Islamic Corporation for the

Development of the Private Sector

CHAPTER 5
WAQF AND ISLAMIC BANKING
AND FINANCE: THE MISSING
LINK

The current economic situation of almost all Muslim countries

in terms of their high illiteracy rate, lack of good healthcare, high
unemployment rate, the spread of poverty and low level of food
production must encourage one to study the institution of waqf,
which has played an instrumental role in addressing a range of
socio-economic issues in the Muslim societies of the past. Many
contemporary Islamic economists contend that the institution of
waqf is still relevant to the socio-economic development of the
Muslim societies, most of which face a multitude of problems.
The relevance of waqf has also been highlighted in the wake
of success of IBF, which has assumed mainstream relevance in
some of the countries in the OIC block. Yet, applications of the
principles of waqf in IBF are rather scarce. This chapter focuses
on some possible roles that waqf may play in the contemporary
practices of IBF. The major focus towards the end of the chapter
shifts to what is known as cash waqf.

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Waqf and Islamic Banking and Finance: The Missing Link

INTRODUCTION
Islam strongly endorses socio-economic and welfare-friendly practices, supporting and promoting
philanthropic and charitable deeds. The concept of waqf in Shari’a is regarded as an empirical embodiment
of this very proposition. Waqf derives its origin from approximately fourteen centuries back, and is known to
have been first practised by the Prophet himself for public utility or social causes.

Waqf is a financial or non-financial charitable institution established by someone by withholding an

immovable and movable property, with a view to perpetually use it (i.e., the property itself) or to spend
revenue derived from the asset (e.g., money and the activities in which it is invested) on either well-defined
causes or general social and charitable causes. The welfare of the beneficiaries is the common intention,
whether the cause is specified or not. Once a property (or another asset) is locked into a waqf, its ownership
changes from the benefactor to God. This means a waqf is essentially a permanent trust that cannot be
dissolved, although the designated beneficiaries may benefit from its revenue generating activities.

The main motivation for a founder to create waqf is to seek the pleasure of God in accordance with the Islamic
teachings as described in the Quran and the prophetic traditions. However, other worldly pursuits are not
completely ruled out in some forms of the awqaf that have historically been used in the Islamic history.

Awqaf have been used by Muslim philanthropists in the past and at present, in pursuit of religious satisfaction.
Although it is a common assertion in the Islamic literature that waqf is a unique Islamic financial institution,
there are parallels in other traditions as well. For examples, endowments and trusts in the Western world are
similar to the institution of waqf. Admittedly, such developments in the West took place much later than the
use of waqf in Islamic countries, and it is possible that trusts and endowments were an Islamic influence in the
Western world.

The main objective of this chapter is to highlight the missing link between the institution of waqf and Islamic
finance today. Before doing so, however, it is important to give background of the role of the institution of waqf
of immovable properties as a financial instrument, the causes that led to its destruction and its re-emergence
in its new movable form as an efficient financial institution that can take on most of the challenges it faces.
Awqaf properties in India is an interesting example, which should provide a credible explanation of how waqf
as an institution disappeared or became ineffective over time (see Box 5). The developments in the waqf
sector in Malaysia are encouraging (see Box 4), and one should hope that the institution of waqf may in fact be
revived with the help of IBF.

IMMOVABLE WAQF: A FINANCIAL INSTITUTION

Mosques in Islamic tradition are perhaps the first example of setting up immovable waqf. Thus, history of
awqaf is as old as Islam itself. Historically speaking, during the lifetime of the Prophet Muhammad (peace be
upon him), whenever a need was identified within the Muslim society, it was fulfilled immediately through
the creation of a waqf. For example, when the Prophet felt the need for a regular place for Muslims to perform
their daily prayers, he built the Quba’ Mosque on his arrival in Medina, followed by building Masjid Nabawi
due to the increasing number of newly converted Muslims. During that time these two mosques were not used
for daily prayers only but were also used by the Prophet to teach Muslims their religion. Besides, the Prophet
created different other awqaf for the benefit of the people. For example he dedicated one of his gardens in
Medina to feed the Muslims. He also gave his acquired land in Khyber as a waqf to build a guest-house for
travellers and newly converted Muslims. Furthermore, the Prophet encouraged his companions to create a
new waqf whenever a need arose. For example, he encouraged Muslim troops to dedicate their weapons for
the battles the Muslims had to get engaged to defend themselves. First notable example of a waqf for social
welfare was a drinking water well (called Rummah), which was bought from a Jewish man to provide free
drinking water to all. There are numerous other examples of establishment of awqaf in the life span of the
Prophet.

As time passed the creation of waqf did not only cover building of mosques, guest houses, schools, army
establishments, agricultural farms and wells for drinking water and irrigation. It expanded during the Umayyid

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and Abbasid times by financing almost all social services. With the spread of Islam, the demand for Islamic
education and learning increased. Consequently, mosques were extended to include the learning centres and
educational establishments. The facilities also included residences for scholars and students. The additional
demand for capital was met by the philanthropists to establish an increasing number of awqaf in different
parts of the Muslim world. Such educational establishments increased in number and with it the number of
awqaf. According to Ibn Hawqal, the number of primary schools set up under awqaf reached 300 in the city
of Saqaliah alone, and that they accommodated hundreds and in some cases thousands of students. Later on,
due to the continuous increase in the number of people converting to Islam, the need for more schools to teach
them emerged. This encouraged rich people and rulers to create awqaf to support Islamic education in the
form of building separate schools, and shops and houses to finance students, paying teachers’ salaries besides
dedicating books to set up libraries.

The waqf sector did not only cover the education sector, it also spread to benefit orphans and travellers in
the form of guest-houses and other places of shelter for the beneficiaries. The increase in the number of waqf
properties led the state to organise and supervise them. During Caliph Hisham Bin Abdel Malik’s time (65-
87 AH / 684-705 AD), a comprehensive regulatory framework was developed to ensure proper functioning
of awqaf and to avoid their possible misuse and appropriation by general public or others. Tawbah Bin
Numir, a prominent jurist of that time, was appointed as the chief judge, and his duties included setting up
and maintaining a registry for awqaf. This act of good governance of waqf properties was followed by other
Muslim states of that era and the following successive governments until the end of the Moghal empire in
India (see Box 5).

From that time, the supervision of awqaf was entrusted to the courts that ensured that the founders and
their appointed trustees managed the awqaf affairs diligently, efficiently and in strict adherence to Islamic
teachings. Succession planning was very integral to waqf management in the early governance system.
However, in the event of a founder’s death before they had specified any trustees, the chief judge had the
right to appoint new trustees. During that time, the management of public waqf was placed under a dedicated
institution called Diwan al-Ahbas, while the management of family waqf was administered by the founders
and their appointed trustees. There was a well-defined dispute resolution mechanism, supervised and
managed by the chief justice of the caliphate.

