Cash waqf risk management and perpetuity restriction conundrum

Abstract

Purpose The purpose of this paper is to comprehensively discuss the issue of risk vis-à-vis the perpetuity restriction principle inherent in waqf (Islamic endowment). Specifically, it attempts to consolidate the axioms in both conventional and Islamic finance, such as the risk-return trade-off and al-ghunm bi al-ghurm (liability accompanies gain), with the perpetual nature of waqf. Overall, this paper attempts to find a resolution to the dilemma of perpetuity restriction inherent in cash waqf against the natural occurrence of the risk. Design/methodology/approach This paper is based on the secondary research methodology; past literature encompassing journal articles, books, relevant financial axioms, fatwas (Islamic rulings) and state enactments is critically reviewed to present its case. In regard to state enactments, only Malaysian state enactments have been used, thus restricting the study to the Malaysian case only. Findings This study contends that the dilemma of the perpetuity restriction and the natural occurrence of risk can be resolved through the integration of waqf risk management, especially concerning cash waqf, with the Islamic spiritual approach. By implementing standard operating procedures that inculcate awareness on waqf risk management and Islamic spirituality in waqf stakeholders (waqif (donor), trustee and beneficiaries), the stakeholders may accept the reality of risk that is inevitable even after all efforts have been exhausted. In other words, the violation of perpetuity is exonerated given that mental faculties aligned with revealed texts have been exhaustively used beforehand. Practical implications Findings from this study may broaden the choice of investment avenues for waqf trustees while adhering to the perpetual restriction of waqf. More importantly, waqf trustees will not be forced to invest in interest-bearing securities or be involved in any usurious transactions just to obtain guaranteed returns and preserve the corpus of waqf. Originality/value This study offers a unique perspective on cash waqf risk management by re-analyzing the axioms and concepts of finance and waqf while observing the welfare of the beneficiaries.

A study of cash waqf contribution between millennials of Malaysia and Indonesia

“…The effect of waqf on society is unquestionable, and many Muslim leaders and scientists have addressed its importance and contribution to improve a society’s social and economic performance until today. The studies of waqf have been widely examined in various areas, such as a hybrid product of waqf (Akbar and Amijaya, 2021); governance issue of cash waqf (Kamaruddin and Hanefah, 2021; Sano and Kassim, 2021; Alshater et al , 2022); the intention of online cash waqf (Kasri and Chaerunnisa, 2021); the validity of cash waqf (Mauluddin and Rahman, 2018); digital banking and cash waqf (Berakon et al , 2021); risk management of cash waqf (Azrai Azaimi Ambrose and Abdullah Asuhaimi, 2021); cash waqf and poverty (Saiti et al , 2021; Hassan et al , 2019a; Hassan et al , 2019b); cash waqf and microenterprise (Mohd Thas Thaker et al , 2021); cash waqf and determinant of demographic background (Khan et al , 2020); commitment of cash waqf donor (Jalil et al , 2022; Hassan et al , 2019a, 2019b, 2019c); top management of Shariah-compliant companies to contribute cash waqf (Allah Pitchay, 2022).…”

Analysis of issues and solutions on the implementation of istibdal waqf property in states of Peninsular Malaysia

“…Replacement with assets such as land and buildings are not an issue, but if it involves the replacement with compensation money, then the waqf manager must immediately replace it with fixed assets, to maintain the original purpose of the waqf as determined by the waqif which sets the purpose of a waqf property. This is because the compensation money is exposed to the risk of depreciation where it is not in line with one of the conditions of waqf, which is to maintain its value (Abu Zahrah, 2010; Ambrose and Asuhaimi, 2021). However, the study results show that there are some cases of istibdal taken by the PBN, not converted into fixed assets even though compensation has been given.…”

Determinant factor of crowdfunders’ behavior in using crowdfunding waqf model in Indonesia: two competing models

“…As part of the third or volunteer sector, waqf is seen as a means of combating poverty and other socio-economic problems (Abdullah, 2019; Iman and Mohammad, 2017). Three important restrictions apply implementation, such as, irrevocable, perpetuity and inalienability (Ambrose and Asuhaimi, 2021). Irrevocable means that once asset is designated as waqf , its status cannot be undone because it remains waqf forever.…”

“…Eternity means the same asset it should remain intact, immortal and last forever. Inviolable, the same asset cannot be sold, passed down as inheritance or be gifted to others person (Ambrose and Asuhaimi, 2021).…”