Introduction

1. There is no uncertainty that the being of waqf since the clip of the prophesier s.a.w is meant for the worlds to make good workss for the society and should profit the Muslims. Waqf or gift has been embodied in Islam as one of the good workss in which the religious title rewarded by Allah with 70 times returns.[ 1 ]In another poetry, the act of philanthropic gift by disposing out belongings as an act of charity is encouraged in Islam.[ 2 ]From economic point of position, waqf is a powerful mechanism in developing the state in signifier of charitable instruments which is really alone and good for poorness relief programmes.

2. In Islamic tradition waqf is really of import. Its possible in future development should non be underestimated. The mean rate of return on investings made in developing waqf belongingss came to a lower limit of 20-25 % ( Rashid, 2012 )[ 3 ]. Besides spiritual intents, waqf land has besides been used for substructure development, instruction sector, health care and public comfortss. For illustration, among the outstanding instruction establishments that were founded and maintained utilizing waqf lands are the Al-Azhar University in Egypt, University of Cordova in Spain, Universitas Islam Indonesia in Jogjakarta, Indonesia[ 4 ]and AlBukhary International University in Malaysia. While in the health care sector, the infirmary ( Al Noori Hospital ) in Damascus and clinics ( Klinik Nur ) in Malaysia.[ 5 ]

Review of Development in Waqf

3. Recently, there is an increasing involvement in resuscitating the waqf establishments. Several international conferences on waqf have been held in recent old ages ( i.e. Harvard, 2006, 2008 ; South Africa, 2007 ; Singapore, 2008 ; Kuwait, 2008 ; Iran, 2008, Malaysia, 2010 ) .[ 6 ]These conferences and seminars have discussed how waqf establishments have been revived by agencies of questioning relevant governments and carry oning studies on waqf land regulations and ordinances in many parts of the Muslim universe. Box 1 provides the illustration development of waqf lands and belongingss in Malaysia and Singapore. However, despite assorted attempts by the authoritiess to heighten the benefits, the use of waqf lands is still non being optimized and in fact there are a batch undeveloped waqf lands which have possible to be invested through assorted instruments.

4. From the position of research, the literatures discussed the different use of Islamic manners of investing for waqf establishments ( Kahf, 1998 ; Hasan and Abdullah, 2008 ) . There are besides a few literatures dedicated to the subjects of waqf land development. Most of these have discussed the historic development of these lands and their legal facets ( Perai, 2005 ; Hasan and Abdullah, 2008 ) . There are Hagiographas that have classified waqf lands harmonizing to how they have been used, for illustration agribusiness, building, mosques, graveyards, etc. ( MAIS, 2008 ) . There is, limited literature that has categorized waqf lands harmonizing to their strategic locations and uses allow entirely fiting them with Islamic investing manners ( Noor and Mohamed, 2009 ) .

5. There is no recent intelligence of any worth-mentioning waqf development undertaking except in Malaysia during the last two old ages ( 20 major and 70 minor waqf undertakings have been completed, worth over US $ 100 million )[ 7 ]. On the other manus, the figure of belongingss sponsored by the Awqf Properties Investment Fund of IDB ( APIF ) was non up to the grade. During 2002-03 merely 8 undertakings were developed, while 7 undertakings in 2009 and 5 undertakings in 2010. The distribution of dividend from the financess was comparatively low at merely 2.5 % compared to Harta Tanah PNB Trust in Malaysia at 6-7 % of income distribution yearly[ 8 ]. In add-on, World Waqf Foundation has been really inactive as there is no publication from the foundation since 2004.

Box 1. Development of Waqf Lands in Malaysia and Singapore

The development of waqf in Malaysia and Singapore particularly land is basically aimed at bring forthing more income to waqf establishment that could be benefited by the donees.

In the context of Malaysia, there are over 35,727 hectares of registered waqf lands in which may be invested to profit the Muslims society. [ 1 ] One of the recent big graduated table investings of waqf land in Malaysia was initiated by the Federal Territories ‘ Islamic Religious Council together with Tabung Haji, TH Technologies Sdn. Bhd. and Bank Islam Malaysia Berhad affecting a undertaking for the building of a 34-storey edifice at a cost of RM151 million. Regardless of this development, it is observed nevertheless that the use of waqf lands is still non being optimized and in fact there are a batch undeveloped waqf lands which have possible to be invested through assorted instruments.

There are assorted theoretical account of investings of waqf land could be adopted by the waqf authorization either they are depending on support from the federal or province authorities or statutory organic structures or fiscal establishments. The extreme of import is that the ability of the waqf establishment to take the most appropriate and suited methods of fiscal strategies for any of its investing undertaking. In Malaysia, the instruments of investing of waqf land viz. debt-based instrument, equity-based instruments, self-finance instrument and Islamic securities instruments. However, the bing waqf lands have non been strategically categorized and the manners of Islamic investings have been used randomly.

