Waqf Fundraising Management

Indonesian Journal of Islam and Muslim Societies
Vol. 8, no.1 (2018), pp. 57-86, doi : 10.18326/ijims.v8i1. 57-86
Waqf fundraising management:

a conceptual comparison between
traditional and modern methods in
the waqf institutions
Muhammad Shulthoni and Norma Md Saad
Department of Economics, Kulliyyah of Economics and Management Sciences,
International Islamic University Malaysia
E-mail: [email protected]; [email protected]
DOI: 10.18326/ijims.v8i1.57-86
Abstract
This paper focuses on the theoretical structure of funding for Islamic
philanthropy, especially waqf. Waqa>f is projected to play further significant role
to tackle present social problems, where financial sustainability has become one
of the foremost challenges faced by awqa>f institutions. There is a need to study
various models of fundraising that could be applied to reform awqa>f institutions.
Employing content analysis approach, this paper analyses traditional and
modern structures of fundraising that are applicable for development and
management of waqa>f fundraising: istibda>l, h}ukr, ija>ratayn, venture philanthropy
of waqf model (VPWM), value-based capital model of waqf (VBCMW), and
social enterprise waqf fund model (SEWF).The discussions are expected to be
able to contribute towards boosting a better fundraising management of awqa>f
institutions in Muslim communities as well as countries.
Makalah ini fokus pada struktur teoritis pendanaan untuk filantropi Islam,
terutama wakaf. Wakaf diproyeksikan untuk memainkan peran penting lebih
57
IJIMS: Indonesian Journal of Islam and Muslim Societies, Volume 8, Number 1, June 2018: 57-86
lanjut untuk mengatasi masalah sosial saat ini, di mana keberlanjutan keuangan
telah menjadi salah satu tantangan utama yang dihadapi oleh lembaga-lembaga
awqa>f. Ada kebutuhan untuk mempelajari berbagai model penggalangan dana
yang dapat diterapkan untuk mereformasi institusi awqa>f. Dengan menggunakan
pendekatan analisis isi, makalah ini menganalisis struktur penggalangan dana
tradisional dan modern yang berlaku untuk pengembangan dan pengelolaan
penggalangan dana wakaf: istibda>l, h}ukr, ija>ratayn, venture philanthropy of
waqf model (VPWM), value-based capital model of waqf (VBCMW), dan social
enterprise waqf fund model (SEWF). Diskusi diharapkan dapat berkontribusi
untuk meningkatkan manajemen penggalangan dana yang lebih baik dari
lembaga awqaf di komunitas Muslim serta negara.
Keywords: Waqf fundraising; Management; Traditional method of fundraising;

Modern method of fundraising
Introduction
Historically, waqf1 had significantly contributed to the well-being and ed-
ucational development of the Muslim societies. It was a successful and
exemplary model for funding and sustaining Islamic educational institu-
tions, such as universities, schools, madrasahs and other public services in
the past that some of these institutions are still in existence.2 Nowadays,
however, the Muslim societies expect that many awqa>f institutions should
take over more responsibilities to meet the current social and education-
al problems. There are challenges to be faced by significant numbers of
awqa>f institutions today. These challenges revolve on how to mobilise
and manage their resources to improve Islamic educational institutions,
societal economic development and help preserve the vast liquid assets
1
Waqf (plural awqa>f) means the act of creating a religious endowment.Waqf is the
devotion of wealth either in stated terms or by implication, for any charitable or religious
purpose, or to protect any benefit to human beings.
2
The waqf-based Islamic educational institutions, for example, are Al-Azhar University
in Egypt and Al-Zaytuna University in Tunis.
58
Waqf fundraising management: A conceptual comparison...(Muhammad Shulthoni and Norma Md Saad)
from being lost in the never-ending circles of charity. There are evidences
suggesting that considerable figures of waqf assets and awqa>f institutions
are mismanaged and many suffered from lacked of funds to generate
productive use of waqf assets.3
Several previous studies revealed that the development, unstruc-
tured management of waqf institutions,4 funding, technical expertise,
inefficiency, and ineffectiveness5 are some of the examples of the awqa>f
problems that need to be solved. Mohammad Tahir Sabit identifies that
insufficient legal provisions, poor information system, lack of trained em-
ployees, lack of trust and insufficient financial resources are the major
constraints in developing waqf properties.6 Other problems pointed by
researchers in relation to management of awqa>f are lack of accessibility,
unskilled na>zi} rs,7 misuse of waqf assets,8 doctrinal understanding of waqf
(perpetuity and inalienability), and special purpose waqf.9 Furthermore,
Mohammad Tahir Sabit and Abdul Hamid Mar Iman observe that the
3
Abul Hassan and Abdus Shahid, “Management and Development of the Awqa>f Assets”,
Proceeding of the Seventh International Conference—the Tawhidi Epistemology: Zakat and Waqf
Economy, Bangi 6-7 January2010,Institut Islam Hadhari, Universiti Kebangsaan Malaysia,
309-328.
4
Andy Agung Prihatna, “Filantropi dan Keadilan Sosial”, in Chaider S. Bamualim and
Irfan Abubakar (eds.), Revitalisasi Filantropi Islam: Studi Kasus Lembaga Zakat dan Wakaf di
Indonesia, Jakarta: Pusat Bahasa dan Budaya, Universitas Islam Negeri Jakarta, 2005, 3-7.
5
Syed Othman Al-Habshi, “Waqf Management in Malaysia”, in Mohammed Ariff, (ed.),
The Islamic Voluntary Sector in Southeast Asia: Islam and the Economic Development of Southeast
Asia, Singapore: Institute of Southeast Asian Studies, 1991.
6
Mohammad Tahir Sabit Haji Mohammad, “Sustaining the Means of Sustainability:
The Need for Accepting Wakaf (Waqf) Assets in Malaysian Property Market”, Proceeding of
PRRES, 2008, 1-17.
7
Uswatun Hasanah, “Potret Filantropi Islam di Indonesia”, in Idris Thaha (ed.), Berderma
untuk Semua: Wacana dan Praktik Filantropi Islam, Jakarta: Teraju, 2003, 203-246.
8
Ridwan Al-Makassary, “Relasi Filantropi Islam dan Keadilan Sosial di Indonesia”, in
Idris Thaha (ed.), Berderma untuk Semua: Wacana dan Praktik Filantropi Islam, Jakarta: Teraju,
2003, 141-153.
9
Hamid Harasani, Toward the Reform of Private Waqfs: A Comparative Study of Islamic Waqfs
and English Trusts, Leiden: Brill, 2015.
59
three basic components which form the basis of creation of waqf, spe-
cifically irrevocability, perpetuity, and inalienability have become the
components that presented undesirable effects on realizing full benefits
from waqf, such as problems of liquidity and cash flow, ensuing in legal
conflict particularly for contemporary waqf (i.e. cash waqf).10 As a result,
there is limited cash flow that subsequently blocked the growth of waqf.
These evidences indicate that the present circumstances of most awqa>f
institutions are not satisfactory. The role of na>zi} rs has come into mistrust.
It can be said that in many areas, there has been a catastrophic downfall
of awqa>f. The awqa>f institutions are not given the right maintenance and
therefore, enormous awqa>f assets are ill-managed. In addition, accord-
ing to Abul Hasan and Abdus Shahid, the unavoidable consequence is
much deterioration and disrepair of these valuable assets.11 Regarding
this issue, there is a contention that the decentralisation (privatisation)
of waqf is a fit structure of waqf management, since its centralisation (na-
tionalisation) has led to mismanagement of waqf and opened the door to
many problems in a lot of Muslim countries.12 For example, it triggered
unemployment, as the na>zi} rs who were selected by the wa>qif became re-
liant on monthly wages, without administering the waqf assets properly.
In addition, Baskan emphasizes that there is a necessity in returning the
waqf assets to private organisation by establishing waqf boards of trus
tees independent of the government ministry.13 It can be argued that
10
Mohammad Tahir Sabit Haji Mohammad and Abdul Hamid Mar Iman, “Obstacles of
the Current Concept of Waqf to the Development of Waqf Properties and the Recommended
Alternative”, Malaysian Journal of Real Estate, Vol.1, No. 1 (2006): 27–38. Retrieved from
http://eprints.utm.my/501/
11
Abul Hassan and Abdus Shahid, “Management and Development of the Awqāf
Assets”,309-328.
12
Siraj Sait and Hilary Lim, Land, Law and Islam: Property and Human Rights in the Muslim,
London and New York: Zed Books, 2006, 147.
13
Birol Baskan, “Waqf System as a Redistribution Mechanism in Ottoman Empire”, A
Paper Presented at 17th Middle East History and Theory Conference, 10-11 May 2002, Center for
60
the transferring of waqf management to the independent body will bring

