International Journal of Islamic and Middle Eastern Finance and

Management
A proposed model for waqf financing public goods and mixed public goods in
Malaysia
Azniza Hartini Azrai Azaimi Ambrose, Mohamed Aslam Gulam Hassan, Hanira Hanafi,
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Azniza Hartini Azrai Azaimi Ambrose, Mohamed Aslam Gulam Hassan, Hanira Hanafi, (2018) "A
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Journal of Islamic and Middle Eastern Finance and Management, https://doi.org/10.1108/
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A proposed model for waqf Waqf

financing
financing public goods and mixed
public goods in Malaysia
Azniza Hartini Azrai Azaimi Ambrose
Faculty of Economics and Administration, University of Malaya, Kuala Lumpur,
Malaysia, and Received 5 January 2017
Revised 5 July 2017
Accepted 23 December 2017
Mohamed Aslam Gulam Hassan and Hanira Hanafi
University of Malaya, Kuala Lumpur, Malaysia
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Abstract
Purpose – The purpose of this paper is to formulate a model for waqf financing of public goods and mixed
public goods in Malaysia which constitute the country’s federal government expenditures. The model is built
on the basis of understanding the concept of waqf, learning from waqf institutions of the past and present and
addressing specific Malaysian waqf issues.
Design/methodology/approach – This study uses both primary and secondary data. The primary data
originate from semi-structured interviews of waqf academicians from the Islamic economics and Islamic
finance fields, waqf government officials and private sector institutions that are involved in waqf
management. The secondary data come from the Malaysian Federal Constitution, law enactments, books,
e-books, bulletins, journals, conference proceedings, government reports and websites.
Findings – By synthesizing the data, it is found that return from cash waqf investment in unit trust can be
used to finance 11 items of federal government expenditures. The overall process can be managed by
Yayasan Waqaf Malaysia through a collaboration with an Islamic unit trust firm.
Practical implications – This research shows how waqf can practically assist the Malaysian federal
government in financing public goods and mixed public goods. It indirectly shows an alternative source of
financing for these goods. Other economies can also learn and adapt from the model developed in this paper.
Originality/value – This paper attempts to revive the function of waqf as a provider of public goods and
mixed public goods from Islamic history. Inadvertently, this paper also introduces waqf as a possible fiscal
tool.
Keywords Waqf, Fiscal policy, Cash waqf, Cash–waqf financing
Paper type Research paper

1. Introduction
Waqf had been the provider of public goods and mixed public goods in previous Muslim
economies. This was made possible because of its nature as a perpetual source of fund
where continuous income was derived. To be clear, public goods are “goods that are non-
excludable (not easily denied to unauthorized consumers) and non-rival (capable of being
enjoyed by many consumers at once)” (Kuran, 2001, p. 841). National defense, public
transportation and clean environment are a few examples. Meanwhile, examples of mixed
public goods include healthcare, education and housing which can be both excludable and
non-excludable, as well as rival and non-rival. International Journal of Islamic
The aim of this paper is to show how waqf can provide finance for public goods and and Middle Eastern Finance and
Management
mixed public goods in the case of Malaysia. As the goods under study are also constituents © Emerald Publishing Limited
1753-8394
of federal government expenditures, this paper inadvertently shows how waqf can finance DOI 10.1108/IMEFM-01-2017-0001
 IMEFM certain federal government expenditures. It must be understood at the early stage of this
paper that the return from waqf investment and not the capital of waqf that is used to
finance said expenditures. As is argued later, the very concept of waqf is the preservation of
principle where only the return from it is spent. To develop the waqf process in question,
arguments are divided into nine separate sections exclusive of the introduction section.
Section 2 succinctly explains the concept and Shariah laws of waqf. Section 3 focuses on the
historical use of waqf in financing public goods and mixed public goods. Section 4 attempts
to identify the issues that can hinder the use of waqf in financing public goods and mixed
public goods. Section 5 states the data and methodology used in this study. Sections 6 and 7
discuss the findings obtained, synthesizing the findings to form a structure of waqf
financing public goods and mixed public goods. Sections 8 and 9 conclude and present ideas
for future research, respectively.

2. The concept and governing Shariah laws of waqf

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Waqf can be viewed as a pious endowment in Islam. Waqf, or its plural awqaf, means
“holding certain property and preserving it for the confined benefit of certain philanthropy
and prohibiting any use or disposition of it outside that specific objective” (Kahf, 2016, p. 2).
Meanwhile, Kahf (2014, p. 201) defines waqf from the economic perspective as “diverting
funds (and other resources) from consumption to investing them in productive assets which
provide either usufruct or revenues for future consumption by individuals or group of
individuals”. It was a practice that Prophet Muhammad peace be upon him (pbuh)
encouraged which can be seen from this particular hadith in Sahih Muslim:
Umar acquired a land at Khaibar. He came to Allah’s Apostle (pbuh) and sought his advice in
regard to it. He said: Allah’s Messenger, I have acquired land in Khaibar. I have never acquired
property more valuable for me than this, so what do you command me to do with it? Thereupon
he (Allah’s Apostle) said: If you like, you may keep the corpus intact and give its produce as
Sadaqa. So ‘Umar gave it as Sadaqa declaring that property must not be sold or inherited or given
away as gift. And Umar devoted it to the poor, to the nearest kin, and to the emancipation of
slaves, aired in the way of Allah and guests [. . .].
The word sadaqa in the hadith means charity, and charity is part of the third-sector
economy. Therefore, waqf is also part of the same sector but with its own distinct
characteristics, namely, cannot be sold, inherited or given away as a gift. Such has been
stated in the hadith. Al-Sarakhsi and Ahmad (1906) in Mohsin (2013) further specified the
principles of waqf as irrevocability, inalienability and perpetuity.
Irrevocability means when an asset is declared as waqf, it remains as waqf forever and
thus owned by ALLAH. Meanwhile, inalienability dictates that the corpus of waqf must not
be sold, inherited or given away as gift. This is actually a direct interpretation of the hadith
mentioned earlier. Lastly, perpetuity stipulates that the corpus of waqf must remain
permanently intact, cannot be perishable and cannot cease easily.
These principles however are not rigid in its implementation. In line with the Maliki
School, Kahf (2014) argued that a temporary waqf should also be made permissible in the
case where the founder of waqf explicitly states so, or the objective is temporary. Despite
their volatile values, cash, shares, unit trust and other forms of financial rights are suitable
for waqf endowment. This suitability presents opportunity for the middle-income class and
possibly lower to also endow waqf. Stated in Mohsin (2013) and Çizakça (1998), Imam Zufar
from the Hanafi School approves cash as waqf endowment. Meanwhile the Shafi’e, Maliki
and Hanbali Schools’ view everything with valid sales and can be renewed occasionally by
its usufruct or otherwise, may be converted into waqf (Mohsin, 2009). In fact Ebu’s Su’ud, an
Islamic jurist that had lived during the Ottoman ruling, is of the opinion that only
 contemporary custom shall or shall not limit the kind of asset suited for waqf endowment Waqf
(Imber, 1997). As such, Section 23(1) of the Wakaf (State of Selangor) Enactment (2015) financing
states that:
The Corporation may accept –
 shares, bonds, sukuk or other instruments for valuable guarantee; and
 benefits from the units of share, bonds, sukuk or other instruments for the said
valuable guarantee, given by way of wakaf by any person, society or institution
provided that the business or investment carried out is consistent with Hukum
Syarak.

