2019 - Rahman - Cash Waqf Deposit Product

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Cash Waqf Deposit Product: An Innovative Instrument of Islamic Banks for


Socio-Economic Development in Bangladesh

Chapter · July 2019


DOI: 10.1007/978-3-030-18445-2_8

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CHAPTER 8

Cash Waqf Deposit Product:


An Innovative Instrument
of Islamic Banks for Socio-Economic
Development in Bangladesh

M. Mizanur Rahman and M. Nurul Islam Sohel

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

M. Mizanur Rahman (*) · M. Nurul Islam Sohel


Islami Bank Training and Research Academy (IBTRA), Dhaka, Bangladesh

© The Author(s) 2019 135


K. M. Ali et al. (eds.), Revitalization of Waqf
for Socio-Economic Development, Volume I,
https://doi.org/10.1007/978-3-030-18445-2_8
136 M. MIZANUR RAHMAN AND M. NURUL ISLAM SOHEL

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).

1.1   Cash Waqf


Cash waqf can be defined as the donation of an amount of money by
a founder and the dedication of its usufruct in perpetuity for the pre-
scribed purpose (Mohsin 2008). According to history, cash waqf already
started during the time of Prophet (saw), in that the Prophet’s compan-
ion was reputed to have used waqf to donate their farmland for develop-
ment purposes. The revenue from the land would be solely used for the
sake of the development of society. Consequently, cash waqf is targeted
to become an effective option for poverty alleviation programs, especially
in Muslim countries.
8 CASH WAQF DEPOSIT PRODUCT … 137

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

forms of development and sophistication, in Turkey, Iran, Egypt, Sudan,


India, Pakistan, Bangladesh, Malaysia, and Singapore (Cizakca 2010).

1.2   Waqf Literature Review


In Islamic history, the first religious waqf is the mosque of Quba’ which
is located in Medina (Yusof et al. 2014). Originally, cash waqf was found
back to ancient of Mesopotamia, Greece, and Roman Empire, where
they had to wait until sixteenth century for their full development and
maturity in Islamic world, when among the Ottomans they became the
most popular form of philanthropy (Cizakca 2004).
The University of Al-Azhar is one of the examples of waqf. It was
founded in Cairo in 972 and was financed by its waqf revenues until
the government of Muhammad Ali in Egypt took control over the
waqf in 1812. Parallel to the development of the trust in common
law countries, a remarkably similar structure developed in the Islamic
world—the waqf developed, thrived, and then declined. Recently, the
emergence of great wealth in Islamic countries and the Islamic tradi-
tion of philanthropy have resulted in the revival of interest in the struc-
ture of the waqf and increased sources being held on terms that seek
to comply with the requirements of Islamic law (Stibbard, Russell and
Bromley, 2012).
The profit of waqf fund can be allocated for poor “Family
Rehabilitation” by enhancing poor people’s welfare and can be appor-
tioned through educational and cultural development. It is a new dimen-
sion in the mobilization of waqf fund for educational development such
as by funding relevant research, supplying free books, and improving
educational programmes. Then, waqf funds can provide health and san-
itation for poor people by establishing health care center and providing
reasonable quality medicines (Masyita et al. 2005). From the economic
perspective, waqf is a tool to create economic effect or social benefit
multiplier effect (Adam and Lahsasna 2013). Nowadays, technologi-
cal innovation making cash waqf more user-friendly and easier by send-
ing SMS using mobile phone that are implemented by Bank Islam and
Maybank through Yayasan Restu Waqf and Maybank Waqf (Ibrahim
et al. 2013).
In the contemporary context, cash waqf seems to be one of the most
preferable methods for endowment in perpetuity, because of its liquid
nature. This is arguably because cash is free to endow, easy to manage,
8 CASH WAQF DEPOSIT PRODUCT … 139

