Implications for Growth of Awqaf Institutions - Research Paper Example

Waqf In Islamic and Finance Institutions Abstract Waqf is a voluntary act of charity that is under the Muslim term of sadaqah and infaq, which means charitable spending. According to the Indian statute, Mussalman Wakf Validating Act of (1913), Waqf means “unconditional and permanent dedication of property which implies that detention in the God’s ownership is in a way that the property of the owner may be endowed and to the benefit other people except if prohibited by Islam.” Waqf is mostly compared to other English common law of trust. According to the translations in the Fyzee’s treatise set by Umar the Second Caliph describes it as a person’s visit to Mohammed and asks for guidance in regard to valuable piece of a land that the person owns. In regard to the Muslim law, this paper tried to explore the institutions of Waqf and Muslim financial institution, examining Waqf in a wide scope focusing on the Muslim Waqf ethnics in managing the wealth of people and how it is generally applied in the Muslim community. Keywords: Waqf, Muslim law, socio-economic, Shari’ah rulings, waqf founder, endowment Waqf In Islamic and Finance Institutions There are a numerous institutions long standing in our diverse world of challenging economies. The traditional of wakif is one of them and with deep roots. The Muslim Prophet (pbuh) established awqaf (singular wakif) as a core of Sunnah. Wakif is part of the Islamic socio-economic foundation model was built foundation. Waqf which is in a context of religious endowment in the Muslim law applies to donating cash, buildings, or land for the religion of Muslims, for the purposes of charity. All the assets donated in Waqf are held by charitable trust. The donation is referred as mushrut-ul-khidmat, while the person making a donation is called wakif. This paper will discuss the creation of wakif and financial institutions, examining the law governing these institutions. It is paramount to note that, in the history of Islamic, endowment of awqaf have widely improved the social life economic upkeep. In the context of the Islam, wakif are assets donated, purchased or bequeathed as perpetual trust as for charity (sadaqah jariya) that the Islamic community regards as socially beneficial. Over the years, this condition has led to a reasonable accumulation of wealth in the society. Wakif is an important sector of social and economic dedication to the Muslim society that has improved its socio-economic standards. According to the Muslim regarding waqf, any Muslim who has attended majority and is of sound mind is qualified to make a waqf while a minor cannot make a waqf. Most importantly, the Waqf is a righteous endowment, and therefore has to be purely legal objects (UN-HABITAT, 2005). Waqf are Islamic non-profit entities that represent a diverse range of social, economic and cultural development. Even though waqf many perform public services, they are non-governmental. They belong to the Muslim community as applied by the Muslim law (Mohammed, Sadig Hammd (2006),). The operations of the waqf dovetail into a wide array of sectors including economy and include a wide range of institutions including healthcare facilities, real estates, education, social services and recreation. Waqf institutions come in different structures such as government agencies, non-government organizations, and other associations. Waqf institutions not only include small organization, but a considerable number of them are large-scale organizations controlling substantial assets, and employing a large population in different countries. In fact, major hospitals, universities, museums, and many NGOs are waqfs. For instance, Oxford University in the United Kingdom and Cambridge University are an example of waqfs assets. The Success of Waqf in the Society The Muslim waqf has succeeded in the diverse society in many areas. For instance, the setting up of Melton college, Oxford University in the year 1264.The Melton Foundation became respected in England and led to the foundation of Peterhouse, later Cambridge University. The Merton Collage was compatible with the Islamic law and would have been successfully approved by any judge (Qadi) of the Islamic law. Features of Waqf Wakif is a motivating force in performing and promoting charitable deeds triggered by righteous intentions for the growth of the society. The main objectives of waqf are: Provision of the economic growth of the society Provision of the religious services It is a relief to the socio-economic obstacles to the needy, education, environment and other good intended purposes. There are two main characteristics of Waqf, namely: Perpetuity: Under perpetuity, once endowment has been placed as waqf, it remains that way forever and removal of that property from waqf is a complex and lengthy process. In the course of the process of removal of the property, it is exchanged with an equivalent property of the same value, and must be approved by the Shari’ah Court. After the approval, the new property is dedicated to the waqf to benefit as the previous property. Theoretically therefore, perpetuity implies the assets of waqf should never reduce or lose value. A Maliki scholar called Ibn Arafa, defines perpetuity “as long as the property lasts” this is to refer to such perishable assets as livestock, trees, and furniture. Other jurists argue that the ideal waqf model has a mechanism through which it can perpetuate by itself, for instance perishable assets can be held in perpetuity. For example, biological assets are self-generating and regenerating assets such as farm animals, crops and orchards. Performance of Stipulations of the Waqf Founder: According to this, waqf is an act of provision in a voluntary way and the conditions the founder specified must be met I full course, as long as they do not conflict with the Shari’ah law. This means that the revenues of waqf must be only used for the founder. Moreover, no   court has the power to change the obligations of the founders. If a purpose becomes unavailable, then revenue of provider is purposed to another project, if no project, it goes to needy. Functions of the Waqf Wafq has many functions, a few include: A founder with a lot of personal wealth decides to endow some of the property for a specific purpose. Amount of capital and the endowed purpose are registered under a deed of endowment that is submitted to the administrators. The privately accumulated wealth becomes the property of Allah (swt) . Waqf is devided into be divided into two