Take note that despite the flexibility, the Shariah law (Hukum Syarak) must be uphold as is
obvious and written in the enactment.
It must be duly noted that the creation of waqf is for benevolent causes that are
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permissible in Islam. Hence, creating waqf for pornographic dissemination, alcohol dealings,
paying off riba’ (usury) and other impermissible causes are irrelevant. In relation to this, it is
permissible for non-Muslims to create waqf based on the following hadith:
Verily, Allah does not treat a believer unjustly in regard to his virtues. He would confer upon him
(His blessing) in this world and would give him reward in the Hereafter. And as regards a non-
believer, he would be made to taste the reward (of virtue in this world) what he has done for
himself so much that when it would be the Hereafter, he would find no virtue for which he should
be rewarded.
In fact non-Muslims who are peaceful toward Muslims are also allowed following the action
of Shafiyah binti Huyaii, the wife of Prophet Muhammad pbuh, who had made her Jewish
relatives as beneficiaries of waqf (Othman, 2015). These fit well for Malaysia, as the country
consist of people from various religions.
Because the default for waqf creation is goodness, there are other implied principles.
According to Kahf (2014), these characteristics are:
 waqf that has no clear purpose by default becomes waqf for the poor;
 when a waqf’s purpose becomes invalid, then that waqf becomes waqf for the poor;
and
 whenever a waqf deed is lost causing its purpose to become unknown, then this
particular waqf also becomes waqf for the poor.

It is important to be aware of all these characteristics so as not to compromise the essence of

waqf in proposing the said model.
Aside from the principles of waqf, there are also five pairs of stipulation for waqf
creation. Stated by Abu Zuhrah (1972) in Mohsin (2009), the stipulations originate from the
Hanafi madhab. The five pairs are ziyadah (increase) and nuqsan (decrease), idkal (addition)
and ikhraj (removal), i‘ta’ (granting) and hirman (dispossession), taghyir (replacement) and
tabdil (conversion), as well as istibdal (substitution) and ibdal (exchange). Ziyadah and
nuqsan give flexibility to the founder to prioritize between various groups of rightful
beneficiaries. Idkal and ikhraj give room to the founder or trustee to include another
beneficiary that has more need of waqf and to exclude another existing beneficiary that no
longer requires the benefits of waqf. I‘ta’ and hirman allow the founder or trustee to give
away all or a portion of waqf revenue to whoever s (he) wills for a period of time and
dispossess whoever s (he) wills. As for taghyir, it gives the right to the founder to replace the
use of waqf revenue with another, while tabdil gives the right to completely change the
 IMEFM corpus itself. Lastly, ibdal means the actual selling of unproductive waqf property, while
istibdal is substituting the original waqf property with another waqf property by way of
purchase (Department of Awqaf, Zakat and Hajj [JAWHAR], 2009; Siraj, 2012).
These five pairs of stipulations can contribute greatly to the modus operandi for waqf
financing of pure and mixed public goods. They highlight the frontiers of waqf and its
management with the intent to guarantee the continuous benefit from waqf. However,
caution must be taken when exercising the five pairs of stipulation for waqf creation. The
first four, ziyadah and nuqsan, idkal and ikhraj, i‘ta’ and hirman, as well as taghyir and
tabdil, can only be applied when the founder outlines them in the waqf deed (Mohsin, 2009).
Hence the formulation of waqf deed is of utmost important for the perpetual return from
waqf.
Scholars also divide waqf into categories. In general, waqf is divided according to its
purposes, namely, am, khas and hybrid waqf (Yon et al., 2008; Mahamood, 2011). Waqf am is
founded for the purpose of general welfare, while waqf khas is founded for a specific welfare
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objective. These are similarly stated as the definition of wakaf am and wakaf khas in Wakaf
(State of Selangor) Enactment 2015, Wakaf (State of Malacca) Enactment 2005, Wakaf
(Negeri Sembilan) Enactment 2005 and Wakaf (Perak) Enactment 2015. Meanwhile, hybrid
waqf or wakaf musytarak is simply a combination of different categories of waqf as
mentioned in Johor Wakaf Rules. On the other hand, Kahf (2016) and Obaidullah (2008)
categories waqf into religious, philanthropic and private. Examples of religious waqf are
mosques and cemeteries; examples of philanthropic waqf are public goods, mixed public
goods and care of environment and animals, while private waqf is specifically for the
founder’s descendants.
Overall, the discussion in this section shows that scholars do not have a uniform view on
the Shariah laws and classification of waqf. These differences in opinion are due to ijtihad, a
process where Islamic jurists think exhaustively of the solution to a legal question (waqf in
this case) (Laldin et al., 2008). Still, they share the same intent, namely, to safeguard the
perpetual benefit derived from waqf. Resulting from this flexibility, waqf became a tool that
highly impacted the Muslim economies of the past.