benefit as waqf assets is managed in a professional manner.
From the stated situation of the awqa>f institutions in many Muslim
countries, considerable efforts have to be made in the progressive way in
order to find the proper approach to maintain the existing waqf assets
and funds. Undeniably, the current reassessment of the role of the waqf
supports anticipations to study from the faults of the past and to move
inmanagingwaqf assets and funds in a professional manner within mod-
ern management framework.
In order to revive these awqa>f institutions, there is a need to study the
traditional models of fundraising in order to propose new models that
could be applied in the awqa>f institutions. Therefore, the purpose of this
study is to analyse and compare several classical and modern fundraising
models, management, and innovation in the development of waqf assets
and funds in theMuslim world. In addition, the study will also identify
the best and most effective fundraising model to be adopted by awqa>f
institutions around the world.
The concept of fundraising

Since waqf institutions share some characteristics with non-profit organi-
sations, fundraising is an essential element for the running of these insti-
tutions. Functioning, suitable, and effective fundraising methods are re-
quired to secure the preferred human and financial resources. Although
waqf in some categories is common around the Muslim world, organised
fundraising and waqf on a huge scale is still mostly an extraordinary phe-
nomenon for the Muslim community. Lindahl and Conley argue that
“little study focuses on fundraising for religious institutions, although it
is a fact that this category constantly attracts huge amount of charitable
Middle Eastern Studies, University of Chicago.
61
funding each year.”14 Additionally, it is necessary to recognise the con-

cept of fundraising comprehensively in the waqf institution in order to
boost its development. This is because of the significance of waqf as one
of the most vital non-profit organisations that exist in the Islamic legacy.
Although the term ‘fundraising’ can be largely defined to take into
account political fundraising and raising funds for business ventures,
this research focuses on the efforts engaged in raising a provision for
non-profit charitable organisation, namely waqf. Fundraising is some-
times understood as tantamount with non-profit organisations.15 The
term fundraising is frequently used interchangeably with the term “de-
velopment or advancement”. According to Worth, fundraising is a move-
ment that started with the goal of producing charitable or philanthropic
giving.16 In the simplest words, fundraising means “asking for a gift” even
though it is a long process in which asking for a gift. In other words, it
is a step in more complicated processes. Andreasen and Kotler describe
fundraising as an activity of accumulating financial resources and ascer-
taining the fundamental bases of funds.17 Also, Warwick highlights that
fundraising is not only an effort to procure funds for the organisation,
but also includes the creation of a donor base, making donors active,
visible and efficient.18
From the definitions given above, it can be inferred that fundraising,
as the movement focused on obtaining monetary and non-monetary re-
14
Wesley E. Lindahl and Aaron T. Conley, “Literature Review: Philanthropic
Fundraising”, Nonprofit Management and Leadership, Vol.13, No.1 (2002), 91.
15
Michael J. Worth, Nonprofit Management: Principles and Practice, Singapore: Sage
Publications, 2009.
16
Michael J. Worth, Educational Fund Raising: Principles and Practice, American Council
on Education Series on Higher Education, Washington, DC: Case Publications, 1993.
Alan R. Andreasen and Philip Kotler, Strategic Marketing for Non-profit Organizations,
17
Upper Saddle River, NJ: Prentice Hall, 2008.

