Lecture 08 final updated

Wealth Planning and Management

Waqf

“The Global University in Islamic Finance”

‫بسم ال الرحمن الرحيم‬

‫)إذا مات النسان انقطع عمله إل من ثلث؛ صدقة‬
‫جارية‬
.(‫وعلم ُنتفع به وولد صالح يدعو له‬
‫ي‬

The Prophet (s) 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.


Definition of Waqf

Waqf, habs and tasbil all mean ‘to stop, to
prevent, to restrain’ i.e. al-habs wa al-man‘,
all mean devoting in the way of Allah (fi
sabil Allah).

“ The confinement of a private property,
movable or immovable, from the
ownership and the dedication of its usufruct
in perpetuity to the welfare of society”


What are the 3 types of waqf

– Waqf Khayri (public waqf) – is an endowment made
by the founder to support the general good and
welfare of poor and the needy in society.
– Al-waqf al-Dhurri, Alwaqf al-ahli and waqf ala-wlad
– are same and refer to family waqf. The founder
endows his property to his children, grandchildren,
relatives or other persons whom he specifies. If the
beneficiaries not longer alive, then waqf property
will be given for public welfare purposes. Encourage
by the Prophet (pbuh)
– Al-waqf al-mushtarak (combined public and family
waqf) – created by the founder to support both the
public and his family.

“The Global University in Islamic Finance” 4

Describe the conditions for validity
of waqf
– Founder must be ‘aqil (sound mind), baligh (adult) and
hurr ( a free man/women) and capable to transfer the
ownership to the ownership of Allah.
– Dedicated property can either be movable or immovable
– Appoint a muttawalli (trustee) either himself or someone
else
– Beneficiaries can be specified by the founder in his
waqfiah (waqf deed), it can be either his family members,
society
– Creation can be either oral i.e verbal or written

5

Describe the endowment Assets (al Mawquf)

– Immovable and movable property – land field, farms,
buildings., mosque are immovable. Movable are cattle and
implements of animal husbandry, books, money, crops,
weapons, and share of company.
– Waqf sahih (sound waqf) and waqf ghair sahih (unsound
waqf)- waqf sahih is the waqf upon mulk land i.e. Privately
owned freehold property over which the owner held
complete rights of alienation. Waqf ghair sahih are state
owned land and whose property belongs to the empire’s
public treasury
– Direct and indirect waqfs – direct waqf is a waqf created to
serve the people free of charge like mosque, schools. The
creation of indirect waqf is needed in order to provide
running expenses e.g. Renting properties.
6

What are the restrictions to waqf
- Irrevocability – founder cannot revoke the dedication if the
property has already been declared as waqf
– Perpetuity – waqf created must be perpetuity this will
ensure no confiscation of the property by the government
or individual and will ensure continuous support.
– Inalienability of the Waqf- once the property of waqf is
transferred to Allah (swt) no one can ever become owner of
it. The usufruct derived from it can benefit man as
intended.

7

Legitimacy of Waqf & Cash-Waqf

All schools of fiqh Hanafi, Maliki, Shafe‘i & Hanbali agreed upon immovable
and movable properties as a subject matter of waqf including the creation
of “cash waqf”.
• “By no means shall ye attain righteousness unless ye give (freely) of that which ye
love; and whatever ye give, of a truth God knoweth it well (surah al-’imran 3:92)
• “it is not righteousness that ye turn your faces towars East or West, but it is
righteousness to believe in Allah, and the Last Day, and the Angels, and the Book, and
the Messengers, to spend of yoru substance out of love for Him, for your kin, for
orphans, for the needy, for the wayfarer, for those who ask, and for the ransom of
slaves, to be steadfast in prayer and practise regular charity.”(Surah al-Baqarah 2:177)


Legitimacy of Waqf & Cash-Waqf

• Evidence from the Sunnah

“Abu Hurairah (Allah be pleased with him) reported Allah’s Messenger
(pbuh) as saying: when a man dies, his acts comes to an end, except three
things, recurring charity, or knowledge (by which people benefit), or pious
offspring, who prays for him. (Sahih Muslim)
Majority of Muslim jurists understood that recurring charity serves as the
basis of waqf.


