The current issue and full text archive of this journal is available on Emerald Insight at:

www.emeraldinsight.com/1759-0817.htm

JIABR
9,3 Developing waqf land through
crowdfunding-waqf model
(CWM): the case of Malaysia
448 Mohamed Asmy Bin Mohd Thas Thaker
Kulliyyah of Economics and Management Sciences,
Received 24 May 2016 International Islamic University Malaysia, Kuala Lumpur, Malaysia, and
Revised 24 July 2016
Accepted 10 December 2016
Anwar Allah Pitchay
Department of Islamic Finance, School of Management,
Universiti Sains Malaysia, Gelugor, Malaysia

Abstract
Purpose – This paper aims to attempt to offer a viable alternative model of source of financing to develop
waqf land, which is known as crowdfunding-waqf model (CWM).
Design/methodology/approach – The extant literature on the financing constraints faced by waqf
institution in developing waqf land, and crowdfunding have been reviewed critically and used in the attempt
of proposing an alternative model.
Findings – The paper has developed CWM as a source of financing for waqf institution in Malaysia. This
model is expected to provide waqf institution in Malaysia to meet their liquidity constraint in developing waqf
land. It also involves an involvement of crowdfunding platform.
Research limitations/implications – The paper is based on conceptual explorations of literature
in the area of waqf and crowdfunding. This is a conceptual paper, so it did not use any empirical
analysis.
Practical implications – The findings of this paper will provide waqf institution with an alternative
source of financing to develop waqf land. The present study also has implications for government and
policymakers. By involving crowdfunding, it helps the government to reduce its expenses for the
development of waqf land in Malaysia.
Originality/value – This paper offers an additional literature on waqf and crowdfunding especially from
the Malaysian context. The paper proposes a viable alternative model for waqf institution as a source of
financing by using crowdfunding, to develop waqf land. This model incorporates donation-based
crowdfunding model and reward-based crowdfunding model. This model is different with the existing way of
raising Cash waqf, which is conducted also via online basis by financial institutions and state government
agencies. Later, the collected Cash waqf fund is transformed into illiquid assets such as building of hospitals,
educational institutions and purchasing machinery and assets. However, the nature of proposed model in this
study is to assist waqf institution to develop waqf land. Crowdfunding model is used to raise fund to develop
waqf land in Malaysia. The fund collected via crowdfunding model is based on donation and reward based,
not based on the nature of Cash waqf.