18
Mal Warwick, The Five Strategies for Fundraising Success: A Mission-Based Guide to
Achieving Your Goals, San Francisco: Jossey Bass, 2000.
62
sources from benefactors, is not easy to be explained. Some prefer to

emphasise on the collection of funds, while others concentrate on the
fundraising activities and tools. According to Holloway,19 fundraising can
be classified into three formulas: (1) raising moveable and immovable
resources from the society; (2) creating a base of revenues from the exist-
ing assets by investment and innovation; and (3) utilising non-monetary
resources such as volunteers, equipment, and positive images of the insti-
tutions to achieve the resources. In short, this research adopts Holloway’s
categorisation of fundraising. Hence, it can be argued that fundraising in
waqf institutions covers all efforts to provide financial and non-financial
resources in an attempt to integrate it into social entrepreneurial activi-
ties. However, these initiatives require a general model for the develop-
ment of waqf fundraising and management.
The classical models of waqf fundraising

Monzer Kahf opines that waqf assets can be established through various
modes of financing which can be applied in the development of waqf
assets; traditional schemes, modern schemes, and self-finance schemes.20
The traditional concepts of istibda>l, h}ukr and ija>ratayn have been used by
waqf institutions in the Muslim countries.
Substitution of the waqf property (istibdāl)

One of the traditional financing concepts of waqf assets is istibda>l (substi-
tution of waqf properties), where a waqf asset is swapped for another asset
that affords at least similar services or returns without any change in the
19
Richard Holloway, Towards Financial Self-Reliance, London: Aga Khan Foundation,
2001.
20
Monzer Kahf, “Fiqhi Issues in the Revival of Awqa>f”, Islamic Horizons Article retrieved
from monzer. kahf.com/papers/.../revival_of_awqaf_-_islamic_horizon.pdf, 1998.
63
requirements laid out by the founder.21 Umar Ahmad et al. define istibda>l
as “selling of all or part of waqf property and the earnings from the sale
can be utilised to purchase a different part of property devoted as waqf
for similar purposes”22 Thus, it is projected that the implementation of
the istibda>l should assist the waqf institution in getting cash to fund waqf
investment project through replacement of less productive waqf property.
There are numerous issues concerning the utilisation of istibda>l as a
financing mechanism to magnify waqf properties for socio-economic de-
velopment. Muslim jurists have different opinions regarding the concept
of istibda>l because there is no direct injunction from Qur’a>n and h}adi>th
referring to istibda>l.23From an economic perspective, according to Monzer
Kahf, either a full or partial substitution (istibda>l) of waqf cannot multiply
capital value of the waqf assets even though it might expand its returns
because of the possibility of uselessness of the property before replace-
ment.24 For these reasons, a number of interpretations of fuqaha> are pro-
vided relating to the acceptability of istibda>l. Some Muslim jurists opine
that an istibda>l is prohibited except in extraordinary cases. Some of them
view that an istibda>l is allowed with slight requirements.
According to Abu Zahrah, Imam Malik and Imam Al-Shafi‘i refuse
the view to make an istibda>l for a mosque even if the mosque has been
damaged.25 They are of the view thatmosque cannot be substituted with
a new structure as it would change the existing construction of the wa>qif’s
21
Monzer Kahf, “Fiqhi Issues in the Revival of Awqa>f”..., 1998.
22
Umar Ahmed, Mustafa Omar Mohammad and Ahamad Faosiy Ogunbado, “Examining
the Traditional Waqf-Based Financing Methods and Their Implications on Socio-economic
Development”, IOSR Journal of Business and Management, Vol. 17, No. 2 (February 2015), 119-125.
23
Jasni Sulong, “Permissibility of Istibdal in Islamic Law and the Practice in Malaysia”,
Journal of US-China Public Administration, Vol.10, No. 7 (2013), 680-689.
24
Monzer Kahf, “Towards the Revival of Awqa>f: A Few Fiqhi Issues to Reconsider”, in
Harvard Forum on Islamic Finance and Economics, Vol. 1 (October 1999).
25
Muhammad Abu Zahrah, Muh}a>d}arah fi al-Waqf, Cairo: Da>r al-Fikr al-‘Araby, 2005,
159; see also Al-Mudawwanah, 1994, Vol. 4 and Al-Umm, 1990, Vol. 4.
64
charity.26 In other words, it would terminate the perpetual endowment

of the wa>qif. In contrast, Imam Ahmad accepts the idea to create an ex-
change (istibda>l) of the mosque for the land of the mosque.27Additionally,
Imam Ahmadagrees withthe istibda>l deed if the mosque has been dam-
aged and could not beusedby Muslims.
According to Imam Al-Shafi‘i, istibda>l is allowed for immoveable pro
perties based on particular situations, such as the waqf estate is damaged
or the land has become unproductive.28 In that case, waqf properties can
be sold or exchanged with another asset for the development of waqf.
With regards to moveable asset, Imam Al-Shafi‘i opines that istibda>l is
prohibited due to the position of the waqf property that cannot be sold,
inherited, or owned as the ownership has been passed to Allah.29 On the
other hands, the Maliki School of Law argues that the istibda>l of waqf
is acceptable in order to substitute the damages and swap for the lost
benefits of waqf assets.30 The essential concern of the Ma>liki jurists is
the benefit of the waqf assets. Therefore, the application of istibda>l must
comply within the shari>‘ah and guarantees the benefits of the waqf assets
to the beneficiaries.
Monzer Kahf divides istibda>l into the substitution of one waqf with
another similar asset and the substitution of waqf land with cash value.31
He states that the mode of istibda>l provides flexibility needed for the op-
26
Jasni Sulong, “Permissibility of Istibdal in Islamic Lawand the Practice in Malaysia”...,
680-689.
27
Muhammad Abu Zahrah, Muh}a>d}arah fi al-Waqf, Cairo: Da>r al-Fikr al-‘Araby, 2005.
28
Muhammad Abu Zahrah, Muh}a>d}arah fi al-Waqf, Cairo: Da>r al-Fikr al-‘Araby, 2005;
Umar Ahmed, Mustafa Omar Mohammad and Ahamad Faosiy Ogunbado, “Examining
the Traditional Waqf-Based Financing Methods and Their Implications on Socio-economic
Development”…,119-125.
29
Muhammad Abu Zahrah, Muh}a>d}arah fi al-Waqf, Cairo: Da>r al-Fikr al-‘Araby, 2005.
30
Jasni Sulong, “Permissibility of Istibdal in Islamic Lawand the Practice in Malaysia”...,
680-689.
31
Monzer Kahf, “Financing the Development of Awqa>f Property”, American Journal of
Islamic Social Sciences, Vol.16, No. 4 (1999), 39.
65
erational accomplishments of the waqf. It can also improve the services