Legal Condition for a Non-Muslim

The Shafie School permitted the creation of waqf from a non -Muslim even if it is for the
benefit of a Mosque. He based his opinion on the following hadith :
• ‫عن انس بن مالك رضي ال عنه قال: قال رسول ال )ص( " ان‬
‫ال ل يظلم مومنا حسنة يعطى بها في الدنيا ويجزى بها في الخرة‬
• ‫واما الكافر فيطعم بحسنات ما عمل بها ل في الدنيا حتى اذا‬
‫“افضى الى الخرة لم يكن له حسنة يجزى بها‬

The Prophet (pbuh) said “Allah will not oppress any Muslim from his good
deeds, as he will be rewarded in this world and in the hereafter. But for the
non- Muslim he will be rewarded for all his good deeds only in this world”


Mixing of Cash Waqf

Fatwa from Kuwait Awqaf Public
Foundation (web-site)

“It is permissible to mix the cash-waqf of a
non-Muslim with the cash-waqf of a
Muslim as long as it satisfies with the legal
condition for the creation of waqf”


al-Mawquf ‘alaihm al-Mawquf
(the beneficiaries) (endowment property)
Classification of Waqf Property
1. Waqf khayri (public waqf) 1. Waqf manqul (movable waqfs)
&Waqf ghair manqul
2. Waqf dhurri (family waqf) (immovable waqfs)
3. Al-waqf al-mushtarak 2. Waqf sahih (sound or valid
(combined waqf) waqfs) & waqf ghair
(lands, farms, fields or sahih (unsound or invalid
buildings or privately waqfs)
owned freeholds 3. Direct and Indirect waqfs
properties (lands, farms, fields, or buildings or
privately freehold properties.


Ten Stipulations
for the Creation of Waqf


What are the TEN (10) stipulations for the
creations of Waqf
– Ziyadah (increase) and Nuqsan (decrease) –the founder can
increase the share of one beneficiary or decrease the share of
another. E.g. Equal share for mosque and hospital. Hospital
requires more fund, the founder can change the revenue to
increase for hospital and reduce for mosque.
– Idkal (addition) and Ikhraj (removal) – add new beneficiaries
and remove another- flexibility for public waqf.
– I’ta a (granting) and Hirman(dispossession) – allows founder
to grant all or a portion of his waqf revenue to whomever he
chooses for a specific period and dispossess. Revenue for
scholarship can be channelled to heart patient in hospital.


What are the TEN (10) stipulations for the
creations of Waqf
– Taghir(replacement) and Tabdil (conversion) –
founder can replace use of the waqf revenue to
purchase of hospital equipment instead of rental
maintenance while tabdil allows the founders the
right to change the waqf property. Eg. convert
unproductive land to housing to gain revenue.
– Istibdal (substitution) and Ibdal (exchange). Ibdal
actual selling of non-profitable waqf property
while Istibdal is the purchase of another property.


Modes of Investing and Financing

Immovable Waqf Properties Movable Waqf Properties
• al-hikr (long lease right) 1. renting (jewelry, weapons)
• al-ijaratain 2. exchange (crops)
(the lease with dual payment) (selling and buying)
• al-istibdal (substitution) 3. mudharabah (cash money)
• Al-mursad (advanced lump sum is paid by the lessee to be credited by the waqf
department toward the agreed upon periodical rent applicable for reconstruction.


Describe the modes for Immovable waqf
– Hikr (long lease right)- was developed to prevent the
waqf property from being sold in case it came to any
harm. The right is given to the trustee to lease the
waqf property on a long lease at a nominal periodic
rent. The right is sold for a lump sum, which is equal
to the value of the waqf property in advance and with
a nominal periodic rent paid to the trustee
– Al-ijaratian (the lease with dual payment) – resulted
from destruction of some fo waqf properties by fire
in Constantinople (1020AH) dual method of finance
and reconstruct these damage waqf properties, This is
also a long lease contract with a large lump sum to be
paid in advance which is approximately equal to the
value of the waqf property for reconstruction and
with a nominal periodic rent.


