RA) in Madinah, which was founded in the first year of Hijra during the Prophet’s own lifetime. The famous Well of Uthman originally belonged to someone who was selling water to the poor inhabitants of Madinah at an exorbitant price.

The Prophet SAW promised Paradise to the person who would buy the well and endow it to the residents of that city. Upon hearing this, Sayyidina Uthman at once set out for the owner and purchased the well in two instalments, paying a total sum of 38,000 silver dirham, which was a hefty sum of money at the time. He then registered the well as waqf and allowed everyone, Muslim and non-Muslim, to draw water for free.

Alhamdulillah, this well has remained “intact” to this day, and one can still witness water being pumped from it, albeit now using an electrical motor, to irrigate the surrounding farmlands. Indeed, many date palms and other trees thrive in the area.

Over the years, the authorities in charge of the waqf, the mutawalli, have invested the money received from the sale of farm produce as well as from other investments related to the original endowment. As of 2013, this investment income totalled 50 million Saudi riyal (RM52.24 million). As the enduring example of the Well of Uthman makes evident, waqf undoubtedly stands as one of the greatest contributions of Muslim civilisation.

Throughout the Islamic world, and across many centuries, waqf has led to the completion of magnificent works of architecture, and has allowed vital services — including education and healthcare — to be financed, organised and maintained, to the benefit of hundreds of thousands of individuals, Muslims and non-Muslims alike.

Waqf also provided a means of achieving a more equitable distribution of income and wealth, and of introducing sustainable and inter-generational social investments in society. Some of us today may not realise this, but for every conceivable enterprise for the advancement of public good across the Muslim world historically, there was always a waqf behind it.

Institutions of waqf reached their zenith during the 16th and 17th centuries, at the height of the Ottoman Empire. Indeed, the waqf system became one of the building blocks of the Ottoman economic and social order.

Imperial waqfs established by the Ottoman sultans were some of the largest economic and social institutions of the time, holding vast agricultural land holdings and diverse income-yielding real estates, managing extensive budgets, and providing not only religious services, but social and educational projects too.

In the language of economists, these imperial waqfs also functioned as redistributive institutions. They collected income from different rural regions, and channelled the funds into town economies, redistributing this income through the purchase of food and other goods, the provision of charitable services, the upkeep of buildings, and even through maintaining the salaries of their employees.

As well as contributing to the economic development of the Muslim world, moreover, historians have shown that the law governing waqf was borrowed by Europeans, and by the English, in particular, following the Crusades in the Holy Land (1095-1291), when they became acquainted with Islamic jurisprudence and culture.

A famous example of this — something I was privileged to witnessed during my days at Oxford University — is Merton College, which was established with a financial endowment in 1264. Scholars have argued that the original endowment deed which established the college was based on Islamic law through waqf deeds common at the time.

This endowment has, of course, facilitated centuries of scholarships, learning and teaching, and has safeguarded and fostered the freedom of thought and expression which is so essential to the university system today.

We might draw a parallel with the earlier Nizamiyyah College of Baghdad, founded in 1065; this institution’s independence and self-government, made possible through its waqf endowment, created the intellectual environment which, in turn, produced luminaries of the Muslim world, such as the great Imam al-Ghazali (d. 1111). Indeed, the historical significance of waqf is highlighted by the fact that the founding of Merton College is now generally viewed as a milestone in the evolution of European and Western universities.

In the United States of America, meanwhile, most of the top universities have their own endowments. The Harvard Endowment, which is Harvard University’s largest financial asset, is made up of more than 13,000 individual funds invested as a single entity.

The endowment’s returns have enabled leading financial aid programmes, promoted groundbreaking discoveries in scientific research, and funded hundreds of professorships across a wide range of academic fields.

Distributions from the endowment provide a critical source of funding for Harvard. At the end of the fiscal year of 2017, the endowment paid out US$1.8 billion (RM7.1 billion), contributing over a third of Harvard’s total operating revenue in that year — to put this into perspective, this is larger than the government budget of Afghanistan, Montenegro, and Barbados, for example (figures taken from The World Factbook — Langley: CIA, 2016).

This endowment, which has facilitated so much discovery and learning, is ultimately modelled on the Islamic waqf system.