of the waqf in specific cases. In addition, the tolerability of the istibda>l of
waqf is only dedicated to expand and preserve waqf assets. In practice, ac-
cording to Ahmed et al., istibda>l has been utilised in various formulations
such as “selling part of waqf property to develop the existing of the same
property, selling a bundle of waqf properties and purchasing a new one to
be used for the same purpose of the sold properties”.32 This concept has
been practised in Indonesia, Malaysia, Singapore, Kuwait, Egypt, Sudan,
Turkey, and in many other Muslim countries.33 Finally, it can be argued
that practising and authorising istibda>l of waqf property for another asset
should be solely based on achieving greater flexibility in creating waqf to
be more productive.
Long lease with large advance lump sum (the mode of ḥukr)
A literal meaning of the term h}ukr is ‘monopoly or exclusivity’.34 Accord-
ing to Ahmed et al.35 and Anas Zarqa36 this model is designed by the Hanafi
jurists in the third century of hijrah to avoid waqf assets being sold due to
damage. In practice, a waqf administrator may face the problem where
a part of the waqf property cannot generate revenue, unless additional
investments or innovations are initiated to develop it. One may consider
selling such property and purchase another property that can generate
thesame revenue without additional investment. Nonetheless, selling
waqf property, according to the majority of classical fuqaha>’ is prohibit-
32
Umar Ahmed, Mustafa Omar Mohammad and Ahamad Faosiy Ogunbado,
“Examining the Traditional Waqf”..., 119-125.
33
“Examining the Traditional Waqf”…, 119-125.
34
Monzer Kahf, “Financing the Development of Awqa>f Property”..., 39.
35
“Examining the Traditional Waqf..., 119-125.
36
Muhammad Anas Zarqa, “Financing and Investment in Awqa>f Projects: A Non-
technical Introduction”, Islamic Economic Studies, Vol. 1, No.2 (1994), 6.
66
ed except under special conditions and after getting the approval of the
shari>‘ah judge.37 Rather than selling the waqf asset, Monzer Kahf proposes
that the na>z}ir sells the right of the waqf asset to the lessee for a long lease
at a nominal periodical rent.38
This contract gives an opportunity to the na>zi} r to get a huge lump sum
of cash in the form of advanced rental. Shamsiah Karim opines that the
lessee can also impose a constant rent or flexible rent depending on the
value of the property.39 The lump-sum revenues from the rent/sale of
rights to utilise the waqf asset and periodical rent can be channelled toa
more beneficial investment.40 It can also be used to preserve and expand
waqf assets. This model of financing was utilised in the 12th century in
Egypt and Syria.41 In addition, Crecelius observes that in the16th century
Egypt, the h}ukr payment was used by the administrator of Muhammad
Bey Al-Dhahab’s waqf institution.42 Fundamentally, h}ukr contract has
similar characteristic withthat of an istibda>l.43 This kind of contract is also
used in different countries with different terms. Baer cited by Ahmad Dallal gives
evidence that in Tunisia it is called inza>l and nasba, jalsa in Morocco, and
muqata‘a in Turkey.44 Undoubtedly, the h}ukr contract is a solution to get
37
Muhammad Anas Zarqa, “Financing and Investment”…, 6.
38
Monzer Kahf, “Financing the Development of Awqa>f Property”, American Journal of
Islamic Social Sciences, Vol. 16, No. 4 (1999), 39.
39
Shamsiah Binti Abdul Karim, “Contemporary Shari’a Compliance Structuring for
the Development and Management of Waqf Assets in Singapore”, Doctoral Dissertation,
Durham University, UK, 2012.
40
“Examining the Traditional Waqf...,119-125.
41
Gabriel Baer, Fellah and Townsman in the Middle East: Studies in Social History, London:
Routledge, 1982.
42
Daniel Crecelius, “The Waqf of Muhammad Bey Abu al-Dhahab in Historical
Perspective”, International Journal of Middle East Studies, Volume 23, Number 1 (1991), 57-81.
43
“Examining the Traditional Waqf..., 119-125.
44
Ahmad Dallal, “The Islamic Institution of Waqf: A Historical Overview”, Islam and
Social Policy, (2004), 13-43.
67
a sum of money which is nearly equal to the value of the waqf property.
It can overcome the problem of the everlasting waqf from the perspective
of the legal requirements of various Islamic schools of law. Furthermore,
according to Monzer Kahf, the acceptance of the model does not rely on
the sum of the monthly rent, but on the objectivity of the practice and
the ultimate expenditure of the lump sum revenue produced by selling
exceptionality rights.45
Lease with dual payment (ijāratayn)

A literal meaning of ija>ratayn is two leases. It is a tenancy with dual pay-
ment. This model is one of the instruments whereby the lessee can hold
permanent rights of the property.46 The contract model of ija>ratayn, ac-
cording to Monzer Kahf, is close to the conception of h}ukr.47 There is
only a slight difference between the two. In the ija>ratayn, the huge lump
sum must be utilised for the restoration of the rented asset itself. In this
specific procedure, dual lease obliges the lessee to make a great down
payment nearly equal to the value of the waqf property and a nominal of
periodic rent to get the rights to utilise the waqf asset in the permanent
basis. Subsequently, the down payment is utilised by the waqf administra-
tor to restore leased waqf property. One may keep in mind that the rights
to utilise waqf property can be transferred and inherited to others, and
the contract of the lease is renewed annually.48 As a result, no significant
amount of cash can be used for developing other waqf properties.
This model of financing was used during the late Ottoman Empire
period in Anatolia in the 16th and 17th centuries when many waqf assets
45
Shamsiah Binti Abdul Karim, Contemporary Shari’a Compliance Structuring for the
46
Development and Management of Waqf Assets in Singapore, Doctoral Dissertation, Durham

University, UK, 2012.
47
48
Muhammad Anas Zarqa, “Financing and Investment in Awqa>f Projects”..., 6.
68
in these periods were devastated by bonfires.49 The model of ija>ratayn was

introduced to solve the problem. This model, according to Anas Zarqa, is
poorer than h}ukr because it involves higher costs on the part of the waqf
assets than in h}ukr, particularly, using the rental payment to reconstruct
a particular damaged waqf property.50Tahir Sabit et al. argue that under
ija>ratayn, the waqf beneficiaries may not significantly benefit from either
the rental earning or the lump sum amount.51 Therefore, the model is
not an ideal model to be developed in order to expand waqf assets in the
modern period.
The modern models of waqf fundraising
Venture philanthropy of waqf model (VPWM)