3. Historic use of waqf in financing public goods and mixed public goods
Public goods and mixed public goods were provided by waqf in Islamic history and had
been vastly described in the literature. Prophet Muhammad pbuh had converted properties
left by Mukhayriq into waqf to finance for defense, and Uthman bin Affan had bought a well
in Madinah to make drinking water free for all Muslims (Gil, 1998; Kahf, 2014). These two
cases of waqf occurred after Prophet Muhammad pbuh migrated to Madinah; soon after it
became the first Islamic state (Gil, 1998). Madinah is a relatively small state which one may
argue the obvious relevance of waqf for the service of public goods back then.
However, waqf for the service of these goods still remain relevant even after Muslim
territories expanded. As a matter of fact, the number of waqf property increased such that
Diwan al-Ahbas was formed during the Umayyad Caliphate at the state level to avoid abuse
(Mohsin, 2009). In this era, awqaf for education were highly demanded and thus
mushroomed which included construction of libraries and schools, financing of teachers and
sponsoring scholars and students (Mohsin, 2009). This is perhaps the earliest form of waqf
for mixed public goods.
When the Abbasid Caliphate came about, Caliph Al Ma’mun had provided healthcare
and education through the means of waqf (Kahf, 2014). A waqf investment fund was even set
up consisting of agricultural lands, business and residential rental buildings to finance for
the hospital operating expenses (Kahf, 2014). Worth pointing out here is the fact that
 agricultural lands and residential buildings have lesser risk than businesses. Perhaps the Waqf
former two are at risk only when natural disaster strikes or when residents could not pay the financing
rent for some reason. The latter, on the other hand, has the risk of loss and bankruptcy.
Hence the question arises: Why would the Caliph risk investing in businesses too? Perhaps
the Caliph realized that risk can be minimized by investing in multiple permissible avenues,
thus ensuring a continuous source of finance for the said hospital. The said waqf investment
fund remarkably resembles portfolio theory, whereby risk can be minimized and return
optimized by holding a diversified portfolio of assets with different risk levels (Brealey et al.,
2011). Anyhow, this very fact indicates that waqf is a flexible structure that can be shaped
within Shariah limits to generate ongoing income. It is no wonder that waqf was later made
to support other wide-ranging items in the public goods and mixed public goods category.
As is evident in the late periods of the Abbasid Caliphate, waqf was endowed for the
purposes of animal care, counselling of marital problems, pharmaceuticals and training new
doctors (Mohsin, 2009; Kahf, 2014).
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In the early days of the Ayyubid Dynasty, waqf became a government policy that
supplemented the fiscal reforms brought about by Sultan Salahuddin (Frenkel, 1999). Food,
education institutions, public bath, orchards and shops are examples of properties that were
endowed by the Sultan (Frenkel, 1999). Just like Caliph Al-Ma’mun, Sultan Salahuddin had
also created a portfolio of waqf fund to ensure the continuous operation of certain education
institutions (Frenkel, 1999). In fact, waqf as a government policy became a legacy that was
preserved by the Ottoman Empire, so much so that the waqf system reached its pinnacle
during that era. It was estimated that income from waqf equaled a third of the Ottoman’s
revenue in the late eighteenth century (Kuran, 2001). The use of waqf was so expansive that
it catered to schools, supported retired sailors, paid commuter ships, financed town defense,
supplied water, paid tax for fellow countrymen and created employment opportunities (Peri,
1992; Çizakça, 1998; Babacan, 2011). Even Christians and Jews in the Ottoman period
established endowments resembling waqf encompassing assets such as warehouses, shops,
houses, apartments and even orchards and vineyards (Shaham, 1991). It is to no surprise
that Babacan (2011, p. 69) went so far to assert that waqf constituted “a third fiscal category
beside the state treasury and “timar system,” which was based on taxation of revenues
(mostly agricultural) from land”.
In the middle of nineteenth century, the waqf system began to collapse due largely to
political reasons. As a vast state that practiced the millet system, it was easy for “France and
Russia to gain the protection of Catholics and Orthodox in the Middle East and thus to
interfere in the internal politics of the Ottoman Empire” (Khayat, 1962, p. 68). On top of that,
excessive borrowing from European bankers had caused the Ottomans to receive external
pressures for waqf reform (Khayat, 1962). Specifically, a system that was initially
decentralized and autonomous, was forced to centralize.
Centralization of waqf had resulted in much interference by the government and soon led
to corruption (Çizakça, 2000). But the fact of the matter is that there were cases of corruption
even when waqf was decentralized. Two such incidences occurred between the sixteenth
and the twentieth centuries involving awqaf in Jerusalem and Damascus, leading Baer
(1997) to surmise a possible intention to control public goods. Indeed, whether it is
governmental or non-governmental, there is always the likelihood for exploitation.
Politics was not the only reason though; there were also structural weaknesses in the
implementation of waqf. Because the implemented waqf could not adapt to an economy that
was rapidly industrialized, waqf was deemed inefficient to provide public goods (Kuran,
2001). At this point, waqf had actually stopped progressing. According to Kuran (2001),
history could be different if the waqf system was able to become an enterprise with a
 IMEFM corporate status. Furthermore, there was also an issue on the lender of cash waqf. Because
cash waqf was only loaned out to consumers instead of entrepreneurs, lesser profits were
generated from these loans (Çizakça, 1998). Lesser profit means lesser waqf capital, and this
destabilizes the waqf institution. Important to mention here is that the said profit from
lending, termed istiqlal, was actually usury and is prohibited in Islam (Çizakça, 1998).
Undoubtedly, a secure, profitable and permissible means to generate waqf income is
essential.
The evolution, success and degradation of waqf in history provide valuable lessons for a
successful modern implementation of waqf. We learned that waqf had successfully financed
public goods and mixed public goods in the past; we had even become a part of the
government policy during the Ayyubid Dynasty. This goes to show that it is highly possible
to use similar waqf implementation at present. However, the literature recommends that the
waqf institution be corporatized for it to be successful and sustainable. In this respect, waqf
should also be invested wisely to generate profit. On top of that, exploitation of waqf must be
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minimized if not eliminated. Most importantly, we have gathered that the structure of waqf
is flexible so long that Shariah laws are respected. This sets the tone for the model of waqf
financing Malaysian public goods and mixed public goods.

4. The Malaysian waqf system and its issues

Understanding the concept of waqf and learning from history is not enough. The waqf
system in Malaysia is different from that mentioned in the past; hence, literature pertaining
to Malaysian waqf must be reviewed. The Malaysian waqf system must be understood and
arising waqf issues identified. Efforts on this section inject realistic inputs into the model we
are developing.