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

authorizes them accomplishing the total development in terms of their


social, cultural, and economic viability and religious, moral and spiritual
supremacy.
The focus of economic growth in the conventional economic system
lacks a sense of justice and equality. Doubtless, justice and equality are
reflections of Maqasid al Shariah.
Cash waqf is the latest product in the realm of our banking sector
particularly in Islamic economics and finance. Cash waqf provides a
unique opportunity for making investment in different religious, edu-
cational, and social services. Savings made from earning by the well-
off and the rich people of the society can be utilized by purchasing
cash waqf Certificate. Income earned from there will be spent for
different purposes like the purposes of the waqf properties itself
(Mannan 2014).
Sadeq (2005) expressed that in Bangladesh 8000 educational institu-
tion and more than 123,000 mosques are based on waqf. Other than
religious and educational sector cash waqf fund may be utilized for all
socio-economic purpose. Sadeq (2002) also discussed the potential role
of the institution of waqf in poverty alleviation, particularly in the devel-
oping world. He attempted to define a new approach to poverty anal-
ysis and suggests a way to make the role of waqf more effective in the
poverty alleviation and socio-economic development of a resource-poor
country.
Mohsin (2008) add for investing in cash waqf, the contract of
mudarabah is allowed in order to generate the funding. There is a source
of social fund that is economically and politically free of charge, which
is cash waqf under the Islamic socio-economic concept. Cash waqf is a
special charitable endowment fund, is expected to become one of the
instruments for the property improvement programs worldwide mostly
in Islamic countries (Aziz 2013).
Microcredit and Safety Net Program insufficient for poverty alle-
viation, and on the other hand, these steps fueled income inequality
and argued waqf as tool for poverty alleviation and reducing income
inequalities along with zakat. So, if we really want to do something
for the needy and poor, we have to revive this much needed institu-
tions where at present waqf-based institutions are not growing at a
considerable level. Therefore, starting a worldwide waqf movement is
indispensable.
8 CASH WAQF DEPOSIT PRODUCT … 141

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.

3  Theoretical Underpinning of Cash Waqf

3.1   Cash Waqf


Cash waqf has been defined by many scholars, from that it can be said
that cash waqf is a charitable endowment established with cash capital
permanently dedicated and privately (Cizakca 2010) owned by a Muslim,
or a corporate body governed according to Shariah with perpetual dedi-
cation of its usufruct to be spent on any purpose recognized by Shariah.

3.2   The Application of Cash Waqf as Modern Instruments


The economic meltdown and financial difficulties of the twenty-first cen-
tury have led to demands for the restructuring of waqf institutions across
Muslim countries in order to introduce and create movable property
such of cash waqf in its comprehensive method and strategy. The mod-
ern models for the creation of cash waqf have been in place and practiced
in Muslim countries such as waqf shares model, corporate cash waqf
model, deposit product model, waqf mutual fund model and wakala
waqf fund are discussed in this section.
8 CASH WAQF DEPOSIT PRODUCT … 143

Waqf Shares Model


Waqf shares model is a system which is known as a public waqf and is
practiced and well known in countries like Malaysia, Sudan, Kuwait, and
UK (Magda Ismail 2008). In this model, the fund provider will purchase
shares from reputable and recognized religious institutions at an agreed
amount. The price can range in any amount and the fund provider will
receive a cash waqf certificate to indicate that the buyer has purchased
waqf shares. The waqf shares will then later be donated to the endowed
institution that will act as a mutawalli to manage the accumulated funds.
The total amount of accumulated funds is channeled to charitable activ-
ities and events as stipulated by the concerned institution such as con-
struction, renovation of mosques, establishment of schools or school
renovation, economic and social development and other useful and devo-
tional activities in the interest of needy people in the nation.

Corporate Cash Waqf Model


The corporate cash waqf model has been developed and practiced in
Malaysia in Kumpulan an-Nur (1998), in Turkey in Sabanci Foundation
(1974), in Pakistan in the Hamdard Foundation (1953), and in South
Africa in the National Waqf Foundation (2000). The fund provider of
the corporate cash waqf model can be an individual or corporate body.
In this corporate, cash waqf model the individual or corporate body con-
cerned channels their dividends to associated waqf institutions as their
cash waqf. The role of the associated waqf institution is to act as the
mutawalli who will manage the venture and invest the accumulated mon-
ies into profitable transactions in the interest of the needy. At the end of
the contract or business, the profit is used for charitable projects (Magda
Ismail 2008).

