2019 - Rahman - Cash Waqf Deposit Product
2019 - Rahman - Cash Waqf Deposit Product
2019 - Rahman - Cash Waqf Deposit Product
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1 Introduction
There is no direct injunction in the Quran about waqf. However, there is
a hadith reported by Ibn Umar, whereby Umar Ibn Al Khattab acquired
a piece of land in Khyber and went to Prophet (saw) and sought advice
regarding the land. The Prophet (saw) advised that the land should be
made inalienable and the profit given to charity. This implies that in
Islam, land was the first waqf. The mosque of Quba’ in Medina, which
exists until today, was the first mosque in Islamic history that was waqf
oriented. Others using waqf land include the Al-Azhar University in
Egypt, the University of Cordova Spain, and the Al Noori Hospital in
Damascus (Ahmad Zaki et al. 2006).
Philanthropic waqf was started during the era of Prophet (saw)
in Medina when the inflow of immigrant has caused for scarce of
water supply. This has caused for expensive price of water in Medina.
After that, Prophet (saw) called anyone of his companion to purchase the
Bir’ Ruma and declared it for waqf. Caliph Uthman volunteers himself
and buys the well and declares it as waqf for the Medina societies (Allah
et al. 2014).
The above-mentioned Hadith implies that cash waqf is permitted
in Islam. Additionally, the non-cash waqf institutions face numerous
and of enormous challenges. Of the problems, highly centralized Waqf
administration, inadequate manpower, organizational and administrative
incompetency, operational inefficiency and problem of waqf disputes,
unregistered waqf properties, lack of integrity and knowledge of the
mutawallis, illegal occupation and misappropriation of waqf properties
and having no Shariah and advisory board, are mentionable.
However, due to wrong perception among Muslims that waqf endow-
ment can be made only through land and not in cash. Therefore, many
Muslim did not get a chance to participate in waqf endowment. They
believe that only land can fulfill the conditions of waqf (perpetuity, irrev-
ocability, and inalienability) (Aziz et al. 2013). An individual endows
usually when he/she feels of giving and donating his/her property as
goodwill, while cash waqf and infaq (donate) have no specific time to
implement. It means that he/she is free from any obligations to perform
this social service (Yusof et al. 2014).
Therefore, instead of waqf land, the other prominent and potential
waqf are a cash waqf, which has developed considerably since the time of
Prophet (saw). cash waqf has become increasingly well known due to its
flexibility, which allows distribution of the waqf’s potential benefit to the
poor anywhere (Mannan 1998).
The fund from cash waqf payers will be collected by fund managers
and the money will be invested in any Shariah-based investment oppor-
tunities (Hoseini 2010). Cash waqf is seen as an alternative to achieve
modern macroeconomics development which can reduce government
spending, government’s reliance on debt and budget deficit, and finance
development projects (Mohamad 2012). It is a religious endowment by
using cash collected in a trust fund under the management of the super-
intendent entrusted to manage this endowment for the welfare and ben-
efit of the Muslims (Konsep Wakaf Tunai 2016).
After gaining the profit from the investment, it can be allocated for
poor families and also can be channeled through educational and cultural
development. Then, waqf funds can provide health center and provid-
ing reasonable price for medicines with appropriate quality (Masyita et al.
2005). From the economic perspective, waqf also can be used as a tool
to create economic effect or social benefit multiplier effect (Adam and
Lahsasna 2013). However, cash waqf is not practiced aggressively nowa-
days due to debatable element in terms of its perpetuity and inalienability
(Ibrahim et al. 2013).
Alternatively, in modern times, a cash waqf can also be established
with the shares of incorporated joint-stock companies. Imam Zufar, who
had approved of the cash waqf for the first time, had envisaged that the
corpus should be invested through mudarabah.
Although the origins of cash waqf can be traced back to ancient
Mesopotamia, Greece, and the Roman Empire, their full development
and maturity in the Islamic world had to wait until the sixteenth cen-
tury, when they became the most popular form of philanthropy among
the Ottomans. This popularity did not fail to trigger opposition among
the learned circles. The basic argument of those, who opposed the cash
waqf, was based on a seemingly powerful point: Once endowed, the cor-
pus of a waqf belongs to Allah. But while investing the corpus of a cash
waqf, whether in the form of a mudarabah or simple loaning, the cash
endowed is inevitably distributed to the borrowers. But what belongs
to Allah, the opposition argued, cannot be distributed to third persons
(Cizakca 2010).