In the instance Singapore, although many waqf were still managed by the private legal guardians, all awqaf created are vested in Majlis Ugama Islam Singapura ( MUIS ) and required to be registered in MUIS. The effectual and efficient direction of waqf assets and belongingss by MUIS had enabled waqf gross to increase exponentially. MUIS besides adopted joint venture and partnering attack to develop waqf belongingss ( i.e a S $ 28 million development of the 20 units of massionette and merchandising for 99 old ages rental ) . This attack and method proved to be an effectual manner to develop waqf belongingss, peculiarly with belongings monetary values gyrating upwards and land scarce Singapore.

There are many originative solutions in the development of waqf belongingss. In current belongingss investing, Real Estate Investment Trust ( REITs ) instrument is a popular path to having belongingss as the construction extremely entreaties to the investors. MUIS has creatively made an “ internal REITs ” for its waqf belongingss ( i.e the purchase of a 6-storey office edifice with a pool of waqf belongingss ) . As at 2006, MUIS manages waqf belongingss and assets worth about S $ 341 million. [ 2 ] Equally far as fiscal resources are concerned, hard currency waqf strategy and modern fiscal manner of Sukuk Musharaka bond have been introduced to fund waqf development activities.

[ 1 ] Harmonizing to a study conducted by Jabatan Agama Islam Malaysia ( JAKIM ) in 2000.

[ 2 ] WAREES PTE LTD ( 2007 ) .

Beginning: MUIS ( 2006 ) , Hassan and Abdullah ( 2008 ) .

Adhering Constraints to Development of Waqf Land

6. In pattern, a broad scope of applications of the waqf thought have emerged over clip and infinite, including for intents of markets, clubs and other civic gifts, normally under the disposal of a mutawali, every bit good as for mosques, schools, graveyards, lodging for the hapless and general public assistance. In this regard, waqf occupies the ambivalent zone of many charities and altruists along with other establishments. However, important issues confronting waqf establishments need to get the better of when it comes to procedure of developing the waqf lands. For case, the waqf disposal is accused of giving less than impartial and merely determinations and ailments of graft against the waqf functionaries are non uncommon.[ 9 ]There are besides many illustrations of disputed waqf lands that now in the procedure of tribunal hearing around the Muslim universe.

7. The binding restraints faced by the development of waqf land, among others are: I ) unregistered waqf lands – without land rubrics registered in the name of the waqf authorization, the land can non be developed and they remain undeveloped ; two ) unexplore option of Istibdal on non-prime land or sale – Istibdal or permutation would be a suited option to non premier land being exchanged for premier or more suited lands for identified development enterprises or renovation ; three ) waqf on leasehold land and belongingss classified as national heritage – waqf authorization may meet obstructions developing waqf land that are leasehold ( till rental expires ) or sort under the class of national heritage under the protections of several local authorization ; four ) legal model – to understand different legal models of waqf disposal and waqf affairs ; and V ) security for funding path – for undertaking funding, the construct of waqf may non let transcending to the demand for land going collateral which is a footing for funding.

8. In term of waqf establishments, it is undoubtedly unsatisfactory. In many countries, there has been a annihilating groundss of awqaf. The awqaf establishments are non given proper attending and hence, huge awqaf belongingss are ill-managed. The inevitable effect is much decrepitude and disrepair. Even the best wqaf edifices, with enormous commercial potency, are non acquiring basic fixs and care ( Ahmad and Khan, 1998 ) . Indeed there is a general feeling that waqf belongingss of the highest quality, is now some kind of inexpensive trade good, available in the commercial market. On top of which the practical prostration of establishment of awqaf has resulted in a vacuity which, in most Moslem states have failed to make full in the spread. The grounds for this include: I ) hapless legislative model ; two ) administrative oversights ; three ) deficiency of political will ; iv ) apathetic attitude of the direction commission of the awqaf ; V ) deficiency of support ; and six ) deficiency of honestness and unity.

Proposed Model for Waqf Land Development

9. There are huge un-managed assets of awqaf in the universe where Muslims besides represent a immense sum of societal wealth. In the development procedure, these can be combined to bring forth necessary installation of societal services particularly for the hapless people ( Bellhachmi, 2004 ) . The establishment of awqaf could play a better function in the procedure of societal and economic development. In order to accomplish this phase, there is a demand to give particular attending to the development of the huge under-used awqaf belongingss to reactivate its maps and ability to supply those of import services they used to transport out in the yesteryear. One of the major jobs in relation to resuscitating awqaf is a deficiency of financess for renewing the productiveness of the waqf land/properties every bit good as other movable and immoveable assets.