One central problem in waqf management is how to proceed with the
available waqf funds (especially cash waqf) so as to preserve its original
value and to develop the value over time.52 In the context of cash waqf
management, several models have been projected. There are many sug-
gestions from practitioners and academics to expand the utilities of waqf
into financing activities53,taka>ful (Islamic Insurance) and to develop in-
49
Stephen P. Heyneman, Islam and Social Policy, Vanderbilt University Press, 2004;
Shamsiah Binti Abdul Karim, “Contemporary Shari’a Compliance Structuring for the
Development and Management of Waqf Assets in Singapore”, Doctoral Dissertation,
Durham University, UK, 2012.
50
Muhammad Anas Zarqa, “Financing and Investment in Awqa>f Projects”..., 6.
51
Mohammad Tahir Sabit Haji Mohammad, Abdul Hamid Mar Iman, Ismail Omar,
an Ideal Financial Mechanism for the Development of the Islamic Trust Properties in Malaysia,
University Teknologi Malaysia, 2005.
52
Mohd Nahar Mohd Arshad and Mohamed Aslam Mohamed Haneef, “Reositioning
Issues of Waqf as a Third Sector Organisation into the Mainstream Economy”, Journal
of Chemical Information and Modelling, Vol. 53, No. 9 (2015), 1689–1699. http://doi.
org/10.1017/CBO9781107415324.
53
Habib Ahmed, “Waqf-Based Microfinance: Realizing The Social Role of Islamic
Finance”, Integrating Awqaf in the Islamic Financial Sector, (2007), 1–22.
69
ventive economic models.54 Corporate waqf based on musha>rakah and

mud}a>rabah models are widespread in the Muslim countries (i.e. Malaysia).
In addition, Alias has suggested a model termed as the Enterprise Waqf
Fund (EWF) to boost the function and the organisation of cash waqf
funds by engaging the venture capital or venture philanthropic systems
and approaches.55 Finally, Zakaria et al.proposed the VPWM in combina-
tion with the establishment of sustainable waqf businesses.56 They argue
that a sustainable waqf business is able to ensure that the philanthrop-
ic activities will produce revenues consistently.57 In this phase, another
form of the potential venture philanthropy models for cash waqf opera-
tions will be presented.
The concept of venture philanthropy is not a new concept for Islamic
investments.58 This concept is based on the principles of venture capital,
but in the Islamic (society) context, its purpose is to produce a financial
and social benefit to the Muslim community. Conventionally, revenues
from venture capital are distributed to shareholders, while benefits from
venture philanthropy endowments are reinvested in order to develop
both its investment portfolio and development impact.
A number of philanthropists have defined venture philanthropy by
emphasising on different elements. So far, there is no single accepted
definition of venture philanthropy. According to Pepin, venture philan-
54
Abdullah Jalil and AsharafMohd. Ramli, “Waqf Instrument for Contruction Contract:
An Analysis of Structure”, The Journal of Muamalat and Islamic Finance Research,Vol.5, No.1
(2008), 183-196.
55
Tunku Alina Alias, “Venture Capital Strategies in Waqf Fund Investment and
Spending”, ISRA International Journal of Islamic Finance, Vol. 4, No. 1 (2012), 99–126.
56
Azliza Azrah Mohd Zakaria, Rose Ruziana Abd. Samad, and Zurina Shafii, “Venture
Philanthropy -Waqf Practices and Its Implementation: Scenario in Malaysia”,International
Journal of Business, Economics, and Law, Vol.1 (2012), 108-115.
57
Philanthropy -Waqf Practices”…, 108-115.
58
Tunku Alina Alias, “Venture Capital Strategies in Waqf”..., 99-126.
70
thropy seems to be similar to that of venture capitalists, taking the ini-

tiative, but investing in innovative ideas produced by donations.59 Alam
highlights that venture philanthropy is not only a funding institution
which is focusing on the financial resources but it is also engaging in
the management and technical supports.60 This support is concentrated
on empowering institutions to build better organisational capacity. One
should keep in mind that the purpose of establishing a venture philan-
thropy or venture capital is to create a win-win solution between capital
benefactor and the beneficiary.61 In other words, venture capital will pos-
sibly be focusing on financial returns on the investment while venture
philanthropy would be expecting social benefits instead.
In 2006, Matthew Bishop in the Economist article publicised the term
‘philanthrocapitalism’ to illustrate a trend sweeping philanthropic insti-
tutions. There has been “a need for philanthropy to become more like
the for-profit capital markets”62 In other words, according to McGoey, the
new idea of the philanthrocapitalism is “the explicitness of the self-inter-
ested motives underlying large-scale charitable activities”.63 Furthermore,
Lorenzi and Hilton view that the term philanthrocapitalism is “the appli-
cation by an individual of significant accumulations of financial capital
to address social problems so as to affect social justice”.64 It is dedicated
59
John Pepin, “Venture Capitalists and Entrepreneurs Become Venture Philanthropists”,
International Journal of Nonprofit & Voluntary Sector Marketing, Vol. 10, No. 3 (2005): 165-173.
http://doi.org/10.1002/nvsm.10
60
Nafis Alam, “Islamic Venture Philanthropy: A Tool for Sustainable Community”,
(March, 2010). Available at SSRN: http://ssrn.com/abstract=1565859.
61
Philanthropy -Waqf Practices”…,108–115.
62
Matthew Bishop, “Philantrocapitalism”, 2006 http://philanthrocapitalism.net/
about/about-the-authors/matthew-bishop/.
63
Linsey McGoey, “Philanthrocapitalism and Its Critics”, Poetics, Vol.40, No. 2 (2012), 197.
64
Peter Lorenzi and Francis G. Hilton, “Optimizing Philanthrocapitalism”, Society, Vol.48,
No. 5 (2011), 398.
71
to transfer the wealth –using business practices, tools, and market forces
to develop better social good-- from the rich to the poor. It can be in-
ferred from the concept that there is a need to build social entrepreneur
for philanthropists to invest in. The building of social entrepreneur is
designed as the application of human capital to produce social capital
through the process of sustainable business practices.65In some ways, ac-
cording to Ramdas, the philanthrocapitalism and venture philanthropy
can be perceived as a normal expansion of the patterns of the capitalism
as a reasonable alternative economic system.66
Pepin explains venture philanthropy as one of the non-traditional char-
itable sources of revenues in the perspective of social entrepreneurship.67
He categorises non-traditional source of returns into venture philanthro-
py, commercial ventures, and social venture capital.68 The classifications
share a similar characteristic which is to provide funding with the expec-
tation to get returns that would be funded for social dedications.69 The
returns are produced through commercial activities in order to gain the
profits that will contribute to the sustainability. Indeed, in the capitalist
system, there can be two types of business organisational entities. On
the one hand, corporations can be perceived as profit-maximising busi-
ness, whose objective is to produce shareholder value, and; on the oth-
er hands, non-profit organisations exist to satisfy social objectives.70 The
65
Peter Lorenzi and Francis G. Hilton, “Optimizing Philanthrocapitalism”..., 398.
66
Kavita N. Ramdas, “Philanthrocapitalism: Reflections on Politics and Policy Making”,
Society, Vol.48, No. 5 (2011), 393.
67
John Pepin, “Venture Capitalists and Entrepreneurs Become Venture Philanthropists”,
International Journal of Nonprofit & Voluntary Sector Marketing, Vol. 10, No. 3 (2005), 165-173.
http://doi.org/10.1002/nvsm.10
68
John Pepin, “Venture Capitalists and Entrepreneurs Become Venture Philanthropists”...,
165-173. http://doi.org/10.1002/nvsm.10
69
Philanthropy -Waqf Practices and Its Implementation”…,108-115.
70
Clyde Eirikur Hull and Brian H. Lio,“Innovation in Non-Profit and For-Profit
Organizations: Visionary, Strategic, and Financial Considerations”, Journal of Change
72
experience of Grameen, in building social business of the microfinance,