The Waqf Mutual Fund Model


The waqf mutual fund model is a system where the fund provider will
contribute cash money to mutual funds and they will stipulate that a
certain percentage of his return (e.g., 60%) will go to his personal earn-
ings and the rest of the percentages (say 40%) of her returns will directly
go to waqf for charitable activities. The waqf endowment will act as the
mutawalli to manage the 40% contributed by the fund provider and
invest the money in profitable investments for the benefit of the needy
(Magda Ismail 2008).
144 M. MIZANUR RAHMAN AND M. NURUL ISLAM SOHEL

Wakala with Waqf Funds Model


In this system of the wakala with waqf funds model, the donor/
shareholder makes initial donation to create waqf funds. The amount is
based on the specifications of Shariah experts. Later, the shareholder will
lose his ownership right while the donated amount becomes the property
of the waqf endowment. The waqf endowment has the right to develop
rules and regulation on how to spend, develop, and invest the donated
money. The reputable company will manage the accumulated funds as
the administrator and deposit the funds while the donation donated as
takaful would be combined together for the investment and the total
profit will be deposited again with whole fund. In this system, the donor
is the beneficiary of the waqf fund. The waqf endowments should con-
sist of a team of capable people with the experience and skill to optimize
donated funds, as the more the waqf invests is lucrative investments,
business, and transactions, the more the profit would be realized. Also,
the more the waqf institution has enough funds, the more waqf is capa-
ble of helping the needy.

The Cash Waqf Deposit Product Model


In Bangladesh, cash waqf deposit model has been developed by
Professor Abdul Mannan in 1997 and launched in 1998 and since then
this product has been practiced in SIBL and later IBBL and four more
Islamic banks have also started practicing this product. The procedure
for the deposit product model is that the fund provider will deposit
money directly into cash waqf in a specific account in a specific bank.
The fund provider would be given the list or name of beneficiaries where
he will choose the beneficiaries. The bank will later act as a mutawalli and
invest the deposited money into a mudarabah contract and the accumu-
lated gain will be used for the needy. It is the duty of the waqf endow-
ment management to consciously plan the type of lucrative transactions
and business the waqf institution wants to venture into. The feasibility of
proposed ventures should be studied and examined properly in order to
meet the demands of applicant who are in serious need.
8 CASH WAQF DEPOSIT PRODUCT … 145

4  Cash Waqf Deposit Product Development


in Bangladesh

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.

4.1   Objectives of Cash Waqf Deposit Product


The general objectives of the cash waqf deposit model are to mobilize
deposit through banking channel and utilize the returns of the deposit
to different charity directly by the bank or by the depositors. The more
specific objectives are to:

a. provide banking services as facilitator to create cash waqf and to


assist in the assist in mobilization of social savings by creating cash
waqf with a view to commemorate alive or deceased parents, chil-
dren and to strengthen the integration of the family relationship of
the well-off people and the rich;
b. manage waqf through banking channel;
8 CASH WAQF DEPOSIT PRODUCT … 147

c. increase social investment and to transform the social savings into


capital;
d. benefit the general public specially the poor sections of the people
out of the resources of the rich;
e. create awareness among the rich regarding their social responsibili-
ties to the society;
f. assist in developing Social Capital Market;
g. assist in overall development efforts of the country and to make
a unique integration between social security and social peace.

4.2   Guidelines of Governing the Operations


of Cash Waqf Deposit Product
The guidelines governing the operation of the cash waqf are as follows:

a. Cash waqf shall be accepted as endowment in conformity with the


Shariah. The bank will manage the waqf on behalf of the waqif;
b. Waqf are done in perpetuity and account shall be opened in the
title given by the waqif;
c. Waqif will have the liberty to choose the purpose to be served,
either from the list of 32 purposes identified by bank or any other
purpose permitted by the Shariah;
d. Cash waqf amount will earn profit at the highest rate time to time
offered by the bank;
e. The waqf amount will remain intact and only the profit amount
will be spent for the purpose(s) specified by the waqif. The
unspent profit amount will automatically be added to waqf
amount and earn profit to grow over time;
f. Waqif may also instruct the bank to spend the entire profit
amount for the purpose specified by him/her.
g. Waqif will have the opportunity to create cash waqf at a time.
Otherwise, waqif may declare the amount intended to build up
and may start with a minimum deposit of Tk. 1000/= one thou-
sand only. The subsequent deposits shall also be made in thou-
sand or in multiples of thousand;
h. Waqif shall also have the right to give standing instruction to the
bank for regular realization of cash waqf at a rate specified by
him/her from any other a/c maintained with bank;
148 M. MIZANUR RAHMAN AND M. NURUL ISLAM SOHEL

i. Cash waqf shall be accepted in specified endowment receipt


voucher and a certificate for the entire amount shall be issued as
and when the declared amount is built;
j. The principles and Shariah-based rules of cash waqf account are
subject to amendment and review from time to time.

