Waqf: Financing Through Islamic Philanthropy

MALAYSIA’s premier trustee company, Amanah Raya Bhd, released a statistic back in mid-2009 that there wasover RM40 billion worth of Muslims’ Waqf estate could not be distributed to the beneficiaries – an alarming figure indicating that more educational awareness and management expertise are needed in managing Waqf.

According to the Deputy Head of the Advisory Division (Shariah) of Malaysia’s Attorney-General’s Chambers, Mahamad Naser Disa, the Shariah law in the country is not uniform enough, when it comes to endowment, will-writing, Ar-Rahn and grant. Furthermore, Mahamad Naser said the constraints of existing laws also made it difficult for estate management process. Aside from discussing issues related to Zakah, Zakatul-Fitr, Wasiyyah, Hibah and other Sadaqah, the pivotal roles that Waqf plays to the well-being of the Ummah cannot be ignored. Waqf actually acts as a panacea to the re-distribution of wealth among Muslims, and the rest of the society, in general. Increasing educational awareness about Waqf is vital if Waqf contributions are to benefit generations to come.

At the one of annual national budgets tabled by Malaysia Prime Minister Dato’ Seri Mohd Najib Tun Abdul Razak, a need for comprehensive development of Islamic insurance (i.e.: Takaful), investment banking and other Islamic financial services were highlighted. On that note, Waqf is one of them, an Islamic philanthropy which should be emphasized upon society, especially towards the ummah development in the country. Historically, Waqf started during the era of Prophet Muhammad. Although, there is no direct mention of Waqf in the holy Al-Quran, there is a hadith reporting an incident when one Umer Ibn Al Khitab acquired a piece of land in Khyber and sought the advice of Prophet Muhammad regarding the usage of the said land. Prophet Muhammad advised that the land should be made inalienable and the profit arising out of its usage be given to charity. From that hadith, Waqf is perceived to be a permanent dedication of a property by a Muslim out of good faith for charitable purposes.

The Significance of Waqf
By definition, Waqf is derived from the Arabic verb “waqafa”, which etymologically means to hold, keep or detain. According to Imam Abu Hanifa, Waqf is the detention of a specific thing in the ownership of the Waqif, or appropriator, and the devoting of its profits, or usufruct, to charity for the poor or other pious intentions. In other words, a Waqf, or in Arabic plural term, Awqaf, is an act of holding certain property and preserving it for the confined benefits of certain philanthropy that disallows any use or disposition of it outside the specific objectives. Waqf also applies to non-perishable property, the benefit of which can be extracted without consuming the property itself.

From another perspective, Waqf may also serve as a vehicle for Islamic financing in a society. In Islam, land was the first category of Waqf. The mosque of Quba’ in Medina, which exists until today, was the first mosque in Islamic history that was Waqf-oriented. Other examples of appropriated Waqf land include the Al-Azhar University in Egypt, the University of Cordova in Spain and the Al Noori Hospital in Syria.

In Malaysia, a state government linked investment corporation established by the southern state of Johor, JCorp, has played a significant role in implementing Waqf for the nation’s ummah development. A subsidiary of JCorp, Kumpulan Waqf An Nur Bhd, was established to help manage a chain of Waqf-ed An Nur Clinics, with the support of another subsidiary, KPJ Healthcare Bhd, indicates an effectiveness utilization of Islamic financing in a society. Another prime example of Waqf development by JCorp is Malaysia’s first Waqf hospital, AlNoori Hospital, located in Pasir Gudang, Johor. In western countries, Waqf has long been in existence, but is popular known under the term “endowment”. For example, ivy-league universities like Harvard, Cambridge and Oxford were founded under the endowment concept. In 2003, the top 10 largest universities, by size, in the US and the UK, had an endowment funding worth US$74.24 billion and US$7.27 billion, respectively. Up to the turn of the millennium, the endowment fund in various sectors in the West hit US$2 trillion with income revenue exceeding US$700 billion. The concept of philanthropy capitalism introduced in 2006 by former US President Bill Clinton, with continued support from the present US President Barrack Obama, has helped support the movement of Clinton Global Initiative (CGI), which acts as a vehicle to assemble the wealthiest billionaires around the globe to contribute funds to help the poor.

In 2009, the movement collected up to US$125 billion through contributions from “Super Rich Friends”, under the concept of effective giving. With such realization and effectiveness, it is about time for Muslims to uphold the spirit of Waqf to enhance the development of the brotherhood. Furthermore, the acts of Waqf also facilitates the creation of a conducive economic environment to the society as a whole.