Negligence on part of the waqf founders and their trustees was deemed a criminal offence, punishable by
lashing. The supervisory authorities took the institution of waqf very seriously and ensured that the waqf
assets and properties were in good order. An example of the supervision of these properties can be traced
back to 173 A.H. The then chief justice Abu Tahir Abdel Malik Bin Muhammad Hazmi used to supervise all
the waqf properties three times a month. In case of any damage found to the properties in terms of any tear
or wear the chief justice ordered to repair the damage and to keep up the premises in good shape. Moreover,
if the chief justice found any misuse on part of the trustees, punishment in terms of whipping the trustees ten
times would be the way to prevent such negligence in the future.

Given this serious attitude of the society towards waqf and a comprehensive regulatory and supervisory
regime that was developed to protect it. It is not surprising to learn that almost all major socio-economic
activities in the past caliphates in the Muslim world benefited from awqaf. One of the most notable
philanthropists who contributed to the development of awqaf was the wife of the famous Abbasid caliph
Harun Rashid. She created many awqaf in the services sector. The public works financed through her awqaf
included Zubaida Well in Makkah, a highway between Baghdad and Makkah, and a canal from Iraq to Makkah
to supply water to the pilgrims.

As stated earlier, the education sector benefited immensely from numerous awqaf set up by philanthropists in
the Muslim world. Historical records of the year 366 AH show that 70 libraries were financed through awqaf
in Cordoba only. Almost all academic positions and scientific research in the Muslim world were financed by
awqaf. Scientific research organisations like Dar al-‘Ilm, Dar al-Hekma, and Azhar University in Egypt in 400-
405 A.H. were all financed through waqf revenues.

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Education, health, public infrastructure and almost all other

socio-economic activities benefited from the institution of
waqf in the past. The question arises: how can IBF employ this
important instrument to develop Islamic financial products
that, on one hand side, make an economic sense for the
institutions offering Islamic financial services and, on the
other hand, are deemed socially beneficial for the users of such
financial services ?

In addition, the health sector was also financed through waqf revenues, not only in the Islamic world but
its benefits also spread to finance the European countries too. Although there were awqaf that would fund
research in health sector, most of the waqf properties were established to finance construction and on-going
operations of hospitals. There were 50 waqf hospitals in the Muslim Cordoba alone. Waqf revenues were also
used to finance famous medical publications such as the Kitab al-Kiliyat fi al-Tib of Ibn Rushd, which was
translated into different languages and became the main medical book in Europe, besides Kitab al-Hawi fi al-
Tib, a book written by Ibn Sina.

The growth of waqf continued through centuries in the Muslim world, until the end of the Ottoman period in
Turkey at the start of the 20th century, and the collapse of Mughals in India in the middle of the 19th century
(see Box 5).

The creation of waqf reached its peak during the Ottoman Caliphate and this encouraged the sultans,
ministers, princes and their wives and mothers to create a waqf in different forms for public benefit. These
types of waqf were known as Sultans’ awqaf 1.The creation of waqf was not limited to the above mentioned
people, although during the Ottoman period a number of rulers were generously involved in the sector.
Given the high-level patronage, and the social welfare these awqaf contributed to, they led to very significant
economic activities. Their role in job creation and sustainable employment has been highlighted by many
researchers on the topic. According to some estimates, three-quarters of all the arable land during the time of
the Ottomans belonged to awqaf. Furthermore, there were 8.23 percent people employed in the waqf sector in
1931. The comparable figure for the public sector employment was 12.68 percent.

Most of the Ottoman awqaf were in immovable forms such as agricultural lands and farms, and orchards and
gardens. A typical Sultan’s waqf would comprise a palace, stables, storage facilities, beehives, various types of
livestock and agricultural tools. There would be a residential community of farmers, and other people involved
in running of the waqf . All the facilities to the community would be provided by the waqf, which created stable
and sustainable economies on a local level.

The above discussion suggests that the immovable waqf during the early days of Islam until the Ottomans
played a significant economic role through its varied and wider contributions to the different socio-economic
sectors. Education, health, public infrastructure and almost all other socio-economic activities benefited
from the institution of waqf. The question arises: how can IBF employ this important instrument to develop

1. Sultan’s Awqaf have parallels with, and perhaps were influencing factor behind, the establishment of khanqahs in India. Similar to Catholic monasteries,
khanqahs were establishments set up and run by Muslim sufi saints all over India.

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Islamic financial products that, on one hand side, make an economic sense for the institutions offering Islamic
financial services and, on the other hand, are deemed socially beneficial for the users of such financial
services?

DESTRUCTION OF THE INSTITUTION OF WAQF

After the collapse of the Ottoman Caliphate, Turkey underwent political reforms that resulted in the creation
of the Republic of Turkey. The political change in Turkey affected the institution of waqf adversely. In fact,
deterioration in the waqf administration had started well before that. During the regime of Sultan Mahmud
II (1785 AD - 1839 AD), who called for the establishment of a Minister of Waqf apart from the Muslim jurists,
the signs of decay started appearing. The objective of this change in policy was to bring the local machinery
of waqf supervision into a centralised bureau in Istanbul. Under this regime, new and additional waqf
administrators were appointed to administer the affair of the awqaf. Consequently, Muslim jurists lost control
over the institution of waqf. This led to the burgeoning mismanagement and abuse of the waqf system, as
many of the appointed administrators were not familiar with the legalities of this institution. The centralisation
of waqf administration and lack of good supervision and governance from Shari’a courts resulted in many
problems that weakened the institution and diluted its effectiveness.

One such problem was an increase in the costs of running awqaf. Many awqaf trustees decided to quit their
regular jobs or business and instead become full-time employees to start drawing heavy monthly/regular
salaries. This, along with a culture of laziness not only contributed to inefficiencies in the institution of waqf
but was also held responsible for slow down in general economic activity on a macro level. Moreover, the new
appointed state administrators were interested in protecting their own jobs rather than further developing the
waqf properties and their associated businesses. In many cases, misappropriation of the waqf properties and
abuse of assets and resources became rampant. This was, therefore, a natural outcome that most of the awqaf
started facing liquidity problems, which resulted into further neglect of the waqf properties.

In addition, strategic uses of waqf created a number of social problems. For example, a number of rich
families started using family waqf as a tool to preclude their daughters from their inheritance. This point is
highlighted by many contemporary economists, most notably Timur Kuran and Mahmoud El-Gamal. This
situation continued until the regime of Muhammad Ali Pasha (1769 AD - 1845 AD) who found out about 600
thousand feddan2 out of 2 million feddan of agricultural land had been put into a waqf. This created not only
an imbalance in the social structure but also was responsible for loss of revenue for exchequer, as almost one-
third of the agricultural land in that period was under awqaf and, hence, tax exempt.