4.1 Public awareness on philanthropic waqf

There are some evidences that show that Malaysian Muslims restricted views on waqf
endowment. Most only assume that waqf can be endowed only for the purpose of mosque
building, cemetery upkeep and other forms of religious waqf (Ghani and Othman, 2009;
Osman et al., 2012; Suhaimi and Rahman, 2014; Othman, 2015). The core reason can be
traced back to waqf stipulations in the Federal Constitution of Malaysia.
In accordance to Item 1 of the Ninth Schedule, List 2, State List of the Malaysian Federal
Constitution, all Islamic religious matters including waqf are under the ambit of 13 different
state authorities and applies to Muslims only. The list does not include “matters of external
affairs, defence, internal security, finance, trade, commerce and industry and also matters on
probate and administration though they involve Muslims’ testate and intestate distribution
of assets” (Mahamood, 2011). We can clearly see here that unlike Muslim economies in the
past, religious tools such as waqf do not directly aid economic matters and are confined
within the category of religious waqf only. Çizakça (2000) and Ghani and Othman (2009)
blame this restriction on British imperialism who had separated Islamic matters from the
country’s economy.
However, of recent, some attempts have been made to change this situation. For one, the
federal government has established JAWHAR to improve the socio-economic development
of the Malaysian Muslim community. In turn, JAWHAR has established Yayasan Waqaf
Malaysia (YWM) to aid in its purpose. Through these two institutions, the federal
government allocates budget for the development of public waqf all over Malaysia; some of
which are economic in nature. However, it is difficult to gauge the impact that these two
institutions have on the community awareness of philanthropic waqf.
 4.2 Increasing the value of waqf Waqf
Realize that allocating certain amount of government budget to waqf causes further financing
burgeoning of government expenditures. Burgeoning government expenditures is a
recurring problem in Malaysia since the Asian financial crisis 1997/1998. Bank Negara
Malaysia (BNM), the Malaysian central bank, indicates that the government’s expenditures
have persistently superseded revenue over the years (Figure 1). The primary deficit in
Figure 1 is calculated by deducting federal government revenue from total federal
government development expenditure and federal government operating expenditure. Thus,
to implement the case of waqf in question, we cannot rely on the government to provide
funding. Also, it is rational to assume that the value of public waqf endowment is small in
comparison to the price of public goods and mixed public goods where istibdal is concern.
Hence, it is imperative that a realistic and Shariah-approved method is determined to
increase the value of waqf.
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Knowing this, the Fiqh Academy in its Resolution No. 140 (15/6) made it compulsory for
waqf assets, both movable and immovable, to be invested (Mohsin, 2014). Note that return
from waqf investment does not constitute as the corpus of waqf. This begs the question of
what type of corpus is suitable for waqf financing pure and mixed public goods. Two forms
of waqf are common in Malaysia, namely, cash waqf and waqf land. Cash waqf has been
made permissible by the National Fatwa Council Islamic Affairs of Malaysia that convened
on 10-12 April 2007 (JAWHAR, 2009), and is granted tax exemption. Waqf land, however, is
not entitled to any. Plus there are many issues surrounding waqf lands such as the non-
applicability of the National Land Code on waqf land administration (Kader and Mohamed,
2014), no tax exemption granted despite call for recommendation (Mohammad, 2018) and
unsystematic registration of waqf land (Majid and Said, 2014). Still, Malaysia possesses vast
waqf lands (Isamail et al., 2015) that can be put to productive use such as the implementation
of waqf in question. It would be a waste not to.
Putting that aside, the conditions for investment as detailed in the Resolution are
(Mohsin, 2014):
 The investment must be Shariah-compliant.
 To minimize risk, diversification as an investment strategy should be considered.
Risk can also be managed by obtaining surety ships and guarantees, confirming
contracts and performing feasibility studies.

Figure 1.
Primary deficit of the
Malaysian federal
government (RM
million)
 IMEFM  Avoid high-risk investments. However, it is permissible to invest cash waqf through
permissible contracts such as murabahah (cost plus), mudharabah (profit sharing,
loss bearing), istisna’ (order to manufacture) and others.
 Chosen investment must be suitable to the corpus of waqf and duly protects the
waqf and beneficiary rights. Thus, although the mudharabah mode is considered as
a high-risk investment, it is allowed due to its compatibility with cash waqf.
 Waqf investment activities should be transparent.

In relation to this, the Securities Commission Malaysia (SC) had suggested that cash waqf be
invested in Islamic capital market products (SC, 2014). These products are managed by a
professional fund manager and hence risk can generally be contained. Examples of Islamic
capital market products include sukuk, Islamic unit trust, Shariah-compliant shares, Islamic
real estate investment trust (I-REITs) and Islamic exchange-traded funds. SC (2014) further
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states that they are ready to regulate the waqf assets in question in accordance to SC’s
prepared guidelines such as the Guidelines on Unit Trust Funds, Guidelines for I-REITs and
others. As a matter of fact, Larkin Sentral Property Berhad has made an initial public
offering (IPO) of waqf of shares on June 18, 2017, regulated by SC (Larkin Sentral Property
Berhad, 2017). The main advisor for the IPO is Maybank Investment Bank Berhad.
Basically, the mentioned waqf of shares can be purchased by the public for ¢10/unit and
consequently endowed as waqf to be managed by Waqf An-Nur Corporation Berhad
(WANCORP) as the private manager of the said waqf. Its structure is depicted in Figure 2.
Permission to invest in both a low- and high-risk investment, and investment in Islamic
capital market products indicates a progressive move from traditional waqf financing mode
to a contemporary waqf financing mode. In fact, Section 26(1f) of Wakaf (Negeri Sembilan)

As a public manager of waqf, its

SIRC of Johor/Public responsibility is to supervise
Manager of Waqf WANCORP

iv(b) 10% from dividend

received
90% from dividend
received As a private manager of waqf, its
WANCORP/Private responsibility is to manage the waqf
Manager of Waqf asset (IPO)
iv(a)

Dividend to
iii
be declared Declaration of waqf and
ii IPO that will be offered to
WANCORP
100%

i
Figure 2. Larkin Sentral Property Waqf Founder/
The structure of waqf IPO purchased by Customer
of shares offered by waqf founder/
customer
Larkin Sentral
Property Berhad
Source: Larkin Sentral Property Berhad (2017, p. 21)
 Enactment 2005 and Section 11(1c) of Wakaf (Perak) Enactment 2015 permit the investment Waqf
of waqf. Despite this, scarce waqf investment actually took place by State Islamic Religious financing
Councils (SIRCs). The common practice of SIRCs is to use collected cash waqf to purchase
both movable and immovable property and that property is then considered as the corpus of
waqf, a clear example of the istibdal process. This practice is transcribed in Section 38 of the
Wakaf (State of Selangor) Enactment 2015 and Section 26 (2) of Wakaf (Negeri Sembilan)
Enactment 2005, as well as waqf projects seen in the official website of e-wakaf Johor.
Still, there exists one example of investment made by SIRC, namely, the public–private
sector relationship between Perbadanan Wakaf Selangor (PWS), a waqf management
corporation under SIRC of Selangor, and Bank Mualamat Malaysia Berhad (BMMB). Wakaf
Selangor Muamalat is born from this collaboration, with its operational structure
represented in Figure 3. As can be seen, Muamalat Investment Sdn. Bhd. as an Islamic fund
management company is in charge of cash waqf investment. Notice that not all of the cash
waqf collected is directed to investment but subsequently directed to the beneficiaries.
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In this case, Wakaf Selangor Muamalat and Larkin Sentral Property Berhad have a
different take on waqf investment. It can be assumed that the latter possesses a higher-risk
profile than the former. As is alluded earlier in Resolution No. 140 (15/6) of the Fiqh
Academy, high-risk investment is permitted when the corpus of waqf is suitable for it and
waqf of shares is one such instance. Still, it does not mean that the high risk is not managed.
Stated in the prospectus of Larkin Sentral Property Berhad, the company will find other
sources of finance should return from the IPO is insufficient (Larkin Sentral Property
Berhad, 2017).

