Crowdfunding|39 38 CHAPTER 4 CROWDFUNDING 4.1 OVERVIEW Modern crowdfunding is practiced in a form of fundraising that links between two groups of people: those who have additional funds and those who need funds. In terms of operation, the fund is commonly channelled through crowdfunding platforms and is explicitly managed as most platforms provide a real-time update system. In addition, many platforms allow funders to receive regular updates on their contributions through emails and dashboards. This would be different from the traditional funding system, in which contributors sometimes have no idea whether their money is being used appropriately or not (Khairuddin & Ishak, 2021). 4.2 CURRENT TREND AND PRACTICES Currently, crowdfunding has attracted many talents to obtain their funds via online platforms (Wahjono et al., 2017). Therefore, crowdfunding is widely recognized as an alternative funding to intermediary institutions in which business entities could obtain their capital from the public, through the internet platform (Schwienbacher & Larralde, 2010). At the same time, crowdfunding is a popular mean to gather money for the purpose of charitable activities, community-based projects, and humanitarian campaigns. Through this unique practice, entrepreneurs or activists can obtain funds through crowdfunding platforms (Mollick, 2014). In general, four crowdfunding models are widely practised including donation, reward, lending, and equity. The first two models are known as community-based crowdfunding while the rest is popularly known as financial return-based crowdfunding (Ishak & Kamaruddin, 2021). In fact, all crowdfunding models are seen to have the potential to support businesses or society-based projects as far as the element of trust has been established between two groups: funders and project initiators (Wan Mohamad Nazarie & Williams, 2021). This has been proven by many studies that trust in crowdfunding is the main factor of successful projects (Moysidou & Hausberg, 2020). Without trust, there would be fewer funders, resulting in crowdfunding being ineffective as a financing platform (Wan Mohamad Nazarie & Williams, 2021). CHAPTER 4 39 Table 4.1: Crowdfunding Models Model Islamic instruments 1 Donation-Based crowdfunding Sadaqah, Infaq, Zakat,Waqf 2 Reward-Based Crowdfunding Hibah 3 Lending-Based Crowdfunding Murabahah, Tawaruq, Qard Hassan 4 Equity-Based Crowdfunding Mudharabah & Musharakah On one hand, crowdfunding poses several advantages in many forms. Firstly, it provides investors high returns instead of putting their money in mainstream financial institutions. As for project initiators, the cost of repayment would be lower than borrowing from financial institutions like banks (Bade, 2018). Secondly, crowdfunding improves the socio-economy by creating many new jobs, especially when the project starts to run (Abdullah, 2016). Other than that, crowdfunding can also liberalise financial resources as this would allow society to determine and influence the types of businesses needed in the future that uphold the interest of society (infoDev, 2013). Subsequently, crowdfunding contributes both entrepreneurs and society by boosting economic growth and providing job opportunities, mainly towards sectors in which it is difficult to get support from current financial services (Ramos & Stewart, 2014). 4.3 THE ROLE OF CROWDFUNDING IN STRENGTHENING MUSLIM SOCIOECONOMIC In Malaysia, crowdfunding and Islamic crowdfunding are recognized as a new player of the financial sector, especially when Securities Commission of Malaysia (SC) issued the guideline on regulation of markets in 2014. Based on the guideline, equity-based crowdfunding and lendingbased crowdfunding platforms must register and follow SC requirements (Securities Commission, 2015). Till 2022, ten (10) equity-based crowdfunding platforms and eleven (11) Peer-to-Peer (P2P) lending, which is a part of lending-based crowdfunding have been registered under SC. Currently, it is reported that P2P has successfully raised RM 739M from 9,989 campaigns, while equity crowdfunding has raised RM 86M from 89 campaigns (SC, 2020). In terms of Islamic crowdfunding, Nusa Kapital a P2P platform operated by Ethis Kapital is considered as the first Shariah-compliant P2P platform operator in Malaysia (Ramli et al, 2023)
40| Waqf Crop Micro Takaful Framework Through Crowdfunding-Waqf In Malaysia 40 As for charity-based crowdfunding, it is argued that this fundraising has been practiced in this country since 1982. As of today, many reported donation-based platforms are managed by NonGovernment Organizations (NGOs) like kitabantu and kitafund. This practice has created spill over effects into banking sector, especially after the introduction of Value Based Intermediation (VBI) in 2017. As a response, several donation-based crowdfunding platforms have been established by Islamic banks like Jariah Fund (Bank Muamalat Malaysia Berhad) and Maybankheart (Maybank). Meanwhile, MyWakaf has been launched by Association of Islamic Banking and Financial Institutions Malaysia (AIBIM) as a platform to encourage Islamic banking institutions in actively supporting the needs of the society (Eldersevi & Muhammad, 2021). Since this platform applies the concept of waqf, it involves a corporation between banking institutions and State Religious Councils, since the latter is the sole authority in waqf management in this country. 4.4 DEFINITON OF TERMS 4.4.1 Crowdfunding - way of raising funds from a large number of individuals who are interested in supporting the idea, product, service, charitable projects.
40 As for charity-based crowdfunding, it is argued that this fundraising has been practiced in this country since 1982. As of today, many reported donation-based platforms are managed by NonGovernment Organizations (NGOs) like kitabantu and kitafund. This practice has created spill over effects into banking sector, especially after the introduction of Value Based Intermediation (VBI) in 2017. As a response, several donation-based crowdfunding platforms have been established by Islamic banks like Jariah Fund (Bank Muamalat Malaysia Berhad) and Maybankheart (Maybank). Meanwhile, MyWakaf has been launched by Association of Islamic Banking and Financial Institutions Malaysia (AIBIM) as a platform to encourage Islamic banking institutions in actively supporting the needs of the society (Eldersevi & Muhammad, 2021). Since this platform applies the concept of waqf, it involves a corporation between banking institutions and State Religious Councils, since the latter is the sole authority in waqf management in this country. 4.4 DEFINITON OF TERMS 4.4.1 Crowdfunding - way of raising funds from a large number of individuals who are interested in supporting the idea, product, service, charitable projects. 41 CHAPTER 5 WAQF 5.1 OVERVIEW Waqf literally means hold, confinement or prohibition (Monzer Kahf, 2011). Technically, despite the multi-dimensional definitions of waqf, it can be concluded as the holding of property in such a way that the original holding is not consumed, remains fixed and its benefits are utilized for charity purposes (Hossein Pirasteh and Hojjatoulah Abdolmaleki, 2011). Waqf is a practice where the ownership of an asset is held in order to donate its benefit (Al-Terjani, 1992). The main objective of waqf practice is to gain rewards from Allah and is considered as one of highly encouraged practices in Islam (al-Zuhaili, 1984). The ownership of a property will be removed from its donor once the property is donated as waqf. In other words, he cannot claim his property back and has no jurisdiction on it anymore (al-Syirazi, n.d.). The administration of waqf property under a professional institution has a big potential in developing and strengthening the Muslims’ economy (Ahmad Zaki Abdul Latif & Norhayati Hassan, 2005). In Islamic history, waqf has been expanded from lands and orchards to mosques, schools, libraries, wells, roads, hospitals and orphanages (Ikrimah Said Sobri, 2008). Moreover, items that can be donated as waqf have evolved from immovable to movable properties. Modern shape of waqf has reformed from books, Quran and prayer mats to cash waqf, share waqf, corporate waqf and others (Ahmad Zaki Abdul Latif & Norhayati Hassan, 2005). All these methods of waqf do not only help the government in establishing public facilities for the society but also contribute to the development of Muslims’ socioeconomics. Hence, waqf becomes one of the devices developed by the Muslims to fulfil many crucial needs in various sectors that are today financed by the state/the government. Examples of such needs are education, health care, national security, commercial and business activities, transportation facilities, shelter, and food for the poor and needy. Other than that creating jobs for many people, is been part of the objective besides supporting the agricultural and industrial sectors without inflicting any cost on the government. 5.1.2 THE HISTORY OF WAQF IN ISLAM From the historical perspective, the practice of waqf is unknown amongst the Jahili Arabs, which was introduced by Islam. Imam Shafie was reported to say that he never knew if there are any CHAPTER 5
42| Waqf Crop Micro Takaful Framework Through Crowdfunding-Waqf In Malaysia 42 members of the Jahili society who donate a house or land as waqf (Al-Zuhaili, 1984). As chronicled in Islamic history, the Quba’ mosque in the city of Medina is the first religious waqf. Followed by the mosque of the Prophet Muhammad (PBUH) six months later (Monzer Kahf, 2011). 5.1.3 THE LEGISLATION OF WAQF IN ISLAM 1. The saying of Allah in surah al-Baqarah, verse 261 which means: “The likeness of those who spend their wealth in the Way of Allah, is as the likeness of a grain (of corn); it grows seven ears, and each ear has a hundred grains. Allah gives a manifold increase to whom He pleases. And Allah is All-Sufficient for His creatures' needs, All-Knower”. 2. The Prophet SAW was reported to say: “When a person dies, his good deeds will be ended except those three; First, his pious son’s praying for him. Second, his continuous donations and welfare and finally, his beneficial knowledge that has been endlessly taught and applied by others”. 3. Consensus between the Muslim jurists on the legality of waqf. Imam Al-Qurthuby said: The legality of waqf has been unanimously agreed by the companions of the Prophet SAW. 5.1.4 TYPES OF WAQF Generally, waqf can be divided into three types (Monzer Kahf, 2011). 1. Religious Waqf - The Quba mosque and the Prophet’s mosque in Medina are examples for this type of waqf. Any mosque and real estate confined for providing revenues to spend on mosque maintenance and running expenses are included in the first type. 2. Philanthropic Waqf - The aim of this waqf is to support the poor and activities of the public interests such as libraries, educations, health services, financial supports for small businesses just to name a few. 3. Posterity or Family Waqf (Waqf Zurri) - This type of waqf began during the reign of the second caliph, Umar R.A when he invited several companions to witness the documentation of waqf in Khaibar. However, some of the donors charged specific conditions through the document for example, fruits and revenues of their waqf should primarily be given to their families whereas the remaining revenues can be distributed to others. (Monzer Kahf, 2011).