This problem was partly addressed by imposition of half rate of tax to the waqf land by the regime prior to
Muhammad Ali Pasha who in fact took away the tax exempt status of the waqf lands. Altogether while this
addressed the tax related issues, it also killed the establishment of genuine awqaf. With this came an end to an
era that allowed pious individuals and families to set up awqaf for religious purposes and social causes. The
regime of Muhammad Ali Pasha was well aware of this in-intended consequence and hence great care was
taken to maintain the mosques and other religious establishments, primarily to manage public reaction to the
adverse effects of its policies towards awqaf administration.

However, the Pasha regime failed to find satisfactory solutions to the problems created by he centralisation of
the administration of waqf, and instead decided to nationalise it by confiscating all waqf properties. This was
followed in almost all the countries in the Middle East, which were under the Ottoman Caliphate. This policy
continued in entire of the Muslim world during the period of colonisation.

The destruction of this institution continued even after independence of the Muslim countries, as the
centralisation of its administration and lack of good supervisory frameworks remained in place and the
successive governments did little to ameliorate the situations. The Indian example (given in Box 5) is an
extremely interesting case in this respect. The situation is not entirely different in the neighbouring Pakistan
(with majority Muslim population), where awqaf properties are administered by a dedicated ministry.

2. An Egyptian unit of area equivalent to 1.038 acres (0.42 hectares).

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It appears as if the key to success of waqf was its complete

independence from the state machinery. The Islamic jurists
had full control on the affairs of awqaf under their supervision
and administration. The creation of ministries for awqaf
administration proved to be inefficient, which brought a lot
of malpractices in their affairs, leading to deterioration and
eventually complete destruction of the institution.

Consequently, many waqf lands and properties are in tatters. Although some of the waqf properties in such
countries are located on prime locations (like down town areas and city centres), no or little has been done
to restore them into revenue generating ventures for good causes. In a number of cases, registration and
documentation are missing, making such properties prone to illegal possession and encroachment.

The process of nationalisation of waqf, which Ottomans started, continued in other countries after the end
of the period of colonisation. For example, in 1952 a new law was implemented in Egypt in order to abolish
family waqf. The same law was followed in Syria and later in Tunisia in 1954. These legislative changes gave
the ministries of awqaf many additional rights over all waqf properties. For instance, the new laws gave the
ministry the right to become the supervisory body for all public awqaf, the right to change the founder’s
conditions, and the right for founders to revoke their family waqf, etc. Subsequently, it discouraged people
from creating any new waqf. As a result, many founders started to revoke their waqf property with the
exception of waqf for mosques. The process continued until recently when some renewed interest in waqf
emerged.

RECENT REVIVAL AND THE CREATION OF MOVABLE

WAQF
From the earlier discussion we realised that the 20th century was the worst century for the institution of waqf.
Its socio-economic role deteriorated, as old awqaf gradually became dysfunctional, with no further progress
in terms of numbers and assets. Also, there has been little development in improving legal and supervisory
frameworks in this respect. Nevertheless, not every thing has been lost, as there is now a renewed interest
in the revival of this important institution in the OIC countries and some other countries with Muslims as
minority populations. In this respect, the institution of cash waqf is expected to have a bright future.

A few Islamic economists have highlighted in their researches the potential role of the institution of waqf
in economic development and poverty alleviation. They have for long advocated resurrection of waqf in
this respect. Due to this and because of political pressure, the governments, financial institutions, other
social sector organisations and individuals in a number of Muslim countries have allocated huge amounts of
capital to redevelop the old waqf properties into financially profitable and economically meaningful entities
again. Islamic financial institutions have understandably played an important role in this respect. Financial
structuring of the waqf regeneration projects was by and large done by the institutions offering Islamic
financial services. Specific examples of financial structuring for waqf projects include the use of musharaka
sukuk, diminishing musharaka, ujra al-mithl, mudaraba sukuk and build-operate-transfer (BOT) modes.
Perhaps the most notable example of the regeneration of waqf properties and land is that of Waqf King

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Abdelaziz Bin Al Saud in the holy city of Makkah. With the help of a number of innovative Islamic financial
structures, a series of tall towers have been constructed outside the Holy Mosque. Given their strategic
location, these towers have emerged as very successful commercially run waqf businesses that provide
hoteling facilities, shopping and a lot of other services related with religious tourism.

The current government in Turkey has also allocated huge funds to regenerate mosques and other buildings
of touristic attraction. All such properties are owned by their respective waqf. Consequently, there is now s
significant focus on bringing many of the dysfunctional awqaf into economic life. A number of waqf-owned
buildings have been renovated to turn them into restaurants, cafes, and commercially viable heritage shopping
centres. Many mosques that were in very bad shapes are being renovated. With the renovation work, some
new buildings are being constructed as shops, cafes and restaurants to ensure that the mosques are run on a
sustainable basis.

Regeneration projects are a good step towards the revival of the institution of waqf. However, there is a
need to bring reforms in the legal, supervisory and regulatory frameworks governing awqaf in the Muslim
countries. The administration of awqaf must be decentralised to ensure that these entities are run locally and
by competent people with integrity. Furthermore, laws should be changed to encourage the establishment of
family awqaf, which has disappeared completely in almost all the countries in the OIC block. This will require
bringing reforms in taxation laws and property rights.

CASH WAQF AS A FINANCIAL INSTITUTION: THE MISSING

LINK
As stated above, there is an urgent need for amendments to the current law and administration of waqf in
almost all Muslim countries to encourage more founders to create waqf, especially cash waqf. The cash waqf
can play at least two roles in reinvigorating the old waqf properties and financing other socio-economic
projects in Muslim societies. The cash waqf is a special type of endowment that differs from the ordinary real
estate waqf in that its original capital consists, purely or partially, of cash. Although the institution has existed
in the Islamic history since the fifteenth century, it has been developed as a banking product only recently.
Social Islamic Bank in Bangladesh has been offering a cash waqf deposit for a few years now. Other banks
offering deposits based on the cash waqf include Islamic Bank Bangladesh, EXIM Bank, Bank Asia, Shahjalal
Islami Bank, Al-Arafah Islami Bank, Prime Bank (all in Bangladesh) and Bank Islam in Malaysia. All these are
examples of indirect cash waqf models (see Figure 2).

This is a very positive development, as these deposit programmes will bring institution of cash waqf under
decentralised yet tightly regulated financial regime. Furthermore, this allows Islamic banks to introduce
cash waqf as a retail product that may be used to collect small amounts of donations and charity from a large
number of people. This is consistent with the proposition made in Chapter 7 of this report under donation-
based banking (see Box 6).

Deposits, however, is only one of the many products based on the cash waqf. Other products include:

1. Waqf shares scheme;

2. Direct cash waqf scheme (as depicted in Figure 1);
3. Semi-compulsory waqf scheme;
4. Corporate waqf scheme; and
5. Cooperative waqf scheme
Many of these schemes are being run informally or under charitable trusts in Muslim as well as non-Muslim
countries with Muslim minorities.