It is, I believe, a testament to the contribution that the concept of waqf has made to progress and development worldwide, and it also demonstrates the immense potential of the waqf instrument to generate funds for international public good.

Despite these success stories in the East and the West, both today and in the past, the prevailing view is that more could and should be done, to ensure that waqf institutions are managed effectively to achieve broader socio-economic objectives.

In Malaysia today, most of the waqf properties are connected to religious institutions: mosques, madrasas, and cemeteries. Very little of these waqf land generate income for the waqf’s sole authorities, the mutawallis, which are the respective state Islamic councils here in Malaysia (i.e. the Majlis Agama Islam Negeri).

These properties and lands are underdeveloped, and this is due in large part to their location, as much of the waqf land is rural, scattered across large areas, with little potential for development. Current statistics indicate that of Malaysia’s nearly 13 and a half thousand hectares of waqf land, only two per cent of the total area has actually been redeveloped.

In addition to the challenge posed by the location of these waqf lands, the state Islamic councils also face problems in relation to the registration of waqf land titles. In cases where the land was bequeathed many generations ago, the titles for waqf land cannot always be identified. Without these titles, it is almost impossible for these councils to develop the land.

More broadly, waqf is under-utilised as a viable instrument for social economic sustainability simply because of a widespread lack of understanding about its operational structure, and about the applicable, permissible ways of channelling its benefits.

Many stakeholders, as well as members of the general public, remain unaware of the different ways in which the waqf system can be harnessed to generate revenues to be distributed to beneficiaries.

Perhaps the biggest impediment to the development of the waqf system, however, is the perceived poor management of waqf institutions, as a result of limited regulation and supervision mechanisms.

Of the various challenges to the waqf system that I have mentioned, it is this last point which I wish to focus on today, as I believe that strong governance and professionalism are the keys to inspiring public trust in waqf institutions, which will, in turn, generate greater vibrancy within the system, thereby addressing many of the other problems I have outlined already.

I am delighted to observe that the past three decades or so have witnessed the creation of a comprehensive and dynamic ecosystem in the world of Islamic finance.

Yet, while waqf can undoubtedly benefit from this ecosystem, there are peculiar factors relating to waqf which need to be addressed through specific measures. In order to strengthen governance within the waqf infrastructure, and to develop a broader strategy to revive the use of waqf as a platform for Islamic social finance, it may therefore be necessary for the institution of waqf to develop its own formal governance framework.

This framework may include a clear specification of the roles and responsibilities of the waqf trustee and the waqf authority, as well as a code of conduct outlining the need for the trustees to act in good faith, with prudence and fiduciary care, and in the best interest of the donors and beneficiaries.

For this reason, I believe that the internal governance of the waqf authorities must not be neglected, and that there should be adequate internal controls put in place, including risk management protocols and regular audits.

Good governance also involves strengthening engagement with the relevant stakeholders.

Waqf authorities should continuously engage with different stakeholders, while also establishing an effective communication policy to manage these relationships.

In terms of communication with the wider public, meanwhile, I believe transparency is another essential requirement, especially for the environmentally-aware millennial generation, who are the champions of the Environment, Social and Governance (ESG) Criteria that underpin ethical finance.

As the potential founders and donors of years to come, these young people really do represent the future of waqf. We should pay attention to their demand for alternative financial products, and seize this as an opportunity to demonstrate to them and others the true potential of the ESG financial governance mechanisms that have already started to emerge, for example, under the institutions of both zakat (tithes) and waqf.

To establish effective governance, we must further ensure that all waqf governing bodies have the experience and expertise required in this asset-management role. This includes ensuring that waqf authorities possess the necessary understanding of the Islamic principles and laws which govern waqf.

Officers of waqf authorities and their trustees should, therefore, undergo regular training in this area, which would also allow them to remain up-to-date with the latest developments in relevant areas, such as the Islamic finance industry.

To unlock the full potential of waqf assets, meanwhile, the state Islamic councils should also collaborate with the private sector to tap into the latter’s wealth of experience in commercial property development. Such collaboration proved highly beneficial, for instance, in the case of the first commercially-developed waqf land project in Malaysia — the headquarters of Bank Islam Malaysia in Kuala Lumpur.