Keywords Malaysia, Crowdfunding, Liquidity constraint, Waqf land

Paper type Conceptual paper

Journal of Islamic Accounting and

Business Research
Vol. 9 No. 3, 2018
pp. 448-456
© Emerald Publishing Limited
1759-0817
The work described in this paper has been financially supported by the Ministry of Higher Education
DOI 10.1108/JIABR-05-2016-0062 of Malaysia (FRGS Grant: FRGS15-212-0453).
1. Introduction Case of
Waqf reflects one of the most important socio-economic institutions that ensuring the social Malaysia
and economic role could be established and uphold with fairness and justice (Chapra, 1985).
During the Islamic history and civilisation, waqf institution have played its significant role
in providing the social goods such as education and health, public goods (roads, bridge and
national security), commercial business, utilities (water and sanitation), religious services
(building and maintenance of mosque and graveyards), helping the poor, orphans and the
needy, creating employment, supporting agricultural and industrial sector without imposing 449
any cost on the government (Sadeq, 2002). It has brought a significant movement to the
Muslim in various dimensions of social and economics. The waqf institution which is also
known as a non-profit institution had played a very significant role through its varied and
wide contributions to the economic and social life during the early period of Islam.
The practice of waqf is not new to the Malaysian history. The waqf practice in Malaysia
can be traced to the fourteenth century after the embracement of Islam by the Malacca
Sultanate (Aun, 1975). There are a number of waqf lands that exist since the Malaya period,
which is before the independence of Malaysia. The administration of waqf in Malaysia was
managed by group of people like Imams, Penghulu (individual Mutawalli) and then
gradually the responsibility was placed under one organisation which is the State Islamic
Religious Councils (SIRCs) at each state level. The functions of SIRCs in Malaysia seem to
have improved with various steps that have been taken by the government, such as
introducing national waqf entities like Jabatan Wakaf, Zakat dan Haji (JAWHAR) and
Yayasan Wakaf Malaysia (YWM) and SIRCs’ subsidiaries such as Perbadanan Wakaf in
some of the states (e.g. Selangor, Negeri Sembilan and Johor). These entities are responsible
in administering and managing matters related to waqf specifically.
The report of the Portal i-Wakaf by JAWHAR currently estimated the total size of waqf
lands as recorded by the SIRCs to be around 8,861.13 hectares that is worth about RM64m
(JAWHAR, Portal i-Wakaf, 2012). Though, SIRCs have a huge number of potential waqf
land, most of the lands are however still lying idle. According to the former director of
JAWHAR, Datuk Dr. Sohaimi Mohd Salleh mentioned that 99.28 per cent of the waqf land
currently remained undeveloped, mainly because of shortage of financial resources (Sabit,
2009). So far, the Malaysian government becomes the main source of funding to the SIRCs
for developing waqf land through many projects and developments.
In the 9th Malaysian Plan (RMK-9), the Malaysian government has allocated almost RM
257 million, which comprises RM244 million for developing 19 physical projects and RM12.5
million for non-physical projects. However, under the 10th Malaysian Plan (RMK-10), the
government’s allocation has been reduced to RM72.76m or 72 per cent because of economic
reasons and limited to ten selected projects (Bernama, 2012). Based on the total budget of
RMK-9 and RMK-10 allocated for waqf development, SIRCs has managed to develop only
0.16 per cent of the total waqf land. Furthermore, SIRCs needed at least RM80bn to develop
the entire waqf lands in Malaysia (Ngah, 2012).
It can, therefore, be rightly asserted that the development of waqf properties requires
other innovative financing mechanism and sources of funding in addition to the government
funding. As such, a new mechanism that will allow for a sustainable source of financing is
needed in developing the idle waqf land in Malaysia. In lieu with this, the present study
proposed crowdfunding-waqf model (CWM). The CWM is expected as the most suitable
model that can effectively address or minimise the liquidity constraints faced by waqf
institutions in Malaysia.
Crowdfunding takes advantage of crowd-based decision-making and innovation and
applies it to the funding of projects. As this mode of raising initial capital has proven to be
JIABR successful in many countries like Australia, the USA, Canada, The Netherland, the UK,
9,3 France, India and Brazil (The World Bank, 2013), the potential of this model to revamp the
waqf land in Malaysia is great. This model is different with the existing way of raising Cash
waqf, which is conducted also via online basis by financial institutions and state
government agencies. Later, the collected Cash waqf fund is transformed into illiquid assets
such as building of hospitals, educational institutions, and purchasing machinery and
450 assets. However, the nature of proposed model in this study is to assist waqf institution to
develop waqf land. Crowdfunding model is used to raise fund to develop waqf land in
Malaysia. The fund collected via crowdfunding model is based on donation and reward
based, not Cash waqf itself.
Therefore, the objectives of this study are to:
 propose a sustainable model that could address that the issue of liquidity faced by
waqf institution in developing waqf land; and
 recommend ways and policies to enhance optimisation of crowdfunding in
developing waqf land.

To the best knowledge of the researcher, there has been no any research conducted
proposing crowdfunding to develop waqf land. It is therefore expected that the model being
developed this research will be applicable to waqf institutions in the country and will benefit
not only individuals, organisations and the country as a whole but could also be adapted
and validated for other countries as well.

2. Literature review
2.1 Financing issues of waqf land
There are many studies have been conducted to examine the present development of waqf in
many countries. Most of the researchers focussed on how to revive the role of waqf in the
present environment which becomes ineffective because of financial constraints, in
particular.
According to the earlier study by Ngah (1987) on waqf challenges in Malaysia, he found
that there was lack of finance/capital for developing waqf land. Indeed, the income generated
from waqf properties is too low because of few factors which are:
 the rental of the waqf property is lower than the market value;
 the rental payments for waqf properties are long overdue; and
 lack of manpower for collecting rentals.