The cash waqf controversy lasted throughout the sixteenth and sev-
enteenth centuries without conclusion. Apparently, notwithstanding
the controversy, based on Abu’l-Su’ud’s fatwa and supported by the
Ottoman sultans’ orders, these waqf continued to flourish. Nowadays,
cash waqf, quasi-cash waqf, or mixed cash real estate waqf exist in various
138 M. MIZANUR RAHMAN AND M. NURUL ISLAM SOHEL
more practical to distribute its benefits among the wider sections of ben-
eficiaries and easy to utilize for beneficiary’s day-to-day needs (Abdullah
Nadwi and Kroessin 2013). Imam Az-Zuhri ruled that for the sake of
Islamic purposes, the welfare of society and development of the Ummah,
waqf in the form of dinar (money) is allowed (Ibrahim et al. 2013). The
ruling has made by the National Council, which permitted the cash waqf
practices, and it was followed by several states in their respective Islamic
Council (Osman et al. 2012).
Cash waqf is mainly to devote or dedicate a certain portion of one’s
money toward legitimate ends of helping the poor and the needy as
well as to bring about positive change in the society. It is further argued
that in order to achieve this feat it is essential to develop a strategic plan
toward utilizing the philanthropic waqf for maqasid-based legislative
strategies.
Pitchay et al. (2014) investigated the priority of cash waqf donors in
Malaysia. The findings show that the donors are acquainted and prefer
to invest their donations in education, health, masjid and madrasa, social
care and welfare, trade and commerce, environment, infrastructure and
art, as well as culture and heritage.
The waqf bank can be applied as the bank of the poor. It can be per-
missible in Islam based on validity of cash waqf and the need of waqf,
its beneficiaries as well as the society. But, if there is favorable, political
will institution of waqf through waqf bank contributes to society greatly.
The institutions of waqf have the unrealized potential to establish a waqf
Bank.
Syed Adwam Wafa (2010) explains that the impact of developing
waqf for education in Malaysia not only promoting the significant rule
of waqf toward the country, but also will be impact to (1) promoting
the third sector of Islamic economic, (2) establishing economic activities
through several projects and business, (3) complementing the royal aid
development, benevolent, and educational programs, and (4) promoting
the oneness of society.
Several authors analyzed socio-economic profile and explored poten-
tial expenditure options of the waqf institutions in Bangladesh. It is
recommended that some potential expenditure options, supervisory
investment institutions, insurance (takaful) and microfinance to pro-
vide financing and loans to the needy. They realized waqf institutions as
social institutions instead of religious one. So that, Islam does not only
encourage the waqf institutions to build mosques or orphanages but
140 M. MIZANUR RAHMAN AND M. NURUL ISLAM SOHEL
The above-reviewed literature shows that the idea of cash waqf is not
anything new though its practice is not that old and not even that much.
The implementation of this cash waqf has attracted many researchers to
study the potential and impacts of this instrument. In 1998, Professor
Mannan has promoted cash waqf through SIBL. This bank produces
cash waqf certificates to collect funds from waqif and distribute the gains
of the managed funds among the deserving persons or beneficiaries. Cash
waqf certificates were the first in banking history whereby the certificate
provided an opportunity for Muslims in Bangladesh to invest in reli-
gious, educational, or other social development.
The banking industry in Bangladesh has continued using cash waqf as
its investment product, especially through the Islamic Bank Bangladesh
Limited (IBBL), which offers a cash waqf product known as Mudarabah
Waqf Cash Deposit Account (MWCDA) The investment is used to
generate the cash waqf funds for the welfare of Muslims in Bangladesh.
Till now, six Islamic banks out of eight and six conventional banks in
Bangladesh are practicing this instrument for social development and
some banks are on pipeline.
