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CASE-STUDY WAQF-SHARES: FINANCING THROUGH MOVABLE WAQF

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CASE-STUDY WAQF-SHARES: FINANCING THROUGH MOVABLE WAQF
by Dr. Magda Ismail

 

Historically speaking the institution of waqf, which is a non-governmental organization (NGO), has played a significant role throughout Islamic history, from the time of the Prophet (pbuh) to the beginning of the 19th century. Although this institution existed before the coming of Islam, yet, Islam was the first religion to develop its legal framework and regulate it. Thus, it became one of the devices created by Muslims to fulfill many services that are financed by the state or the government today, such as education, healthcare, national security, transportation facilities, basic infrastructure, food, shelter, and jobs for many. It acted like a network, penetrating many service sectors whenever it found a need to promote a particular sector. We cannot deny the role of this institution in the development of Islamic civilization before its destruction towards the end of the 19th century. With the recent revival of some of the Islamic institutions in the 21st century, the waqf found its way back with a new dimension focusing mainly on the creation of movable waqf in different countries. Waqf-share is one of the movable waqf which has been practiced in many Muslim and Muslim minority countries today. With the current financial crisis and the urgent need for capital to continue providing services needed by the different societies, the introduction of waqf-shares as a fundraising effort was totally accepted. The main objective for introducing waqf-shares is not only for capital accumulation but also to facilitate the process of creating waqf by the different sects of people in any society, regardless of whether they are rich or not, with the minimum amount of money they can afford in order to participate in developing their societies. This paper will address the current practice of waqf-shares in four different countries.

Definition of Waqf-Shares

There is a consensus among the fuqaha (Muslim jurists) regarding the definition of waqf. According to them waqf means the appropriation of the ayn (property) from private ownership and the dedication of its usufruct to charitable purposes. Hence, waqf-share is a movable waqf that is established with liquid money to promote services to mankind in the name of Allah (s.w.t). For the creation of waqf-shares the founder has to purchase the waqf-shares which were issued by the trustee of the waqf in order to generate income in perpetuity for the beneficiaries. The beneficiaries can be projects that promote the well-being of Muslim society such as building schools, hospitals, clinics, providing water supply, electricity, etc. In return the founder will receive a waqf certificate showing that he has contributed to the development of such a project.

Key Restrictions on Waqf-Shares

Muslim scholars agree that once a property, movable or immovable, is created as waqf it should be placed under three key restrictions. The first one is the irrevocability, where the founder cannot revoke the dedicated waqf once he declared it as a waqf. The second is its perpetually, i.e. once the property has been declared as waqf it must be perpetual to ensure the regular and the continual support to the beneficiaries. The last one is its inalienability; once the property has been created as awaqf it becomes like a frozen asset that cannot be gifted, inherited, sold or subject to any alienation whatsoever. All these conditions and restrictions are very important to be observed while creating the immovable and the movable waqfs including waqf-shares. The main objectives of these restrictions are to secure a continual benefit for present and future generations, besides ensuring continual rewards to the founders until the Day of Judgment as mentioned in the following hadith when the The Prophet (pbuh) said:

When a man dies his acts come to an end, except three things, recurring charity, knowledge (by which people benefit), and pious offspring, who pray for him.

Waqf-Shares Structure

The main objective of creating waqf-shares is the accumulation of capital through fundraising from the different categories of people and in different amounts in order to provide them with services needed in their society. Recently this type of waqf-shares has been practiced in Malaysia, Indonesia, Kuwait and the UK. The process started as follows;
•A founder buys waqf-shares from a specified institution for any project specified by the issuer institution for the beneficiaries such as; building mosques, schools, hospitals, providing the basic infrastructure, expenses for the different sectors, etc.
•The founder then receives a waqf-certificate as evidence that he had purchased waqf-shares with a specified amount of money for a specific project.
•These waqf-shares will then be endowed to the issuers institution that acts as a trustee to manage and invest the collected funds to that specified project.
•To ensure the perpetuity of such waqf. The accumulated funds have two different ways to be channeled to the beneficiaries;
•In case the selected project will be established on waqf land, then the accumulated funds will be channeled directly to the specified project, such as building schools on waqf land or building hospitals on waqf land; here istibdal had been practiced.
•In case the projects will be established on private land, then the accumulated funds must be invested and the revenue generated must be distributed in a proportion which varies from one project to another e.g. 70% to the specified project, 10% to the trustee for their management and 20% to be added to the capital as highlighted in the following structure.

