Ladies and Gentlemen,
It is a pleasure for me to be here this morning for the Fifth annual Roundtable on Islamic Finance jointly organised by the Securities Commission Malaysia and the Oxford Centre for Islamic Studies. Having attended each of the four earlier Roundtables, I am also pleased and certainly not surprised to note that this Roundtable series has become a highly anticipated event on the Islamic finance calendar. The theme of this year’s Roundtable proves its continued relevance as a platform for intellectual and insightful deliberation on significant subject matters within the Islamic finance area.
- The subject of Waqf has been attracting growing interest across the globe, particularly in the Muslim world, among various stakeholder groups. The important role of waqf in the history of the development of Muslim societies has been well recognised. There appears now to be a concerted effort to revive the institution of waqf towards regaining that role in order to unlock the potential value of the vast pool of waqf assets today. At the same time, the growing focus on waqf is in line with the overall drive to identify new growth segments to broaden and strengthen the development of the Islamic finance industry.
- In assessing and deliberating on the area of waqf, it would be instructive for us to discuss, at least briefly, the concept of wealth from the Islamic perspective. Wealth is one of the many blessings from Allah, the pursuit of which – in a manner that is lawful or permissible – is expressly provided for in Islam. At the same time, there are provisions on the distribution of accumulated wealth that is beyond the needs of the individual and his dependents. In this respect, zakat is the obligatory channel for wealth distribution, while sadaqah and other forms of charity (or khairat) are deeds that are encouraged. Charity has a complementary function as it not only fulfils the distribution of wealth but also meets certain social objectives. Islamic endowment or waqf has similar functions
Ladies and gentlemen
- There is a perception among certain quarters that waqf assets can be utilised for religious purposes only such as the construction and maintenance of mosques. While religious waqf constitutes one category of Islamic endowment, philanthropic waqf – being another category – provides for much broader activities and represents the area of substantial opportunity to generate social, economic and commercial benefits and development.
- For instance, in the Muslim Ottoman cities, the waqf system was instrumental in the development and construction of public facilities. In the field of education, the University of Al-Azhar in Egypt was financed by its waqf revenues for over 800 years while the Shishli Children Hospital in Istanbul was funded by a health waqf. It has also been acknowledged that the endowment for Merton College, Oxford University was inspired by Islamic waqf.
- The perpetual nature of waqf is a key factor that distinguishes it from most other forms of charity and more importantly enables it to provide sustainability to the wide-ranging activities that it can potentially support. Waqf assets ideally generate steady, if not increasing, flow of revenues or usufructs (benefits) to serve their objectives.
- Furthermore, the selective application of “istibdal” in waqf is an important and practical concept that can help spur more effective and productive development of waqf assets. “Istibdal”, which is essentially substitution of a waqf asset with another asset, enables the overall benefits arising from a waqf asset to be enhanced or at least sustained in perpetuity. Equally importantly, this concept also takes into consideration the needs of the home country’s economic progress and development to optimize the use of the assets.
- A well-structured waqf system can have a profound and lasting impact on a country’s economic, social and financial landscape. The galvanization of waqf assets to drive or support a wide range of activities can contribute towards stronger GDP growth for the country. For example, land or real estate waqf can be developed into residential, industrial or commercial properties that help generate economic value for the nation, while at the same time create employment opportunities for the population.
- From a financial standpoint, the institution of waqf can fulfil significant needs of the public sector thereby relieving some burden on government expenditure. As a result, government finances can be allocated or directed to other areas requiring funding, which in turn would contribute towards more extensive and broad-based nation-building.
- Efficient utilization of waqf assets can also broaden and enhance social impact projects and socially responsible development within the country. One of the outcomes will be a more inclusive society that enjoys better standards of living and sustainability of the environment.
Ladies and gentlemen
- While waqf had historically been an integral part of the social and economic system of some Islamic countries, its present-day contribution and development are generally hampered by a number of challenges. As these main challenges, I believe, will be deliberated at length during this Roundtable, I will only touch on them very briefly.
- Legislation: Existing legislation and regulation for waqf in many jurisdictions are generally insufficient to support its orderly development, resulting in these countries facing practical challenges or not having the requisite infrastructure. In this respect, the agenda for reform must be driven by the government in providing an enabling environment for waqf development.
- Governance and professionalism: One of the common reservations expressed by potential waqif or donors is the management of waqf assets. Professional management of these assets will help enhance opportunities for more productive returns and outcomes. Furthermore, implementing relevant governance principles in relation to the management of waqf assets will clearly define the fiduciary responsibilities of the mutawalli or trustee and instil confidence in the institution of waqf.
- Capital: In rejuvenating the productivity of waqf assets, there is an attendant need to mobilise capital, primarily in the form of cash. Waqf development could be undertaken in tandem with products and services in the Islamic finance industry such as the issuance of sukuk. There are already a few sukuk structures that have been successfully implemented in developing waqf assets. For instance, in Singapore, sukuk musharakah was structured to develop commercial buildings on waqf land. Another example is the issuance of Sukuk al Intifa’a (timeshare ‘bonds’) for the construction of the Zam Zam Tower Complex on the land adjacent to the Holy Mosque in Mecca.
- In addition to addressing these challenges, initiatives are already being undertaken by several jurisdictions to promote the development of waqf. In the case of Malaysia, the proposed Corporate Waqf Master Plan, as announced in the 2013 Budget, would be a key strategic document that could help unleash the potential for waqf, and corporate waqf in particular, to be another growth driver for the Islamic finance industry. A corporate waqf platform that is professionally managed has the ability to attract broader participation from the waqif, or donors, given its legal and governance structure that would provide a higher degree of confidence to the market.
- It is also crucial that a cohesive strategy on stakeholder education be implemented. There is a need to raise the awareness and appreciation of the benefits of effective waqf development and, equally importantly, to correct any misperception or misplaced reservations. The various stakeholder groups must share the same aspirations to bring waqf development to the next level and collectively commit to put into effect the necessary measures to get there.
Ladies and gentlemen
- Prophet Muhammad (sal Allahu alaihi wa sallam) said: “When a man dies, his deeds come to an end except for three things: sadaqah jariyah (continuous charity); knowledge which is beneficial; and a virtuous offspring who prays for him (the deceased).” [Sahih Muslim]. This Hadith demonstrates the importance placed on undertaking charitable acts and providing knowledge, both of which can be fulfiled through the institution of waqf.
- I would like to encourage everyone here to take this excellent opportunity to dissect the opportunities, issues and challenges on waqf development and identify key action plans to drive the initiative of reviving the institution of waqf. With the presence of so many distinguished and experienced individuals in this room, and based on the high quality of deliberation of past Roundtables, I am confident that we will emerge from this weekend’s sessions with measures and recommendations that will make this Roundtable well worth our endeavour.