The two volumes on waqf result from a workshop on the āRevival of Waqf for Socio-Economic Developmentā, jointly organized by the Islamic Research and Training Institute (IRTI) of the Islamic Development Bank Group, Islami Bank Bangladesh Limited (IBBL) and the Center for Zakat Management (CZM), in Dhaka, Bangladesh during November 4ā5, 2017.
For more than half of a century, the modern Islamic financial practice has been considered in a nascent stage by many academicians and practitioners. Until recently, the potential Islamic finance for solving the socio-economic difficulties of society has not received enough attention. However, the recent development and progress of Islamic banking and finance have proven its ability to provide a complement to the conventional system. This is evident during the recent financial crisis (2007ā2009). The resilience of Islamic finance makes it promising for not only absorbing financial shocks but in providing fair and efficient alternative means of financial intermediation. Similarly, the potential contributions of Islamic finance are viewed from their ability to foster financial inclusion, support small and medium enterprises through risk sharing and asset-back financing, and Shariah restrictions to speculation may also reduce systematic risk. Consequently, the United Nationsā paradigm shift to Sustainable Development Goals (SDGs) is another avenue that paves the way for Islamic finance to excel since its models focus on the societal well-being and environmental protections through Maqasid Shariah realization. The models of Islamic banking and finance have been linked with the institutional and welfarist concept of sustainability that aims at providing long-term solvency of the financial institution as well as the well-being of society. Islamic social financeāwaqf, zakat, microfinanceāis such a link for socio-economic development of the masses.
An efficient waqf management helps to preserve valuables either in the form of cash or non-cash-fixed asset earned from voluntary but permanent distribution of wealth in an Islamic society. An waqf institution transforms this value to enhance socio-economic contributions of Muslims and Islamic entities in a Shariah compliant way. It is considered as a charitable capital gift, and more explicitly āa beautiful loanā to Allah swt. Since the Caliph Umar (r.a) with his land in Khaibar until today, numerous initiatives are considered to explore and justify the importance of waqf as (1) a voluntary contribution, (2) a sustainable development institution and (3) an effective socio-economic development tool.
Inequitable distribution of economic resources leads to deprivation and poverty. Redistribution is one of an economyās most important tools to alleviate poverty and inequality. In an Islamic economy, the social institutions of zakat and awqaf are two major instruments of redistribution that can contribute to develop human capital and alleviate poverty through specific programmes. Redistribution can be done in cash and in kind. Redistribution in cash can lead to two effects: externalities in the redistribution of public goods and utility function of the consumption pattern of the poor people. Like zakat, awqaf has played an important historic role in the socio-economic development of Islamic communities and nations. Awqaf institutions have provided adequate financial assistance to the poor and the needy and facilitated the spread of mosques, books and Islamic education. Even to this day, Islamic centres, religious schools (madrasa), libraries, Quranic schools and mosques in many countries are principally funded from waqf. To enhance the capabilities and welfare of the poor, it is vital to ensure access to public goods such as education, health, physical facilities and social services. Waqf can potentially be a key source of funds for these ends.
From a historical perspective, waqf had an important role in the socio-economic development of Muslim communities during the golden era of Islamic transformation. Even in the beginning of the nineteenth century, the Ottoman Empire established a specialized ministry to look after waqf properties and enact laws for proper maintenance of waqf. For example, poverty alleviation is an essential socio-economic goal. Islam offers instruments of redistribution to end poverty. There is compulsory charity, i.e. zakat, voluntary charity, i.e. Sadaqah and perpetual charity, i.e. waqf for this purpose. The poorās non-income aspects, i.e. education and health, can significantly be improved and their access to resources, physical facilities and employment can be increased through financing from waqf. The three most common types of awqaf are religious waqf, philanthropic waqf and family waqf. The aim of philanthropic waqf is to provide the poor with social support, i.e. health and education services. Prophet Muhammad (PBUH) started this type of waqf at the dawn of Islamic civilization with the objective of reducing the inequality and disparity in society. In addition, waqf can provide many services to various sectors such as health care, education, transportation, jobs, shelter and food for the poor and needy in addition to providing some basic infrastructure services. Many of these services are listed in the 17 SDGs with 169 targets.