Implementing and maintaining a robust governance framework for the management of waqf may seem a daunting and onerous undertaking, but it is an absolute imperative if waqf authorities are to gain and reinforce stakeholders’ trust and confidence, thereby ensuring the sustainability of waqf as a key component of Islamic social finance, and of the social economy as a whole.

In this day and age, when noble and benevolent intentions are sometimes given in to our own selfish desires, or even exploited by irresponsible parties, it is more important than ever that the institution of waqf remain unblemished and beyond reproach.

While improving waqf governance is essential, other mechanisms also exist which could help to restore waqf to its former prominence. Indeed, there are examples of some of these already in action.

Take, for instance, the recent call for the revival of idle, immovable waqf assets through the adoption of new innovative contracts of Islamic finance. These contracts, such as Musharakah Mutanaqisah (Diminishing Partnership) and Build-Lease-Transfer arrangements, succeed not only in transferring the idle and unproductive waqf holdings into modern buildings, but also in providing job opportunities for large numbers of people in building and construction projects.

The creation of movable waqf assets — including cash waqf models such as waqf shares, mobile waqf and corporate waqf — is another encouraging recent development. Among other benefits, these cash waqf models have enabled the setting up of clinics and dialysis centres to improve healthcare, and the provision of qard al-hasan, an interest-free loan that is extended by a lender to a borrower at goodwill, to allow the impoverished and needy to begin small businesses.

We must also, of course, consider the ways in which the waqf system can work alongside and complement other instruments of Islamic finance. For instance, Islamic financial institutions, potentially with the support of government, could be more active and creative in developing waqf assets through the issuance of sukuk to increase participation from the public.

In this regard, the Securities Commission Malaysia has already established a regulatory framework to facilitate the issuance of Sustainable and Responsible Investment (SRI) Sukuk. The objective is to spur the growth of the Syariah-compliant SRI Sukuk segment, leveraging on similarities in the underlying principles of the Syariah and SRI.

Of particular relevance to today’s event is the fact that one of the categories eligible for SRI projects under this framework is the development of waqf assets. This should help to unleash the potential of waqf as a mechanism for undertaking Syariah-compliant SRI projects of a significant size. I, therefore, urge Islamic financial institutions and related stakeholders to initiate and enhance existing efforts to issue waqf-based SRI Sukuk as soon as practically possible.

As we seek to develop the waqf system in these times of rapid change and discovery, we must finally consider how financial technology, or digital finance, might be harnessed to enhance the efficiency of waqf collection and distribution. Waqf may be calculated and monitored using smart apps, for example, that present funding options to donors based on their personal preferences.

Indeed, portals and apps have already been created to collect cash waqf, such as through crowdfunding schemes, and to finance small businesses through qard al-hasan. The advent of blockchain technology provides another means by which donors can monitor waqf donations and ensure that beneficiaries receive what has been allocated to them.

In this age of ever-increasing connectivity, technology can also be used to link donors in wealthy Muslim nations to those in need in poverty-stricken or conflict-torn areas, in a more structured and transparent manner.

The possibilities presented by the connection of billions of people worldwide, through mobile devices with unprecedented processing power, storage capacity and access to knowledge, really are unlimited. Technological advances are being made every day, and emerging breakthroughs in fields, such as artificial intelligence, robotics, the Internet of Things, nanotechnology and biotechnology will, no doubt, further enhance the potential of the waqf system in ways that we cannot imagine today.

However, our laws and regulations, along with our innovative products and methods, cannot alone guarantee the effective revival of the institutions of waqf. The success of all that I have mentioned also requires a “softer” element, upon which the long-term sustainability and viability of waqf ultimately depends.

That softer element is trust or amanah. Trust can only be established through the actions of responsible individuals and the financial community collectively. More must, therefore, be done through public awareness and educational programmes, to enlighten donors, trustees, beneficiaries and all other stakeholders of the waqf ecosystem, as to the measures and actions that will be necessary if we are to fulfil the true purpose of waqf and ensure its long-term sustainability.