Waqf|43 42 members of the Jahili society who donate a house or land as waqf (Al-Zuhaili, 1984). As chronicled in Islamic history, the Quba’ mosque in the city of Medina is the first religious waqf. Followed by the mosque of the Prophet Muhammad (PBUH) six months later (Monzer Kahf, 2011). 5.1.3 THE LEGISLATION OF WAQF IN ISLAM 1. The saying of Allah in surah al-Baqarah, verse 261 which means: “The likeness of those who spend their wealth in the Way of Allah, is as the likeness of a grain (of corn); it grows seven ears, and each ear has a hundred grains. Allah gives a manifold increase to whom He pleases. And Allah is All-Sufficient for His creatures' needs, All-Knower”. 2. The Prophet SAW was reported to say: “When a person dies, his good deeds will be ended except those three; First, his pious son’s praying for him. Second, his continuous donations and welfare and finally, his beneficial knowledge that has been endlessly taught and applied by others”. 3. Consensus between the Muslim jurists on the legality of waqf. Imam Al-Qurthuby said: The legality of waqf has been unanimously agreed by the companions of the Prophet SAW. 5.1.4 TYPES OF WAQF Generally, waqf can be divided into three types (Monzer Kahf, 2011). 1. Religious Waqf - The Quba mosque and the Prophet’s mosque in Medina are examples for this type of waqf. Any mosque and real estate confined for providing revenues to spend on mosque maintenance and running expenses are included in the first type. 2. Philanthropic Waqf - The aim of this waqf is to support the poor and activities of the public interests such as libraries, educations, health services, financial supports for small businesses just to name a few. 3. Posterity or Family Waqf (Waqf Zurri) - This type of waqf began during the reign of the second caliph, Umar R.A when he invited several companions to witness the documentation of waqf in Khaibar. However, some of the donors charged specific conditions through the document for example, fruits and revenues of their waqf should primarily be given to their families whereas the remaining revenues can be distributed to others. (Monzer Kahf, 2011). 43 5.1.5 OWNERSHIP OF WAQF Some Muslim jurists agreed that the right owner of the waqf property is Allah. On the other hand, there are jurists who believe it belongs to the beneficiaries. However, this ownership is not absolute, in a sense that they are not permitted to dispose or use it in a different way from what was decreed by the donor himself. (Monzer Kahf, 2011). 5.1.6 CHARACTERISTICS OF WAQF There are two characteristics for waqf. 1. Perpetuity which means that waqf property will forever remain as waqf after its dedication. Nothing can be done to eliminate the status of a waqf property except by an exchange with another property of equivalent value. It also must be with the approval from local court or the Shariah court in the Malaysian context. The new property will then automatically become waqf’s property for the same purpose and beneficiaries of the former one. 2. Permanence of stipulations of waqif. Due to the fact that waqf is a voluntary act of benevolence, conditions specified by the waqif must be fulfilled as long as they are in line with the Shariah rulings. This characteristic covers all waqif’s stipulations whether they relate to purpose, distribution of revenues, management, and supervisory authority (Monzer Kahf, 2011). 5.1.7 PILLARS FOR WAQF AND THEIR CONDITIONS a) Donor (Waqif) Waqif is the one who donates his property as waqf. The conditions are: 1. he must own the property he wants to be donated completely, 2. of sound mind, 3. reach the age of puberty, 4. of his own choice and not being forced to do so. b) Property or Asset (Mawquf) Mauquf is the property that is donated as waqf. The conditions for the mauquf are: 1. must be something that is beneficial, 2. must have its value (mutaqawwim),
44| Waqf Crop Micro Takaful Framework Through Crowdfunding-Waqf In Malaysia 44 3. must be completely owned by the waqif, 4. it is donated for a noble purpose which is not contradicting the Syarak. c) Mawquf ‘Alaih Mauquf ‘Alaih is the one who the benefit is given to. The conditions are: 1. he or she must be a person who can own property (ahlan li al-tamlik), 2. the mawquf ‘alaihi is able to utilize the benefit of waqf in a way that is not contradict the Shariah rules d) Sighah Sighah is the statement of waqf. The sighah can be done either by words, writings together with words or sign. It can be done either directly (soreh) or indirectly (kinayah). 5.2 CURRENT TREND AND PRACTICES Figure 5.1 Current Trend of Waqf Waqf affairs are the responsibility of the Islamic Religious Council of each state. The courts recognized Sharia as the governing law of property for Muslims including waqf. Section 25 of the Civil Law Act 1956 stated that the administration of Muslim’s property shall be in accordance with the Islamic law. There are 14 State Islamic Religious Councils, one for each of the 13 states and one for the Federal Territory. Therefore, the jurisdiction over waqf lies within the jurisdiction of the syariah court List II (1) of the Ninth Schedule of the Federal Constitution. Among the fundamental characteristics of waqf in Malaysia is that every waqf asset shall be registered in the name of the Islamic Religious Council as proprietor in every state respectively. The government of Malaysia has formed a department for zakat, waqf and hajj on the 27th March 2004 with the aim of making the administration systematic and effective. This department however does not have an authority to administer and manage waqf properties but rather plays a role as a planning coordinator and observes the waqf matter. The Department of Waqf, Zakat and Hajj (JAWHAR) then officially established Yayasan Waqaf Malaysia (Malaysian Waqf Foundation) on 23 July 2008 under the Trustee [Incorporation] Act 1952. Yayasan Wakaf Malaysia as a national waqf entity. The vision of Yayasan Wakaf Malaysia is to be a leader in waqf development in Malaysia and its for the sole purpose of identifying the underutilised assets of awqaf and planning for their development in coordination with the State Islamic Religious Council of each state. In Malaysia, cash waqf has also gained acceptance. In 2007, through a fatwa passed by the Malaysian National Fatwa Council, cash waqf has been permitted (Yayasan Waqaf Malaysia, 5, July, 2014). In addition, Amir et.al. (2010) corroborated that, the huge cash waqf fund collected by the Selangor State Religious Council (SSRC) gives numerous advantages in developing the Islamic economy, loans in financing small and medium industry business, settling of debts, such as houses, investment in property for the Muslims as property will be rented to generate profits (Ibrahim et.al. 2013)