However, there is a limited study that focuses on the contribution
of social development, that is why this study was undertaken to assess
the growth and contribution of cash waqf in Bangladeshi socio-
economic development and also to sort out the challenges and to project
the potentials of cash waqf in Bangladesh. This study is also targeted to
develop a microfinance-based cash waqf product proposal, as Islamic
microfinance is a very strong instrument of IBBL for rural poverty allevi-
ation in Bangladesh.
This paper is divided into five sections. After this introduction along
with the literature review, the second section is research methodology
of the study. Third section provides brief understanding on cash waqf,
while fourth section discusses cash waqf deposit product in Bangladesh.
Fifth section discusses the cash waqf deposit product for socio-economic
development in Bangladesh. Section six proposes an integrated approach
of cash waqf and Islamic microfinance for poverty alleviation. Section
seven discusses the implication of cash waqf toward Muslim society. The
last section has concluded paper with some recommendations.
142 M. MIZANUR RAHMAN AND M. NURUL ISLAM SOHEL
2 Research Methodology
The research methodologies applied in the research were quantitative
and qualitative as well. In executing this research, a combination of field-
work and library research was conducted. Thus, both primary and sec-
ondary data were collected and used. Some cases were also studied and
some brief information on a few clients is presented.
Data were gathered from a wide variety of sources through field-
work, such as interviewing selected key officials, waqifs and beneficiaries;
authors of waqf literature on Bangladesh and media reporters and jour-
nalists who have reported on various aspects of waqf, individual muta-
walli of various waqf estates as well as some beneficiaries. The result of
this data is obtained from the field research whereby the researchers,
and from documentation research refers to reading material in relation
to cash waqf practices have been presented. The data obtained from the
sources stated above will be reviewed and used as guidelines for the con-
struction of cash waqf.
According to 1986 census of waqf estate, there are 150,593 waqf estates
in Bangladesh including 1400 estates around different mazars, hav-
ing multipurpose uses. Of the total waqf estates, 97,046 are registered,
45,607 are verbal, and the rest 7940 are waqf by tradition. Out of these
large waqf estates, only 13,200 waqf estates are under the administrative
control of Waqf Administrator and of which 10,683 waqf estates are of
mixed nature. The annual income of the waqf estates is Tk. 906 million
and expenditure Tk. 856 million. The net collection is Tk. 50 million
only.
Although waqf management and development have been a big con-
cern for the Muslim scholars since long, the phenomenon of corrup-
tion in the waqf management can be found throughout history through
misuse, mismanagement, looting, encroachment, and unlawful seizure
of waqf properties. Bangladesh is no exception to this case. Most of the
waqf properties in Bangladesh, registered or unregistered, are neglected
and sloppily maintained, underdeveloped and are devoid of any dynamic
futuristic developmental plan. Some of these valuable waqf properties,
especially the lands, are being leased out with nominal charges or sold
out for insignificant prices.
The problem the waqf institutions faces in the country are also
numerous and of enormous magnitude, which are: inadequate man-
power, occupation and misappropriation of waqf properties, subscrip-
tions remaining unrealized, uncollected arrears, violation of the waqf
Ordinance 1962, personal use of the waqf compensation money, etc.
Against this backdrop, the trend of waqf endowments in Bangladesh is
pathetically negative at present.
There is no dearth of laws in Bangladesh for managing and admin-
istering waqf properties. The waqf laws emerged at different stages
initiated by the British in 1894. But over the decades, no policy was for-
mulated for ensuring sustainable good governance and better manage-
ment of such a huge size of waqf properties which could have, like in the
past, contributed to the dissemination of Islamic education, development
of Islamic science, spread of Islamic culture, and extension of social wel-
fare services.
Considering the above-mentioned problems in handling the
waqf entities, Professor Mannan in 1997 has socialized cash waqf in
146 M. MIZANUR RAHMAN AND M. NURUL ISLAM SOHEL
Bangladesh through SIBL. This bank issues cash waqf certificates to col-
lect funds from the rich and distributes the gains of the managed funds
among the poor. Later, 5 more Islamic banks have introduced this model
and since development of this cash waqf system it has been becoming
increasingly popular, particularly because of its flexibility which allows
distribution of the waqfs’ potential benefits to the poor.