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Figure 1: Direct Cash Waqf

1. Waqif/Founder 2. Mutawalli/Trustee 3. Beneficiaries

80%
Cash-Waqf Old Mosque
Individuals

INSITUTION/ Accumulated
ORGANIZATION/ Amount
NGO
Waqf Hospital,
Organisations Waqf Clinic

Accumulated
Cash-Waqf

Waqf School
Institutions Waqf College

20%

Figure 2: Indirect Cash Waqf

1. Waqif/Founder 2. Mutawalli/Trustee 3. Beneficiaries

Individuals Cash-Waqf

CASH WAQF 10%

FINANCIAL
INSTITUTION Management

Organisations School/College
Accumulated /University
Funds
Cash-Waqf
20%

SFD Hospital/
Institutions Clinic

Invested Revenue
According Any Specified
to Shari’a Property

70%

Beneficiaries

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Benefits of Cash Waqf in the Contemporary Practice of IBF

With small amounts of money by a large number of people, very significant sums of money can be collected,
especially in countries with huge populations. Small donations can be efficiently put into a cash waqf structure
to invest on a long-term basis. These investments may be made into large infrastructure projects like urban
transit rails, airports and seaports and other similar infrastructural projects. From the income of these
projects / investments other socially relevant goods and services can be produced for the specifically targeted
beneficiaries or for general public. The social goods and services typically financed by waqf have been:

A. Education: schools, both religious as well as contemporary education;

B. Health Sector: primary hospitals but may also include specialist hospitals, e.g., a cancer treatment and
research hospital;
C. Orphanages and residential facilities for working women;
D. Interest-free financing for personal use or for setting up small businesses (microfinance);
E. Public parks and other public amenities; and
F. Drinking water, etc.
Moreover, Deposits based on cash waqf offer a distinct advantage as it allows authorities to monitor charitable
flows, something that has assumed paramount importance in the world facing terrorism and other security
threats.

Nonetheless, similar to the current centralised administration of the immovable waqf properties the cash
waqf based products and institutions may face challenges in some Muslim countries where the existing laws
are not favourable for such activities and operations. Hence, it is imperative that an enabling environment
is created for their successful and efficient functioning. There have been some cases where some trustees
changed their cash waqf schemes into trusts, endowments or foundation structures to escape from usurping
the management of their cash waqf under the current centralised administration of waqf.

CONCLUSION
In conclusion, one may safely contend that waqf, either immovable or movable, can play an important role in
economic development and social uplift of Muslim societies. Cash-waqf, in particular, can be sued to develop a
new model of banking and financial intermediary that can in due time be used to replace the current interest-
based financial system.

Understanding the significance of decentralisation of its administration, and creating a favourable

environment will enhance waqf’s financial role not only in providing the goods and services needed in Muslim
and Muslim minority countries but will also assist governments in providing these services without any cost
to them.

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BOX 4: AWQAF PROPERTIES IN MALAYSIA

Waqf1 (plural awqaf) is popularly known in Malaysia Some of the states, i.e., Selangor, Malacca and
as wakaf. Awqaf exist in various forms, from Negeri Sembilan, have created specific statutes
traditional to contemporary modes of creations. called Wakaf Enactments. The other states,
Current awqaf are extensions of the practice of including the Federal Territories (Kuala Lumpur,
waqifs (waqf donors) that occurred in the past. Putrajaya and Labuan), have codified the provisions
These were influenced by Islamic religious faith, in the administration of Islamic Law statutes,
whose introduction to Malaysia occurred around the which also include other matters specifically
15th century. related with Muslims. The major focus of the law
contains several parts of the codification, ranging
It is important to note here that, in Malaysia, from procedures of waqf creation; conditions of
awqaf are given not only by Muslims but also by its validity; powers and rights of the SIRC as the
non-Muslims, and they are both domestic and sole trustee; powers of the Waqf Management
international. In addition, Muslims and non-Muslims Committee; vesting of mawquf; establishment of
alike enjoy the benefits of mawquf (waqf property). waqf funds and waqf schemes; and also references
According to the Department of Waqf, Zakat and to fatwa and Shari’a law.
Hajj (JAWHAR, i.e., Jabatan Wakaf, Zakat dan Haji),
awqaf lands in Malaysia are 11,091.82 hectares, All state laws (enactments/ordinances/acts) provide
worth RM1.17 billion2 . Efforts have been made that the SIRCs, also known as Majlis Agama Islam
from time to time by the respective organisations, (Majlis), are the sole trustees of all awqaf, whether

Notwithstanding any provision to the contrary contained in

any instruments or declaration creating, governing or affecting
any wakaf, the Majlis shall be the sole trustee of all wakaf,
whether wakaf ‘am or khas, situated in the State of Selangor.
particularly the State Islamic Religious Councils an ordinary waqf (waqf ‘am) or a special waqf khas).
(SIRCs) with the co-operation of various parties, to For example, Section 32 Waqf (State of Selangor)
develop awqaf lands. The Malaysian Government Enactment 1999 provides that:
has also contributed significant funds for the
purpose through the Malaysia Plan (Rancangan “Notwithstanding any provision to the contrary
Malaysia). contained in any instruments or declaration
creating, governing or affecting any wakaf, the
Based on the existing Malaysian legal framework, Majlis shall be the sole trustee of all wakaf, whether
the matter of waqf, has been made as one of the wakaf ‘am or khas, situated in the State of Selangor.”
important Muslim affairs in the country. The word
wakaf can be found in the Federal Constitution and The term “sole trustee of awqaf assets” implies that
it is positioned under the State matter. With the the Majlis of each state have been legally appointed
authority of the Constitution, the promulgation of by their respective laws to supervise all awqaf
waqf law has been made in the legislation of the assets and be responsible for their management
states with a number of significant substantive and and development. No other parties or bodies are
administrative provisions to regulate the matter. entitled to hold trusteeship power, except in cases
from the past, i.e., before the promulgation of the
Islamic administrative laws of the states. Hence,
1  Given that in the Malaysian legal documents the word “waqf” is spelled
as “wakaf,” we shall use the two spellings interchangeably in this box. delegating the powers to others, or the existence of
2. Equivalent to US$508 million (using exchange rate of RM1 = US$0.30).