Describe the modes for Immovable waqf
– Al-istibdal (substitution)- emerge from the fact that
the waqf property cannot be sold. Muslim jurist
agrees to exchange the waqf property with another
property or for money in order to renovate the old
ones. If the waqf property can no longer generate
revenue. It provides liquidity and the disadvantage is
that it lost half of the waqf property or its good
location.
– Al-murshad mode_ in which advance lump sum is
paid by the lessee to be credited by the waqf
department towards the agreed upon periodical rent
applicable after reconstruction. Advantage land is
developed, disadvantage is that the lessee will claim
his ownership of this land after a long time


Describe the modes for movable waqf
– Jewellery can be created as waqf and no zakat for
waqf property.
– Measurable and weighable waqf property could be
sold and its proceeds can be invested in Mudarabah
i.e. changing its status from crops to cash waqf.
(wheat seed grain given to poor for cultivation and
taken back and given to others, in the way perpetuity
of the waqf is maintained.
– Cash waqf (liquid form) can utilised Mudarabah
partnership. Imam Zufar who approved the validity
of darahi (money) to dedicated as waqf says that the
money deposited as a waqf can be invested in
mudarabah and the return to be used for a pious
purpose.


Administration of Waqf as highlighted in the
Hadith
The Hadith narrated ibn ‘Umar (pbuh): In the lifetime of Allah’s Messenger
(pbuh), ‘Umar gave in charity some of his property, a garden of date palms
called Thamgh. ‘Umar, said, “O Allah’s Messenger! I have some property
which I prize highly and I want to give it in charity.”

The Prophet (pbuh) said, “Give it in charity (i.e. as an endowment) with its
land and trees on the condition that the land and trees will neither be sold
nor given as a present, not bequeathed, but the fruits are to be spent in
charity.”

So ‘Umar gave it in charity, and it was for Allah’s Cause, the emancipation
of slaves, for the poor, for guests, for travelers, and for kinsmen. The
person acting as its administrator could eat from it reasonably and fairly,
and could let a friend of his eat from it provided he had no intention of
becoming wealthy by its means.


Hadith Highlightes
• Perpetuity of the Waqf: once the property becomes a waqf it
MUST NOT be sold or inherited or given away as a gift.

• Beneficiaries: it is up to the founder to specify his
beneficiaries, either to the public or to his family. In this
hadith Caliph ‘Umar devoted it to both i.e. WAQF
MUSHTARAK.

• Administration of the waqf: the founder himself can
administer his own waqf and at the same time he can benefit
from its REVENUE in a reasonable manner as long as he lives.


The Historical Role of
Waqf & Cash-Waqf
Waqf & cash-waqf played significant roles
through their varied and wide
contributions to the economic and social
life of the people. There roles were like a
network, which penetrated all sectors
such as;
1. the agricultural,
2. the industrial &
3. the social sector.

II. MODERN APPLICATIONS OF CASH WAQF

The last two decades witness the revival of the
institution of waqf and the creation of movable waqf
i.e. cash waqf in almost all Muslim countries and
Muslim minority countries.

The followings will highlight nine different cash-waqf
models that have been practiced in 15 countries and in
3 international organizations.


Total Cash Waqf Collection by Country

70.00
60.00
50.00
Am ount 40.00
(USD m illion) 30.00
20.00
10.00
0.00
Malaysia SingaporeIndonesia Turkey Bangladesh United
Kingdom
Country

Country Total Collection (USD)

Malaysia 64,403,255.94
Singapore 28,123,810.09
Indonesia 1,178,097.68
Turkey 23,953,569.85
Bangladesh 899,621.00
United Kingdom 3,166,752.62


KEY ISSUES

Why Cash Waqf?
Cash waqf is more flexible and does not face
the problems associated with static perpetuity
like capital tied up in fixed assets that may be
unproductive.


The Objectives of Cash Waqf
• To enable individuals to donate under a waqf system;

• To create a fund that can be used for purposes benefiting the
Muslim community;

• As a platform for Muslim organizations to source for funds to
finance its programmes;

• To inculcate the culture of participating in waqf;

• To encourage Muslims to recognize waqf as a viable tool to
enhance their societies;


Cont.
• As part of a comprehensive Muslim economic development
strategy;

• To enable Muslims to be involved in charity in a more
systematic manner;

• To develop a productive and credible waqf institution; and

• To provide an opportunity for all people, regardless of their
religion and level of income, to create waqf in the form of
liquid assets which is easier than creating immovable assets.