Some well-to-do persons pooled their funds to jointly create cash
waqf to set up a number of private universities in the wake of the enact-
ment of the Private University Act, 1992. Among others, there is one
organization, which is partially created by cash waqf, namely the Social
Science Institute (SSI). In this way, the cash waqf has added a new
dimension to the activities of charity in Bangladesh.
To modernize and to popularize this cash waqf model, the fund accu-
mulation of a cash waqf project could be realized through setting up of
three instruments: Cash and E-Waqf Fund, per-square feet value certifi-
cate and the issuance of sukuk. These instruments provide an opportu-
nity for the donors to dedicate their wealth for waqf purposes. Cash and
E-Waqf Fund is considered as the easiest means for the public to join
the waqf scheme because they are only obliged to donate their money in
cash or deduct from their bank account via E-Waqf facility. This model
may contribute to popularizing the role of waqf in the country including
cash waqf which can be instrumental in transferring savings of the rich
to the members of the public in financing various religious, educational,
and social services in the country. Cash waqf can also work as a supple-
ment to the financing of various social investment projects.
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Firstly, al-waqif donates money not only to help poor people but also
to get reward hereafter or to satisfy Allah, and secondly, honesty is very
important for successful musharakah and mudarabah contract. The
investment can be invested through waqf land developments, microfi-
nance, SME loan, portfolio investment in IFI’s securities.
Fourth, the profit distribution should be distributed according to the
donor’s will. However, if he assigns the responsibility to the bank, then
it can be distributed in three ways: (i) to charities such as mosque, madrasa,
poor, social activities, training of youth, marriage for poor girl religious
education, etc., (ii) to management includes maintenance, managerial
expenses, and future development and capital enhancement, and (iii) to
marketing because when there is any natural disaster or illness, etc. then
through publicity by television, radio, or newspaper, it is always easy to
raise donated fund. The procedure of deposit product model (Fig. 1) is
as follows:
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Education of orphans
Uplift of absolute Educational Villages health care Settling disputes
poor development and sanitation
Providing informal Legal aid to deserving
education women
Rehabilitating Physical education Arranging dowryless
handicapped marriages
Supporting local Supplying pure Public transportation
culture and heritage drinking water and plantation
Rehabilitating Conducting Dawah Assistance to
beggars activities non-Muslims
Rehabilitation of Supporting vocational Establishing Public utility services
destitute women education hospitals, clinics, etc.
Education in neglected Mosque development
area Projects
Uplift urban slum Financing educational Graveyard
Dwellers institutions development projects
Educating deserving Research in health Edgah development
descendants sector projects
Projects for memory
of father/mother
Establishing
educational chair
the income generated from waqf may be spent for different benevolent
purposes.
Islamic banks collect waqf deposits as perpetual endowment on
mudarabah principle from the rich people and manage the fund on
behalf of the Waqif, who will have the right to create cash waqf at
a time or client may start with a minimum deposit of Tk. 10,000 and
the subsequent deposit shall also be made in thousand or in multiple
of thousand Taka. The account can be opened in foreign currency. Any
bona fide adult citizen of Bangladesh with sound mind may open this
account with any of the bank with a title selected by the Waqif.
The Waqif have the right to choose the purposes to be served either
from the list or any other purposes permitted by the Shariah. Bank will
spend the fund in the following (Table 1) purposes:
(i) Family Rehabilitation
This cash waqf scheme has target to improve the conditions of poor, liv-
ing below the poverty line by rehabilitating physical handicapped and
disadvantaged group of people, beggars, destitute women, and up-lift of
urban slum dwellers.
especially for the poor, health research grant and research in particular
disease.
(v) Infrastructure Development
Poverty alleviation and economic development require necessary physical
facilities and basic utilities. Access roads, irrigation dams, flood control
devices, and utilities are essential for implementing any poverty allevia-
tion and development plan in many developing and low-income coun-
tries. These are high-priority poverty alleviation and development needs
of a typical poor country. It is neither possible for the public sector to
provide these goods and services adequately, nor viable for the private
sector to deliver them. The institution of waqf may be appropriately
applied to finance such projects. Thus, in the new approach to poverty
alleviation, the institution of waqf can be made an important instrument
to alleviate poverty in a sustainable way. It will increase capabilities of the
poor to upgrade their economic conditions, rather than depending on
short-lived redistributive charities.
