[PDF]Waqf Cash Money- En

Paper Proceeding of the 5th Islamic Economics System Conference (iECONS 2013), "Sustainable Development Through The Islamic Economics System",
Organized By Faculty Economics And Muamalat, Universiti Sains Islam Malaysia, Berjaya Times Square Hotel, Kuala Lumpur, 4-5th September 2013.


CASH WAQF MODELS FOR FINANCING IN EDUCATION


Muhammad Ridhwan Ab. Aziz1
Fuadah Johari2
Mohd Asyraf Yusof3


ABSTRACT

Cash waqf is a trust fund established with money to support services to mankind in the name of
Allah. The gifted capital was “transferred” to borrowers for certain period, which was then spent
for all sorts of pious and social purposes inclusive for the investment objectives. It is recognized
that there is no ample study in the area of cash waqf. Again literature is very scanty relating to
the cash waqf area especially for the establishment of Islamic financial institution for financing
in education. The main objective of this paper is to examine and compare various cash waqf
models as proposed by many Muslim scholars. The methodology of this paper is a qualitative
research through document analysis of relevance references pertaining to cash waqf models. The
general finding of this article shows that there is possible structure for waqf instrument that can
be implemented in the future for the financing of education. It is expected that with a proper
mechanism of waqf financing provided by specific Islamic financial institution, it is able to
benefit many parties in getting financing facilities as well as for investment purposes that may
attain the both objectives of this world and the Hereafter.

Keywords: Waqf, Cash Waqf, Islamic Bank, Islamic Financial Institutions


1. INTRODUCTION

The word waqf is derived from the Arabic root verb “ waqafa ” means ‘causing a thing to stop
and standstill’. It also takes the meanings of ‘detention’, ‘holding’ or keeping. Ii«t//vvhich (pi.
Awqaf) is called Boniyad in Iran and Habs (pi. Ahbas) in North and West Africa. However, by
taking its different meanings into consideration waqf can be applied to non-perishable property
whose benefit is extracted without consuming the property itself. Although, waqf is not
specifically mentioned in the Holy Quran, the concept of wealth distribution is strongly
emphasized therein (Chowdhury et.al., 2011). Distribution of wealth is a key issue in the
modem economy to make it more dynamic, prejudice free and entrepreneurial. However, a
hadith narrated by Abu Hurairah [May Allah be pleased with him (Ra)] is considered as the
origin of this institution in the world of Islam. “Abu Huraira (Ra) reported Prophet
Mohammad [Peace be upon him ( Pbuh )] as saying: when a man dies, all his acts come to an
end, but three; recurring charity (sadaqah jariyah) or knowledge (by which people are
benefited), or a pious offspring, who prays for him ” (Reported by Muslim, No. 4223)

Generally, waqf can be classified into several categories on the basis of three diverse aspects
that is, timing, purpose and the object of waqf (Jalil and Ramli, 2008).


1Senior Lecturer, Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia. Corresponding author:
ridhwan.aziz@usim.edu.my.

2Senior Lecturer, Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia.

’Research Assistant, Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia.


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Paper Proceeding of the 5th Islamic Economics System Conference (iECONS 2013), "Sustainable Development Through The Islamic Economics System",
Organized By Faculty Economics And Muamalat, Universiti Sains Islam Malaysia, Berjaya Times Square Hotel, Kuala Lumpur, 4-5th September 2013.


Figure 1: The Categories of Waqf in Islamic Jurisprudence


From shariah point of view, waqf may be defined as holding a maal (an asset) and preventing
its consumption for the purpose of repeatedly extracting its usufruct for the benefit of an
objective representing righteousness or philanthrophy. this definition also covers several news
forms of waqf that were not discussed in the classical literature, such as the waqf of financial
rights and waqf of usufruct, are covered by the definition of the word Maal (asset) according to
the majority of fuqaha’ and as expressly mentioned in the collective fatawa, especially tha OIC
Fiqh Academy(Monzer Kahf, 1998). The contemporary jurists also justify the validity of the
cash waqf, because it is in the interest of the waqf, its beneficiaries and the society (Tahir, 2011).

In addition waqf assets can also be immoveable or moveable (e.g. cash waqf. In cash waqf al-
waqif (donor) endowed cash instead of realestate. Cashwaqf begin in primeval Mesopotamia,
Greece and the Roman Empire. In fact, in the eighth century, Imam Zufar had approved
cashwaqf in the Islamic World for the first time. According to him cashwaqf would be invested
through Mudarabah and profits would be spent for charity. Nevertheless, cashwaqf did not
expand and mature until the 16th century and after that century it became popular, especially
among the ottomans. Although there was controversy on the legality ofcashH«c//among the
Shariah scholars but thousands of cash waqf continued to be endowed. In particular,
cashwaqfwas supported by the Ottoman Sultans, because funds were financed in the expansion
of Islam in Europe (Cizakca, 2004, 2010).