Issues
• There is a general lack of promotion about cash waqf
and generally contributors are those who happen to
stumble by accident;

• Project cost could dilute the waqf collected;

• There is not proper standard system of waqf
management;

• A need for a sound management system; as Malaysia
inherit the waqf from Colonials, there is no particular
system in place;


Cont.
• One of the legal problems is that the waqf has to be under
religious affairs as it is under state list and it is burdensome
as it involves the powers of sultan;

• For bigger project like university, the waqf management of
the religious affairs are unable to handle;

• Possible mismanagement and abuse of the waqf as
beneficiaries may not received it;

• Possible decrease or lost of the capital in case of
mismanagement.


1. Reviewing the Current Law of Waqf
in Malaysia

It is much recommended to review the current
law of waqf in Malaysia in the light of shariah
since the current law is inherited from the
colonial era. This will give more flexibility in
terms of the creation of waqf and its
administration and in terms of encouraging
more founders to contribute to this institution.


2. Administration of Waqf
• It is much recommended to give the right to the
waqf institutions/NPO to administer their own
waqf, and for the religious council, in each
states, to act as a supervisory body only.

• It is also appreciated to invite people from the
religious council to be members on any waqf
board so that they can be involved in the
administration and the supervision indirectly.


Cont. Administration of Waqf
To minimize mismanagement it is much
recommended:
• to maintain a waqf registry to monitor the
management of waqf, including to keep
and maintain a register of cash waqf, and
to maintain all documents relating to
waqf.
• a performance report shall be published
by the waqf institution twice a year.

3. List of Needy Areas
For creating waqf for the public it is much
recommended to prepare a list of needs
in the different states of Malaysia and to
give the right to the founder to chose
accordingly.


4. Inclusion of the Ten Stipulations in
the Waqf Deed
It is also much recommended to practice the
flexibility given by including the ten
stipulations in the waqf deed. This will give
the trustee the right to change the ratio or to
switch the beneficiaries if deemed necessary,
or to exchange unprofitable waqf property
with another property, which is profitable.


ISLAMIC B A N K ( T R U S T E E )

ISLAMIC B A N K ( T R U S T E E )

CASH W AQF ( B A N K ) W I N D O W S

FUND A C C U M U L A T I O N INVESTMENT A N D P R O F IT
D IS T R IB U T IO N (C H A R IT Y ,
MNAGEMENT A N D C A P IT A L
ENDOW MENT OF SHARES ( I B AND OTHER E N H A N C E M E N T ) A N D
INSTITUTIONS) A S CASH W A Q F M A R K E T IN G .

CASH WAQF BY O T H E R S INSTITUTIONS FROM
THEIR P A R T S OF D I V I D E N D
WAQF LAND D E V E L O P M E N T S (MUDARABAH
AND M U S H A R A K A H )

WAQF CERTIFICATE (SPECIFIC OR G E N E R A L )

MICROFINANCE (GROUP B A S E D LENDING
OR S O C I A L COLLATERAL [E.G. P R A Y E R
WAQF INSURANE (SPECIFIC O R G E N E R A L ) LEADER], C O M P U L S O R Y SAVINGS AND
ASSETS INSURANCE FOR F A R M E R S

TEMPORARY W A Q F :

SME LOAN: M U S H A R A K A H (COLLATERRAL,
DEPOSIT W ITHOUT S H A R E O F P R O F I T
C O M P U L S O R Y SAVINGS, OPTIONAL
ASSETS I N S U R A N C E )

BUYING W AQF SHARES (50% O F DIVIDEND
POTFOLIO I N V E S T M E N T IN IFI’S
WILL BE D O N A T E D )
SECURI T I E S

E-WAQF (LUMP S U M A M O U N T ) EMERGENCY NEEDS F U L F I L L

OTHERS: SPECIFIC B Y DONOR AND
GENERAL (MOSQUE, MADRASH E T C . )

Figure 2. Cash WAQF model.


Thank You
Q&A


Lecture 08 final updated

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