The thirty-two purposes for utilization of cash waqf fund, as indicated
below shows the diverse areas of investment by Social Investment Bank
Limited. Five more Islamic banks, including Islami Bank Bangladesh
Limited has adopted similar model perhaps for utilization of cash waqf
fund. Although this is not exhaustive, these social investment activities
will create a base for perpetual social capital and help developing credit
program that reinforces family values and stimulate social and moral
foundation a caring society.
154 M. MIZANUR RAHMAN AND M. NURUL ISLAM SOHEL
Table 2 Cash waqf account, deposit and profit distribution of IBBL since
2004–2016
IBBL Waqf Deposit IBBL 3 Year Term Deposit Weighted Average (All Banks)
Fig. 3 Profit rate comparison between cash waqf and weighted average of other
product
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Fig. 4 Growth of cash waqf deposits of full-fledged Islamic banks since 2012–
2016 (Data Source Annual reports of respective banks)
8 CASH WAQF DEPOSIT PRODUCT … 157
These three institutions are housed in the same complex. They play a
vital role for the development of poor students of that locality. Among
these institutions, Monsha High School and College is a seventy-year-old
educational institution. Mr. Abu Tabyeb and his spouse Mrs. Laila Bilkis
have been donating to these institutions for fifty years. A significant
number of students in the village have been studying in Monsha High
School and College. Most of the students are from poor families.
Like any other villages in our country, the children from the poor
families in Monsha village had to provide financial support to their
parents. So, the parents having no choice instead of sending their chil-
dren to educational institutions rather send them to different work-
places for earning their livelihood. Although some of them are admitted
to the village school, after few years they have to leave education. This
lack of continuity of education stands on the way to improve their liv-
ing condition. Considering this matter with utmost importance and
empathy Mr. Abu Tayeb and his better half Mrs. Laila Bilkis decided
to help them by providing educational facilities. For this purpose, they
opened a mudarabah cash waqf account with Anderkilla Branch of IBBL.
They donate entire monthly profit of the waqf deposit with IBBL. For
utilizing the fund properly, they formed a committee in the respective
institutions. At present, they donate approximately BDT 160,000.00
per month which is used solely to bear educational expenses of 105 stu-
dents of Monsha High School and College, salary of 10 teachers of the
same institutions and all living cost of 35 orphans living in the orphan-
age. They desire to expand this welfare activity so that poorer and more
unprivileged can get benefit for the long term and receive proper educa-
tion in their childhood.
Waqf plays a significant role in the Muslims history since its emergence
in more than a millennium in the Arabian Peninsula. Recently, the vol-
untary and charitable acts such as waqf, zakat, and sadaqah receive much
more attention than ever before as a result of increasing inequality and
extreme poverty in the Muslim world. The inequality gap and poverty
level necessitate the need to explore waqf resources as way of reducing
the inequality and reduction of poverty in Muslims communities. It is in
this regard, Muhammad Ali (2011), President of Islamic Development
160
Client’s (Waqif) Fayzunness- Fayzunness- Mawlana Abdur Laila Bilkis and Mohammad Kamalapur
Name Ahmed Ahmed Rashid Memorial Md. Abu Tayeb Azizul Haque Eateemkhana and
Foundation Foundation Waqf Fund Islami complex
Beneficiary FA Multilingual Madrasa-e- Ashrafia Sheba Monsha High Uttar Guzara Kamalapur
institution elementary school Darul Arkam complex School and Baitul Ulum Eateemkhana and
Kawmi Madrasa College, Monsha Senior Madrasa Islami complex
Islamia Senior
Madrasa,
and Monsha
Eatimkhana
Type School Madrasa and Multi Services School, madrasa Madrasa Madrasa
School and orphanage
Address Pashchimpara, Hospital Road, Kapasia, Gazipur Monsha, Monday, Rauzan, East Kamalapur,
Purba Chandra, Basurhat, Kusumpura, Chittagong Morshedabad,
Shafipur, Gazipur Noakhali Patia, Chittagong Dasar, Madaripur
Class Play—Class V Nursery—Class School: up to N/A Up to Dakhil
V class 10
Madrasa: up to
M. MIZANUR RAHMAN AND M. NURUL ISLAM SOHEL
Dawra-e-Hadith
No. of student/ 161 250 400 Beneficiary: 300 150
beneficiary Students: 105
Orphans: 35
No. of teacher 13 15 33 N/A 08
and staff
Monthly waqf Tk. 45,000 Tk. 85,000 Tk. 100,000 Tk. 160,000 Tk. 60,000 Tk. 70,000
profit (Approx)
8 CASH WAQF DEPOSIT PRODUCT … 161
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Mudarabah financing by the waqf fund may generally involve the con-
tribution of capital by the waqf endowment acting as Rabbul Mal to
the needy (as the mudarib) to set up and run a small business, with the
intention of establishing financial security and independence for them.