Waqf|45 44 3. must be completely owned by the waqif, 4. it is donated for a noble purpose which is not contradicting the Syarak. c) Mawquf ‘Alaih Mauquf ‘Alaih is the one who the benefit is given to. The conditions are: 1. he or she must be a person who can own property (ahlan li al-tamlik), 2. the mawquf ‘alaihi is able to utilize the benefit of waqf in a way that is not contradict the Shariah rules d) Sighah Sighah is the statement of waqf. The sighah can be done either by words, writings together with words or sign. It can be done either directly (soreh) or indirectly (kinayah). 5.2 CURRENT TREND AND PRACTICES Figure 5.1 Current Trend of Waqf Waqf affairs are the responsibility of the Islamic Religious Council of each state. The courts recognized Sharia as the governing law of property for Muslims including waqf. Section 25 of the Civil Law Act 1956 stated that the administration of Muslim’s property shall be in accordance with the Islamic law. There are 14 State Islamic Religious Councils, one for each of the 13 states and one for the Federal Territory. Therefore, the jurisdiction over waqf lies within the jurisdiction of the syariah court List II (1) of the Ninth Schedule of the Federal Constitution. Among the fundamental characteristics of waqf in Malaysia is that every waqf asset shall be registered in the name of the Islamic Religious Council as proprietor in every state respectively. The government of Malaysia has formed a department for zakat, waqf and hajj on the 27th March 2004 with the aim of making the administration systematic and effective. This department however does not have an authority to administer and manage waqf properties but rather plays a role as a planning coordinator and observes the waqf matter. The Department of Waqf, Zakat and Hajj (JAWHAR) then officially established Yayasan Waqaf Malaysia (Malaysian Waqf Foundation) on 23 July 2008 under the Trustee [Incorporation] Act 1952. Yayasan Wakaf Malaysia as a national waqf entity. The vision of Yayasan Wakaf Malaysia is to be a leader in waqf development in Malaysia and its for the sole purpose of identifying the underutilised assets of awqaf and planning for their development in coordination with the State Islamic Religious Council of each state. In Malaysia, cash waqf has also gained acceptance. In 2007, through a fatwa passed by the Malaysian National Fatwa Council, cash waqf has been permitted (Yayasan Waqaf Malaysia, 5, July, 2014). In addition, Amir et.al. (2010) corroborated that, the huge cash waqf fund collected by the Selangor State Religious Council (SSRC) gives numerous advantages in developing the Islamic economy, loans in financing small and medium industry business, settling of debts, such as houses, investment in property for the Muslims as property will be rented to generate profits (Ibrahim et.al. 2013) 45 5.3 ITEMS THAT CAN BE DONATED AS WAQF Waqf is an Islamic financial product existed since the day of the Prophet (PBUH)In the prophet’s day only immovable property was donated as waqf. However, it evolved from immovable to movable property. Cash Waqf is a special type of endowment, that is traditionally known as waqf al-darahim and waqf al-dananir and has been practiced during the reign of the Ottoman. It differs from the ordinary land or real estate waqf since its original capital (asl al-mal) fully or partially consists of cash The practice of cash waqf had successfully alleviate the government’s expenditure in providing education, health, municipal and other facilities to the society. The objective of cash waqf is to gather a permanent fund from the Muslim society. Furthermore, it aims to nourish the practice of waqf and boost recognition towards waqf as a potential development tool for the society, cultivating the spirit of cooperation between Muslims. Moreover, it triggers the increment of Muslims’ property asset, implementing waqf development together with the Muslims economy and broadening the charitable scope systematically and effectively. Cash waqf allows equal chance for everyone to practice waqf. It is also easier to administer. Beside its availability to finance various development projects, cash waqf is also eligible for Shariah compliant investment. 5.4 THE ROLE OF WAQF IN STRENGTHENING MUSLIM SOCIO-ECONOMIC Waqf is not only an act of worship. It has its own potential in strengthening and uplifting the Muslim’s socio-economic status. It can be done through a well-managed administration of waqf. Together with the zakat institutions, waqf does not only eliminate poverty and other social problems but functions to enhance the income of the Muslims society. Through the permanent nature of waqf, the ownership of Muslims towards land and real estate can be secured. The ownership of donated assets for waqf will never be transferred to anyone else and remains in the hands of the Muslims. The permanent nature of waqf also resulted in the accumulation of waqf properties. The varieties of their objectives at the same time provide support for widespread religious and philanthropic activities. These play important roles in the sociopolitical life of Muslim societies and communities. By practising the permanent nature of waqf, the ownership of Muslims towards land and real estate can be secured. The ownership of donated assets for waqf will never be transferred to anyone else and remains in the hands of the Muslims to ensure the authority of waqf assets will remain intact.
46| Waqf Crop Micro Takaful Framework Through Crowdfunding-Waqf In Malaysia 46 These play important roles in the socio-political life of Muslim societies and communities (Monzer Kahf, 2011). By cash waqf, the Muslim community funds can be established that enable them to buy highly potential lands and real estates which are usually sold at high prices where only few wealthy Muslims could afford to buy them. Cash waqf, helps the Muslim generate sufficient funds to purchase the properties to elevate the income for the Muslim community. Hence, the same fund can be used to build hotels, commercial centers, shops, and other physical infrastructure. The generated income will then be disbursed for the importance of Muslims. The fund raised from cash waqf plays a vital role in developing the community. It can be utilised to strengthen small businesses and to fund new entrepreneurs who face difficulty to attain financial support from banks and other institutions. These entrepreneurs can be financially help if waqf institution is properly administered (Achmad Tohirin, 2010). Cash waqf is a powerful mechanism in generating fund and investment that significantly contribute to improve industrial, financial system and economic development (2010) Waqf fund can also help to achieve modern macroeconomic objectives which is to decrease the government’s expenditures, downsize the country’s deficit budget and lessen government dependencies towards loan as a source of financing development projects. Waqf fund can also be utilised for educational purposes which includes establishment of libraries, books, teacher and staff salaries and stipends for students. Waqf financing is not restricted to students of Islamic studies, but also conceal any related programmes. The practice of financing through waqf has promoted educational freedom that contributes to the growth of educated scholars not necessarily produced from the rich and noble classes (Monzer Kahf, 2011). For example, the University of Al-Azhar is set to be an excellent example of how a waqf fund can be used to fortify education in the society. Using charity funds as a catalyst to establish education and other public interest centres has been practised by various western or non-Muslim foundations including the Carnegie Corporation, the Rockefeller Foundation and the Bill and Melinda Gates Foundation. The Carnegie Corporation, founded by Andrew Carnegie in 1911, donates around USD 60 million for the worldwide education programme. Waqf fund also sustenance the government in providing infrastructures for the public as shown during the days of the Ottomans. Murat Cizakca (2011) states that if the practice of cash waqf is prolonged until now, greater achievements can be accomplished as what had happened in the days of the Ottomans empire. Health services, which include hospitals construction and wages payment for physicians, apprentices and patients are clear examples of public infrastructures that can be developed through this fund.