Fund accumulation Management Distribution

25% for PWS

BMMB PWS

Joint
Individuals Management Education
Committee

Health
Institution

Return on
Investment
investment

75% for activities determined by

Muamalat Investment manager

Investment
Sdn. Bhd. Figure 3.
Operational structure
of wakaf Selangor
muamalat
Source: SC (2014, p. 50)
 IMEFM 4.3 Laws and governance of waqf
Focusing to the laws of waqf, all states’ legislations stipulate that the SIRCs is the sole
trustee of waqf. Pursuant to Article 74(2) of the Federal Constitution, it is permitted for each
state to enact their own laws but within the ambit of State List of the Ninth Schedule
mentioned earlier. Hence we can see that, to a certain degree, waqf in Malaysia is
decentralized, similar to past Muslim economies before the waqf system was reformed.
However, the past Muslim governments had never stipulated anyone or anything as the sole
trustees of waqf. Waqf endowments had strictly followed the founder’s instruction – even on
the appointment of waqf trustees (Kahf, 2014). These laws give rise to one pertinent
question: Should waqf for financing public goods and mixed public goods be endowed in
such setting? Are law amendments required?
Indeed, there are calls to instate uniform waqf laws in Malaysia. Uniformed waqf laws
can promote cheaper transaction costs, further transparency, positive public perception and
lesser bureaucracy (Kader and Mohamed, 2014; Kader, 2016). This idea of a uniformed waqf
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law is supported by the JAWHAR. The Manual Pengurusan Model Perundangan Wakaf
(Manual of Wakaf Legislation Model Management) was published with the hopes that all
Malaysian states will copy the manual and thus streamline the laws of waqf in Malaysia
(JAWHAR, 2008). However this effort was unfruitful, as only Perak followed said manual
strictly (Kader, 2016). Another suggestion to streamline the laws of waqf in Malaysia is to
instate Federal Territories Waqf Act that can serve as a prime example for other Malaysian
states (Kader, 2016). Should this Act materialize, Article 75 of the Federal Constitution
which states, “If any State law is inconsistent with a federal law, the federal law shall prevail
and the State law shall, to the extent of the inconsistency, be void” can take effect and thus
waqf laws become uniformed. Despite more than a decade of effort, the Act has never been
chartered (Kader, 2016).
Reasons for a new Malaysia waqf law are limited to the ones outlined by Kader and
Mohamed (2014) and Kader (2016). It is crucial to understand that the SIRCs administrate
not only waqf matters but also other Islamic religious matters such as zakah (Islamic
religious tax) and faraid (Islamic inheritance law). With all these responsibilities, SIRCs will
have to manage and enforce waqf of public goods and mixed public goods which are of fiscal
magnitude. It requires nationwide execution. Hence the question arises on whether SIRCs
are capable to manage the said waqf implementation.
Although SIRCs are the sole trustees of waqf in Malaysia, there is some role for the
federal government through JAWHAR and Yayasan Waqaf Malaysia (YWM). JAWHAR is
a department under the Prime Minister, while YWM is the federal government’s trust body.
At the very basic, both JAWHAR and YWM undertakes the development of Malaysian waqf
land through federal government funds as provided under the Ninth Malaysia Plan, Tenth
Malaysia Plan and Year 2010 Budget (Ahmad and Muhamed, 2011). This is made possible
through the National Fatwa Council Islamic Affairs of Malaysia (Ahmad and Muhamed,
2011). The council that convened on April 10-12, 2007, decided that JAWHAR can become a
waqf trustee through YWM given that both YWM and SIRCs agree to this arrangement. As
the waqf land has been developed in most states, it is safe to assume that YWM and most
SIRCs agree to that arrangement.
Although Malaysian waqf laws and management appear regressive to the topic at hand,
there exists some evidence of the contrary. Stated earlier, cash waqf endowment is entitled
for tax exemption under Section 44(6) of the 1967 Income Tax Act. Worth mentioning is that
waqf land is not granted the same incentive despite the existence of vast waqf lands in
Malaysia (Isamail et al., 2015). There is call for recommendation (Mohammad, 2018) because
not subjugating these lands to productive use is wasteful. Waqf lands are also ridden with
 other complications such as the non-applicability of the National Land Code on waqf land Waqf
administration (Kader and Mohamed, 2014) and unsystematic registration of waqf land financing
(Majid and Said, 2014).
Focusing on the positive aspects, several state law enactments permit their respective
SIRCs to create waqf management corporations. For instance, the SIRCs of Selangor and
Negeri Sembilan have established PWS and Perbadanan Wakaf Negeri Sembilan (PWNS),
respectively. The source of power for the former stems from Section 4(1a) of the Wakaf
(State of Selangor) Enactment 2015, while the latter from Section 5 Wakaf (Negeri Sembilan)
Enactment 2005. SIRC of Selangor also collaborates with Bank Muamalat Malaysia Berhad
to manage Wakaf Selangor Muamalat as elaborated earlier. The collaboration is allowed
under Section 4(1b,c) of the Wakaf (State of Selangor) Enactment 2015. These laws indicate
progressiveness in which SIRCs have the intention for waqf to progress more financially and
economically.
In extension, corporate waqf was endorsed in certain states, allowing other entities
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instead of the SIRC to be the trustees. For instance, SIRC of Johor granted permission to
Johor Corporation (JCorp), a public enterprise and conglomerate owned by the state of Johor,
to appoint WANCORP as a private manager of its waqf. However note that SIRC of Johor is
part of WANCORP’s Board of Directors and thus its role as a trustee does not diminish. The
waqf endowed by JCorp constitutes assets and shares that belong to the company (JCORP,
2016). As has been discussed earlier, WANCORP is also the private waqf manager of waqf of
shares publicly offered by Larkin Sentral Property Berhad. Drawing observation from
mentioned waqf of shares and waqf investments at Wakaf Selangor Muamalat, one
management aspect is particularly striking. Both employ a fund manager to advice on
investment. The main advisor for waqf of shares offered by Larkin Sentral Property Berhad
is Maybank Investment Bank Berhad, while that for Wakaf Selangor Muamalat is
Muamalat Investment Sdn. Bhd. Thus the appointment of professional fund manager can be
viewed as an additional precaution towards risk management.
Despite budding professionalism in the areas of waqf, the ultimate purpose of goodness
is not compromised if not enhanced. Education, health, low-cost housing units, disaster relief
and others are provided significantly more when private sectors are involved. Chains of
Waqaf An-Nur clinics and interest free micro-credit loans are some examples of benefits
provided from JCORP’s waqf of shares.
However, it is hard to claim whether allocating waqf management responsibilities to
another organization, in the case of waqf financing pure and mixed public good, is a
necessary step. Even without establishing another organization, SIRC of Johor gained
incredible success in developing waqf projects by selling waqf shares to the public. Section 2
of Wakaf (State of Malacca) Enactment 2005 defines waqf shares as the creation of a waqf
through the issuance of shares which are subsequently endowed as a waqf by the buyer to
the SIRC. Hence waqf of shares and waqf shares are intrinsically different. The SIRC of Johor
pioneered the selling of waqf shares in Malaysia. These waqf shares are sold according to its
specific projects[[strike_start]] [[strike_end]](SIRC of Johor, 2018) that also comprise mixed
public goods. The public can choose whichever project they want to endow by buying that
particular waqf shares. This actually coincides with a study done by Duncan (2004),
whereby an endower prefers to contribute to a specific good rather than across multiple
goods.
The approach of selling waqf shares for specific purposes adopted by SIRC of Johor is
actually different than most SIRCs. Most SIRCs collect cash waqf or sell waqf shares for the
purpose of general welfare. Indeed, the implementation of waqf is different from state to
state owing to the norms and laws of each state. There is one similarity, though. No matter
 IMEFM what the situation of waqf law in each state, waqf entities are still tied to the state
government; SIRC is a body under the state government; WANCORP is established by
JCorp which is a public enterprise belonging to the state of Johor; cash waqf collected by
YWM is channeled to the respective SIRCs; and JAWHAR must hand over completed waqf
projects to SIRCs. After all, waqf is under the ambit of state laws. Hence a model that is
applicable to Malaysia must consider this fact too.