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private trustees, would be treated as illegal and not mawquf from any loss or damage.
conforming to the laws.
The above are the important responsibilities that the
The laws also provide that all mawquf should be Majlis have to carry out in order to fulfil their legal
vested in the Majlis and necessary steps have to be obligations as the sole trustees for all the mawquf
taken to fulfil the said provision. As for immovable situated in the states.
property, registration should be made in accordance
with the provisions of the National Land Code 1965 Types of Awqaf
(Act 56). For example, Section 50 of the Wakaf (State
Generally, the creations of awqaf in Malaysia fall
of Malacca) Enactment 2005 stipulates that:
within 3 major categories:
1. The Majlis shall take all necessary steps as soon
a. Waqf `am
as practicable to vest in itself wakaf which are
created under this Act. b. Waqf khas

2. Any usufruct or benefit from a mawquf shall c. Waqf al-mushtarak (spelled as al-musytarak)
be vested to the Majlis from the date of the Waqf `am refers to any form of waqf dedication
commencement of the wakaf, and the Majlis aimed at general welfare or khairat without
may claim any usufruct or benefit of a mawquf specifying any particular beneficiaries (individuals
from any person before the registration of the or organisations/institutions) or specific purposes.
wakaf. This category of waqf is applicable to things or
3. All mawquf situated in the State of Malacca, objectives directed towards general social welfare
before the commencement of this Enactment, and charitable purposes. In contrast, waqf khas
shall, without any conveyance, assignment is a type of waqf with specified beneficiaries or
or transfer whatsoever and in respect of all purposes. Under this form of waqf, the waqif will
immovable property upon registration under identify the persons who are to benefit from the
the provisions of the National Land Code [Act awqaf or the purpose for which the waqf must be
56 of 1965], is hereby vested to the Majlis to the applied. The combination of waqf `am and waqf khas
extent of any property affected thereby. forms the hybrid category, waqf al-mushtarak.

4. Subject to the provision of section 32, the Majlis Thus, a waqf which is created from any type
shall take all necessary steps to vest in itself for of property or established under any type of
the like purposes any such property situated scheme will use either the waqf `am or the waqf
elsewhere than the State of Malacca. khas concept. Each type is treated differently in
The Majlis administers all mawquf in accordance accordance with Islamic principles. It follows that
with the stipulation of the founders when they were for a waqf khas, the mutawalli or the trustee has
created. As such, according to the existing laws the the responsibility to implement all the stipulated
capital of the mawquf is applied in pursuance of such conditions of a waqif unless they are opposed to
creations, and held as segregated funds and will not Shari’a and the law of the country. In the latter case,
form part of the baitulmal. Their income is paid to proper modifications and adjustments must be
and forms part of the baitulmal, and in case of waqf made with due reference to the authoritative bodies
khas being received by the Majlis, it is applied in of the competent jurisdiction. The authority may
accordance with their stipulations. come from the verdict (also known as a fatwa) of a
Mufti or an order from a court, normally a Shari’a
According to the Islamic law of waqf, it is incumbent court, depending on the applicable laws of a state.
on the Majlis as the mutawalli of awqaf assets, to According to the textbook of waqf in the Shari’a,
observe as much as possible all the stipulations and a reference has to be made to the qadi (judge) of
the conditions laid down by the founder in the waqf a state. In Malaysia, according to the laws and
deed. He should always be cautious in administering practices, the power generally rests with the State
and supervising the mawquf as he deals with the Fatwa Committee. However, some states confer
public interest. The foremost duties of the mutawalli the power on the Majlis or the Wakaf Management
consist of preserving and keeping the mawquf intact, Committee. As for a waqf `am, the mutawalli or the
gaining profits from the mawquf and collecting and trustee may, at his discretion, use the mawquf for
distributing the revenues among the beneficiaries. any good purpose as long as it is compatible with the
He should also carefully protect the substance of the Shari’a law of waqf.

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 Waqf and Islamic Banking and Finance: The Missing Link

Waqf shares mean the creation Waqf of shares means shares of

of a waqf through the issuance of company or enterprise or existing
shares which are subsequently shares dedicated for waqf.
endowed as a waqf by the
purchaser to the Majlis. ease of understanding, their definitions are given
below as provided in Section 2 of the Wakaf (State of
Malacca) Enactment 2005 (No.5 of 2005):
Property Endowed as Awqaf
“Wakaf shares mean the creation of a wakaf through
Movable and immovable properties have been the issuance of shares which are subsequently
made awqaf for general and specific purposes or endowed as a wakaf by the purchaser to the Majlis;
beneficiaries, depending on the wishes of waqifs.
Previously, Malaysians preferred their awqaf to be Wakaf of shares means shares of company or
established from immovables, consisting of landed enterprise or existing shares dedicated for wakaf.”
properties, especially for the erection of mosques,
The Wakaf (State of Selangor) Enactment 1999 (No.7
graveyards and Islamic religious schools including
of 1999) only provides provisions on waqf shares,
pondok schools.
but nothing is mentioned about waqf of shares.
In the current context, awqaf from movables are Section 17 (1) of the law provides that:
also included. These include cash waqf, waqf shares
“The Majlis may offer wakaf shares of any property
and waqf of gold. The latter is a new kind of mawquf
obtained or to be obtained by it to any person for
accepted by Yayasan Waqaf Malaysia (YWM, the
such shares to be purchased which is subsequently
Malaysia Waqaf Foundation).
endowed as a wakaf to the Majlis.”
Cash waqf is also accepted in the country. Although
In regard to the Wakaf (Negeri Sembilan) Enactment
its validity has been debated by some Muslim jurists
2005, a provision on waqf shares has been included
in Islamic jurisprudence due to its impermanent
under Section 11 which mentions a waqf scheme.
character, the Malaysian waqf authorities have
approved a cash waqf provided that it is converted
into or used towards creating permanent benefits.
Normally, the funds collected will be used to
purchase immovable assets or be added to existing
waqf development projects. Recently, a collaboration
between Bank Muamalat Malaysia Berhad (BBMB)
and Perbadanan Wakaf Selangor (PWS, Wakaf
Corporation of Selangor) has taken place with the The Majlis may offer waqf
introduction of a cash waqf scheme called Wakaf shares of any property
Selangor Muamalat. This new scheme aims to
accumulate funds and distribute them in two main obtained or to be obtained
areas: healthcare and education.
by it to any person for such
What is more unique is that the creation of waqf
has been expanded to cover waqf of shares which
shares to be purchased which
can be formed either from movable or immovable is subsequently endowed as a
properties. It is very important to note here that
waqf shares are different to waqf of shares. For waqf to the Majlis.

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Waqf may be created through the offering of shares, issuance

of bonds or any other instrument for valuable securities which
are subsequently endowed as a waqf by the purchasers of the
shares, bonds or any other instrument for valuable securities.