Waqf|47 46 These play important roles in the socio-political life of Muslim societies and communities (Monzer Kahf, 2011). By cash waqf, the Muslim community funds can be established that enable them to buy highly potential lands and real estates which are usually sold at high prices where only few wealthy Muslims could afford to buy them. Cash waqf, helps the Muslim generate sufficient funds to purchase the properties to elevate the income for the Muslim community. Hence, the same fund can be used to build hotels, commercial centers, shops, and other physical infrastructure. The generated income will then be disbursed for the importance of Muslims. The fund raised from cash waqf plays a vital role in developing the community. It can be utilised to strengthen small businesses and to fund new entrepreneurs who face difficulty to attain financial support from banks and other institutions. These entrepreneurs can be financially help if waqf institution is properly administered (Achmad Tohirin, 2010). Cash waqf is a powerful mechanism in generating fund and investment that significantly contribute to improve industrial, financial system and economic development (2010) Waqf fund can also help to achieve modern macroeconomic objectives which is to decrease the government’s expenditures, downsize the country’s deficit budget and lessen government dependencies towards loan as a source of financing development projects. Waqf fund can also be utilised for educational purposes which includes establishment of libraries, books, teacher and staff salaries and stipends for students. Waqf financing is not restricted to students of Islamic studies, but also conceal any related programmes. The practice of financing through waqf has promoted educational freedom that contributes to the growth of educated scholars not necessarily produced from the rich and noble classes (Monzer Kahf, 2011). For example, the University of Al-Azhar is set to be an excellent example of how a waqf fund can be used to fortify education in the society. Using charity funds as a catalyst to establish education and other public interest centres has been practised by various western or non-Muslim foundations including the Carnegie Corporation, the Rockefeller Foundation and the Bill and Melinda Gates Foundation. The Carnegie Corporation, founded by Andrew Carnegie in 1911, donates around USD 60 million for the worldwide education programme. Waqf fund also sustenance the government in providing infrastructures for the public as shown during the days of the Ottomans. Murat Cizakca (2011) states that if the practice of cash waqf is prolonged until now, greater achievements can be accomplished as what had happened in the days of the Ottomans empire. Health services, which include hospitals construction and wages payment for physicians, apprentices and patients are clear examples of public infrastructures that can be developed through this fund. 47 Waqf has a vast potential. The cash waqf plays a vital role in developing the community. It can be utilized to strengthen small businesses and to fund new entrepreneurs who face difficulty attaining financial support from banks and other institutions. These entrepreneurs can be financially helped if waqf institution is properly administered. At the same time the funding of cash waqf through qard al-hasan will eradicate the phenomena of loan sharks. In another perspective, waqf is closely associated with philanthropic purposes and can serve the function to alleviate social problems. Many social problem occurrences are caused by financial glitches such as insufficient funds which can contribute to baby dumping, drug rehabilitation centres, teen pregnancy, and other social problems. Hence, waqf funds can be channeled to help drug rehabilitation centers that are in need for financial support in order to carry out their programmes Proper administration of the waqf fund will not only benefit human but also other living being like animals as what practised In Damascus, specific waqf fund is allocated to treat abandoned animals (Monzer Kahf, 2011). The waqf system as stated here shows that the practice of waqf has varied and emerged significantly. 5.5 DEFINITION OF TERMS 5.5.1 Waqf - Withholding property that remains in its form and can be utilized, where the proceeds from the property can be used for the intended purpose (mubah), to be handed over to a party determined by the waqif according to Shariah, without renouncing the original property. 5.5.2 Waqif - A person who creates waqf. 5.5.3 Mauquf - The property or asset been submitted as waqf. 5.5.4 Cash Waqf - A special type of endowment which differed from the ordinary real estate waqf in that its original capital, asl al-mal or, corpus, consisted purely or partially, of cash. 5.5.5 Public Waqf - A dedication in perpetuity of the capital and income of property for general religious or charitable purposes recognized by Islamic Law. 5.5.6 Private Waqf - A dedication in perpetuity of the capital of property for specific religious or charitable purposes recognized by Islamic law and the property so dedicated, the income of the property being paid to persons or for the said specific purposes prescribed in the waqf.
48| Waqf Crop Micro Takaful Framework Through Crowdfunding-Waqf In Malaysia 48 CHAPTER 6 AN INSIGHT ON CROWDFUNDING WAQF CROP MICRO TAKAFUL 6.1 OVERVIEW It is fundamental to have a comprehensive analysis of Waqf Crop Microtakaful, a proposed framework for addressing food insecurity in Malaysia, which is funded through crowdfunding. The report examines the many aspects in waqf and takaful, as well as how they can be merged with crowdfunding to provide a sustainable solution for the agriculture industry. 6.2 CROWDFUNDING Utilising crowdfunding as a means to manage waqf and crowdfunding is not easy process in reality. Based on fieldwork conducted, several challenges are identified as the followings: 1. Achieving the target Even though crowdfunding has proven its role in assembling funds from funders, be it small or medium, many campaigns have unsuccessfully reached their target. It is understood that despite crowdfunding can attract a large number of funders, their contribution is seen as relatively small. Through field work conducted, CEO Wakaf Penang has admitted that a special allocation has been provided for promoting their waqf crowdfunding campaign through MyWakaf platform. 2. Spreading awareness It is commonly perceived that welfare related fund should be borne by the government. Therefore, launching a crowdfunding campaign to support B40 community may be treated with scepticism, especially when this idea is still new in Malaysia. This point is admitted by CEO Arba Foundation in which many still inquire on the channel of the fund. 3. Obtaining approval from the state authority Unlike other Islamic funds, waqf funds is exclusively belonged to the state authority, except for the federal territories. Therefore, if the platform intends to implement waqf in its fund management, permission and cooperation must be sought from the respective State Islamic Religious Council (SIRC). Another point of concern is since waqf is under the state authority, every government has enacted their regulation as well as administered their waqf independently. Many Takaful operators have experienced such challenges in proposing waqf Takaful. CHAPTER 6
48 CHAPTER 6 AN INSIGHT ON CROWDFUNDING WAQF CROP MICRO TAKAFUL 6.1 OVERVIEW It is fundamental to have a comprehensive analysis of Waqf Crop Microtakaful, a proposed framework for addressing food insecurity in Malaysia, which is funded through crowdfunding. The report examines the many aspects in waqf and takaful, as well as how they can be merged with crowdfunding to provide a sustainable solution for the agriculture industry. 6.2 CROWDFUNDING Utilising crowdfunding as a means to manage waqf and crowdfunding is not easy process in reality. Based on fieldwork conducted, several challenges are identified as the followings: 1. Achieving the target Even though crowdfunding has proven its role in assembling funds from funders, be it small or medium, many campaigns have unsuccessfully reached their target. It is understood that despite crowdfunding can attract a large number of funders, their contribution is seen as relatively small. Through field work conducted, CEO Wakaf Penang has admitted that a special allocation has been provided for promoting their waqf crowdfunding campaign through MyWakaf platform. 2. Spreading awareness It is commonly perceived that welfare related fund should be borne by the government. Therefore, launching a crowdfunding campaign to support B40 community may be treated with scepticism, especially when this idea is still new in Malaysia. This point is admitted by CEO Arba Foundation in which many still inquire on the channel of the fund. 3. Obtaining approval from the state authority Unlike other Islamic funds, waqf funds is exclusively belonged to the state authority, except for the federal territories. Therefore, if the platform intends to implement waqf in its fund management, permission and cooperation must be sought from the respective State Islamic Religious Council (SIRC). Another point of concern is since waqf is under the state authority, every government has enacted their regulation as well as administered their waqf independently. Many Takaful operators have experienced such challenges in proposing waqf Takaful. CHAPTER 6 49 4. Internet coverage Internet usage nowadays is more widespread, whether it is for learning or work. Utilising the internet may facilitate the fund collection process as funds can be directly donated through smartphone or laptop. However, the internet access is still in low position and telecommunications coverage is still weak and lagging. This has become main concern by representatives from Sabah Islamic Religious Council. 5. Security issues Through the internet usage, data of users are shared. This has raised serious concern by respondents from Perlis Islamic Religious Council on the extent of crowdfunding platforms are able to protect the data of their users. 6.3 INFORMATION ON MUFTI’S VIEWS For the purpose of designing Waqf Crop Micro Takaful Framework (WCMTF), it is crucial to gain some important information related to Islamic legislation and procedures from the rightful sources to implement the framework. Perspectives on microtakaful product and the legislative aspects on investing cash waqf are gained from these religious legal officials (mufti) in Malaysia. 6.3.1 VIEW ON MICROTAKAFUL PRODUCT Most religious legal officials have shown positive response to most micro takaful projects or products related to assisting the underprivileged societies such as the B40. They give full support by looking at the rational of introducing micro takaful products that is to ensure that every level of society in Malaysia is being protected, especially those with low incomes in the B40 group. Besides, they opined that this micro takaful development effort is a noble effort demanded by Islam in the welfare of mankind in general. From their perspectives, many takaful operators introduce affordable microtakaful products among the B40 to increase the ownership rate among them. Among them are Perlindungan Tenang, SSPN-I-Plus, Koperasi Tabarru' Scheme, Fisherman's Takaful, and Takaful Hayati. In this regard, the development of micro takaful products in other priority areas such as flood, crop and other related area is highly encouraged as this effort does not only help those in distress but also ensure the sustainability of their lives in accordance with the maqasid shariah islam which is to safeguard life and property. Therefore, essentially, microtakaful is an effort to be celebrated as the concept of takaful itself which is based on the concept of working together that is permissible in the Islamic Shari'ah.