gives a lot of lessons that can be learned. This social business, according
to Yunuset al., is projected and activated just like traditional business
enterprise, with products, services, markets, expenses and revenues.71 Its
concept is close to social entrepreneurships which includes both profit
and not-for-profit initiatives.72 In addition, it can be argued that a social
business is an innovative practise of business that can be placed anywhere
between a profit-maximising and a non-profit organisation. It has differ-
ence with NGOs (non-governmental organisations) that most of which
are not anticipating to recover their total costs from their operations.73
Thus, the NGOs are obliged to dedicate part of their time and energy to
raising cash.
In line with Pepin, Scarlata and Alemany use the term Philanthropic
Venture Capital (PhVC) to define an investment that is not only focusing
on maximising shareholders’ prosperity but also on maximazing ethical
dimensions of the social impact on the investments.74 Moreover, Scarlata
and Alemany argue that the PhVC model is not only fund providers but
also value-added services to portfolio organisations with the main objec-
tive of maximising the social impact or social return on the investment.75
Management, Vol.6, No. 1 (2006), 53-65.
71
Muhammad Yunus, Bertrand Moingeon, and Laurence Lehmann-Ortega, “Building
Social Business Models: Lessons from the Grameen Experience”, Long Range Planning, Vol.43,
No. 2 (2010), 308-325.
72
Muhammad Yunus, Bertrand Moingeon, and Laurence Lehmann-Ortega, “Building
Social Business Models”..., 308-325.
73
Eric Werker and Faisal Z. Ahmed, “What Do Non-governmental Organizations Do”,
The Journal of Economic Perspectives, Vol.22, No. 2 (2008), 73-92.
74
Mariarosa Scarlata and Luisa Alemany,“Deal Structuring in Philanthropic Venture
Capital Investments: Financing Instrument, Valuation and Covenants”, Journal of Business
Ethics, Vol. 95, No. 2 (2010), 121-145. http://doi.org/10.1007/s10551-011-0851-8. See
also Azliza Azrah Mohd Zakaria, Rose Ruziana Abd. Samad, and Zurina Shafii, “Venture
Philanthropy -Waqf Practices and Its Implementation”…, 108-115.
75
Mariarosa Scarlata and Luisa Alemany, “Deal Structuring in Philanthropic Venture
Capital Investments”…, 121-145. http://doi.org/10.1007/s10551-011-0851-8
73
Therefore, it can be agreed that adapting the model into waqf institutions
would enable the development of waqf funds and assets in order to give
more benefit to the beneficiaries. The modification of Scarlata and Ale-
many’s model in waqf can be seen in the Figure1.
Figure1 The Venture Philanthropy of Waqf Model

Wāqif
Donors
Nāẓir
(Waqf
Institution)
Waqf fund
(venture
capital)
Advice and Engagement of Nāẓir

Social
Enterprise
Exit/Returns
Social impact
Beneficiaries
(Society)
Source: Adapted from Alemany and Scarlata (2009 and 2010).

Figure 1 demonstrates the VPWM of waqf investment. Wa>qif in the
VPWM endows fund to the na>z}ir who will then invest in the high pro-
spective social impact of social enterprises. The main goal of VPWM
is to achieve and maximise social benefit rather than to concentrate
on financial return maximisation as accomplished in traditional ven-
74
ture capitals.76 It differs from the microfinance that is operated just like
conventional venture capital that normally raises investment from cash-
rich institutional investors, such as Grameen Bank in Bangladesh. The
VPWM, instead, accumulates capital from waqf contribution. In organ-
isational structure, the microfinance model is principally the same as
profit-maximising business but it is modified to be socially oriented as it
targets the poor and the micro-enterprise.
The model (VPWM) suggests that the social enterprise77 (social busi-
ness entity) does not remain by just organising its social entrepreneurial
activities to become self-sustainable, but also to channel contributions to
the society. In this regard, growth and sustainability of social enterprise
can be achieved both through the provision of waqf fund as well as value
added services which help support social enterprise on a strategic and
managerial level. Additionally, the sustainable social enterprise entity
is expected to establish another social enterprise by operating the same
core of business or a different type of business.78
Two types of returns can be obtained from the VPWM. First, if the
funded ‘social enterprise’ has sound sustainability and has an ability to
maximise its social impression, the return will be distributed to the soci-
ety; and second, the self-sustainability of social enterprise is expected to
76
Further explanation about Venture Philanthropy can be learnt from Mariarosa Scarlata
and Luisa Alemany, “Deal Structuring in Philanthropic Venture Capital Investments”…,
121-145. http://doi.org/10.1007/s10551-011-0851-8.
77
UK DTI (2002) defines a social enterprise as “a business with primarily social objectives
whose surpluses are principally reinvested for that (social) purpose in the business and the
community”. And, social entrepreneurship is defined as “entrepreneurial activity with social
orientation and intent”. For further explanation see John L. Thompson, “Social Enterprise
and Social Entrepreneurship: Where Have We Reached”, Social Enterprise Journal, Vol. 4,
No. 2 (2008).
78
Philanthropy -Waqf Practices and Its Implementation”…,108-115.
75
create and empower the production of some financial returns.79 If the