5. Methodology
To address the identified issues, this study gathers both primary data and secondary data.
Primary data were obtained from semi-structured interviews. We interviewed Malaysian
Government officials employed at waqf-related bodies, as well as practitioners of waqf. In
addition, waqf academicians who are also experts in Islamic Economics and Islamic Finance
were interviewed too. Most academicians are from west Peninsular Malaysian universities
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and one from a Middle Eastern university. To respect their request for anonymity, the
interviewees are stated in numerals. In detail, Interviewees 1 to 7 are academicians,
Interviewees 8 to 11 are government officials who are employed under the federal and state
government, while Interviewees 12 and 13 are private waqf managers. These interviewees
are selected through purposive sampling or theoretical sampling.
Answers by the interviewees in the form of transcribed interview data are analyzed
using thematic analysis. Thematic analysis is a process clarifying the structures and
meanings of data by identifying themes from those particular data (Gavin, 2008; Bryman,
2012). Themes are formed from categories that consist of codes found in the transcribed
interviews (Bryman, 2012). For this particular study, the whole transcript was first
thoroughly read to get a sense of meaning. Then the codes that correspond to the topic were
identified and categorized in tables which are then formed into themes. Meanwhile,
secondary data are sourced from the literature and cited to guarantee concurrent validity. A
clear structure of waqf financing public goods and mixed public goods is then introduced by
synthesizing the findings from thematic analysis and literature review.

6. Tackling the Malaysian waqf issues

When public awareness is garnered, there is a high probability that the public will
contribute waqf for financing pure and mixed public goods, especially so when a realistic
and practical structure is put in place. Such structure can be developed by providing
solutions to issues highlighted in Section 4. To put in simply, the interviewees’ answer can
be themed into the corpus of waqf, waqf investment mode, waqf laws, waqf governance and
waqf deed documentation.

6.1 Cash as the corpus of waqf

According to Interviewee 7, during a personal interview dated 31 March 2016:
I think the one that is really convenient to finance the economy and to governments basically
being expenditure or economics or budget or whatever for public finance is the cash waqf.
Cash waqf is deemed permissible in Malaysia by the National Fatwa Council Islamic Affairs
of Malaysia that convened on 10-12 April 2007. In fact, tax exemption is granted following
Section 44(6) of the 1967 Income Tax Act. Hence cash waqf has already become the norm in
Malaysia where almost all income classes have the opportunity to contribute.
Meanwhile, Interviewee 8 during a personal interview on 7th June 2016 said:
 All the waqf lands that we have right now, the federal government can help to develop. That is Waqf
one of the ways that the federal government can help SIRC. This is because waqf lands have
potential. It has potential because if we can develop these lands, the federal government will be
financing
less burdened to elevate the ummah’s (Muslim’s) economy.
Indeed, Malaysia does possess vast waqf lands (Isamail et al., 2015) that can be put to
productive use. However, there are many issues surrounding waqf lands such as the non-
applicability of the National Land Code on waqf land administration (Kader and Mohamed,
2014), no tax exemption granted despite call for recommendation (Mohammad, n.d.) and
unsystematic registration of waqf land (Majid and Said, 2014). These issues can delay the
implementation of waqf financing pure and mixed public goods.

6.2 Investing cash waqf into Islamic unit trust

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Personal interviews that was conducted with Interviewee 3 (5 April 2016), Interviewee 5 (29
February 2016) and Interviewee 7 (31 March 2016) suggested that the cash waqf collected
should be pooled and invested. Interviewee 7, in a personal interview dated 31 March 2016,
illustrated a scenario of a pooled cash waqf RM 1bn in value:
So if we are talking about one billion, one billion will stay there. So it creates a long lasting
sustainable fund. Now, you just invest the one billion and the one billion you never touch it. The
one billion will keep on expanding and growing.
This is the principle of perpetuity, one of the principles of waqf at work. Concurrent to this,
the Fiqh Academy in its Resolution No. 140 (15/6) made it compulsory for waqf to be
invested and cash waqf, especially, Interviewee 5, during a personal interview on 29
February 2016, gave one specific suggestion on the mode of investment suited for cash waqf:
Number three I think is about the vehicles, vehicles we talking about how we are going to develop
the prospect, the waqf asset, what are the prospective investment, what will be the kind of vehicle.
For example now probably we have not many land or sort of fix asset to [endow as] waqf but we
can [endow] waqf in form of cash. So how are we going to convert this cash to become like
[Islamic] unit trust.
Islamic unit trust fund is a class of “collective investment scheme that offers investors the
opportunity to invest in a diversified portfolio of Shariah-compliant securities, sukuk and
money market instruments” (SC, 2014, p. 42). As such, an Islamic unit trust is exposed to
risk volatility as any instrument in the Islamic capital market has. However the fact that its
management constitutes an established Islamic unit trust company (Section 6.3) that has
wide experience in risk management, risk volatility can be contained. Besides, the Islamic
unit adopts the diversification strategy that can mitigate risk. Should there be any loss that
can decrease the principal value of cash waqf, then the federal government should
compensate that value. A similar measure is opted by Larkin Sentral Property Berhad,
whereby the company will bear the loss alone. Logically, this does not add further to the
federal government’s expenditure because in the current economic setting, it is the original
duty of the federal government to provide finance for these goods.
On top of that, two of the conditions for waqf investment outlined in Resolution No. 140
(15/6) of the Fiqh Academy are adhered to, namely, Shariah-compliant investment and the
employment of diversification. Plus, as the Islamic unit trust publishes a prospectus and
other reports on a timely basis, transparency is also assured. This can elevate public trust
and cash waqf endowments.
 IMEFM 6.3 Revamping the law and governance of Malaysian waqf
To minimize risk of investment and generate high profit, an Islamic unit trust manager or an
Islamic fund manager should be appointed to decide the portfolio for cash waqf investment.
Drawing examples from Larkin Sentral Berhad and Wakaf Selangor Muamalat, a
collaboration with an established Islamic unit trust firm is especially warranted. The
collaboration is vital because SIRCs have very little knowledge and experience in
investment, finance and economics. This claim resonates with a statement made by
Interviewee 2 during a personal interview on 7 January 2016, “you are talking about an
organization that requires a kind of new outlook, new thinking, so the human capital that
should manage this should improve”. In addition, despite the fact that some SIRCs establish
corporations and hence are able to focus on waqf, the reality is different. Interviewee 10
during a personal interview on 9 March 2016, revealed:
Although we established a company subsidiary, the reality is there is only one employee in it so it
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is difficult for the employee to carry out the matters of waqf.