The importance of Islamic social finance is increasingly being recognised on an international level, with waqf, zakat and sukuk all seen as financial tools that could help to improve our quality of life, and sustain the welfare and wellbeing of humankind in the world today.

Given the significant potential for waqf to contribute to humanity in this way, it is essential that its stakeholders worldwide now work to coordinate and collaborate across national boundaries, in the orderly development of the waqf ecosystem.

In this context, and given its global leadership in the Islamic finance industry, Malaysia has not just the opportunity, but also the responsibility to act as an example that other countries may emulate, and to pave the way for this internationally essential development.

Published in: The New Straits Times, Friday 23 February 2018

Source: https://www.nst.com.my/opinion/columnists/2018/02/338153/waqf-gaining-trust-social-economic-sustainability

The following is the keynote address by the Sultan of Perak Sultan Nazrin Muizzuddin Shah at the conference yesterday at Mandarin Oriental, Kuala Lumpur.

BISMILLAHI r-Rahmani r-Rahim. Assalamualaikum Warahmatullahi Wabarakatuh.

It is my great pleasure to be here at such a prestigious international event to discuss crucial questions about the future of the Islamic economy. Embedded within this economy is the concept of halal. As those of you gathered here today will know, halal refers to that which is permissible or lawful according to Islamic law. As such, the concept and practice of halal should be omnipresent in the end-to- end ecosystem of both production and consumption within the Islamic tradition. The halal industry has, therefore, always been of paramount importance to Malaysia as a Muslim-majority country. Indeed, I would like to take this opportunity to encourage the ongoing work of the Halal Industry Development Corporation (or HDC) in Malaysia, which has implemented various initiatives since its foundation in 2006, with the aim not only of furthering the development of the halal industry locally, but also, I hope, of fostering its ecosystem beyond Malaysia.

There are approximately 1.84 billion Muslims in the world today, making up around 24.4 per cent of the world’s population, or just under one quarter of humankind. By 2030, this number is expected to increase to 2.2 billion. It is important to recognise, however, that although Islam is one religion, the Muslim community is not one homogenous group. The worldwide Islamic community is spread over 200 countries, with an estimated one fifth of the world’s Muslim population living in non-Muslim- majority countries. Muslims throughout the globe are citizens of their respective countries, but they also have a sense of belonging to the ummah, the worldwide Muslim community.

The growing Muslim population worldwide translates into a rising international demand for halal products. Halal is now a truly global industry, and this ever-increasing globalisation represents an exciting opportunity for the Islamic economy, to grow more prominent within the world economy as a whole. However, it also presents a number of challenges, to do with international attitudes and rapid technological change; and it entails important responsibilities concerning the ethical governance of the halal industry and its proper regulation worldwide. I will be considering these aspects of the burgeoning global halal industry in my speech today.

These are, indeed, exciting times for the global halal economy. The value of the halal industry is growing at a remarkable rate: from approximately US$2.3 trillion (RM8.89 trillion) in 2012, the halal sector is expected to almost triple, to US$ 6.4 trillion by this year. This is an astonishing growth within a period of just six years, and represents a major success for the global halal industry. In Malaysia, there have been a number of concerted efforts and programmes, most notably, the formulation of the Halal Industry Blueprint for 2008-2020, to propel the international growth of the industry, and to make Malaysia a global leader in innovation and production.

While halal is perhaps most often associated with food and drink, there are in fact a wide range of halal products and services which can be offered, including healthcare and pharmaceuticals, personal care and cosmetics, travel and tourism, and financial services. According to Reuters, by the end of 2018, the halal food industry alone will be worth USS 1.6 trillion, the halal cosmetics industry will be worth USS 39 billion, and the halal pharmaceuticals industry will be worth US$ 97 billion. It is projected that the halal food and drink sector may be worth as much as US$ 2.1 trillion by 2030.

This vast and widespread growth is due to the increasing demand for halal alternatives across a variety of retail sectors, particularly in parts of the world with a rapidly growing Muslim population. The halal market is not only thriving in Muslim-majority countries, but also in major non-Muslim- majority economies, including China, Japan, the US and the UK. In the United Kingdom, for instance, food production companies are increasingly recognising the importance of the Muslim market, with around 20 per cent of sheep meat in England being consumed by the Muslim population. More and more companies are therefore catering to the Muslim market by producing halal food items. Indeed, one of Malaysia’s Department for Halal Industries has been collaborating with local councils in the North East of England to develop a business hub for producing halal meat. This is an excellent example of the way in which building bridges and establishing global links can help to foster the development of the halal industry worldwide.