As implication, he mentioned that the expenditure of SIRCs exceeds the revenue generated.
Similarly, in another study Habshi and Othman (1998) noted that Muslim countries like
Malaysia are struggling to use the existing waqf lands because of internal constraints.
According to their findings, financial is among the constraints considered the main factors
that hindered the growth of waqf land in Malaysia. Their findings are also consistent with
the recent study conducted by Pitchay et al. (2015) who find that lack of liquidity faces by
waqf institution is among the main reason why waqf lands could not benefit the people.
Meanwhile, Ahmad and Muhamed (2011) noted that present practise of waqf among the
Muslim people is not encouraging because of financial shortage. They claimed that the
contemporary founders of waqf declared un-productive or commercially viable land
compared to history practiced. Chowdhury et al. (1970) noted other problems in the systems
such as waqf revenue are insufficient to bear the operational cost, waqf properties have no
self-generating income and are unproductive, delay in the earning of the compensation in the
acquisition of waqf properties, procrastination is the istibdal and irregularity in receiving Case of
the benefit of the waqf properties by the beneficiaries. Malaysia
Hasan and Abdullah (2008) have conducted a study on the investment of waqf land as an
instrument of Muslim economic in Malaysia. This study has highlighted the issues of
financial resources that limit the growth of waqf lands in Malaysia. On the financial
provider aspect, basically SIRCs in Malaysia are depending on government fund allocation.
Malaysian national reporter, Bernama (2012) reported that in 9th Malaysian Plan (RMK-9),
Malaysian government has allocated RM 256.89 and in 10th Malaysian Plan (RMK-10),
451
government has reduced the allocation of budget to RM72.76m because of some economic
reasons. The total allocation of budget in RMK-9 and RMK-10 only contributed to develop
0.16 per cent of total land and according SIRCs need at least RM80bn to develop the entire
waqf lands in Malaysia (Ngah, 2012). Thus, Existing Director JAWHAR, Datuk Haji Anan
Bin C. Mohd (2012) has claimed that the main challenges of developing waqf land in
Malaysia are:
 lack of fund allocated by the government; and
 high cost of maintenance of waqf lands.

However, all the studies to date have tended to focus only on the financial constraints in
developing waqf lands by SIRCs. None of the earlier studies which have been discussed have
attempted to conceptualise this issue into a sustainable framework or model. The studies
would have been more interesting and appealing if the authors had considered
conceptualising the issue into a model or framework that could address it.

2.2 Crowdfunding
Lambert and Schwienbacher (2010) have defined crowdfunding as:
[. . .] an open call, essentially through the Internet, for the provision of financial resources either in
form of donation or in exchange for some form of reward and/or voting rights to support
initiatives for specific purposes.
Crowdfunding can be divided into four categories, namely, donation crowdfunding, reward
crowdfunding, lending crowdfunding and equity crowdfunding.
2.2.1 Donation crowdfunding. Donation crowdfunding is where the collection of funds
takes place for social, artistic, philanthropic or other purpose, and not in exchange for
anything of tangible value. It does not provide any material return (Massolution, 2015). For
example, in the USA, Kickstarter, Indiegogo, etc. are among of the platforms that support
donation-based crowdfunding.
2.2.2 Reward crowdfunding. Reward crowdfunding is the collection of funds, where the
investors or donors receive some tangible reward (such as membership rewards scheme,
products and coupon) as a token of appreciation. These rewards can be in many different
forms and not monetary form (cash) (Massolution, 2015). For example, Kicktstarter,
Rockethub and Indiegogo.
2.2.3 Lending crowdfunding. Lending crowdfunding is an online platform that matches
lenders or investors with borrowers or issuers to provide loans with lower interest rate
which is set by the platform (Massolution, 2015). There are some platforms arrange loans
between individuals, while other platforms collect funds and then lent to small and medium
enterprises. Some of the leading examples from the USA are Lending Club and Prosper, and
from the UK are Zopa and Funding Circle. Some of the platforms charge a fee based on the
loan.
JIABR 2.2.4 Equity-based crowdfunding. Equity-based crowdfunding refers to the fund raised
9,3 through online by a business, particularly early-stage funding, by offering equity interests
in the business to investors (Massolution, 2015). Businesses that are looking to raise capital
through this mode typically advertise online through a crowdfunding platform (CFP)
website, which serves as an intermediary between investors and the start-up companies
(Massolution, 2015). In the UK, two platforms, namely, Crowdcube and Seedrs, have
452 dominated the narrative for investment crowdfunding from the equity side