4.3   The Modus Operandi of the Cash Waqf Deposit Product


The cash waqf deposit product model is a waqf bank model com-
monly uses by most of the Islamic banks in Bangladesh. The permis-
sibility of cash waqf can be extended to waqf bank for several reasons:
(i) waqf issues are rational, (ii) the utility of a Waqf Bank, and (iii) com-
pliance of the structure and operation of a waqf. Thus, the establishment
of waqf bank could be allowed for the benefit of waqf, its beneficiaries,
and also public interest, as long as it is not against Shariah principles. The
function of cash waqf can be the function of a waqf bank through loans
to the needy, and investment on mudarabah, musharakah, and ijarah. If
a wider application is given to the idea, a waqf bank can use such cash
waqf for the same purposes (Mohammad 2011).
In doing so, the mechanism of this figure is: First, an Islamic bank
will act as a trustee for cash waqf. It will supervise and monitor the col-
lection of waqf fund, investment, and distribution of profit to the charity
activities. Although the Islamic bank will monitor all activities of waqf,
actual financing, investment and profit distribution will be done under
proper management of its cash waqf windows. If in the future the win-
dows activities expanded in a large extent, then it would be operated as a
separate waqf Bank.
Second, the cash waqf model can be used to raise cash waqf fund. It
requires diverse techniques because different al-waqif prefers dissimilar
way of cash waqf endowment. The techniques as follows: (i) endowment
of shares as cash waqf, (ii) cash waqf by other institutions from their
parts of dividend, (iii) waqf certificate, (iv) waqf insurance, (v) temporary
waqf, (vi) deposit without share of profit, and (vii) e-waqf.
Third, in term of investment, the use of cash waqf fund is the best
Islamic mode of financing, such as musharakah, diminishing musharakah
and mudarabah, or a combination of both two.
In doing so, waqf fund should be used to finance pious people and
other Islamic Financial Institutions (IFI’s), basically for two reasons.
8 CASH WAQF DEPOSIT PRODUCT … 149

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Fig. 1 Deposit product model (Public waqf)

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:

• The fund providers’ deposits money with cash waqf-based account


in the bank;
• While depositing the money, the founder will be given a list of the
beneficiaries whereby he can choose or specify his/her beneficiaries;
• The bank will act as a mutawalli and will invest the capital through
mudarabah contract;
150 M. MIZANUR RAHMAN AND M. NURUL ISLAM SOHEL

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Fig. 2 Cash waqf certificate developed by SIBL, Bangladesh

• Revenue generated will be channeled to charitable purposes, speci-


fied by the founder.

4.4   Cash Waqf Certificate Scheme


The fund established through cash waqf will be invested which will
ensure social security for the poor and social peace for the rich.
Eventually, cash waqf would create a bridge of mutual care and compas-
sion between the rich and the poor, thereby, contributing to the pro-
cess of social harmony and cooperation. To stimulate this system, it is
interesting to report that Social Investment Bank introduced Cash Waqf
Certificate (Fig. 2) on experimental basis in December 1997, and it was
formally launched on January 12, 1998. The fact of the matter is that
Cash Waqf Certificate Scheme is likely to bring about wide-ranging eco-
nomic and social benefits to the society as a whole. It appears that the
cash waqf certificate scheme, introduced by SIBL offers a unique oppor-
tunity at the institutional level to drive social benefits and divine blessing
for life here and hereafter.
8 CASH WAQF DEPOSIT PRODUCT … 151

Table 1 Purpose of cash waqf fund utilization of Islamic banks in Bangladesh


Thirty-Two purposes for utilization of cash waqf

Family Education and culture Health and Social utility services


empowerment sanitation

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

5  Cash Waqf Deposit Product for Socio-Economic


Development in Bangladesh
Cash waqf is a unique product developed in our banking sector particu-
larly in Islamic banking and finance sector, and it provides opportunity
for making investment in different religious, educational, and social ser-
vices. Six Islamic banks, out of eight, in Bangladesh have so far intro-
duced this cash waqf deposit product in the name of MWCDA with aim
in helping the destitute and hapless people of the society. Waqf, a perpet-
ual endowment, by the well-off and the rich people of the society and
152 M. MIZANUR RAHMAN AND M. NURUL ISLAM SOHEL

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.