50| Waqf Crop Micro Takaful Framework Through Crowdfunding-Waqf In Malaysia 50 This is in accordance with the evidence of the Quran in the surah of Yusuf: 72. "The caller said: We lost the king's trophy and whoever can return it will have the food of the camel, and I will guarantee the gift.” 6.3.2 VIEW ON INVESTING CASH WAQF In addition, it is vital to gain views and opinion from the religious scholars (mufti) who are known for deep thought and their ability to scrutinise and compare opinions and views with regards to investing cash waqf from different Shari’ah sources. As the result, the divergent views expressed by these scholars are to some extent reconciled in assisting the policymakers and other interested parties to have a clear understanding of the actual meaning of the concept of sufficiency of sustenance/need and conditions that deem to appropriately align with the concept. This is expected to provide the basis for the policymakers to formulate policies and strategies for the intended beneficiaries who are the low-income individuals and groups who constitute the vulnerable groups in a society. Table 6.1 Muftis’ View on Investing Cash Waqf STATE ISLAMIC RULING REFERENCE Selangor Permissible and recommended Muzakarah of the Fatwa Committee of the National Council for 4th Malaysian Islamic Religious Affairs on 13-14 April 1982 Terengganu Muzakarah of the Fatwa Committee of the National Council for 46th Malaysian Islamic Religious Affairs on 22 April 1999 Perak Muzakarah of the Fatwa Committee of the National Council for 65th Malaysian Islamic Religious Affairs on 13 October 2004 Melaka Negeri Sembilan Muzakarah of the Fatwa Committee of the National Council for 77th
An Insight On Crowdfunding Waqf Crop Micro Takaful|51 50 This is in accordance with the evidence of the Quran in the surah of Yusuf: 72. "The caller said: We lost the king's trophy and whoever can return it will have the food of the camel, and I will guarantee the gift.” 6.3.2 VIEW ON INVESTING CASH WAQF In addition, it is vital to gain views and opinion from the religious scholars (mufti) who are known for deep thought and their ability to scrutinise and compare opinions and views with regards to investing cash waqf from different Shari’ah sources. As the result, the divergent views expressed by these scholars are to some extent reconciled in assisting the policymakers and other interested parties to have a clear understanding of the actual meaning of the concept of sufficiency of sustenance/need and conditions that deem to appropriately align with the concept. This is expected to provide the basis for the policymakers to formulate policies and strategies for the intended beneficiaries who are the low-income individuals and groups who constitute the vulnerable groups in a society. Table 6.1 Muftis’ View on Investing Cash Waqf STATE ISLAMIC RULING REFERENCE Selangor Permissible and recommended Muzakarah of the Fatwa Committee of the National Council for 4th Malaysian Islamic Religious Affairs on 13-14 April 1982 Terengganu Muzakarah of the Fatwa Committee of the National Council for 46th Malaysian Islamic Religious Affairs on 22 April 1999 Perak Muzakarah of the Fatwa Committee of the National Council for 65th Malaysian Islamic Religious Affairs on 13 October 2004 Melaka Negeri Sembilan Muzakarah of the Fatwa Committee of the National Council for 77th 51 Malaysian Islamic Religious Affairs on 10-12 April 2007 Sabah Muzakarah of the Fatwa Committee of the National Council for 80th Malaysian Islamic Religious Affairs on 1-3 February 2008 Sarawak All religious scholars (mufti) stated their agreement and recommendation in the idea of investing cash waqf. This is based on the basic principle that any kind of Islamic Sharῑ῾ah compliant investment which is geared towards making profit and is guided by the principle of “Gaining profits is with the undertaking of risk” and legal maxim “Return must be justified by guaranty/ risk”. However, these religious scholars have own opinions in the manner of executing the process of investing the cash waqf. Apart from that, the understanding of cash waqf and other form of waqf must be clear. Some muftis indicated the investment can be done provided that there is additional fund. Mufti Sabah shared his ideas by stating the views from two different main sources. i. For those who are of the view that the cash waqf is not required as is the view of some Hanafi and Maliki jurists as well as the ultimate view in the Shafii and Hanbali schools, then it is certain that any form of expansion of the waqf is also not required. ii. Whereas for those who are of the view that the cash waqf is not required like the majority of Hanafi jurists, other views in the Shafii school and some Hanbali jurists, then the business of expanding the cash waqf is allowed on the condition that the ain waqf is maintained and preserved. in the context of this cash waqf, ain waqf is the value of the cash waqf. This second view is more likely to be used by the majority of contemporary Islamic scholars today and has even been debated in al-Majmak al-Fiqh al-Duwail which convened in the country of Oman after looking at the changes and development of muamalat Maliyah among the Islamic community. It also considers the current needs in order to increasing the effectiveness of waqf as a pillar of the economic development of Muslims and subsequently being able to preserve community life. Based on the latest decision of the scholars which allows to invest waqf cash in places that are allowed by syarak, only in terms of investment that must identify places that comply with shariah and less risk to remain the ain of waqf so that these waqf funds are not affected. Accordingly, most
52| Waqf Crop Micro Takaful Framework Through Crowdfunding-Waqf In Malaysia 52 of the investments that are carried out are in the form of fixed deposits because the risk is relatively low. As a result of the investment profits, the benefits can be donated to the public. Another important point highlighted is the jurisdiction is necessary and must be allowed by the shari'ah. Even fatwas issued by contemporary scholars and fatwa bodies allow cash, fixed term waqf and waqf in the form of financial assets. With the openness of fiqh views without neglecting dhawabit and related laws, waqf and waqf assets can be developed better, can attract people to donate and can contribute to the development of the ummah in the religious aspects of education, economic and social welfare. 6.4 INFORMATION ON WAQF In recent years, waqf has gained momentum as a tool for promoting social welfare and economic development in Muslim communities. As a result, it is essential to comprehend how waqf is managed and administered in various regions and cultures. Interviews were conducted interviews with representatives of State Islamic Religious Councils (SIRCs) in several states to better comprehend their perspectives on waqf practices. The SIRCs are responsible in managing and administering waqf properties in their respective regions and have extensive knowledge and experience in this area. 6.4.1 SPECIFIC WAQF Islamic Religious Councils in many Muslim countries promote specific waqf or charity as a highly organised form of welfare practice in Islam. Waqf refers to the establishment of a waqf with a specific goal, such as the construction of a mosque, educational centre, or health facility, and the waqf is directed to be used solely for that purpose. This ensures that the pledged assets are allocated for the benefactor's goals, and it provides the opportunity to continue its benefits in perpetuity. The specific waqf is accepted and practised by the majority of the State Islamic Religious Council. This is among the findings of the interview on specific waqf.