This further cements the idea for collaboration with an established Islamic unit trust firm
whose niche and experienced is in investment and risk management.
However, to put such structure in place, Malaysian waqf laws must be changed. Indeed,
the majority of the interviewees believed that waqf laws in Malaysia must be revamped but
defer in detail. One-half the interviewees believed that waqf should be made independent
from the government and SIRCs, “I think yes, [in order to] enhance the waqf we need to make
a law of waqf and add waqf independent from the government” (Interviewee 1, personal
interview, 24 January 2016). The second half believed that waqf should be completely
centralized, “If we can centralise waqf, knowledge sharing can be easily fostered between
different states and waqf for education and infrastructure for example, can be easily
provided nationwide” (Interviewee 8, personal interview, 9 March 2016). Meanwhile the
third half believed that SIRCs only need to manage religious waqf and private waqf while
public waqf is to be centralized:
The traditional waqf can be under the SIRCs; but the new form of cash waqf models which are
more driven by finance, economics, and government initiatives that serve some economic sectors
for the government cannot be under the purview of the SIRCs (Interviewee 7, personal interview,
31 March 2016).
This last opinion is shared by Interviewee 13 during an email interview on 18 January 2017,
who views SIRC as the sole trustee of waqf as regressive to waqf development. More often
than not, private waqf trustee such as WANCORP and BMMB have more experience in
investment and risk management of waqf. We shall analyze these opinions separately.
Making waqf an independent entity requires the abolition of SIRCs as the sole trustees of
waqf, hence reducing much bureaucracy. After all, the tradition of waqf dictates that the
founder has the right to appoint a trustee on his or her own accord (Kahf, 2014). As the
overall matter of waqf management is in the hands of the individual, there will be more trust
and motivation for the public to endow waqf. This thus leads to the formation of waqf for
public goods and mixed public goods. However, there is a weakness to this. The founders of
waqf might not choose to endow waqf for the purposes of public goods and mixed public
goods. Or even if they do, there will be a chance of oversupply of certain public goods and
mixed public goods while a deficit on others. This is certainly not efficient for countrywide
provision of these goods. Besides, this suggestion might be paradoxical because it
completely disregards state laws and the power of Rulers as the head of Islam in each
Malaysian state.
 In this case, complete centralization of waqf on the federal government level is a better Waqf
suggestion. Interviewee 9 in a personal interview on 7 June 2016, agreed that the federal financing
government must be more involved:
The legal framework in Malaysia can still be used. It is just that the federal government must be
given space to offer more opinion and also take up role in the law for that purpose.
Interviewee 12 during a personal interview on 16 November 2016, echoed the same
sentiment:
If we want waqf to develop further, there must be someone from the Ministry to manage. Perhaps
under the Prime Minister’s Department?
Centralization can be attained by two ways – standardization of state waqf laws or
promulgation of a model law for waqf (Kader, 2016).
There are positive sides to centralization. Interviewee 8 in a personal interview dated 9
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March 2016, asserted that centralization of waqf makes the task of coordination and
provision easier. Poorer states can obtain waqf fund from richer states, hence ensuring a
balance provision of goods throughout the country. Moreover, when certain public goods
and mixed public goods are already sufficient, the government can encourage waqf
endowments for other goods, which can instead prevent an oversupply of certain goods.
This claim is supported by a point made by Interviewee 2 during a personal interview dated
7 January 2016, “there must be something identified by the government such as roads,
parks”.
Regardless, if the public perceives that the government will mismanage the waqf they
endowed, the public might not want to endow waqf at all, hence defeating the purpose of
these awqaf entirely. There is indeed a reason to believe that centralization at a government
level can lead to misuse (Çizakça, 2000) but so does that at the non-government level (Baer,
1997). Besides, centralization can become a reality only if SIRCs agree. In the words of
Interviewee 9 during a personal interview on 7 June 2016:
Since it concerns the Federal Constitution, if the federal government say they need more
jurisdiction on waqf, it is up to the SIRCs to decide because the power lies with them. If SIRCs are
willing then it is okay. But if SIRCs still want to use the existing law then the existing law it is. It
is up to the SIRCs.
The very fact that Federal Territories Waqf Act has not materialize even after more than a
decade of effort and only Perak followed the manual published by JAWHAR (Kader, 2016)
indicate that centralization is near impossible.
Another option is to decentralize religious waqf and private waqf, i.e. maintaining SIRCs
as the sole trustees for these types of waqf, while waqf that is more economic in nature
(philanthropic waqf) is centralized on the level of federal government. The latter includes
waqf of public goods and mixed public goods. This option of partial centralization is by far
the most practical. First, a number of interviewees do not think that SIRCs can be the sole
trustees in the latter case because they are not equipped with the necessary knowledge and
capacity for a country wide execution of waqf. As was stated by Interviewee 5 during a
personal interview on 29 February 2016:
I am not going to undermine those in the religious authority department but majority are in the
background of Shariah or the background of usuluddin probably but they are little in the area of
muamalat, the practical area [. . .] to make the waqf to be productive.
Interviewee 6 strongly claimed the same too. Moreover, this option does not run far from the
stipulation in State List of the Ninth Schedule and all states’ legislations pertaining to SIRCs
 IMEFM as the sole trustees of waqf. Pursuant to these laws, only an exclusion clause can be enacted
to relieve SIRCs from managing waqf that are of fiscal magnitude. In particular, Article 75 of
the federal constitution can be opted. The fact that SIRCs will not completely lose its role as
a trustee of waqf plus seeing that SIRCs have the intention for waqf to flourish, as argued in
Section 4.3, makes this option highly probable. Unfortunately, this option also has the same
weaknesses as total centralization of waqf which are public trust and the tendency for
misuse. But as Islamic unit trust publishes a prospectus and other reports on a timely basis,
transparency is assured.
Because partial centralization of law is the way forward for waqf financing pure and
mixed public goods, this brings up the question of management for the cash waqf. YWM is
especially suited to be the trustee, as it is the existing federal trust body. Following examples
from Wakaf Selangor Muamalat and Larkin Sentral Property Berhad, YWM should
collaborate with an established Islamic unit trust firm to aid in the formation of unit trust
that has an efficient portfolio. Efficient portfolio is a portfolio of investment that generates
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the highest return given any level of risk (Brealey et al., 2011). More importantly, the
portfolio of investment must be Shariah-compliant. As such, Figure 4 depicts the operational
structure of investment.
The Islamic capital market in Malaysia is regulated by the SC. Hence just like the IPO by
Larkin Sentral Property Berhad, the formation of Islamic unit trust fund for cash waqf
investment must be authorized by the SC. This includes the authorization of the fund’s
management company and trustee (SC, 2017). In other words, YWM and the said Islamic
unit trust firm must also be screen by the SC. To ensure that the Islamic unit trust is indeed
Shariah compliant, it must also go through a screening process by the Shariah Advisory
Council (SAC) of the SC. After gaining approval, call for cash waqf contribution can then be
made and invested in the said Islamic unit trust. The returns obtained are then directed to
the beneficiaries. It is worth reiterating that SC has a positive outlook on cash waqf