(ii) Education and Culture


Provide education of orphans, i.e., supplying books/clothes free of cost,
expansion, and development of proper education for skill development,
informal education facilities for children at home, physical education, and
sports facilities, supporting to Islamic culture and heritage and art pro-
motion, supporting education of deserving students in the form of schol-
arship, supporting vocational education in general, supporting education
to inaccessible and neglected area, financing specific madrasa, school, and
college, etc. of a particular area, educating deserving dependants, and
supporting any project in the area of education, research.

(iii) Health and Sanitation


Cash waqf provides health care and sanitation, supplying arranging
of pure drinking water to households, schools, mosques, slums, etc. in
the villages, and also establishing hospitals, clinics, health care programs
8 CASH WAQF DEPOSIT PRODUCT … 153

especially for the poor, health research grant and research in particular
disease.

(iv) Social Utility Services


Settling disputes, providing legal aid to deserving men/women to estab-
lish their lawful rights, assist in arranging dowry-free marriage to poor
girls, maintenance of public roads, and tree plantation in the village/
road sides, to rehabilitate the reverted Muslims, providing assistance to
peace-loving non-Muslims and solving their problems, creating social
awareness to prohibit gambling and other social vices, such as, thieving
and other anti-social activities, construction, installation, and develop-
ment of public utility services, maintenance of a specific mosque, grave-
yard, and eidgah, etc.

(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

Year MWCD accounts Deposit Profit Profit distribution


(in million Tk.) (in million Tk.)

Number Change Amount Change Rate Million By bank By client


(In %) Tk.

2004 5 1.25 9.51 0.005 0 0.005


2005 32 27 8.61 7.36 11.22 0.27 0 0.27
2006 90 58 51.43 42.82 11.69 1.48 0.01 1.47
2007 169 79 80.01 28.58 10.77 5.57 0.03 5.54
2008 371 202 108.40 28.39 10.35 8.83 0.07 8.76
2009 578 207 159.81 51.41 10.09 13.66 0.08 13.58
2010 879 301 204.00 44.19 9.60 17.03 0.28 16.75
2011 1403 524 261.00 57.00 10.06 24.55 0.33 24.22
2012 18,815 17,412 367.00 106.00 11.97 34.31 0.49 33.82
2013 22,092 3277 435.99 68.99 11.33 38.98 0.66 38.32
2014 25,123 3031 533.00 97.01 10.63 43.01 1.92 41.09
2015 25,976 853 658.51 125.51 9.33 42.86 1.23 41.63
2016 27,073 1097 752.60 94.09 8.57 30.99 1.35 29.64

Source Islami bank own data source

Profit Rate Comparison: IBBL & Banking Sector (In %)


14.0
12.0
10.0
8.0
6.0
4.0
2.0
-
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 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

Waqf certificates of different denominations could be issued to raise


the cash waqf, so that several individuals or institutions may buy them
8 CASH WAQF DEPOSIT PRODUCT … 155

and finance the development projects. Besides, cash waqf could be


encouraged among people through building confidence on management.

5.1   Growth of Cash Waqf Accounts, Deposit,


and Profit Distribution of IBBL
Although cash waqf idea was developed in Bangladesh in 1997, IBBL
has incepted this idea in 2004. Since then this instrument started grow-
ing sharply. Table 2 shows the growth trend of account opening, cumu-
lative deposit along with the actual increase of deposit amount over the
year. The table also shows the accrued total profit distribution along with
the distribution of waqf profit by the client and bank itself. Growth trend
shows that in near future this endeavor will significantly contribute to
Bangladesh economic development and the poverty alleviation of the
Bangladeshi poor.
It may be mentioned here that Islamic banking is not merely
a profit-making institution rather it is welfare-oriented banking.
Therefore, to encourage mobilizing cash waqf fund for socio-economic
development of the country, Islamic bank has given highest weightage
for cash waqf profit distribution. Figure 3 shows that the rate of profit
of the cash waqf deposit is much higher than country’s weighted average
profit rate, while it is also higher than three years term deposit profit rate
of IBBL.