2.3 The development of crowdfunding platform

Over the past five years, it seems that CFP has achieved tremendous growth. There are a
total of 1,250 CFPs across the globe. In terms of geographical distribution of CFP, it shows
that the largest number of CFPs existed in the North America and European countries.
According to Massolution’s (2015) report, as for December 2014, CFPs in Europe make up
around 48 per cent of all CFPs worldwide, while around 30 per cent of all CFPs are based in
North America. CFPs in Asia and South America are represented by 13.5 and 4 per cent,
respectively.
On the other hand, reward-based and donation-based CFPs are all prominent and each
type attracts substantial funds. As of December 2014, the share of newly created platforms
that are reward-based is 28.9 per cent, followed by donation-based platforms (22.6 per cent)
and lending-based platforms (18.3 per cent). Meanwhile, in terms of funding volumes of
different types of CFPs as December 2014, it shows that lending based CFPs representing 68
per cent of total market share with the funding volume of US$11.09bn followed with
donation-based CFPs with funding volumes of US$1.94bn (Massolution, 2015). Reward-
based CFPs and equity-based CFPs continued to reach total funding volumes of US$1.33bn
and US$1.1bn, respectively.
In terms of category’s funding volume, crowdfunding’s application for entrepreneurial
ventures began to gain significant traction over the last few years (Massolution, 2015).
Business and Entrepreneurship had become the lead category in 2014, accounting for over
40 per cent of worldwide funding volume followed with Social Causes (19 per cent), Film and
Performing Arts (12.3 per cent) and Real Estate (6.25 per cent).

2.4 Crowdfunding development in Malaysia

Malaysia is also not excluded in recognising the importance of crowdfunding as shown by
the concerted efforts by the government and some private agencies to introduce it to the
local funding ecosystem. According to Asian Institute of Finance (2017), there are three main
Web-platforms on crowdfunding in Malaysia, namely, pitchIN, MyStatr and MDeC.
However, these CFPs are reward-based and donation-based crowdfunding. So far, as
August 2015, only 19 out of 103 projects are successfully raise funding through these CFPs
(Asian Institute of Finance, 2017). Indeed, all the successful projects are focussing on
community projects, film and video, arts and music.
The market volume for CFP in Malaysia was over $5m between years 2013-2015. This is
covering approximately 6 per cent of total market activity across South East Asia. The total
volume was dominated by donation-based crowdfunding, which accounted for 92.4 per cent
of total Malaysian market, which raised a total of $4.68m. Reward-based crowdfunding
accrued a total of 6 per cent, which amounted to over $325,000 over the period.
In addition to existing CFPs in Malaysia, recently, in June 2015, Malaysian Securities
Commission has approving six equity-based CFPs for operation by the end of December
2015. Malaysia was one of the first countries in Southeast Asia to give regulatory approval
for equity crowdfunding. Among the approved equity-based CFPs in Malaysia are Alix
Global, Ata Plus, Crowdonomic, Eureeca, pitchIN and CrowdPlus.asia. Equity-based Case of
crowdfunding began to emerge with a very small total volume of $58,000, equating to 1.1 per Malaysia
cent of total market activity.