There is also an increasing international awareness of the importance of halal tourism, with travel agents offering halal holiday packages. Halal tourism is thriving across Europe, to the extent that Spain even hosted the inaugural Halal Tourism Conference in 2014, and will also be hosting the Halal Expo conference, on food, tourism and lifestyle, later this year.

As these facts and figures attest, recent years have witnessed the rapid international growth of the halal industry across a variety of sectors, and this growth is predicted to continue. Countries are increasingly catering to Muslims at home, as well as appealing to Islamic tourists and holiday-makers overseas. There is a growing realisation, it seems, that halal is a way of life, and that businesses need to meet the needs and demands of Muslim consumers. In this way, the halal industry is propelling the growth of the Islamic economy on an international level.

Despite these success stories, however, the industry must address some significant challenges if this encouraging trend is to continue.

First and foremost, we must acknowledge that halal continues to face some opposition in non-Muslim majority countries. While many non-Muslims are also choosing halal products for their business and personal needs, recent years have witnessed the rise of what we might call “halal phobia” in certain countries. In December 2017, for instance, a French supermarket supplying halal products was ordered to close for not selling pork or alcohol. This kind of reactionary behaviour could potentially damage the globalisation of the halal industry.

I spoke several years ago at the Saïd Business School in Oxford University, about the role and importance of branding in relation to halal products. While we should be proud of the proliferation of Islamic brands in global markets, we must also ask ourselves to what extent we want to segment markets along identity and religious lines. Pushing Islamic brands too aggressively may affect the marketability of products in non-Muslim communities, and will almost inevitably invite reactions from other religious groups. There is, it seems, a delicate balancing act to be performed, between ensuring the availability of halal products and services to Muslims worldwide, and encouraging non-Muslims to see halal products as viable options for themselves as well.

Another potential challenge to the internationalisation of the halal industry is the so-called “Fourth Industrial Revolution”, or Industry 4.0. Rapid and unprecedented technological advances are currently transforming economies, jobs, and even civilisation itself. We must recognize that the world is changing. Billions of people are now instantly connected to each other via countless portable machines. Huge increases in processing power and storage capacity mean that data is being collected and harnessed like never before. Along with the incredible benefits of such developments come substantial risks, as evidenced by big data scandals such as the one high-profile case unfolding in the news at the moment.

Past industrial revolutions have shown us that if companies and industries do not adapt with new technology, they can struggle or even fail. The change brought about by the Fourth Industrial Revolution will be inevitable, not optional, in my view, and the halal industry must therefore adapt to the new technologies available, in order to discover the benefits they offer. For, I strongly believe that the technological innovations we are witnessing today have the potential to strengthen and improve not only the economy, but also the world as a whole. The possible rewards of Industry 4.0 are staggering: heightened standards of living; enhanced safety and security; and greatly increased human capacity. Rather than falling behind, the halal industry must tap into these potential benefits if it is to continue to grow on an international level.

We must harness new technologies in order to contribute to the global spread of the halal sector. The Malaysian International Halal Showcase (MIHAS) 2017, meanwhile, provided a platform for companies from across the world to share their experiences in using technology to capture the halal market, for instance, in the areas of imports and exports, as well as in improvements in halal product packaging. Again, we see how international collaborations and the sharing of ideas can benefit the halal industry on a global scale. Although the Fourth Industrial Revolution presents a challenge to businesses and industries worldwide, therefore, it also presents an opportunity to expand and improve, and to strengthen international links, for those companies willing to think creatively and modernise with the times.

I wish now to turn to an equally important, related topic: that of responsibility, and regulation. For, it is not sufficient to pursue the global spread of halal products and services, without reflecting on the way the halal industry is run and regulated. The concept, and indeed, the philosophy of halal goes beyond the preparation of food — beyond, even, the habits and beliefs governing consumption, behaviour and lifestyle. It is also, crucially, I believe, about an ethical and wholesome way of doing business.