5.2   Opportunities of Cash Waqf Development


Through Islamic Banks in Bangladesh
SIBL in the process of organizing Social Capital Market operations in
the voluntary sector of the bank had, for the first time in the history,
introduced “Cash Waqf Certificate” scheme in 1997. It also aims at
empowering the family of the rich for the sake of social investment and
welfare. Cash waqf can be instrumental in transferring savings of the rich
to those entrepreneurs and members of the public in financing various
religious, educational, and social services in Bangladesh. Cash waqf can
work as supplement to the financing of various social investments pro-
jects undertaken by Islamic Banks which can eventually emerge as Waqf
Bank. Even today, cash waqf, in Bangladesh, is extremely important in
terms of mobilization of fund for the development of waqf properties.
156 M. MIZANUR RAHMAN AND M. NURUL ISLAM SOHEL

The successful implementation of Cash Waqf Certificate Scheme


by SIBL showing impressive growth of accounts and deposits encour-
aged the IBBL to introduce MWCDA in 2003. Following the similar
rules and regulations as adopted by SIBL with an exception that IBBL
requires minimum of Tk. 50,000/ as initial deposit whereas SIBL
requires Tk. 1000 as initial cash waqf. Later, IBBL has also reduced its
minimum requirements. The main justification of smaller initial deposit
is to encourage larger number of people to participate in creating Social
Capital Market on national scale. The whole spirit of cash waqf fund
mobilization is to involve largest number of people in a society for build-
ing social infrastructure as well as generating social awareness for creat-
ing a caring society. It is to be mentioned that as of June 2017, Islamic
Banks (including Islamic Branches and Windows) in Bangladesh having
over 1112 branches account for at least 23% of the total deposits, 24% of
investment, 31% of inward foreign remittance and around 20% of assets
in the entire banking sector (DIBB 2017).
The Al-Arafah Islami Bank, another Islamic Bank of Bangladesh,
introduced the cash waqf exactly in terms of SIBL in 2004. Later,
3 more Islamic banks, namely Shahjalal Islami Bank, First Security Islami
Bank, Exim Islami Bank have introduced the cash waqf product.
Besides, six conventional banks having Islamic banking operations also
introduced cash waqf deposit products. Prime Bank has Mudarabah Cash
Waqf Deposit Scheme undertaking through Islamic banking branches.
The installment size is BDT 10,000 and it’s multiple. Profit under this
scheme shall be payable to the respective sector/institution/project/

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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

person determined by the waqf on annual basis. AB Bank, Southeast


Bank, Bank Asia, Trust Bank, and Agrani Bank have cash waqf deposit
schemes under their Islamic Branches/Windows. The donors can open
the waqf cash account by depositing a fixed amount or by contributing a
minimum amount every month which they will not be allowed to with-
draw. The bank normally invests those deposits in Shariah-compliant
investment options and distributes the profit to beneficiaries either by
donors or according to their list.
The use of bank as an agent to collect cash waqf is quite a common
practice in several Muslim countries. Aziz et al. (2013) investigated the
relationship between the level of income and method of contribution
and appointment of Islamic Waqf Bank as an agent in collecting waqf
fund. They found a strong tendency that the Islamic Waqf bank’s oper-
ation will run effectively with proper contribution method and appoint-
ment of Islamic Waqf bank as an agent in collecting the cash waqf fund.
Therefore, the use of Islamic bank be the starting point in developing
Islamic Waqf banks, for cash waqf collection purposes in Bangladesh.
Since its inception the cash waqf deposit product the growth is very
much encouraging, indeed as indicated in Fig. 4. Deposit growth of all
the six Islamic banks is positive, while the deposit growth of IBBL and
SIBL is significantly positive and growing sharply in recent years.