social enterprise is a non-profit organisation, revenues produced must be
reinvested within the organisation. On the contrary, if the social enter-
prise is a for-profit body, then any created returns can be redistributed to
na>h}irs and reinvested to another social enterprise through na>h}irs. In this
model, the na>h}irs has the authority to decide on the disposal of the waqf
fund whether to reinvest or to distribute to the beneficiaries (society) as
long as it complies with the shari>‘ah.
In short, the venture philanthropy capital in the waqf fundraising
model will engage a three-stage life cycle. The first phase is asset build-
ing (which may take different durations among waqf institutions which
should take around five to ten years), during which time the VPWM will
focus on fundraising and generating income. The second stage begins
with the management and investment of the waqf funds. The third stage
is utilising revenue from investments to fund the intended objectives.80
Therefore, it is predicted that by executing the venture model in waqf
fundraising would generate a new source of funding to achieve financial
and social returns on the investments. This is for the reason that waqf
would be supportively involved in business creation to the effect that the
enterprise is completely owned by waqf institutions.
Value-based capital model of waqf (VBCM)

The purpose of this model is to focus on the difference between the
value of waqf and its physical entity. The concept of value has several
definitions. Values may be seen as absolutes (inaccessible to science), as
Mariarosa Scarlata and Luisa Alemany,“Deal Structuring in Philanthropic Venture

79
Capital Investments”…, 121-145. http://doi.org/10.1007/s10551-011-0851-8
80
Tunku Alina Alias, “Venture Capital Strategies in Waqf”..., 99-126.
76
inherent in objects (material or non-material), as present within man,

and as identical with his behaviour.81In addition, anything capable of
being appreciated (wished for) is a ‘value’. The object has certain inher-
ent qualities which may be desired by somebody.82 In this context, the
value-based object of dedication which substitutes the permanency of the
subject matter drives afar the restrictions of immoveable and moveable
properties. According to Tahir Sabit and Mar Iman, dedication could be
implemented by amortisation of the value of things are capable of gen-
erating revenues, and things are not capable of producing returns which
would be preserved differently.83
In short, this means that under this model, the focus must be given to
preserving the value of the dedication rather than the physical object of
the subject matter. The VBCM of waqf, at least, will have a two-step life
sequence. The first phase is asset building during which time the VBCM
of waqf will focus on revenue-generating and non-revenue-generating
waqf objects which should be valued in cash. The cash value should be
considered the principal capital of waqf, henceforth referred to as value
capital (VC). The second stage will start with the consideration of VC as
perpetual and should be maintained all the time by the investments.84 All
efforts should be prepared to protect the VC through its returns. In order
to avoid loss, the large portfolio would be arranged to spread the risks.
81
FranzAdler, “The Value Concept in Sociology”, American Journal of Sociology, Vol.62,
No. 3 (1956), 272. http://www.jstor.org/stable/2772921
82
Franz Adler, “The Value Concept in Sociology”..., 272. http://www.jstor.org/
stable/2772921
83
Alternative”, Malaysian Journal of Real Estate, Vol.1, No. 1 (2006), 27–38. Retrieved from
http://eprints.utm.my/501/
84
Alternative”..., 27–38. Retrieved from http://eprints.utm.my/501/
77
The following figure describes the model.
Figure 2 A Model for VBCM of Waqf
Amortised
Account
Investment
Revenue
Distributable Expenses Reserves

Hedge Fund
Income Account
Source: Adopted from Mar Iman and Tahir Sabit (2006).
Based on Figure 2 above, to assure the perpetuity of VC, at this point,

investment and revenue accounts should be matched to the VC account.
All capitals in VC are required to be invested, and its revenues should be
collected. These revenues should be separated into distributable income
and expenses. The distributable income would be distributed to the ben-
eficiaries of the waqf whereas the fund marked for expenses would be
preserved in the reserve account. These funds could be placed in a larger
fund (hedge fund). This is done to compensate losses in one of the prin-
cipal capital accounts.85 It is also projected that by applying the VBCM
85
Mohammad Tahir Sabit Haji Mohammad and Abdul Hamid Mar Iman, “Obstacles
of the Current Concept of Waqf”..., 27-38 (Retrieved from http://eprints.utm.my/501/)
and Mohammad Tahir Sabit Haji Mohammad and Abdul Hamid Mar Iman, Waqf Property:
Concept, Management, Development, and Financing, Kuala Lumpur: Univesiti Teknologi
Malaysia Press, 2014.
78
in waqf, it would reduce the problem of non-liquidity of the waqf assets

and thus encourage the ummah to contribute for further development of
waqf institutions.
Social enterprise waqf fund model (SEWF)

In the following discussion, the investigation of the best possible enter-
prise models for waqf utilisation will be described. As the objective of
waqf is welfareenhancement, it can be argued that Social Enterprise Waqf
Fund model (SEWF) that puts welfare as the ultimate priority is consid-
ered the most suitable model for sustainable (cash) waqf advancement.
Moreover, waqf institution as one of the most vital non-profit organisa-
tions that exist in the Islamic heritage, certainly, has been applying many
methods to ensure its continuity. Accordingly, social enterprise seems a
more applicable model for waqf as a non-profit organisation than ven-
ture business. It can be argued that social enterprise is a construct that
bridges an important gap between business and benevolence. It applies
profitable patterns to maximise social prosperity, rather than maximising
profits for shareholders. Since it is a value-driven business, “pairing such
enterprise with waqf is seen to be more natural due to shared value”.86
The organisers of SEWF can be individuals or a group of administra-
tors who are experts in social entrepreneurship activities. They have to
invent new practices to produce additional and various sources of reve-
nues. The following figure describes the proposed model of SEWF that
can be practised in the development of waqf. The structure of this model
is highlighted below.
86
Mohd Nahar Mohd Arshad and Mohamed Aslam Mohamed Haneef, “Reositioning
Issues of Waqf as a Third Sector Organisation into the Mainstream Economy”, Journal of
Chemical Information and Modelling, Vol. 53, No. 9 (2015), 1689-1699.http://doi.org/10.1017/
CBO9781107415324.
79
Figure 3 A Social Enterprise Waqf Fund Model