An Insight On Crowdfunding Waqf Crop Micro Takaful|53 52 of the investments that are carried out are in the form of fixed deposits because the risk is relatively low. As a result of the investment profits, the benefits can be donated to the public. Another important point highlighted is the jurisdiction is necessary and must be allowed by the shari'ah. Even fatwas issued by contemporary scholars and fatwa bodies allow cash, fixed term waqf and waqf in the form of financial assets. With the openness of fiqh views without neglecting dhawabit and related laws, waqf and waqf assets can be developed better, can attract people to donate and can contribute to the development of the ummah in the religious aspects of education, economic and social welfare. 6.4 INFORMATION ON WAQF In recent years, waqf has gained momentum as a tool for promoting social welfare and economic development in Muslim communities. As a result, it is essential to comprehend how waqf is managed and administered in various regions and cultures. Interviews were conducted interviews with representatives of State Islamic Religious Councils (SIRCs) in several states to better comprehend their perspectives on waqf practices. The SIRCs are responsible in managing and administering waqf properties in their respective regions and have extensive knowledge and experience in this area. 6.4.1 SPECIFIC WAQF Islamic Religious Councils in many Muslim countries promote specific waqf or charity as a highly organised form of welfare practice in Islam. Waqf refers to the establishment of a waqf with a specific goal, such as the construction of a mosque, educational centre, or health facility, and the waqf is directed to be used solely for that purpose. This ensures that the pledged assets are allocated for the benefactor's goals, and it provides the opportunity to continue its benefits in perpetuity. The specific waqf is accepted and practised by the majority of the State Islamic Religious Council. This is among the findings of the interview on specific waqf. 53 Table 6.2 Practises of Specific Waqf among States in Malaysia States Result Reference Kelantan Yes Undang-Undang Wakaf Kelantan 1991 (Akta 519) Pulau Pinang Penang Islamic Religious Council and Malay Customs Act 2003 Perlis Perlis Islamic Religious Council and Malay Customs Act 2003 Sabah Shariah Court Mal Procedure Law (Sabah) 2004 Perak Enactment Waqf (Perak) 2015 Negeri Sembilan Enactment of Administration of Wakaf Negeri Sembilan 2001 Terengganu Enactment 2016 However, a suggestion towards the practises of specific waqf was outlined which stated that waqif has to pledge in his sighah for general waqf because there are some issues on managing the specific waqf. In this situation, it is highly recommendable that the State Islamic Religious Council or waqf institutions are to manage the waqf fund on their own.
54| Waqf Crop Micro Takaful Framework Through Crowdfunding-Waqf In Malaysia 54 6.4.2 PROCEDURES IN EXPANDING CASH WAQF Based on one of the interview questions posed to the muftis with regards to whether the cash waqf can be expanded, muftis stated their positive opinion on this matter. All of them agreed that the cash waqf can be expanded with the clear objective that is not for the sake of profit but to support the general goods and the welfare of the whole society while seeking compound rewards in the hereafter. The original concept of waqf in Arabic is tahbisul asli watasbilul manfaat in which the characteristics is permanent, yet it does not freeze, and it is different from the concept of charity or donation. Two main elements are to be highlighted; capital remains and is not frozen, at the same time it produces producing income. All of them concurred that cash waqf can be expanded as to gain more benefits for those who contribute and for those who receive the benefits. The development of waqf property is recommended in Islam as to achieve the purpose and purpose of waqf, which is to benefit the mauquf alaih in addition to the waqif receiving continuous welfare from its waqf. Nevertheless, it should be understood that in an effort to expand the waqf property must meet the original purpose of the waqaf while maintaining the conditions in the waqf such as expansion that is able to benefit the mauquf alaih as well as the ain of waqf is permanent without any reduction in it. Expanding the cash waqf is one of the efforts to improve the existing administrative, management and legal system of waqf institutions as well as bring changes in the waqf method. In other words, the evolutionary change in waqf methods has occurred from the original concept of waqf which is permanent property to the concept of movable property (Raissouni, 2020). Even today, the method of endowment in cash has also been developed with innovative and creative channels such as stock endowment, stock endowment and corporate endowment. This shows that waqf can be developed with methods that are allowed in accordance with Islamic Shari'a.
An Insight On Crowdfunding Waqf Crop Micro Takaful|55 54 6.4.2 PROCEDURES IN EXPANDING CASH WAQF Based on one of the interview questions posed to the muftis with regards to whether the cash waqf can be expanded, muftis stated their positive opinion on this matter. All of them agreed that the cash waqf can be expanded with the clear objective that is not for the sake of profit but to support the general goods and the welfare of the whole society while seeking compound rewards in the hereafter. The original concept of waqf in Arabic is tahbisul asli watasbilul manfaat in which the characteristics is permanent, yet it does not freeze, and it is different from the concept of charity or donation. Two main elements are to be highlighted; capital remains and is not frozen, at the same time it produces producing income. All of them concurred that cash waqf can be expanded as to gain more benefits for those who contribute and for those who receive the benefits. The development of waqf property is recommended in Islam as to achieve the purpose and purpose of waqf, which is to benefit the mauquf alaih in addition to the waqif receiving continuous welfare from its waqf. Nevertheless, it should be understood that in an effort to expand the waqf property must meet the original purpose of the waqaf while maintaining the conditions in the waqf such as expansion that is able to benefit the mauquf alaih as well as the ain of waqf is permanent without any reduction in it. Expanding the cash waqf is one of the efforts to improve the existing administrative, management and legal system of waqf institutions as well as bring changes in the waqf method. In other words, the evolutionary change in waqf methods has occurred from the original concept of waqf which is permanent property to the concept of movable property (Raissouni, 2020). Even today, the method of endowment in cash has also been developed with innovative and creative channels such as stock endowment, stock endowment and corporate endowment. This shows that waqf can be developed with methods that are allowed in accordance with Islamic Shari'a. 55 6.4.3 MUTAWALLI AND PROCEDURE Table 6.3 Mutawalli Procedures States Result Reference Execution Kelantan Yes Undang-Undang Wakaf Kelantan 1991 (Akta 519) - Pulau Pinang Penang Islamic Religious Council and Malay Customs Act 2003 - Perlis Perlis Islamic Religious Council and Malay Customs Act 2003 - Sabah Syariah Court Mal Procedure Law (Sabah) 2004 - Perak Enactment Waqf (Perak) 2015 - Negeri Sembilan Enactment of Administration of Wakaf Negeri Sembilan 2001 - Terengganu Enactment 2016 - 6.4.4 TAX EXEMPTION FOR WAQIF Individuals and organisations that establish waqf endowments are eligible for tax exemptions and other benefits in many countries, including some Islamic countries. The nature and purpose of the waqf, as well as the country and its laws, may influence the specifications of these exemptions and benefits.