5.3   Top Clients of Cash Waqf and Two Cases of IBBL


Case 1: Laila Bilkis and Abu Tayeb
Mr. Mohammad Abu Tayeb and his wife Mrs. Laila Bilkis are jointly
operating a Mudarabah Cash Waqf Account with Islami Bank Bangladesh
Ltd (IBBL). They are the inhabitants of Monsha village of Potia thana
under Chittagong district. Their philanthropic activities started fifty years
ago. They mainly work for the unprivileged poor children to meet their
educational needs. With a view to addressing those needs, they targeted
educational institutions and orphanages located in their native village.
Education is one of the most basic needs of human being. The more a
nation is educated, the more the nation is self-reliant.
Keeping that view in mind, they are working for the children living
below the poverty line. The institutions getting donation from them are
located at Monsha village. These institutions are—Monsha High School
and College, Monsha Islamia Senior Madrasa, and Monsha Eatimkhana.
158 M. MIZANUR RAHMAN AND M. NURUL ISLAM SOHEL

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.

Case 2: Fayzunnessa-Ahmed Foundation


Fayzunnessa-Ahmed Foundation is operated by Mr. Rizwan Ahmed and
Mr. Shamsuddin Ahmed. It has been maintaining two mudarabah cash
waqf accounts with IBBL since 2012. They established 02 (Two) insti-
tutions to provide better education facility to the poor children. One is
a school named “FA Multilingual Elementary School” and another one
is a madrasa named “Madrasa-e-Darul Arkam Kawmi Madrasa.” “FA
Multilingual Elementary School” was established in December 2014 in
Paschimpara village under Gazipur district. The school follows National
8 CASH WAQF DEPOSIT PRODUCT … 159

curriculum of text book board. Although medium of education is Bangla,


equal importance is given on teaching English and Arabic language too.
At present, there are 161 students from playgroup to class 05 (five)
and 10 (ten) teachers and staffs. There is also a computer lab to promote
computer literacy among the students and a language club to develop
language efficiency in both Bengali and English. The foundation pro-
vides BDT 45,000.00 per month from the profit of the waqf account
to meet monthly expenditures. As their monthly expenditure is BDT
100,000.00, they must depend on other funding sources for additional
fund. “Agami” a USA-based charitable organization visited the school
recently and gave assurance to donate fund to this school. They have
plan to extend education from class five to class seven which has already
been approved by the Education Board, hopefully they will admit stu-
dents in these classes from the next year.
“Madrasa-e-Darul Arkam Kawmi Madrasa” was established in 2009 in
Hospital Road, Basurhat, Noakhali. It is mainly a kawmi madrasa. The
specialty of this madrasa is that the students are provided both general
and religious education. There are 250 students from nursery to six and
15 teachers and staffs. Fayzunnessa-Ahmed Foundation donates approx-
imately BDT 85,000.00 monthly, and the madrasa has monthly income
of BDT 100,000.00 although their monthly requirement as expenditure
is BDT 245,000.00. So, they have to depend on another donation too.
They also get fund from different sources as zakat, fetra, and other chari-
table organizations. Their future plan is to extend classes to Kamil.
Beside the above mentioned two cases some brief information of some
top ranked clients are presented in Table 3, which implies a very positive
potential of cash waqf for socio-economic development of the country.

6  Proposed Integrated Approach of Cash Waqf


and Islamic Microfinance

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

Table 3 Brief information of top waqf beneficiaries of IBBL

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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Fig. 5 Proposed integrated cash waqf and Islamic microfinance framework

Bank (IDB), asserts that “Socio-economic justice and equitable distribu-


tion of income and wealth are among the paramount goals of the Islamic
economy.”
For sustainable socio-economic development in Bangladesh, an inte-
grated cash waqf-based Islamic microfinance model can be developed
that complies with Shariah and aims at reducing poverty, enhancing the
material-well-being and empowering the poor members of the society.
The utilization of the cash waqf proceeds will be a catalyst for using the
Islamic microfinance to fight poverty. In addition, microfinance institu-
tions as fund managers of the cash waqf have the potential of utilizing
the waqf proceeds for the genuine socio-economic development of the
poor in their respective communities.
The Fund Manager being the Islamic Microfinance Institute in this
proposed model will deploy the majority portion of cash waqf deposit
in micro- and small business as per Shariah-compliant mechanisms and
modes like bai, ijara, and shirka (Fig. 5).
The waqf fund will provide the needy and suitable citizens with access
to credit through Murabaha financing by purchasing the required item
and selling it to the needy based on deferred payment. The profit mar-
gin added to the deferred payment will be lower than the financing rate
quoted by Islamic banks. The lower profit margin is based on charity to
lower the burden of repayment on the beneficiary and to distinguish it
from the credit services provided by banks.
Mudarabah financing can be used to provide capital to less privilege
citizens who desire to start a business venture to support themselves.
162 M. MIZANUR RAHMAN AND M. NURUL ISLAM SOHEL

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.