Social Enterprise Beneficiaries
Waqf Institutions Returns Mauqūf‘Alayhi
Investment Choices
Wāqif
Individual Nāẓir 10%
Institutional
Government
Educational 90%
Institutions/others
Source:Waqf Act of Indonesia (No. 41 of 2004), Mohsin (2009) and Alias (2010).
The process flow of the SEWF model is as follows:

a. The wa>qif (founder) will contribute to the social enterprise through
waqf or educational institutions, and at the same time both institu-
tions should givewaqf funds/assets to the na>z}ir.
b. Na>z}ir should manage and invest the waqf fund. The na>z}irs are expected
to come from educational institutions or others who have the skills of
social enterprise.
c. The investment returns will then be distributed to na>z}ir no more than
10% of return, and the 90%87 of it should be circulated to beneficia-
ries including educational institutions and others.
This section has offered an overview of the SEWF model for the devel-
opment of waqf fundraising and management. Hence, for the manager
(na>z}ir) of a non-profit organisation like waqf, it needs a clear mission,
careful placement, and continuous learning and teaching, management
by objectives, self-control, responsibility and accountability to ensure high
performance. In addition, a philanthropy venture capital, value-based
capital, and social enterprise waqf fund models aim at structuring the
Thenisbah (percentage) of shared return is based on the h}adi>th of Ibn Umar regarding
87
the administrator of waqf who is allowed to take a portion of return to feed himself and his
colleagues without excessive manner.
80
waqf assets and funds in a modern and dynamic manner. However, this
could only be done if the legal framework and the maqa>s}id al-shari>‘ah are
able to support the structure especially if it becomes a sensitive issue.
Finally, SEWF is an innovation process in waqf fundraising and manage-
ment that can be implemented by a number of waqf institutions in many
countries.The model is based on value creation and operates by its rules
and reasons. It is argued that the model enables the development of waqf
funds whereby the waqf is invested in profit seeking schemes which also
creates social impact. It is a model that seems well suited to support the
sustainability of waqf institutions in Muslim society.
Conclusion
The institution of waqf has contributed massively towards the develop-
ment of public and social services in the Muslim world. There are tra-
ditional modes of fundraising for the development of waqf assets and
funds such as istibda>l, iji>ratayn, and h}ukr that become the basis of waqf
sustainability. It is apparent that there is a need to innovate new models
which bring new scholars to the field and encourage new methodologies
and frameworks. Therefore, it is expected that by executing the modern
model of fundraising like venture philanthropy model (VPWM) in waqf
fundraising management, it would be able to generate new sources of
funding in order to achieve financial and social returns on the invest-
ments. It is also projected that by applying the value-based capital model
(VBCM) in waqf fundraising management, it would reduce the problem
of non-liquidity of the waqf assets and support the ummah to contrib-
ute to further development of waqf institutions. Finally, social enterprise
waqf fund model (SEWF) is an improvement practise in the waqf fund-
raising management that can be implemented by different waqf institu-
tions in many countries. This model balances revenue generation with
81
social impact creation for the public good to make sure that prosperity
is circulated from the rich to the poor and benefits the ummah. It is a
model that seems well suited to address some of sustainability of waqf
institutions in Muslim society.
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Indonesian Journal of Islam and Muslim Societies

Vol. 8, no.1 (2018), pp. 57-86, doi : 10.18326/ijims.v8i1. 57-86

Waqf fundraising management:

Keywords: Waqf fundraising; Management; Traditional method of fundraising;

the transferring of waqf management to the independent body will bring

The concept of fundraising

Middle Eastern Studies, University of Chicago.

funding each year.”14 Additionally, it is necessary to recognise the con-

Upper Saddle River, NJ: Prentice Hall, 2008.

sources from benefactors, is not easy to be explained. Some prefer to

The classical models of waqf fundraising

Substitution of the waqf property (istibdāl)

charity.26 In other words, it would terminate the perpetual endowment

erational accomplishments of the waqf. It can also improve the services

Lease with dual payment (ijāratayn)

Development and Management of Waqf Assets in Singapore, Doctoral Dissertation, Durham

in these periods were devastated by bonfires.49 The model of ija>ratayn was

The modern models of waqf fundraising

Venture philanthropy of waqf model (VPWM)

ventive economic models.54 Corporate waqf based on musha>rakah and

thropy seems to be similar to that of venture capitalists, taking the ini-

experience of Grameen, in building social business of the microfinance,

Figure1 The Venture Philanthropy of Waqf Model

Advice and Engagement of Nāẓir

Source: Adapted from Alemany and Scarlata (2009 and 2010).

create and empower the production of some financial returns.79 If the

Value-based capital model of waqf (VBCM)

Mariarosa Scarlata and Luisa Alemany,“Deal Structuring in Philanthropic Venture

Capital Investments”…, 121-145. http://doi.org/10.1007/s10551-011-0851-8

inherent in objects (material or non-material), as present within man,

The following figure describes the model.

Figure 2 A Model for VBCM of Waqf

Distributable Expenses Reserves

Source: Adopted from Mar Iman and Tahir Sabit (2006).

Based on Figure 2 above, to assure the perpetuity of VC, at this point,

in waqf, it would reduce the problem of non-liquidity of the waqf assets

Social enterprise waqf fund model (SEWF)

Figure 3 A Social Enterprise Waqf Fund Model

The process flow of the SEWF model is as follows:

Islamic Finance”, Integrating Awqaf in the Islamic Financial Sector,

Teraju, 2003: 203-246.

McGoey, L., “Philanthrocapitalism and Its Critics”, Poetics, vol. 40, no. 2

Raissouni, A. Islamic ‘Waqf Endowment’: Scope and Implications (A.

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