To achieve SDGs between 2016 and 2030, massive investments are needed across the world, such as new infrastructure, power plants and outlays of health care and education. Investment is one of the core pillars of achieving the SDGs. Resource mobilization is the most important requirement for these investments to take place. A balance of private and public investments is required to achieve SDGs. In addition, there must be complementary role of publicāprivate partnerships to achieve SDGs. Public financing and aid-dependent financing are not enough to meet the SDGs. The Official Development Assistance (ODA) is perennially insufficient to implement the SDGs agenda worldwide. Thus, it is urgent to mobilize the large investment demand from all possible sources of finance. The United Nations (2014), in its Report of the Intergovernmental Committee of Experts on Sustainable Development Financing, shows five ways of financing SDGsāpublic and private financing from domestic as well as international sources, along with blended financing. Domestic public finance focuses on mobilizing resources domestically through promoting tax reform, tax compliance and deeper international cooperation to increase equitable distribution of income and wealth, provide public goods and services and manage stability in the macro-economy. From an Islamic perceptive, zakat could be collected by the government. As a part of the fiscal policy of Islam, zakat can lessen the gap between the rich and the poor. There are many actors in the private sector, including households, multinational corporations and financial intermediaries. Domestic private financing can be used to develop micro-entrepreneurship and promote SMEs. From an Islamic perspective, the individual is responsible for his/her obligatory charity (zakat). At the private level, every rich individual can donate a portion of his/her wealth for the purpose of solving social problems for the sake of Allah (waqf).
The Organization of Islamic Cooperation (OIC), through the Islamic Development Bank (IDB), can create a global waqf fund to disperse in downtrodden areas. International private finance contains a wide range of flows, including foreign direct investment (FDI), portfolio flows and cross-border bank loans. Finally, āblended financeā encompasses a large portfolio of potential instruments, including instruments provided by depository financial institutions to leverage private finance (e.g. loans, equity investments, guarantees, etc.) as well as traditional publicāprivate partnerships (PPPs). The rapid growth of philanthropic giving and the significant financial and non-financial contribution philanthropists is also considered a potential source of financing SDGs. All philanthropic providers should cooperate in pursuit of sustainable development. Additional funds can be leveraged through multi-stakeholder partnerships. To determine best practices based on experience, it is important to increase transparency in philanthropy. Philanthropic giving should be mindful of national policies and priorities. Philanthropic donors should consider managing their endowments through impact investment.
A 2015 study by the Islamic Development Bank highlights the great potential that Islamic finance (IF) has to help achieve SDGs. IF is resilient to external shocks, which makes it an effective financial alternative to achieve SDG-8 and other growth-related SDGs. In infrastructure development, resource mobilization is crucial. Thus, IF, with its immense potential to mobilize resources, can be effective in achieving SDG-6, SDG-7, SDG-9 and SDG-11 using Islamic financial techniques. Islamic finance can be an influential tool for achieving SDG-1, SDG-2, SDG-3, SDG-5, SDG-8 and SDG-16. Zakat (an obligatory annual donation to the poor and the needy from all Muslims who possess a certain level of wealth called nisab) and waqf (endowments dedicated to achieving social objectives) are the two redistributive instruments in Islam that have played a dynamic role in poverty alleviation and social protection. Zakat and waqf, being socially and financially inclusive, can be valuable instruments in achieving SDGs. The beneficial impact of zakat and waqf on achieving SDGs can be achieved by integrating them with the financial sector. Providing interest-free loans (qard hassan) to poor and vulnerable people from zakat and waqf sources will assist them to become less vulnerable and more resilient, thus allowing them to take part in productive economic activities. It is imperative to expand the zakat base, develop existing waqf properties for income generation and enhance the efficiency of these institutions in order to revive zakat and waqf for social development.
Chapter 2 by Md. Abdullah Al Zobair and Mohammad Azizul Hoque argues that Bangladesh has yet to incorporate Islamic tools of poverty eradication such as zakah and waqf in its national poverty eradication strategies. Waqf resources show immense promise in achieving the United Nationsā Sustainable Development Goal 1 (SDG-1), which is to āend poverty in all its forms everywhereā. Waqf resources are usually spent privately, which results in most of the waqf estates being unregistered, illegally occupied and underutilized...