Islamic Unit
YWM
Trust Firm

Proposed
Screening by SC Islamic Unit
Trust Fund

Screening by SC

Authorised
Islamic Unit Beneficiaries
Trust Fund Return

Figure 4. Cash Waqf

Operational structure
for cash waqf
investment Founder
 investment in the Islamic capital market (SC, 2014). The IPO of Larkin Sentral Property Waqf
Berhad is proof. This is only natural because waqf instruments can attract more financing
participation to the Malaysian Islamic finance industry.

6.4 Documentation of waqf deed

Some interviewees emphasized the importance of waqf deed that precisely documents the
purpose or beneficiary of said waqf:
But usually in waqf, the deed is specified, it’s very specific. In other words, there is something
which is identified by the government, let’s say the government says we need roads, the
government says we need parks (Interviewee 2, personal interview, 7 January 2016).
That being said, it is not feasible to practice the Malaysian norm of collecting cash waqf for
the purpose of general welfare. After all, this concurs with impact philanthropy, whereby an
endower prefers to contribute to a specific good rather than across multiple goods (Duncan,
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2004). It inadvertently increases the chances and value of waqf contributions because the
founders know the specific purpose for his or her contribution.
Interviewee 7 during a personal interview dated 31 March 2016, actually showed how the
waqf deed can be specified, “[. . .] cash waqf is one that [can] substantially contribute and can
be used as well by the government by creating endowment funds in different sectors [. . .]”.
In this regard, waqf endowments for each public goods and mixed public goods can be set
up by referring to the components of the Malaysian federal government operating and
development expenditures with finer details found in the Malaysian Economic Reports
published by the Ministry of Finance.
Federal government operating expenditures consist of emoluments, supplies and
services, grants and transfers, subsidies, debt service charges, pension and gratuities, asset
acquisition and other expenditures. A cursory look at these components indicates the
ineligibility for waqf because they concern the operational expenses of the government
which do not directly benefit the public. However, Interviewee 2 during a personal interview
on 7 January 2016, said that they were of the strong belief that subsidies can be financed by
waqf:
Now all of those subsidies, if you give it to waqf, I’m sure a lot will be reduced. And definitely the
contribution will be immense.
After all, subsidies such as cooking oil, cash assistance and myriad others benefit the public
immensely. Meanwhile, federal government development expenditure includes defense and
security, agriculture and rural development, trade and industry, transport, public utilities,
education, health, housing, social and community services, general administration and others.
However, it is reasonable to assume that the items of general administration will not garner any
waqf contributions simply because it does not directly correlate with the needs of the public. In
addition to that, the item “others” seem ambiguous and can only be assumed as miscellaneous
items that are associated with the economic sector (BNM, 2016); but, the fact that the economic
sector is overall beneficial to the public makes “others” suitable for waqf too.
Aside from the specific purposes of waqf, the inclusion of the five pairs of stipulation for
waqf creation in the waqf deed should be deliberated. Idkal and ikhraj, as well as i’ta and
hirman in particular, are essential stipulations for waqf financing pure and mixed public
goods. Say that there is a cash waqf fund for building a public park. After successfully
earning enough return to build one and construction has completed, the trustee can allocate
successive return from the cash waqf fund to another purpose in need. The purpose could be
a retirement home, student assistance, aid relief and myriads of others. As such, the purpose
 IMEFM of waqf should be further refined instead of using the broad categorization of federal
government expenditures.

7. The final structure for financing public goods and mixed public goods
through waqf
Findings from Section 6 pointed out numerous points that should be considered in
developing a rational and practical model for waqf financing public goods and mixed public
goods. It has been determined that cash is the most suitable corpus, the cash waqf deed must
contain the purpose of waqf and certain five pairs of stipulations for waqf creation, cash
waqf collected should be pooled and invested into an Islamic unit trust fund and YWM and
an established Islamic unit trust firm should collaborate to manage the waqf in question.
Due consideration of these inputs results in a model for waqf financing public goods and
mixed public goods which is depicted in Figure 5.
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The waqf deeds are grouped into 11 specified unit trust funds according to components
of the federal government expenditure which are subsidies, defense and security, agriculture
and rural development, trade and industry, transport, public utilities, education, health and
housing, as well as social and community services, etc. Therefore, founders can choose to
contribute cash waqf between these 11 purposes. The purposes are further specified into
different waqf deeds that the founder can select. Hence there are different pools of cash waqf
(Cash Waqf A, Cash Waqf B, etc.) corresponding to the different waqf deeds (Waqf Deed A,
Waqf Deed B, etc.). These cash awqaf are then invested into an Islamic unit trust fund. The
returns (Returns A, B, etc.) are then channeled to the specified purposes or beneficiaries
(Purpose/Beneficiary A, Purpose/Beneficiary B, etc.).

8. Conclusion
This article demonstrates that using waqf to finance public goods and mixed public goods is
still relevant in the modern economy. The findings are based on inputs from interviewees

Figure 5.
Model for waqf
financing pure and
mixed public goods
 which is then supported by a literature review. Owing to progressive fatwas, more Waqf
contemporary modes of waqf investment were considered. By leveraging on expertise from financing
an established Islamic unit trust firm, the risk of investment is better managed and reports
can be more transparent. In fact, transparency is further enhanced through the specification
of waqf deed. Apart from the developed model, this article has also addressed Malaysian
waqf issues that can hinder the application of waqf in question. It is beyond doubt that this
effort has injected practical and realistic assumptions to the developed model. Of course, this
particular implementation of waqf does not mean that the use of typical sources of
government revenue become extraneous. Just like Muslim governments of the past, waqf
simply has as a supplementary role to other typical government revenue mode.

9. Suggestions for future research

Further research can be conducted to develop a suitable waqf model for other countries.
More significantly, recognizing waqf as a way to finance public goods and mixed public
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goods in modern economy brings new outlook to the concept of public finance. Specifically,
waqf endowments from the general public for the purpose in question actually modify the
government budget constraint. Research can be done to investigate the impact that this
modification has on various economic variables.

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Corresponding author
Azniza Hartini Azrai Azaimi Ambrose can be contacted at: azniza87@gmail.com

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