To that end, the regulation and governance of the halal industry is going to be key, especially if it requires strategic collaboration across the whole of the halal ecosystem involving numerous government ministries, agencies and business stakeholders. The latest initiative by the Government of Malaysia in setting up the Malaysia Halal Council to coordinate this effort is both timely and welcome. In this country, where the final authority on matters relating to Islam rests with Their Royal Highnesses The Malay Rulers, I am pleased that the establishment of this council has the consent and support of the Conference of Rulers.

Ultimately, supporting the establishment of an international standard for halal products conforms to Islam’s philosophy of the Adamic man’s mandate as God’s khalifah and stewards on earth.

With this God-given honour, we are entrusted also with a grave responsibility: that of ensuring ethics and integrity in business. We must work to establish what the Malaysia International Islamic Finance Centre, or MIFC, has called “a holistic end-to- end Syariah compliance” in the halal industry, ensuring not only the production of halal goods and services, but also a Syariah-compliant business and finance model in its value chain and ecosystem.

We need, in other words, to pursue the continued development of a “halal economy”, in the fullest sense of that phrase. The concept of the “halal economy” was in fact brought to prominence at this very conference in 2011, to describe the integration of the halal industry with Islamic finance. This is a testament to the vital role that the World Halal Conference plays, in promoting the importance of the philosophy of halal and its strong relationship with the spiritual life of Muslims, and facilitating discussions about how to take the halal industry forward in an ethical way.

According to a 2014 report by the MIFC, the global halal industry represents a major opportunity for the growth of Islamic finance models on an international level. The report describes these sectors as “natural economic partners”: the successes of the halal industry could help to promote Islamic finance, while the increased use of Islamic finance models and mechanisms could, in turn, help to ensure “end-to- end Shariah compliance”, making sure that the global halal industry is run in both a successful and an ethical manner. These two key facets of the Islamic economy need to exist in a symbiotic relationship if we are to witness the continued international expansion of a truly halal economy, which is both successful and responsible.

At the heart of Islamic finance is the aim to foster inclusive growth, and to support the livelihoods and aspirations of humankind worldwide. Islamic finance has been practiced for centuries around the world, but it has increased in prominence in recent years. Today, over US$260 billion is invested in Islamic funds in over 300 global Islamic institutions active around the world. By 2020, the Islamic finance sector is forecasted by some to grow to over US$ 6.7 trillion.

We have witnessed significant successes in Islamic finance in recent years, but there is still potential for expansion. In particular, it is striking that Syariah-compliant trade finance, specifically, represents only a very small proportion of global trade finance — in fact, approximately 1.5 per cent, as of 2016. As the halal industry continues its rapid expansion, therefore, halal industry players, together with the Islamic financial institutions, regulators and other market participants, should aspire to do more to nurture a halal ecosystem through the use of Syariah-compliant trade facilities. This would facilitate the growth of Islamic finance within the global trade economy, and would help to promote the sought-after “end to end” compliance for the halal industry.

At the same time, moreover, the halal industry could actually benefit greatly from the capital that can be generated via Islamic finance mechanisms, such as sukuk and takaful. Indeed, some halal companies are already pursuing these funding methods, such that, as of 2014, US$5 billion had been raised through sukuk by 40 issuers from the halal industry. In spite of this, according to the MIFC, however, “the potential of sukuk financing in support of halal businesses is yet to be realised”.

We have seen in Malaysia in recent years the potential of corporate sukuk financing. 2016 was a record year for corporate sukuk issuance: corporate issuers dominated the market with US$47.3 billion of issuance, representing a market share of 63.2 per cent. This is in contrast to historical trends, where issuance was driven largely by sovereigns. This is, I believe, a positive indicator, hinting at the huge global potential of sukuk funding for the halal industry, to raise funds and finance business in a fully Syariah-compliant way, with the aim of achieving that desired goal of “end-to-end” compliance in its ecosystem.

It seems no exaggeration to suggest that the core principles underlying Islamic finance — in promoting inclusion, equity, property rights and ethics — are, fundamentally, “universal values”. Islamic finance has much to offer the world’s economy, and there is a natural connection between Islamic finance principles, responsible finance, and the UN’s Sustainable Development Goals or SDGs.