classes: Public Waqf: A public waqf can be created a purpose that is considered pious, religious, or charitable according to Mohammedan law. A Waqf that is created with the sole purpose of obtaining the approval of the mighty the next world is pious according to Mohammedan law. Few provisions of a pious and religious may be purposed for mosques, provisions for imams, schools, infrastracuture, or assistance to the needy to perform pilgrimage to Mecca, and distribution of alms to the poor. Private Wakf: This is meant to benefit the family of the settler and his descendants. This is well implemented under the powers of a Mutawalli to ensure truth and proper execution of a Waqf. For instance, the Wakf Act 1954 makes registration of a Waqf. This applies to both the walqf created before or after the implementation of this Act, and so the office of a Waqf Commissioner is a must. The Mutawalli of all the registered Waqfs prepare a budget and accounts of the Waqf for the appraisal of the Waqf commissioner and the Waqf board. The Waqf board can assume the direct management of the Waqf. The income of the Waqf can be assessed by the Mutawalli. In English terms, the Mutawalli is treated in express terms, as a Trustee. The importance of the waqf organizations is reflected in the huge assets it controls. It contributes significantly to the economy growth of many nations which accounts for up to 10% of the GDP of some countries. Waqf has generated a lot of interest beyond the confines of philanthropic activists, fiqh and Shariah scholars. With a wide focus on business, the sector is a diverse industry that is subjected to government regulatory authorities’ scrutiny. The Legal Status and Ownership of Waqf The concept of ownership of Waqf is complex and confused. There are differing informations among the four schools of Islamic jurisprudence (mazhabs) about the owner of the waqfs. According to Shafeis, the ownership of waqf is a property of God and what is owned by human is simply trusteeship. The view of both Hanafis and Hanbalis is that the waqf belongs to the beneficiaries although partially in the sense that they only own the benefit and have no authority to dispose of the property or use it otherwise, from what the actual purpose given by its founder. Maliki view waqf as the property of the founder and is just inherited by legal heirs. This indicates that the Malikis do not consider waqf from the perpetuity point of view like the Shafeis, Hanafis and Hanbalis (Ahmed and Habib, 2007). As the waqf outlives the founder and the beneficiary, waqf has a separate personality “thimmah” that is independent of its own. This reflects the concept of the continuing legal entity that was developed in the last three centuries. This concept nevertheless is different from the corporate entity, since the corporate entity can dispose of its assets. The perpetuity of waqf is protected by Shari’ah rulings. Even if the original purpose of the waqf disappears, the benefit can give another purpose yet the property remains in waqf (Thomas and Ann Van Wynen, 1949). Legal reforms of waqf have evolved large comparative studies of law and society. Enacting of waqf law is involves seeking a balance between protecting the waqf assets, developing the organization, maintaining its relationship with other sectors, and examining the impact of other laws on waqf. In an economic and social context of the waqf, the law should assist in restoring faith and strengthening the sector (Ahmed and Habib, 2007). Funding the Waqf Organization Like all organizations that progress, the waqf organizations generate revenues to fund their organization. Waqf generate enough funds from the assets they have in custody. They also appeal to donors who understand the objectives and services of the waqf organization. However, donations are uncertain and unpredictable as a result of the financial crisis mounting pressure on charities corporations and individuals are not giving much. In fact, many waqf organizations have reported that there has been looming reduction of donor funds. For this reason and the necessity to keep the waqf in progress, they have expanded their revenue source to include other form of income from mainly from investments and commercial projects. They have shown a big interest in social services with the pursuit of business interests. This has increased competition for marketplace where awqaf compete with the commercial sector (Usmani and Taqi, 1999). Waqf have different processes for generating revenues. The need for asset custody and perpetuity has an emphasis on the viability instead of going for short-term profit maximization. Their stakeholders include donors (waqifs), beneficiaries, nazers, employees, clients, volunteers and government. Waqf organizations usually face problems of balancing financing and operational objectives. The financial objectives can be expressed in quantitative terms, while operational objectives are conventionally expressed in qualitative terms. There is the risk of overemphasizing the financial objectives at the expense of the operational objectives, meaning they trigger a form of reverse operational objectives that supports financial objectives, rather than the financial objectives supporting the operational objectives. Hence, there is need for waqf organizations to seek a balance between financially efficient and socially effective (Usmani and Taqi, 1999). Conclusion Waqf institutions are effective organizations for the development of religion, social economic, cultural. These organizations lack the organizational discipline of making profits. Although they are not government agencies, they play a considerable role in the political and social life of a country. Waqf play a significant contribution to the government economies development and complements social initiatives of many counties. References Ahmed, Habib (2007), Legal Environment and Nonprofit Sector: Implications for Growth of Awqaf Institutions, Islamic Research and Training Institute, Islamic Development Bank, Jeddah. Mohammed, Sadig Hammd (2006), "Types of Alarsad and Trusts: A Comparative Study from Islamic Sharia Perspective", paper presented at Seminar on Endowments (Awqaf) in Europe, Birmingham, U.K., March 20-22, 2006. Thomas, Ann Van Wynen (1949), "Note on the Origin and Uses of Trust—Waqfs", Southwestern Law Journal, 3, 162-66. UN-HABITAT (2005). Waqf (Endowment) and Islamic Philanthropy. Paper 7 –Islam, Land & Property Research Series, Nairobi, Kenya Usmani, M. Taqi (1999), An Introduction to Islamic Finance, Idaratul Maarif, Karachi. Read More