In fact, this provision on waqf shares constitutes by the purchaser. It can be as small as RM1. The
a sub-category of the waqf scheme. This statute is accumulated monies will be put in a Waqf Fund
unique because other types of waqf, i.e., cash waqf, which will later be used to purchase an identified
waqf bonds and other instruments for valuable immovable property, or be used to finance a
securities, have also been placed under this scheme. property development project as determined by the
The statute further defines the meaning of these Majlis or the trustee.
mentioned waqf in Section 11 (2) as mentioned in
quotes: A number of states have introduced the waqf shares
product. These are: Selangor, Johore, Pahang,
“… the creation of a wakaf through the offering of Malacca and Penang, although the latter has been
shares, issuance of bonds or any other instrument using the name Dana Wakaf (Waqf Fund) for the
for valuable securities which are subsequently product. In this type of waqf, the State of Johor
endowed as a wakaf by the purchasers of the shares, under the Majlis Agama Islam Johor (MAIJ, i.e., the
bonds or any other instrument for valuable securities SIRC of Johor) introduced Saham Wakaf Johor. This
to the Majlis.” was able to accumulate a total of RM6 million3 for
the construction of a student hostel in Cairo.
Other states do not have provisions on such
innovative awqaf products and schemes as these As for the concept of waqf of shares, the application
mentioned states do, although some of these have is simple. Any existing shares in a property or in a
introduced their own waqf shares and waqf of company that belong to a person may be endowed
shares. In fact, these two types of awqaf products as a waqf, for any general or specific purpose.
serve as alternative ways of creating waqf to the
long-standing classical ones. It is worth mentioning here that the Corporate Waqf
introduced by the Johor Corporation Berhad (JCorp)
The mention of waqf bonds (also known as sukuk) falls under the category of waqf of shares, whereby
and other valuable securities instruments clearly part of the units of shares owned by this corporation
shows that Malaysia has already prepared to accept in its subsidiary companies are dedicated as
these contemporary modes of financing to establish awqaf. The dividend income from these shares is
awqaf properties in the country. distributed to the SIRC of Johore (5 percent), JCorp
(70 percent) and 25 percent to general purpose
In the context of the implementation of waqf shares, charities. Waqaf An-Nur Corporation Berhad
the Majlis of a state or an institution with the (WANCorp) has been entrusted with managing
permission of a state Majlis may offer units of waqf all equity shares transferred by JCorp to awqaf.
shares of any property, normally of immovables, to WANCorp is a company established under limited
the public or to any person, so that such shares can guarantee by the JCorp and the appointment of the
be purchased and thereafter be endowed as a waqf. Nazir Khas (Specific Manager) to manage the shares,
The person who is interested in buying the shares particularly the awqaf dividends, was made on 4
that are offered will pay a certain amount of money December 2009 in accordance with Wakaf Rules
to the Majlis depending on the pre-determined 1983, State of Johore.
unit price for a share. The price differs from one
state to another, and depends on the shares bought 3. US$1.8 million (using exchange rate of RM1 = US$0.30).

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Waqf and Islamic Banking and Finance: The Missing Link

In the latest development, Majlis Agama Islam developed using Build Operate and Transfer (BOT)
Wilayah Persekutuan (MAIWP, i.e., the SIRC of as well as the Islamic concepts of wakala, ijara and
the Federal Territories of Kuala Lumpur, Putrajaya istisna`.
and Labuan) also showed an interest in introducing
its own Corporate Waqf product where corporate Imarah Wakaf was the first large-scale commercial
companies will be the targets for its implementation. development project in the country constructed
A luncheon talk on the matter organised by the on waqf land. It involved 3 leading Islamic
MAIWP, which was held on 12 September 2013, organisations, namely the MAIWP, Lembaga Tabung
showed their determination to make the Corporate Haji (TH, i.e, the Malaysia Pilgrimage Fund Board)
Waqf a reality. Today, the product has attracted and Bank Islam Malaysia Berhad (BIMB). The
commercial banks, corporate individuals and the project was funded by the TH at a cost of RM151
public as waqifs. million, and has a 25 year leasing period. MAIWP
as the land owner (i.e., the trustee) will receive
In fact, the existing Corporate Waqf institutions RM56.6 million over that period. Imarah Wakaf is
mentioned above are in line with a resolution passed now being used as the Bank Islam Headquarters
in the 1st Islamic Religious Council Congress held and is well known as Menara Bank Islam. MAIWP
in PWTC, Kuala Lumpur on 26-27 September 2011, has been provided with 1 storey of the building
urging the establishment of such institutions at the and there is also a place of worship called Surau
national and state levels. Wakaf Ahmad Dawjee Dadabhoy, named after
the waqif. It is believed that MAIWP will receive
Financing & Development of Awqaf RM700 million worth of this commercial waqf
building upon the completion of the BOT period. It
In Malaysia, the development of awqaf properties
is worth noting that MAIWP has been recognised
has increased a great deal. Various approaches have
by Dewan Perdagangan Islam Malaysia (DPIM, i.e.,
been applied and these centre on the physical type
the Malaysian Islamic Chamber of Commerce) and
of waqf land developments.
the International Islamic University Malaysia (IIUM)
Awqaf hotels are the most iconic, a recent trend in as the Best Waqf Land Development by Malaysian
waqf property development. Until now, four hotels SIRCs.
have been built under the waqf concept in the states
The above mentioned types of development clearly
of Malacca (Pantai Puteri), Perak (The Regency Seri
show that awqaf are not just confined to traditional
Warisan), Terengganu (Grand Puteri) and Negeri
subjects, such as mosques and graveyards which
Sembilan (Klana Beach Resort). The latter hotel,
are always associated with `ibadah symbols, but
which is located at the Baitul Hilal Complex, also
also take in commercial ones. What is important is
has an observatory with the largest telescope in the
that the profits or revenues of such mawquf should
country, measuring 26 inches in diameter.
ultimately satisfy waqf purposes and benefit mawquf
The above hotels were built on awqaf lands `alayh (i.e., waqf beneficiary/ies). In fact, there are
entrusted to the mentioned SIRCs. These huge many other instances of property developments
projects were funded by the Malaysian government, in Malaysia established under the waqf concept
and the respective SIRCs of those states are the which aim to meet the various needs of society,
sole trustees for their administration. The hotels such as orphanages, business premises, educational
are operated by the appointed companies through complexes and women’s shelters.
leasing contracts.
In addition to the above examples, waqf
Imarah Wakaf (Menara Wakaf) is another unique development is also significant in the area of
example of a waqf development project in medical and health services. For example, JCorp,
Malaysia. It is a 34-storey waqf building under the through WANCorp and in cooperation with some
administration of MAIWP, located at Jalan Perak of the SIRCs and support from KPJ Healthcare
within the Golden Triangle vicinity of Kuala Lumpur Berhad has developed and manages 20 Waqaf An-
City Centre. The building was built on 1.21 acres of Nur Clinics (KWAN); one Waqaf An-Nur Hospital
awqaf lands endowed by a wealthy Gujarati Muslim, (HWAN) at Pasir Gudang; and two mobile clinics
the late Ahmad Dawjee Dadabhoy. The building in Johor on the fundamental of charity through
incorporates Islamic architectural features with waqf concept’s adaptation. The main objective
the latest in international building design. It was of their establishment was to provide healthcare