56| Waqf Crop Micro Takaful Framework Through Crowdfunding-Waqf In Malaysia 56 Table 6.4: States Regulations in Tax Exemption for Waqif States Result Reference Requirement Kelantan In the state of applying Subsection 44(11D) of the Income Tax Act 1967 - Pulau Pinang - Perlis - Sabah - Perak Need to prepare a subcommittee for the waqf fund. Negeri Sembilan Create an account of cash waqf fund Terengganu Tax exemption may be limited to cash waqf only 6.4.5 WAQF MUAQQAT AND WAQF MUALLAQ Both Waqf muaqqat and waqf muallaq are types of waqf in Islamic law, however, they differ significantly in many aspects. Waqf muaqqat, also known as a temporary endowment, is a type of waqf in which the benefits of the endowed property are donated for a set period of time before reverting to the original owner or their heirs. For example, a person may donate a property's rental income to a waqf for ten years, after which only then the property reverts to their children. Waqf muallaq, also known as a conditional endowment, on the other hand, is a type of waqf in which the benefits of the endowed property are suspended until a certain condition is met. Some of Islamic Religious State Councils agreed with the concept of waqf muaqqat and waqf muallaq but there are few reasons that this concept would not be applicable to all state which are as follows in Table 6.5:
An Insight On Crowdfunding Waqf Crop Micro Takaful|57 56 Table 6.4: States Regulations in Tax Exemption for Waqif States Result Reference Requirement Kelantan In the state of applying Subsection 44(11D) of the Income Tax Act 1967 - Pulau Pinang - Perlis - Sabah - Perak Need to prepare a subcommittee for the waqf fund. Negeri Sembilan Create an account of cash waqf fund Terengganu Tax exemption may be limited to cash waqf only 6.4.5 WAQF MUAQQAT AND WAQF MUALLAQ Both Waqf muaqqat and waqf muallaq are types of waqf in Islamic law, however, they differ significantly in many aspects. Waqf muaqqat, also known as a temporary endowment, is a type of waqf in which the benefits of the endowed property are donated for a set period of time before reverting to the original owner or their heirs. For example, a person may donate a property's rental income to a waqf for ten years, after which only then the property reverts to their children. Waqf muallaq, also known as a conditional endowment, on the other hand, is a type of waqf in which the benefits of the endowed property are suspended until a certain condition is met. Some of Islamic Religious State Councils agreed with the concept of waqf muaqqat and waqf muallaq but there are few reasons that this concept would not be applicable to all state which are as follows in Table 6.5: 57 Table 6.5 Reasons for the Inapplicability of the Concept of Waqf Muaqqat and Waqf Muallaq in All States
58| Waqf Crop Micro Takaful Framework Through Crowdfunding-Waqf In Malaysia 58 6.4.6 PROPOSED FRAMEWORK CROWDFUNDING WAQF CROP MICRO TAKAFUL SCHEME To collect waqf funds, an individual must be a Mutawalli. A mutawalli's primary responsibility is to administer the waqf property by the terms and conditions established by the waqif. The mutawalli must carry out the waqif's instructions to safeguard and protect the waqf's assets and income. Following the FGD, everyone agreed that Yayasan Waqaf Malaysia should be assigned the role of mutawalli. Then, Yayasan Waqaf Malaysia presents the Waqf Micro Takaful crowdfunding model application to the Board Meeting alongside representatives from each State Religious Council, the Ministry of Finance, and the Chief Minister of Religion. Once the application has been refined and approved, the waqf micro takaful project can launch its campaign on a crowdfunding platform to attract investors. To gain the trust of the funders, all aspects of the campaign's projects must be transparent, including the purpose for which waqf funds are collected, and channelled, and the number of expenditures. In addition, each project's operations must be centralised so that there is the competition to ensure the project's sustainability. Once the required amount of funds for the project has been raised, the waqf foundation will invest the remaining funds. Among the proposed investments is constructing a student dormitory at a Malaysian institution of higher education. In this instance, the waqf will absorb the loss. The profit distribution is then proposed to be as follows: 1. 20 per cent Waqf Foundation for loss absorption and administrative expenses 2. 10 per cent for operating expenses and asset maintenance 3. 30 per cent allocated to the State Religious Council 4. 40 per cent of takaful to pay the paddy micro takaful scheme contribution
An Insight On Crowdfunding Waqf Crop Micro Takaful|59 58 6.4.6 PROPOSED FRAMEWORK CROWDFUNDING WAQF CROP MICRO TAKAFUL SCHEME To collect waqf funds, an individual must be a Mutawalli. A mutawalli's primary responsibility is to administer the waqf property by the terms and conditions established by the waqif. The mutawalli must carry out the waqif's instructions to safeguard and protect the waqf's assets and income. Following the FGD, everyone agreed that Yayasan Waqaf Malaysia should be assigned the role of mutawalli. Then, Yayasan Waqaf Malaysia presents the Waqf Micro Takaful crowdfunding model application to the Board Meeting alongside representatives from each State Religious Council, the Ministry of Finance, and the Chief Minister of Religion. Once the application has been refined and approved, the waqf micro takaful project can launch its campaign on a crowdfunding platform to attract investors. To gain the trust of the funders, all aspects of the campaign's projects must be transparent, including the purpose for which waqf funds are collected, and channelled, and the number of expenditures. In addition, each project's operations must be centralised so that there is the competition to ensure the project's sustainability. Once the required amount of funds for the project has been raised, the waqf foundation will invest the remaining funds. Among the proposed investments is constructing a student dormitory at a Malaysian institution of higher education. In this instance, the waqf will absorb the loss. The profit distribution is then proposed to be as follows: 1. 20 per cent Waqf Foundation for loss absorption and administrative expenses 2. 10 per cent for operating expenses and asset maintenance 3. 30 per cent allocated to the State Religious Council 4. 40 per cent of takaful to pay the paddy micro takaful scheme contribution 59 Figure 6.2 Crowdfunding Waqf Paddy Microtakaful Framework
60 CHAPTER 7 CHALLENGES AND SOLUTIONS 7.1 OVERVIEW Based on several output gained from the stakeholders, a comprehensive overview of the challenges and solutions for the implementation of a waqf crop microtakaful framework through crowdfunding-waqf in Malaysia are drawn. The proposed framework has the potential to address food insecurity and promote sustainable agriculture practices while providing a source of social welfare for the community. 7.2 CROP MICRO TAKAFUL SCHEME The views by various stakeholders, including farmers, takaful operators, financial institutions, and the government on the issues and challenges for establishing, as well as their potential impact on the implementation and expansion of crop micro takaful are deemed significant. The views and obstacles regarding the establishment of a crop micro takaful scheme are summarised in Table 7.1. Table 7.1 Challenges and Solution for Establishing and Sustainability of Crop Microtakaful Scheme SECTOR/ ACTOR CHALLENGES SOLUTION Smallholder Farmers Lack of knowledge & awareness of Crop Microtakaful Education and Awareness Programs: Promote education and awareness programs to introduce crop microtakaful to smallholder farmers. Lack of trust in takaful Incentives: These incentives can be targeted towards specific groups or communities, such as women or youth, to help ensure that everyone has access to the benefits of takaful. Affordability – contribution rate unaffordable Customized plans: Takaful providers can offer customized plans that are tailored to the specific needs and budgets of smallholder farmers. CHAPTER 7
Challenges And Solutions|61 60 CHAPTER 7 CHALLENGES AND SOLUTIONS 7.1 OVERVIEW Based on several output gained from the stakeholders, a comprehensive overview of the challenges and solutions for the implementation of a waqf crop microtakaful framework through crowdfunding-waqf in Malaysia are drawn. The proposed framework has the potential to address food insecurity and promote sustainable agriculture practices while providing a source of social welfare for the community. 7.2 CROP MICRO TAKAFUL SCHEME The views by various stakeholders, including farmers, takaful operators, financial institutions, and the government on the issues and challenges for establishing, as well as their potential impact on the implementation and expansion of crop micro takaful are deemed significant. The views and obstacles regarding the establishment of a crop micro takaful scheme are summarised in Table 7.1. Table 7.1 Challenges and Solution for Establishing and Sustainability of Crop Microtakaful Scheme SECTOR/ ACTOR CHALLENGES SOLUTION Smallholder Farmers Lack of knowledge & awareness of Crop Microtakaful Education and Awareness Programs: Promote education and awareness programs to introduce crop microtakaful to smallholder farmers. Lack of trust in takaful Incentives: These incentives can be targeted towards specific groups or communities, such as women or youth, to help ensure that everyone has access to the benefits of takaful. Affordability – contribution rate unaffordable Customized plans: Takaful providers can offer customized plans that are tailored to the specific needs and budgets of smallholder farmers. 61 Lack of access to takaful operators/ their staff/products Community-based outreach: Takaful operators can partner with community-based organizations such as cooperatives, local NGOs, and community leaders to conduct outreach programs and provide information about takaful to smallholder farmers. Lack of demand by farmers Customized products: Takaful operators can develop customized insurance products that are tailored to the specific needs and risks faced by smallholder farmers. Takaful Operators In the Malaysian market, there is no stand-alone crop microtakaful scheme. Partner with agricultural input providers: Takaful operators can partner with agricultural input providers such as seed and fertilizer companies to offer crop microtakaful as part of their packages. Crop micro takaful is too risky/ unprofitable to invest in Form a cooperative with other farmers to pool resources and share the risk of crop microtakaful. Lack of quality data to design and rate indemnity-based and index-based crop micro takaful products Creating market linkages: Takaful operators can establish market linkages between smallholder farmers and agribusinesses to provide reliable data on crop production, pricing, and demand. Lack of distribution networks to promote /market crop micro takaful to farmers Microtakaful Network - non-profit organization that focused only on micro takaful product Lack of support from the government Advocacy: Farmers can advocate for their needs by organizing themselves into groups and working with local and national policymakers to voice their concerns. Lack of investment by Takaful Operators into Crowdfunding: Crowdfunding can be used to finance the research and development of new