The profit may be shared on a pre-agreed ration between the waqf fund
and the beneficiary. The waqf fund may then gradually sell back its share
in the partnership to the less privilege, until the waqf fund completely
exits from the partnership, giving 100% ownership to the beneficiary.
The waqf fund can exit the partnership only after the fund has obtained
a return on its capital investment and additional profit to ensure sustain-
ability of the waqf fund, which will go toward helping other recipients
across the nation.
In cases where the needy citizens have a small amount of capital in
their possession to contribute toward a business activity, but which is
insufficient to start up a business, then a musharakah partnership can
be established with the waqf funds, whereby the waqf fund contrib-
utes a determined amount of capital toward the business and the needy
applicant contributes some capital to the partnership. The profit from
the business venture will then be shared based on the ratio of capital
contribution.
Those investments targeting the bottom of the pyramid in productive
sectors will create employment opportunities and boost the economy.
Subsequently, these production and employment generation will result in
socio-economic development of the country.
A portion of the cash waqf deposit would be deployed in promoting
higher education and vocational training on qard basis charging only a
nominal fee without any mark up or profit. This investment will enhance
the capacity of the human resources who will be employed in the pro-
ductive sectors contributing to the overall development of the economy.
Another portion of the waqif’s profit generated from the deployment
of the cash waqf deposit would be invested in higher education and
training purposes on non-refundable basis as required.
Some of the waqif’s profit would also be given as charity for food and
health care purposes for the physically and mentally challenged people
which will help them survive in the society with care, love, and harmony.
Rest of the waqf profit would be spent for primary education purposes
8 CASH WAQF DEPOSIT PRODUCT … 163
targeting the extreme poor of the society. Having support for primary
education the students will be able to ready themselves for further
higher education. Thus, the financially excluded people will be able to
join the mainstream economy creating a win-win and balanced growth
momentum.
i.
Training courses such as primary schools and secondary schools
and established colleges and higher education centers (e.g., in
Bangladesh more than 8000 of educational institution on the basis
of waqf have been established).
164 M. MIZANUR RAHMAN AND M. NURUL ISLAM SOHEL
ii. Building Houses and taking care of orphan centers which kept the
children and people without shelter and give those living facilities
and free education.
iii. Almost most of the mosques in Bangladesh are as cultural and
public centers offer social services to Muslims and about 120
thousand mosques have been established through waqf and
educational activities in the mosques would be presented for free.
In addition, in rural Bangladesh, mosques and Islamic teachings
educational schools would be managed based on benefices.
iv. Clinics and health centers are examples of the charity activities
based on sources of benefices. The Hamdard Foundation based
on herbal medicine in Karachi that is successful model using the
capacity of aid and people’s benefices. Also, this clinic financially
supported from the University of Karachi and relief aid workers in
Pakistan, India, and Bangladesh and give medical services at the
disposal of the vulnerable.
8 Conclusion
Study suggests that there is a considerable mismanagement and misuse of
waqf properties, despite their contribution to social development. Cash
waqf is a potential instrument to develop and expand Muslim economy.
The availability of funds is significant to establish a well financial sec-
tor. Thus, it is relevant with the implementation of cash waqf in order
to have wider sources of fund in line with the main objective of Islamic
8 CASH WAQF DEPOSIT PRODUCT … 165
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