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treatment and dialysis facilities to the general public, the future looks promising. Research on waqf,
in particular those in greatest need, regardless particularly on its financing and development, which
of their ethnicity and religion. Up to June 2014, has produced new findings, serves as good guidance
a total of 1,001,115 treatments had been given to for all the related parties. Financial support from
patients in the chain of KWANs. Out of those, 73,542 the Government in awarding research grants to
treatments were given to non-Muslim patients. The Malaysian universities in this respect is very much
total number of patients with kidney failure that appreciated. Application of some Islamic modes of
have been receiving dialysis treatment in HWAN financing in the development of iREITs, waqf REITs
and KWANs are now 124. In addition, HWAN and and sukuk (Islamic bonds) will surely allow the
the chain of KWANs not only provide healthcare country to develop awqaf properties in accordance
treatment for a nominal charge of RM5 inclusive with international standards. This has already
of medication but also offer dialysis treatment happened in Saudi Arabia with the Zam-Zam Tower
at a subsidised rate to the needy. Patients also which used sukuk al-intifa` (time share bonds) and
receive financial support from Baitulmal, SOCSO Singapore which used MUIS internal REITs to
(also called PERKESO, i.e., the Social Security develop awqaf properties. The time has come for
Organisation) and various other welfare agencies Malaysia to start applying such commercial modes
which allow them to receive free treatment. in developing awqaf properties. The successful
application of BOT in the development of Ahmad
Conclusion
Dawjee’s waqf land can be used as motivation. It
Based on the foregoing discussion on the progress is hoped that one day Malaysia will be one of the
and development of awqaf properties in Malaysia, leading countries in waqf development.

BOX 5: AWQAF IN INDIA

Evolution of waqf in India law on waqf. This never happened. Under the
provisions of the 1954 Waqf Act, the Government
One of the first deeds of a waqf was drafted during of India took a driver’s seat in managing and
the time of the second caliph, Omar bin Khattab. administrating the waqf in the country. The door
Historically, over the subsequent centuries, this for undue political intervention, manipulation
prophetic model was enthusiastically imitated by and corruption in this religious institution was
Muslims all across the globe. In this respect, the deliberately left wide open.
role of Indian Muslims should not be overlooked or
underestimated, as they have endowed enormous Although in 1995, in response to the ever growing
portions of estates in the form of waqf. India, agitated voices of the Muslim community, the
which is home to more than 150 million Muslims, government changed the existing Waqf Act, and
accommodates thousands of waqf properties. ostensibly sought to democratize the process and
Notably, up till the Mughal regime, Indian waqf was mechanism of waqf administration, this in no way
managed by the individually appointed mutawallis served the purpose. In fact, the waqf-related Shari’a
(trustees) and were supervised by qadis (Islamic guidelines were put to rest in the process.
judges) in accordance with Shari’a law. However,
with the fall of the Mughal empire, and the advent The majority of awqaf in India were created in the
of British rule in the subcontinent, there were huge pre-colonised periods. Historically, successive
changes to the methods of overall governance. In Muslim sultans had been greatly generous towards
the transition, the institution of waqf, inter alia, funding awqaf since as early as thirteenth century.
suffered critically and lost its special nature in terms From the sixteenth century onwards, with the
of being supervised by judges. advent of Mughal Empire in the sub-continent,
the proportion and magnitude of awqaf expanded
Remarkably, in the post-independent India, it enormously. Interestingly, during the regime of the
was highly anticipated that the administrative sultans or Mughals there was no centralised waqf
responsibilities of waqf would be handed over to the managing department, as most awqaf were managed
community itself so that these properties would be by the individually appointed trustees. The onus of
managed according to the well-established Islamic supervising awqaf during these periods, though, was

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Waqf and Islamic Banking and Finance: The Missing Link

subjected to a hierarchy. At the ground level, the in protecting the security of their religious
imam of a village was entrusted with the supervision endowments. The waqf institution has been a tragic
of the awqaf and was accountable to the regional victim of political apathy in post-independence
qadi in disputed matters. The regional qadis, who too. In fact, the absence of sincere and religiously-
were the ultimate resort in all Shari’a-related motivated high calibre individuals in the state and
affairs of their respective regions, were required to central waqf boards proved fatal.
report the functions and administration of regional
awqaf to the provincial governor. These governors Awqaf in India, at present, is regulated and governed
supervised and advised on the functionality of the by the Waqf Act, 1995. The Act, consisting of
provincial awqaf and were directed to report the 113 sections and divided into nine chapters,
Sudr as-Sudur, the highest religious authority of the encapsulates the legal status of waqf, its pertinent
state. technicalities, the power and activities of waqf
boards and the rights and obligations of the related
In this method of administration and supervision, authorities as well. The Act requires each waqf to be
waqf properties were in the hands of high calibre registered with the office of the related waqf board,
trustees-cum-Islamic jurists, who, along with being and the trustees are required to provide appropriate
pious and honest, were well versed in the law of details of the waqfs under their management.
waqf. Through this mechanism, waqf witnessed The details required in the waqf deed include
efficient production and their corpuses were highly the category of the waqf, particulars of the waqf
protected from decay, dilapidation, encroachments, properties, specific stipulations of the beneficiaries,
misuse, disuse or abusive exploitations. As an effect, classes of the beneficiaries and the name of the
the confidence of the community was sustained trustee.
through the provision of social benefits and the
productivity of the institution. The Waqf Act 1995 was passed in response to
widespread criticism of the Waqf Amendment
In the aftermath of the Mughal Empire’s Act of 1984, which had attracted opposition from
fragmentation in the early eighteenth century, the the Muslim community for providing excessive
colonial ruler’s new administrative policy required administrative and managerial powers to the central
an instant abolishment of the institution of the qadi. and state governments.
These qadis were replaced with newly appointed
judges who were educated and trained in English Under the Waqf Act of 1995, the waqf board of a
law of administration, and had little knowledge specific state, including the Union Territory of Delhi,
of Shari’a law. It was initially believed that the are required to have 7 to 13 members, of which
religious nature of waqf, and its related underlying the majority are elected from amongst the Muslim
complexities, made it difficult for the British judges members of parliament, state legislatures, state bar
to interfere with this institution. Later, as the new councils and trustees of waqfs which have an annual
rulers grew desperate to generate more revenues income of INR100,000 or more.
through taxation, they introduced for the first time The nominated members of the board are
in Indian history the policy of taxation on all private supposed to be selected from eminent Muslim
lands. Consequently, the Zamindari Act (conferring organisations of the state, recognised scholars of
the ownership of a land to its holder at the time) Muslim theology and law, and a representative of
was implemented in 1793. According to this law, the state government not below the rank of deputy
the legal title on land was to be transferred to the secretary (with reference to Section 14 of the 1995
farmer working on the land at the time of decreeing Act). Most importantly, the expenses incurred for
this new law. This enactment adversely affected the functioning of the state waqf boards are meted
waqf properties as properties fell into the ownership out through the obligatory contributions of the
of individuals responsible to protect and cultivate respective waqf. The rate of each waqf’s contribution
them. for this purpose is fixed at six percent of their total
Legal Status of Waqf revenues. Remarkably, the establishment of the
Central Waqf Council, which was set up in 1965
In post independent India, despite implementation under the now defunct Waqf Act of 1954, and
of numerous measures by successive governments, was established for the sole purpose of advising
nothing has succeeded in regaining the lost- the central government on waqf affairs of the
confidence of the Muslim community, particularly country, has been constantly at the receiving end of