7   Implication of Cash Waqf Toward Country’s


Economic Development
While the millions of waqf spanning the world are varied, the majority
fall into the five basic categories of food, housing, health, education,
and religion. In a civilization, where health, education, and welfare
are effectively managed through endowment and donations, waqf will
give a huge impact on society’s survival. This had been proven during
the Ottoman Empire. The funds may also be used to alleviate poverty
among Muslims (Sadeq 2002), especially since many Muslim coun-
tries are still fighting poverty such as in Indonesia and Bangladesh.
Based on the 2005 Statistics Central Bureau’s data, there were about
40 million Indonesians living below the poverty line. Waqf may help
to narrow the gaps in Muslim communities, especially in education
due to its significance in our lives. In addition, it will improve the
socio-economic level among the Ummah. Moreover, investments done
using the waqf funds will enhance the total permanent equity owner-
ship of Muslims.
The results of waqf can be expressed to humanitarian projects, cul-
tural, economic, health, education, and training, and much other social
welfare. There are many instances of benefices use in the fields of health,
treatment, education, and training. In many Islamic countries have been
doing many considerable parts of a development activities based on
sources and dedicated assets (Sadeq 2002).

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.

In addition to these, waqf can be more effective in eliminating poverty


programs and realizing comprehensive methods. In the past, benefits
had been used to construction and equipping the shrine, maintenance,
and established training centers and the fields of health and treatment,
preparing food for poor, but now waqf in addition cases can be use of
drinking water supply for urban or rural areas, city protection, pay taxes
of neighbors, supply of food for children, etc. In recent years, cash waqf
in many Islamic societies is more common and some of the Muslim capi-
talists, give specific funds in cash as loan to applicants in return the loans
will be used for social services for vulnerable strata.

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

economic. To achieve the development of modern macroeconomic and


well-being, the cash waqf is needed.
The Mudarabah Cash instrument of Islamic Banking and the Cash
Waqf Certificate Scheme developed by Social Investment Bank of
Bangladesh is an epoch-making event. As this cash waqf is generally man-
aged by the Bank, it has its transparency, liquidity, and accountability, it
is a perpetual deposit and its profit can be invested in a wide spectrum of
social investment. Besides the 32 areas identified by several Islamic Banks
in Bangladesh, the Waqif or subscriber can select one or more sectors
according to his wishes in conformity with Shariah. Money for cash waqf
can be deposited at a lump sum or by installment. Bank shall manage
cash waqf on behalf of the Waqif. This ensures appropriate utilization of
the fund of the Waqif in terms of its goals and objectives.
Bank’s 32 sectors of investment include diverse social investment
activities having enduring value which in its ultimate analysis will create a
base for perpetual social capital and help developing credit program that
reinforces family values and stimulates caring society. The Holy Quran
has emphasized the virtues of charity in life on earth and life hereafter.
The Cash Waqf Certificate offers an opportunity to get the divine bless-
ing and to have a rewarding social and spiritual experience and inter-
nal peace. Viewed from this perspective, it becomes social and moral
imperative on the part of the well-to-do to come forward and invest-
ment under Cash Waqf Certificate Scheme for his own benefit indeed.
This will certainly pave the way for a new dimension of social develop-
ment. Cash waqf fund can be spent for the welfare of non-Muslim also,
thereby paving the way of serving the humanity at large.
Cash waqf mudarabah deposit product and cash waqf certificate can
easily connect individual initiates of different Muslim countries and
Muslim minorities in non-Muslim countries at the local national and
global scale and open great prospects, possibilities, and potentialities
for greater variety of pluralism in the expression Muslim solidarity and
reconstitution of socio-economic infrastructure of Islamic Ummah. We
should work for establishment of World Social Bank for managing this
fund. Different banks of Bangladesh and banks across the world can
draw policy and work together to make the cash waqf initiative a success-
ful model to alleviate poverty of the Muslim world.
166 M. MIZANUR RAHMAN AND M. NURUL ISLAM SOHEL

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