Waqf is an endowment of property, cash or land for purposes that are in agreement with the principles of Islamic law.
As a financial charitable institution, “waqf” has been the most significant contributor to social services in the Muslim world.
Although the concept of waqf or endowment predates Islam, the comprehensive regulatory framework that promotes, guides, protects and fosters the development of the waqf institution of waqf is a contribution from the Islamic law.
However, the challenge of under-developed waqf land and abandoned waqf property that provides little to no benefit to their rightful beneficiaries requires urgent consideration. In fact, it is an opportune moment for Islamic financial institutions to contribute to the socio-economic development and gain points on the value-based intermediation scorecard through the financing of waqf assets throughout Malaysia.
Waqf is an endowment of property, cash or land for purposes that are in agreement with the principles of Islamic law. Waqf is established by withholding immovable and movable properties to perpetually spend its revenue or benefit on fulfilling public or family needs, depending on the preferences of and conditions set by the founder.
Once the property is created as waqf, it can no longer be gifted, inherited or sold. Once a property is created as waqf, it should be placed under three key restrictions: irrevocability, perpetuity and inalienability.
The Waqf movement has existed since the beginning of Islamic law.
Waqf gained popularity across Europe and the practice of Islamic waqf principles have been documented in the use of prominent structures, including Merton College in Oxford (founded in 1274), the Taj Mahal, which was founded by Emperor Shah Jahan in 1631 and the oldest university in the world, Al Azhar in Cairo, Egypt (founded around 970).
The success of the waqf institution in Turkey for example, has contributed to a successful model for waqf perpetuity and that consists usually of a Masjid (aka Blue Mosque or Sulaimaniya Mosque), a school coupled with healthcare and other social services and supported perpetually with rentals from business premises and trading space owned by waqf.
In the case of Malaysia, there are more than 13,000ha of old waqf properties that require funds for the restoration process. 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 that only land or property can be a valid contribution to waqf and not cash.
Underdeveloped waqf property in Malaysia becomes a burden to future generations as significant portions of land are untouchable once designated as waqf. Maintenance strategies are required as a key component of property endowments to ensure that the sanctity and objective of the waqf is achieved perpetually.
Some of the primary challenges in the development of productive waqf assets may be expressed as follows:
Under-developed waqf property and land.
Land that is endowed in Malaysia, often remains underdeveloped: current statistics show that Malaysia has 13,400ha left idle and unproductive. A mere two per cent of the total acreage has been developed. A study by the Islamic Development Bank in 2004 revealed a similar trend across the nation.
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/or Shari’ (Islamic legal) implications of waqf development, inadequate cash flow plans or revenue forecasting, etc.
Perceived inadequacy in transparency and governance.
The high financial risk is often supported by a perceived lack of transparency and governance in managing waqf assets. Waqf founders, for example, tend to create waqf assets informally.
What are the potential approaches to encourage the financing of waqf land in Malaysia?
Understanding Waqf potential.
On the back of the challenges mentioned earlier, it is suggested that understanding and awareness of waqf be increased substantially. An appreciation for the potential of waqf should be gained as it is an extraordinary technique for the provision of social services through the generations.
The possibilities for waqf development are immense. However, it may only be achieved through understanding the conceptual framework and the many practices over the centuries.
Opportunities are abound. Some examples within the Malaysian context include:
Building residential towers, affordable housing and even university dormitories that may support university funding.
Converting old waqf assets into multi-purpose buildings that include prayer halls, schools and commercial rental.
Innovative finance solutions. Rejuvenation of Waqf Assets. Another approach to financing would be to rejuvenate waqf assets similar to the successful case of Majlis Ugama Islam Singapura.
In summary, the recent revival of waqf is based on its contribution to socio-economic development in the past. The waqf property development in Malaysia requires a multi-pronged approach to deal with its limitations.
The writer is head of Islamic Social Finance Research Management Centre of INCEIF