Current Practice of Waqf-Shares in Malaysia

In Malaysia the waqf shares model has been supported by seven State Islamic Councils in order for Muslims to contribute through movable waqf for the betterment of their society. Their main objectives in supporting such schemes are: to inculcate the culture of creating waqf; to provide an alternative platform for Muslims to be involved in waqf; to encourage the Muslim society to recognize waqf as a viable tool to enhance the economic position of the ummah; and to encourage Muslims to cooperate under the concept of cooperation. Since its implementation in the early 1990s, the waqf-shares scheme has been able to play its role in gathering the needed funds to develop projects that benefit the Malaysian societies, such as developing the existing waqf lands; building mosques, religious schools, providing physical amenities for the Muslim community and maintenance of religious infrastructure; the establishment of education funds, human capital development and financing medical facilities; real estate development and the purchase of land parcels with the potential to be used for agricultural or residential projects; and financing the operations of tahfiz schools (schools for memorizing the Holy Quran).

Current Practice of Waqf-Shares in Indonesia

The establishment of cash waqf in Indonesia was lead by a non-profit organization, Dompet Dhuafa Republika. This organization, which was established in 1993 by a group of journalists, is driven by a mission to help the needy through zakat, infaq, sadaqah and waqf. Dompet Dhuafa Republika established a dedicated body to participate in waqf programs and to ensure the efficiency and the effectiveness in the implementation of its waqf known as the Indonesia Waqf Board. Recognizing that cash waqf has the potential to provide the necessary funds for charitable projects, including poverty alleviation, the Indonesia Waqf Board launched a cash waqf scheme known as Tabung Wakaf Indonesia or the Indonesian Waqf-shares. The main objective of these waqf-shares is to accumulate capital that can be used for purposes benefiting the Muslim community in Indonesia, such as financing; poverty alleviation programs; the provision of free medical services; the implementation of educational programs; and entrepreneur development programs. In this scheme, the founder can make contributions once or regularly, depending on his financial abilities. To ensure regular contributions, the Indonesia Waqf Board encourages the founders to give standing instruction to their banks for regular transfers from their accounts to the designated bank account of the Indonesia Waqf Board waqf-share scheme.

Current Practice of Waqf-Shares in Kuwait

In Kuwait the non-governmental organizations (NGOs) play an important role in promoting the growth and development of cash waqf schemes. The International Islamic Charitable Organization IICO, which is one of them, was established in 1986 in Kuwait under the law No. 64. The main objective of this charitable organization is to provide global and humanitarian aid, aiming at assisting the poor communities and helping them in developing their resources in the most efficient way. Prior to the schemes adopted by the State Islamic Councils in Malaysia, IICO implemented a model based on waqf-shares. Through this model, it has established nine waqf-share schemes; and each has been given a motto to motivate people to contribute to any of their preferable schemes. These schemes are; waqf-share scheme for the poor and the needy, waqf-share scheme for mosques, waqf-share scheme for printing al-Quran, orphans waqf-share scheme, empowerment waqf-share scheme, sacrifices waqf-share scheme, supplying water waqf-share scheme, breaking the fast waqf-share scheme and waqf-share for the needy families. The waqf-share scheme in Kuwait covered many needy areas and not only for the poor but also for the majority of people in Muslim societies living in different countries.

Current Practice of Waqf-Shares in the United Kingdom
In a country where Muslims are a minority, waqf plays an even more important role for the advancement of Muslims in various social and economic sectors. In the United Kingdom, charitable organizations and solidarity groups are an important element within the Muslim community. One such institution is the Islamic Relief which is a non-governmental organization founded in 1984, as an international relief and development charity organization, with the aim of alleviating the suffering of the worlds poorest people, responding to disasters and emergencies, and promoting sustainable economic and social development by working with local communities. Similar to Kuwait, seven waqf-share schemes have been developed to provide global and humanitarian aids in the different Muslim and Muslim minority countries such as; Chechnya, Afghanistan, Palestine, Bangladesh, Bosnia, Ethiopia, Salvador, Albania, Mali, Kosovo and Sudan. These waqf-share schemes are; education waqf-share scheme, water & sanitation waqf-share scheme, orphans waqf-share scheme, qurbani waqf-share scheme, healthcare waqf-share scheme, emergency & relief waqf-share scheme and income generation waqf-share scheme.

Conclusion: The current practice of waqf-shares in the different Muslim and Muslim minority countries is good evidence of the continuation of the remarkable role of the institution of waqf from the time of the Prophet (pbuh) until today. We hope that by adapting such schemes more non-profit institutions in Muslim and Muslim minority countries will emerge not only to provide the services needed in their societies but also to assist in solving the current financial crisis.

About the Author

Dr. Magda Ismail is a Lecturer at the Economic and Governance Department at INCEIF, the Global University of Islamic Finance in Kuala Lumpur, Malaysia.

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