10. The intended development of waqf lands/properties may be either for the intents of revival or advanced in the sense of investing. There are several manners of funding can be employed for development of awqaf lands such as publishing end product portion, partnership portion, renting etc. Sabit ( 2006 ) has divided the development of waqf assets into three ( 3 ) chief methods: I ) recognition based finance ; two ) joint venture or equity and income sharing ; and iii ) self-financing. The combination of these three methods of funding or two of them may besides necessary based on the demands of the waqf assets.

11. Based on the recent surveies and patterns, this survey proposes for constitution of waqf assets as an offer of alternate investing through the issue of sukuk, complemented by ‘cash waqf fund ‘ . In order to develop awqaf undertakings, making hard currency waqf fund ( i.e Malaysia and Singapore ) and sukuk manner of finance ( Singapore ) will construct up trust between investors, depositors and the awqaf establishments for heightening the fiscal benefit. It is expected that these two beginnings of Islamic investing financess will let the Muslim Ummah to raise waqf subscriber ‘s motivations by financing into the awqaf undertakings so as to carry through the objectivenesss of the awqaf. The inside informations of these two beginnings of support for the development of awqaf establishments are discussed below:

Before set abouting the development of waqf lands, IDB needs to carry through three basic demands: I ) develop a co-ordination mechanism between IDB and waqf authorization for the intent of roll uping waqf lands information ; two ) identify and profile strategic waqf lands for the intent of commercial activities ( i.e infirmaries, educational and preparation establishments, existent estate ) ; and iii ) organize a possible partnership in the signifier of SPV- IDB as a spouse ( sharik ) – with the possible waqf authorization to set about specific waqf projects/investments.

Many wqaf establishments merely do non hold the financess to develop new capacity while maintaining their bing work traveling on. Waqf assets, through the issue of sukuk ( Islamic bond ) , offer an alternate investing. Most of import point is that sukuk as a merchandise is linked the returns and hard currency flows of the funding to the assets purchased, or the returns generated from an plus purchased. Therefore, sukuk can be used as a tool to finance for development of the waqf belongingss. The chief aim is to supply long-run support with a focal point on edifice capablenesss and demoing consequences.

There are several types of sukuk but two, ijara sukuk and musharakah sukuk, are most popular in the existent estate funding and for making financess for building of new composites. The development of waqf assets through the issue of sukuk may be most suited by utilizing the musharakah funding rule, due to three elements: I ) it represents new beginning of financess on footing of net income and loss-sharing ; two ) it is critical to developing awqaf lands ; and three ) there is a great trade of excess hard currency sitting in Islamic fiscal establishments.

Figure 1. Illustration for Waqf Land Development

Beginning: writer ‘s illustration

Figure 1 summarizes the rhythm for waqf land development via sukuk. The waqf direction board creates a musharakah venture. Waqf direction board besides will besides name a Waqf Asset Manager as an agent to develop the land. In order to call up the fund through musharakah sukuk the undermentioned mechanics can be employed[ 10 ]: I ) the waqf plus director and particular intent vehicle ( SPV ) enter into a musharakah venture to develop waqf land for a period with pre-determine net income sharing ; two ) the waqf plus director enters into a biennial forward rental understanding with building company ; three ) on behalf of the waqf direction board, waqf plus director contributes land to the musharakah venture ; and iv ) the SPV contributes hard currency as capital to construct commercial edifice on the waqf land.

The musharakah sukuk can be complemented by hard currency waqf fund. Cash waqf has become progressively popular among Muslim, peculiarly because of its flexibleness, which allows distribution of the waqf ‘s possible benefit to be benefited by the hapless. Cash waqf fund may be opened for beging hard currency waqf with the purpose to back up services to mankind in the name of God. The givers ( waqifs ) of this fund will give their hard currency money for the intent of financing the development of awqaf land/building/properties. The waqf mutawalli will pull off this fund and the fund will be utilized for supplying revolving loans for development of awqaf belongingss. This loans that are collectible to the fund, to be utilised once more for financing other awqaf belongingss.

Decision

12. This note examines briefly the nature of waqf land development, review recent literature and patterns on waqf land development and suggest a solution to set about waqf land development for ISFD. The development of waqf lands is an of import milepost for ISFD given the fact that there are big sum of undeveloped and ill-managed waqf lands in the Muslim universe. By supplying the expertness on heightening the awqf establishments and develop waqf land in member states, it is expected from this project that the establishment of awqaf could play a better function in the procedure of societal and economic development but besides generate extra beginning of income for ISFD to battle poorness in member states. This note proposes ISFD to see set abouting waqf land development through the issue of sukuk and developing hard currency waqf fund together with member states.