Therefore, many Muslim did not get chance to participate in waqf endowment because there is a
wrong perception among Muslims that there may be waqf endowment through only land not
in cash. They believe land can fulfill the three conditions of waqfsuch as perpetuity,
irrevocability and inalienability. However, land may be subject to demolition, destruction due to
the natural calamity and waqf will only last till its value exist (Mohammad, 2008). Through
proper c as h waq fm an age m e n t , it is easily possible to hoi&waqf value as well as value
enhancement.As a result, those who do not have land can participate in endowment through
cashwaqfln addition, nowadays people have more choices for waqf by including cash into waqf.

Furthermore, cashwaqf is far more important since it is more productive compared to land,
buildings, books, cattles and so on, as it is testified by the existing research studies and have
been found profitable in the practices of modem Islamic financial system. In fact, in
cashwacfihc amount or value of the waqf is not an important issue, rather it is worthy to involve
whole ummah in the process of waqf, so that everyone irrespective of financial condition could
be involved by contributing as little as a cent within the prescribed systems of institutionalizing


836


Paper Proceeding of the 5th Islamic Economics System Conference (iECONS 2013), "Sustainable Development Through The Islamic Economics System",
Organized By Faculty Economics And Muamalat, Universiti Sains Islam Malaysia, Berjaya Times Square Hotel, Kuala Lumpur, 4-5th September 2013.


the concepts under government or private initiatives and guidelines provided by Islamic
doctrines. Because, it is not only the preserve of the wealthy (Chowdhuryet.a/, 2011). That is
anyone, subject to certain Shariah conditions, can be al-waqif (donor) through cash waqf.


2. CONCEPT OF CASH WAQF

Cash waqf are charitable endowments established with cash capital. What distinguishes these
from the standard real estate endowments is the nature of their capital, corpus, which is in the
form of cash. The corpus of the real estate waqfs, by contrast, is in the form of real estate. Thus,
whereas a well to do Muslim normally endows his real estate and channels its rent revenue for
charity, in the case of a cash waqf, not real estate but cash is endowed and the revenue generated
out of the investment of this cash is then channelled for charity(Murat Cizakca, 2004).

Cash waqf can only be distributed and allocated for anything not against Sha'riah Law. This fonn
of waqf provides opportunities for facilitating its participation in social development (Tanim
Laila, Undated).

a) Mass Participation: It provides an opportunity for participation of all segments of the
Muslim society and not just the wealthy Muslims, like in the case of real property waqf.
This gives every interested Muslim a chance to participate, contribute with whatever means
he has to offer, even with the simplest amount.

b) Rightful Utilization: cash waqf scheme can gather the scatteredendowments to create a
common fund to maximize its utilization rather than the endowment being spent in mere
consumer consumption. This lends itself to employ an efficient management scheme of
moder n financial system and thereby protect waqf being destroyed by incompetent
Mutawallis.

c) Social and Economic Development: Such a scheme can enhance the government’s national
development plan for poverty eradication and social services through co -ordination. In fact
the fund raised by cash waqf scheme can be used to fund microfinance projects which are
currently funded by high interest rate and charges.

Dunya listed the significances of cash waqf as: (a) compare to immovable property many
members of the public have cash.(b) cash waqf is the best way for a joint waqf {waqf
m\\sY\tvakl waqfjuma 7), thus, it can attract finance for the development of diverse and big
projects, (c) cash waqf can be invested in diverse economic activities, and therefore greater
revenue can be expected, (d) It can be for any objective, and any social purposes, (e) The
chances for the growth of this waqf are higher. Maiman added that it is easily liquefiable
compare to realty(Tahir, 2011).

Ammar further listedthe benefits of cash waqf. They are: (i) currency as the benefits or
replacement of coins is the medium for exchange of goods, (ii) Currency is replaceable with
similar (i.e. it is a mal mithli).(iii) cash waqf enables everyone to donate as waqf, whereby the
poor and needy can benefit from the abundance of resources. (iv)cashu’u(// is capable of creating
more economic stimulus, and it can be a welfare fund used to sponsor many educational, social
and health projects. To sum, the coins of the old, the paper currency of today, or any other form
of liquid asset, under modem banking practice, can be the object of waqf. For the purpose of
loans and investment, currency will be more useful to a bank, while other forms may end up in
non-liquefiable asset, unless prudent deeds of waqf are in place, empowering the bank touse
certificates of shares, sukuk and others as currency(Tahir, 2011).