Waqf development in Malaysia: JAWHAR and YWM
In Malaysia, the development of Waqf is helmed by the Department of Waqf, Zakah and Hajj (JAWHAR) and Malaysia Waqf Foundation (YWM), which were established in 2004 and 2008, respectively. The roles of JAWHAR are to ensure the management of Zakah, Hajj and particularly, Waqf, in every state in an orderly, systematic and effective manner. JAWHAR is also expected to improve the quality of service delivery as well as improve the socio-economic status of the community through the strengthening of Waqf, Zakat, Mal and Hajj.


Indigenous sources of capital, such as endowment of land and property, under the jurisdiction of the State IslamicReligious Council (SIRC) should not be left undeveloped. The SIRC should take on bigger responsibility to play an active role in developing the socio-economy of Muslims as well as overall human capital development – Malaysia 5th Prime Minister, Tun Abdullah Ahmad Badawi

Former Malaysia Prime Minister (PM) Tun Abdullah Ahmad Badawi once highlighted during the tabling of the 9th Malaysian Plan that the indigenous sources of capital, such as endowment of land and property, under the jurisdiction of the State Islamic Religious Council (SIRC) should not be left undeveloped. He pointed out that the SIRC should take on bigger responsibility to play an active role in developing the economy of Muslims as well as overall human capital development. Meanwhile, the roles of YWM are focused on Cash Waqf, in the hope of empowering the community towards Islamic endowment. Established under the Trust Holder Act 1952 by JAWHAR, YWM collects cash fund to support and finance the development of Waqf assets to be more competitive, without losing the primary objective of benefiting their beneficiaries for the long run. YWM also complements the (SIRCs), to whom the developed Waqf assets will be returned to as the sole trustee.

The board of trustees comprise Islamic Affairs Minister and a representative from the Economic Planning Unit at the PM’s Department; JAWHAR director; one representative from each SIRC; and three representatives from the corporate sectors.

Case Study: Penang SIRC
At the mention of Waqf, most Muslims will think of mosque, religious schools and more than likely, abandoned inherited land. Disputes over Waqf land going on for several generations, touching on the issues of management and technicalities, have, at times, deterred the society from viewing Waqf positively. On the converse, the introduction of Cash Waqf has been seen to attract participants from various income level of the society. Penang SIRC, as a point in case, introduced Cash Waqf in 1994, known as the Penang Waqf Share (PWS). Idealistically, the PWS module was a replication of the implementation of Waqf shares by its counterpart, the Johor SIRC.

Under the PWS, a participant solemnly undertakes to purchase a share certificate, the minimum amount of which is RM10. Regretfully, the “share” terminology usage led some Muslims to perceive PWS as an investment that could bring in profit. In reality, the investment meant by the Penang SIRC, was a share in rewards in the hereafter for the good deeds of Waqf. To rectify the misconception, the Penang SIRC changed PWS to Penang Waqf Fund Scheme (PWFS) in 2002. The term PWFS is still in use today to promote Cash Waqf in Penang. Under PWFS, the concept is to increase the number of Waqf assets and to inculcate a donating culture among Muslims in Penang. Introduced under the Wakalah concept, PWFS participant solemnly appoints Penang SIRC to undertake Waqf on his behalf for the sake of general Muslims’ welfare. The minimum for Cash Waqf is RM5, and the contribution can be made through a convenient monthly salary deduction scheme, which will receive income tax exemptions from the Internal Revenue Board.

Hurdles and Probable Solutions
With effective management, the prospect of Waqf transforming the Ummah’s socio-economic status is tremendous.
However, two major hurdles lie ahead – lack of awareness about Cash Waqf and efficient management of Waqf collections. To overcome these hurdles, the commitment from the authorities as well as Islamic financial experts and academicians are required to drive the growth Waqf to the next level. One probable solutions to help improve Waqf asset performance is via Waqf property securitization through Sukuk issuance, a proposal tabled under the Malaysian Capital Market Masterplan back in February 2001. Another is the issuance of a Waqf Takaful Plan, in which a contract with cash endowment can be introduced. On a different plain, a more viable alternative is getting the cooperation of Islamic banks, especially ones with online banking, to assist and encourage more Muslims to participate in Cash Waqf contribution. As convenience as its service, online banking facilitates contributions no
matter the Muslims are located, by just a click away. As far as monitoring Waqf land is concerned, an introduction of a Geographic Information System Based Endowments (GISWAQF) can certainly lend efficient management to the authorities. A sample of (GIS) has been pioneered by a group of researchers from the Centre for Real Estate Studies (CRES) at Universiti Teknologi Malaysia. The commitment from the authorities, professionals and the society is required to revitalize and enhance Waqf as a significant Islamic financing in Malaysia.

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