3. Proposed model
Our proposed model which is known as CWM involves two main different parties which are
waqf institution and donors or crowd funders. Waqf institution can be consisting of SIRCs or 453
Department of waqf, Haji and Zakat (JAWHAR). Meanwhile, donors or crowd funders
consist of the public or a large audience (the so-called crowd), where each individual
provides a fund.
Donation-based crowdfunding (where no rewards are given to the crowd funders) and
reward-based crowdfunding (where crowd funders receive a tangible (but not in financial
form) reward for backing the project) is the biggest and fastest growing form of
crowdfunding, and thus these two models will be applied into the present proposed CWM.
The proposed model could be illustrated by Figure 1.
The following are the detailed explanation of CWM:
 Waqf institution such as SIRCs or JAWHAR plans to develop Waqf land by
developing various projects such as housing, hotels, shopping/business premises,
schools and hospital/clinic. Waqf Institution needs to raise the funding from crowd
funders to implement the projects. Waqf Institution identifies their potential waqf
land and does all the screening process on the projects to get financing from crowd
funders.
 Waqf institution uploads and submits the potential of particular projects’ proposal
to the system which is known as Web-based platform and social networks. Waqf
Institution can establish and manage its own Web-based platform and social
network instead of outsourcing from external parties. The projects have to be
funded within a predefined timeframe.
 Crowd funders choose projects that they want to support. Crowd funders browse the
web to search requests and finally choose the projects they are willing to fund.

Waqf Lands (land)

Waqf Projects
i.e. housing,
hotels,
shopping / business
premises, schools, Online Payment
Gateway
1
4

Waqf Institution 2 Web Based

i.e. SIRCs, Platform

Crowd funders
5 3

7
Figure 1.
8
Crowdfunding-waqf
model
Source: Author’s illustration
JIABR Crowd funders can choose either to involve in donation-based crowdfunding or
9,3 reward-based crowdfunding. For the donation-based crowdfunding, the crowd
funders are donating their money without expecting any return or exchange for
anything of tangible value. On the other hand, waqf institutions in Malaysia can
provide reward in terms of tax exemption or token of appreciation (coupon,
vouchers, gift, etc.) for the reward-based crowdfunding.
454  Crowd funders transfer/send funds through payment gateways. waqf Institution
can have its own payment gateways through collaboration with existing financial
institutions.
 Once the target amount of fund from crowd funders is reached, the system will
update the status of projects and keep track of received fund until it is ready to be
distributed.
 The system distributes the fund to waqf Institution and notifies them to get ready
managing and supervising the projects they proposed earlier.
 Waqf institution manages and supervises their identified projects. Waqf institution
must track the progress regularly and updates the progress into the system until the
particular projects completed and started to commence. This will ensure
transparency between them and the crowd funders.
 The system communicates with waqf institution as for control and audit
purposes through a simple communication media such as short message services
(SMS).

4. The significance of crowdfunding-waqf model

From the developed CWM, it can be seen that the waqf institution and crowdfunding can
complement each other. Micro enterprises are means to boost the economy and
crowdfunding can raise capital and support for waqf land development. Thus, from the
broader perspective, CWM could bring a significant impact to waqf institution, society and
economy and academia and theoretical.

4.1 Impact on the waqf institution

As this model incorporates the use of crowdfunding for developing waqf land, it brings
benefit to waqf institution. For instance, this integration of crowdfunding will be useful in
achieving a higher profile for waqf institution and their projects to move further. Many
donors or investors will be attracted to invest their money into projects offered by waqf
institution. Thus, waqf institution can meet their liquidity in developing waqf land without
relying much on government allocations.

4.2 Impact on the society and economy

The model is also anticipated to bring benefits to the society and economy. As this model
emphasises on developing waqf land, it creates an environment of stimulating socio-
economic development. The projects could bring an opportunity for employment, income
generation, poverty alleviation, women empowerment and so on. Indeed, this model helps
the society to become altruistic by donating their money for the good causes. Meanwhile,
crowdfunding is considered as one of the redistribution schemes in an economy system; it
helps to increase wealth, consumption and investment that later can boost the economy. It
helps to achieve efficiency of allocation of resources in the economy.
4.3 Impact on academia and theoretical Case of
For academia and theoretical, the proposed model adds to the existing literature in the areas Malaysia
of crowdfunding and waqf. This study provides a new literature on the avenue for an
effective use of crowdfunding for waqf and its development, particularly in Malaysia. This
is because waqf had played a significant role in the socio-economic development of Muslims
in the past history. This model is expected to positively change the perceptions of
stakeholders about the dynamics and potentials of this voluntary sector. 455

5. Conclusion
This study has shown that there is large portion of waqf land which is still idle. Waqf
institution is facing the problem of meeting their liquidity to develop particular land. Lack of
allocation is considered to be the most factors affecting their capability to develop waqf land
in Malaysia. Thus, the present study proposes an idea of CWM as to address waqf
institution’s financial constraint and enhance the development of waqf land and contribution
to the national income.