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controversy and criticism from the community. The income from all these waqf properties is INR1.63
major objections raised against its establishment billion per annum amounting to a meagre rate of
include the need and purpose of its existence and return of 2.7 percent. Interestingly, of this revenue
the way its functioning and expenses are financed. six percent is allocated for the working expenses of
As per official directives, the expenses of the Central the respective waqf boards, and one percent of the
Waqf Council are to be meted out through the total revenues is allocated towards the expenses of
collective contribution of each waqf in the country. Central Waqf Council.
Every waqf is required to contribute one percent of
its total annual income for this purpose. According to the Report if these properties are put
to efficient and marketable use they can generate at
The Waqf Act 1995 was passed in response to the least a minimum return of ten percent which is about
recommendations of the Waqf Inquiry Committee INR120 billion per annum.
appointed by the government of India in 1976. The
Committee had strongly advised the government The Committee observed that there has been
to minimize its excessive control over the affairs no sincere political will on the part of successive
of the waqf administration, and to democratise the governments to enhance the waqf institution in
selection procedures and the administrative system the last sixty years. Instead, in various states a
of waqfs. For more than ten years, it had been large number of waqf properties are encroached
repeatedly claimed that the recommendations of upon by embezzling politicians. What is worse is
the Committee had been implemented in letter and that state governments are found to be equally
spirit. involved in this nefarious activity. In this respect,
Delhi State Government leads the way as it has
However, the Sachar Committee, which was illegally occupied more than three hundred waqf
constituted in March 2005 by the government to properties. The Committee’s report reveals that the
examine the socio-economic status of Muslims encroachments upon waqf properties by private
and their religious institutions in the country, persons and government bodies are generally in two
revealed in its final report that a major part of the forms:
legal administrative policies related to waqf are still
restricted and are far from being implemented in ÎÎ An absolute usurpation of property with no
practice. rents or other payments of any sort; and
ÎÎ Those where the occupying party pays a
The Sachar Report further claims that the current
nominal rent which has not been revised for
market value of all the waqf properties in the
decades.
country is estimated to be more than INR1.2 trillion.
According to the Report if these properties are put The consistent indifference and irresponsible
to efficient and marketable use they can generate at attitude of the state and central governments
least a minimum return of ten percent which is about towards the development and protection of waqf
INR120 billion per annum. has damaged the optimal potential of this socio-
religious institution. The Sachar Committee even
The Worrying Findings of the Sachar notes, “it is quite paradoxical that the present Indian
Committee state in which nearly six hundred thousand acres
of waqf lands have been existing since more than
According to the Committee’s report, there are
one century, there still reside almost 38% Muslims
approximately 490,000 registered waqf properties in
in absolute or relative poverty.” The Committee
the country, and the majority of them are registered
strongly recommended numerous amendments into
in West Bengal and Uttar Pradesh - 148,200 and
the clauses of the existing Waqf Act of 1995. A Joint
122,839 respectively. The total area that waqf
Parliamentary Committee (JPC) was constituted
properties encroach is more than six hundred
in December 2006 to conduct a thorough inquiry
thousand acres, and their book value is estimated
into the viability of these recommendations.
to be INR60 billion. However, it is vital to note
The JPC submitted its final report on February
here that this estimation of the book value of waqf
2008 approving some of the Sachar Committee’s
properties represents the value of each property
recommendations, and also providing suggestions.
as estimated sixty years ago. As far as the current
Consequently, the Waqf Amendment Bill 2010 was
market value of these properties is concerned, there
proposed by the then Minister of Awqaf, Mr. Salman
is no exact data available in this regard. The official
Khursheed, and was passed unanimously in the

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Waqf and Islamic Banking and Finance: The Missing Link

Lower House (Parliament) on May 7, 2010. problems, the resentment of Muslims is fuelled by
the absence of any concrete strategy to vacate the
The Bill is at present pending in the Upper House already encroached upon waqf properties.
of the country, and is almost one step away to
becoming legislation. However, the proposed In view of the above, and contrary to the
amendments of the Bill have utterly failed in winning government’s claims that the Amendment Bill is
the confidence of Muslim community. Rather, the meant to prevent corruption in waqf boards and
Bill has attracted severe criticisms from leading to protect waqf properties, most leading Muslim
Muslim organisations for comprising unsolicited organizations, such as the All India Muslim Personal
clauses, and ignoring some key recommendations Law Board, regard the Bill as incomplete and which
of the JPC. The major objection raised against fails to address current problems.
the Amendment Bill 2010 is directed to Clause 87
which makes the registration of every waqf property Conclusion
mandatory, and provides that in case of a dispute
Currently, awqaf in India are faced with challenges
unregistered lands have no legal standing.
on three major dimensions. These include:
This clause has ignited much concern from the
ÎÎ Inefficient utilisation of properties by officials;
community as the Bill is totally silent on the status
of thousands of acres of lands that are definitively ÎÎ Menace of gradual encroachments by
waqf property but are not registered with the related individuals and state governments on
offices. abandoned properties, and

Another objection against the proposed Bill is ÎÎ Lengthy and expensive process of litigation on
directed to a clause that states if the succession of a adversely occupied properties.
given trustee fails, any revenue generated from the To combat all these fatal challenges posed to
related waqf would be spent on the welfare of the Indian awqaf, there is an urgent need for an
community. Since the word “community” lacks any overall shift in the management paradigm. There
definition in the Bill, it is feared that funds arising is a strong demand for much-needed changes in
out of the waqf may be diverted to other areas the methodology, strategies, planning, policies
instead of being specifically allocated for Muslims in and formulae of the institution’s administration.
the country. Unfortunately, going through the Sachar Committee
report reveals that the majority of awqaf in India are
Though the proposed Bill provides that any
lying in a state of complete disorder. In fact, due to
encroachment on a waqf would be tantamount to a
rampant cases of misuse, disuse, mismanagement,
non-bailable offence, the definition of encroachment
encroachments and ill-administration, this socio-
has not been amended as per recommendation
economic and religious-cum-charitable institution is
of the Sachar Committee. In addition to drafting
dying a slow but sure death in the country.

130 | Global Islamic Finance Report 2015