Indeed, in a recent speech, I suggested that Syariah and SDG compliance are, in many ways, one and the same. I would like to reiterate that point today. The UN’s 17 Sustainable Development Goals were set out in 2015 with the ultimate aim to “end poverty, protect the planet, and ensure prosperity for all”. In promoting risk-sharing and ethical investment, as well as charitable giving through zakat and waqf, Islamic finance has the potential to play a major role in the achievement of these aims.

For the global halal industry, what this means is striving to provide goods and services in a way which is not only halal, but which is also tayyib. As those of you gathered here, will no doubt be aware, the term “at-tayyib” is used in the Quran and the Sunnah to describe something that is good and wholesome. In reference to food, for instance, the Quran calls on humankind to consume food that is both lawful and wholesome. The famous verse is when Allah subhanahu wa-ta‘ala (SWT) says:

“O humankind! Consume from the earth what is halal and tayyib, and follow not the footsteps of the devil!”

(Al-Baqarah, 2:168)

We should not be content, therefore, with simply achieving something that is halal, but instead should strive for something that is also tayyib, namely good, ethical and wholesome.

In the context of the global halal industry, this means working to supply products that are sustainable, not damaging to the planet, and pursuing business models that are ethical, responsible, and not exploitative. I have spoken already about the importance of integrating the halal industry with Islamic finance, and this, truly, is why: because the ethical and responsible mechanisms of Islamic finance can produce a business model for companies supplying halal goods and services, which is not simply halal, but which is also tayyib. Indeed, I would say that all the players within the halal ecosystem should strive to make their end-to- end transactions tayyib and wholesome.

Allow me to briefly give an example of how I envisage this wholesome or tayyib business and supply chain working in action. Imagine a company that supplied halal chicken. First and foremost, the company should be funded in a fully Syariah-compliant way, perhaps with the help of sukuk bonds and/or Syariah-compliant trade financing contracts, and financed by an Islamic bank. It should pay and treat all of its employees fairly, with the kindness and respect that are central to the teachings of Islam. Then, the chicken should be farmed in a sustainable, environmentally-friendly, and ethical manner, and ensured a good quality of life in fulfilment of our responsibility to act as khalifah and stewards of the planet. It should, of course, be slaughtered according to the proper halal ritual, transported with consideration of the damaging carbon emissions generated by certain kinds of fuel, and even packaged in sustainable and recyclable packaging wherever possible. Finally, it should be sold to retailers and consumers at prices that are fair for all involved in the transaction.

This, I believe, represents a wholesome and tayyib value chain, producing goods which are halal, and which are also sustainable and financed in a Syariah-compliant manner. It is in this way — in striving for tayyib as well as halal in this industry’s ecosystem — that I believe the Islamic economy can realise its full potential within the wider global economy.

Consumers worldwide, both Muslims and non-Muslims, are increasingly seeking ethical and sustainable options, with the aim of safeguarding the future of humanity, and of our planet. As the halal industry continues to globalise due to rising international demand, it must harness the socially responsible funding mechanisms of Islamic finance, and strive to produce goods and services which are both halal and tayyib. By capitalising on the synergies between Islamic finance principles and the United Nation’s SDGs, we can demonstrate that the Islamic economy has a vital role to play on a global level, and that it is, ultimately, beneficial to Muslims and non-Muslims alike.

After all, Allah SWT reminds us of our God-given honour in the Quran that, “We appointed you as stewards (khalifah) in the earth ... so that We might see how you behave!”

So, ladies and gentlemen: I hope we can behave by striving to make the world a better place for the entire human race, thereby realising our full potential and mandate as the Adamic man and woman. We can make a start by understanding that the true philosophy of halal is one that embraces tayyib in all of our end-to-end dealings in this world. Let us take this realisation forward in continuing to foster a truly halal economy, an economy in which the sum of its parts is not only in full legal compliance, but is also in divine concord.

Published in: The New Straits Times, Friday 6 April 2018

Source: https://www.nst.com.my/opinion/columnists/2018/04/353789/fostering-true-halal-economy-global-integration-and-ethical