837


Paper Proceeding of the 5th Islamic Economics System Conference (iECONS 2013), "Sustainable Development Through The Islamic Economics System",
Organized By Faculty Economics And Muamalat, Universiti Sains Islam Malaysia, Berjaya Times Square Hotel, Kuala Lumpur, 4-5th September 2013.


3. LITERATURE REVIEW

The study of cash waqf was done by several researchers in recently time. Murat (j'izakga (1998)
explains that historical evidence indicates that the real exiting potential lies in the cash awqaf.
The awqaf system has provided throughout Islamic history all the essential services at no cost to
the state and a successful modernisation of the system implies a significant cut in government
expenditure and all the associated benefits including downsizing the state sector and a reduction
or elimination of riba. Cengiz Toramanet.n/. (undated), conclude that in a society where health,
education and welfare were entirely financed by gifts and endowments, the cash awqaf carried
serious implications for the very survival of the Ottoman social fabric.

Islahi (1992), stated that the internationalize the voluntary institution of awqaf is needed
nowadays, by setting up a non-government world Muslim foundation which should provide
public goods on large scale and in much more significant fashion than has been the case up till
now, to combat illiteracy, sickness and lack of technical know-how.

Monzer kahf (1998), explain the importance of waqf for socioeconomic development, which is
consists of creating and developing a third sector distinct from the profit-motivated private
sector and the authority-based public sector, and changing this third sector with the
responsibility of performing a group of tasks whose nature make them better achieved. This
third sector assigned in education, health and social and environmental welfare. Furthermore, it
can provide defense services and public utilities in many instances.

Chowdhury et.al.( 2011) explain thatcash waqf would also help to refonn thepresent institutional
setup and their networking relationship throughout the country with a view to increasing their
performance in the direction of the efficient and need based dynamic management of the waqf
affairs and systems which total policy dimensions at micro and macro mixed with the
diversified objectives of innovations and development in the waqf management systems
complying with the Shariah guidelines.

Again Tahir (2010) explainsthat the vrag/bank can be applied as the bank of the poor. It can be
permissible in Islam based on validity of cash waqf and the need of waqf, its beneficiaries as
well as the society. But, If there is favourable political will institution of vcc/c// throgh waqf bank
contribute to society geatly.The institutions of waqf have the unrealized potential to establish a
nm//Bank.

Tahir & Hamid(2006)explain that the new formulation of waqf may be realized by making a
distinction between the perpetuity of the physical being of the object and it isnot
‘dedication ’ of benefits. New form of waqf can be declared in the non-traditional way. Old
waqf, however, may still remain subject to the old conditions as long the greater interests of the
waqf are not threatened by these conditions.

Wafa (2010) explains that the impact of Developing Waqf Vox Education In Malaysia not only
promoting the significant rule of waqf towards the country, but also will be impact to (1)
promoting the third sector of Islamic Economic, (2) establishing economic activities through
several projects, and business, (3) complementing the royal aid development, benevolent and
educational programs, and (4) promoting the oneness of society.


838


Paper Proceeding of the 5th Islamic Economics System Conference (iECONS 2013), "Sustainable Development Through The Islamic Economics System",
Organized By Faculty Economics And Muamalat, Universiti Sains Islam Malaysia, Berjaya Times Square Hotel, Kuala Lumpur, 4-5th September 2013.


4. MODELS OF CASH WAQF FOR EDUCATIONAL FINANCING

The permissibility of cash waqf can be extended to waqf bark for several reasons. (1) itw//issues
are rational (ijtihadi), (2) The Utility of a Waqf Bank, (3) Compliance of the Structure and
Operation of a Waqf. Thus, the establishment oiwaqfbank could be allowed for the benefit of
waqf, its beneficiaries, and also public interest of (maslahah) as long as it is not against Shariah
principles.The function of cash waqf can be the function of a waqf bank through loans to the
needy, and investment on mudarabah,mu ’malah, and ijarah. If a wider application is given to
the idea, a waqfbank can use such cash vt'«c//' for the same purposes(Tahir, 2011).

4.1. Bank Model 1

As a rule, productive waqf must be kept invested and income generating, which can be best
achieved by going to the business of banking. The contemporary Islamic banking practice
provides evidence of successful cash investment methods that are not only good for expecting
good returns on the investment but also protection of the capital which will be discussed in due
course.

Additionally, the bank will use cash waqf for its capital according to fiqhi principles in its
operations (both loans and investment). Therefore, the core characteristic of waqf i.e. perpetuity
of the object or the capability of recurrent use and benefit, would apply to both the casbwaqf
and waqf bank alike.


Figure 2: Waqf Bank Model 1


Borrower 1

Borrower 2

More

Trade

Financing

->

Generated

income

/

Fig. 1. Waqf Bank's Proposed Structure and Operation


First, the bank can be entrusted with cash waqf or collect cash waqf from the public for special
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