6. Limitations and direction for future research

This paper has at least two limitations. First, this study is only for Malaysian experience.
Second, it is conceptual paper where there is no empirical analysis conducted. To improve
this study in the future, following are some directions for further research studies:
 The developed model should be validated through interview and surveys to gauge
the intentions of the stakeholder in using this model. Theories such as technology
acceptance model (Davis, 1989) and theory of planned behaviour (Ajzen, 1991) can
be very useful in this regard.

References
Ahmad, S. and Muhamed, N.D. (2011), “Wakaf institutions and national economic development: a case
on Wakaf land development in Malaysia”, Prosiding Perkem VI, Vol. 1, pp. 139-147.
Ajzen, I. (1991), “The theory of planned behavior”, Organizational Behavior and Human Decision
Processes, Vol. 50 No. 2, pp. 179-211.
Asian Institute of Finance (2017), Crowdfunding Malaysia’s Sharing Economy: Alternative Financing
for Micro, Small and Medium Enterprises, Kuala Lumpur.
Aun, W.M. (1975), An Introduction to the Malaysian Legal System, Heinemann Educational Book
(ASIA), Kuala Lumpur.
Bernama (2012), available at: Bharian/articles/RM256_4jutabangunkan17projekwakafDiMalaysia_
JamilKhir/Article/index_html
Chapra, M.U. (1985), Towards a Just Monetary System, The Islamic Foundation, Leicester.
Chowdhury, M.S.R., Chowdhury, I.A., Muhammad, M.Z. and Yasoa, M.R. (1970), “Problems of Waqf
administration and proposals for improvement: a study in Malaysia”, The Journal of Internet
Banking and Commerce, Vol. 17 No. 1, pp. 1-18.
Davis, F.D. (1989), “Perceived usefulness, perceived ease of use, and user acceptance of information
technology”, MIS Quarterly, Vol. 13 No. 3, pp. 983-1003.
Habshi, A. and Othman, S. (1998), “Case study”, International Seminar on Awqaf and Economic
Development, Kuala Lumpur.
JIABR Hasan, Z. and Abdullah, M.N. (2008), “The investment of Waqf land as an instrument of muslims’
economic development in Malaysia”, Dubai International Conference on Endowments’
9,3 Investment, Awqaf and Minors Affairs Foundation, Dubai.
Lambert, T. and Schwienbacher, A. (2010), “An empirical analysis of crowdfunding”, SSRN
No: 1578175.
Massolution (2015), “2015CF-crowdfunding industry report”.
456 Ngah, K. (1987), “Kajian potensi perancangan pembangunan tanah wakaf di Pulau Pinang”, Pusat
Penyelidikan Dasar, Universiti Sains Malaysia.
Ngah, N. (2012), available at: www.jawhar.gov.my/index.php/ms/akhbar/123-artikel-bh25102012,
www.jawhar.gov.my (accessed Monday December 2012).
Pitchay, A., Meera, K.M. and Saleem, M.Y. (2015), “Factors influencing the behavioral intentions of
muslim employees to contribute to cash-waqf through salary deductions”, JKAUU, Islamic
Economics, Vol. 28 No. 1, pp. 63-98.
Sabit, M.T. (2009), “Alternative development financing instruments for waqf properties”, Malaysian
Journal of Real Estate, Vol. 4 No. 2.
Sadeq, A.M. (2002), “Waqf, perpetual charity and poverty alleviation”, International Journal of Social
Economics, Vol. 29 Nos 1/2, pp. 135-151.
The World Bank (2013), Crowdfunding’s Potential for the Developing World, World Bank, WA, DC.

Corresponding author
Mohamed Asmy Bin Mohd Thas Thaker can be contacted at: asmy@iium.edu.my

For instructions on how to order reprints of this article, please visit our website:
www.emeraldgrouppublishing.com/licensing/reprints.htm
Or contact us for further details: permissions@emeraldinsight.com