62| Waqf Crop Micro Takaful Framework Through Crowdfunding-Waqf In Malaysia 62 research and development of new agriculture micro takaful products agriculture micro takaful products. This involves using online platforms to raise funds from a large number of individuals and organizations to support research and development activities. Financial Institutions Lack of interest in bundled crop-credit takaful Provide financial incentives for bundled crop-credit takaful: The government can provide financial incentives to smallholder farmers who purchase bundled crop-credit takaful products, such as subsidies or tax breaks. Government focus on public sector FI’s and not Cooperatives or other agencies trusted by farmers Government policies: Governments can provide tax incentives, subsidies, and regulatory reforms that create an enabling environment for cooperatives and other trusted agencies to provide financial services to smallholder farmers. Governments No Comprehensive Regulatory and Supervisory for micro takaful approaches and best practices Creating regulatory and oversight systems for microtakaful could help reduce market uncertainty and increase market transparency, which would be good for consumers and the industry as a whole. Agricultural takaful is not a priority policy area: leave it to the private sector Invest in research and development to generate evidence-based data on the benefits of agricultural takaful for smallholder farmers Lack of knowledge of the role of crop micro takaful Integrate takaful into existing agricultural programs: The government can integrate takaful into existing agricultural programs such as extension services or agricultural credit programs. Prefer other Disaster Risk Financing for Agriculture (DRFA) Instruments Risk-Sharing: Risk-sharing arrangements can be used to help smallholder farmers manage risks and adopt crop micro takaful
Challenges And Solutions|63 62 research and development of new agriculture micro takaful products agriculture micro takaful products. This involves using online platforms to raise funds from a large number of individuals and organizations to support research and development activities. Financial Institutions Lack of interest in bundled crop-credit takaful Provide financial incentives for bundled crop-credit takaful: The government can provide financial incentives to smallholder farmers who purchase bundled crop-credit takaful products, such as subsidies or tax breaks. Government focus on public sector FI’s and not Cooperatives or other agencies trusted by farmers Government policies: Governments can provide tax incentives, subsidies, and regulatory reforms that create an enabling environment for cooperatives and other trusted agencies to provide financial services to smallholder farmers. Governments No Comprehensive Regulatory and Supervisory for micro takaful approaches and best practices Creating regulatory and oversight systems for microtakaful could help reduce market uncertainty and increase market transparency, which would be good for consumers and the industry as a whole. Agricultural takaful is not a priority policy area: leave it to the private sector Invest in research and development to generate evidence-based data on the benefits of agricultural takaful for smallholder farmers Lack of knowledge of the role of crop micro takaful Integrate takaful into existing agricultural programs: The government can integrate takaful into existing agricultural programs such as extension services or agricultural credit programs. Prefer other Disaster Risk Financing for Agriculture (DRFA) Instruments Risk-Sharing: Risk-sharing arrangements can be used to help smallholder farmers manage risks and adopt crop micro takaful 63 Lack of the budget to allocate to the promotion and support of agricultural takaful (subsidise) Cost-Sharing Arrangements: Cost-sharing arrangements can also be used to help smallholder farmers access crop micro takaful. In conclusion, crop micro takaful scheme is confronted with several challenges, including those relating to awareness, cost, risk, and environmental factors. However, these challenges can be overcome by utilising a mix of innovative risk management strategies, digital technologies, risk assessment and pricing models, and targeted education and awareness-raising campaigns. Crop microtakaful scheme has the prospective to become a more sustainable and effective tool if these challenges are prudently addressed. Its primary functions are to protect farmers from the risk of crop loss and to promote sustainable agriculture. 7.3 CROWDFUNDING Although there are various challenges identified, waqf based crowdfunding still has a potential to support B40 in the form of Takaful protection. In fact, waqf has contributed to the well-being of the nation particularly for Muslim welfare. Also, it is classified as an efficient instrument for financing within society (Sulaiman et al., 2019). Not surprisingly, the government gears efforts to improve the practice of waqf and reform its administration for the sake of the country's economic development (Mahmood & Mohd Shafiai, 2013). The crowdfunding platform such as myWakaf can be a practical example for establishing waqf based crowdfunding. This platform is managed by Bank Negara Malaysia (BNM) through the Association of Islamic Banking and Financial Institutions Malaysia (AIBIM) with the cooperation from SIRCs. This initiative aims to develop the potential of waqf assets and to empower the Muslim economy. To date, several Islamic Banks such as Affin Islamic Bank Berhad, Bank Islam Malaysia Berhad, Bank Muamalat Malaysia Berhad, Bank Rakyat, Maybank Islamic Berhad and RHB Islamic Malaysia Berhad have facilitated the operation of this platform in providing financial resources for the current waqf as well as to create new waqf assets in education and welfare (MyWakaf, n.d.). Since MyWakaf is designed in the form of a modern crowdfunding platform, it can provide insight to realise the idea of waqf-based crowdfunding for microtakaful.
64| Waqf Crop Micro Takaful Framework Through Crowdfunding-Waqf In Malaysia 64 7.4 THE CHALLENGES OF EMPOWERING WAQF IN MALAYSIA Table 7.2 Challenges and Solution for Empowering Waqf in Malaysia CHALLENGES SOLUTIONS Society’s Awareness of Waqf. The awareness of the general Muslim community regarding the practice of waqf is still unenlightened. Society views that zakat is a religious obligation that must be implemented when all the conditions are met while waqf perceived as a non-obligatory act. 1. To inculcate sense of awareness among Muslim society on the rules and significance of waqf. 2. The mindset that waqf is just a non-obligatory practice that is not sinful if not implemented should be transformed to a new approach that considers waqf to be a non-obligatory practice that would prove to be a great loss if not performed. Muslim Society’s Lack of Understanding of Waqf as a Whole. The lack of understanding of waqf jurisprudence has added pressure on the conducive development of waqf in Malaysia. This also impact the smooth development of Crowdfunding Waqf Crop Micro Takaful. 1. To initiate awareness among Muslim society on the rules of waqf. 2. To register all waqf asset once it has been declared The awareness of the society regarding the Crowdfunding Waqf Crop Micro Takaful Scheme. This is due to the fact that this scheme is a new one 3. To initiate awareness among Muslim society on Crowdfunding Waqf Crop Micro Takaful.
Challenges And Solutions|65 64 7.4 THE CHALLENGES OF EMPOWERING WAQF IN MALAYSIA Table 7.2 Challenges and Solution for Empowering Waqf in Malaysia CHALLENGES SOLUTIONS Society’s Awareness of Waqf. The awareness of the general Muslim community regarding the practice of waqf is still unenlightened. Society views that zakat is a religious obligation that must be implemented when all the conditions are met while waqf perceived as a non-obligatory act. 1. To inculcate sense of awareness among Muslim society on the rules and significance of waqf. 2. The mindset that waqf is just a non-obligatory practice that is not sinful if not implemented should be transformed to a new approach that considers waqf to be a non-obligatory practice that would prove to be a great loss if not performed. Muslim Society’s Lack of Understanding of Waqf as a Whole. The lack of understanding of waqf jurisprudence has added pressure on the conducive development of waqf in Malaysia. This also impact the smooth development of Crowdfunding Waqf Crop Micro Takaful. 1. To initiate awareness among Muslim society on the rules of waqf. 2. To register all waqf asset once it has been declared The awareness of the society regarding the Crowdfunding Waqf Crop Micro Takaful Scheme. This is due to the fact that this scheme is a new one 3. To initiate awareness among Muslim society on Crowdfunding Waqf Crop Micro Takaful. 65 Administrative and legal Challenges. Waqf management still differs and varies from one state to another resulting in irregular (non-uniform) waqf management. A uniform waqf enactment is important because it enables the smooth management of waqf property including Crowdfunding Waqf Crop Micro Takaful. 1. Federal government took the initiative to introduce a waqf legislation that will act as a guideline for the respective state governments. 2. Each state government enact their own waqf enactment which is in perfect and harmony with each other. Constraints on Specific Waqf That Are Inconsistent with Contemporary Demands and Environments. 1. The waqf authorities take the initiative by doing an istibdal, which is to develop the waqf land with a purpose that is more suitable to the local environment and replace the land in another location that suits the intended purpose of the waqif. 2. Develop the waqf land with activities that generate revenue and profit, which can be channeled to enrich the existing objective of the Waqif. In this case, the Crowdfunding Waqf Crop Micro Takaful Scheme Paying Taxes on the Waqf. Although it has been declared that waqf contributions are eligible for tax exemptions; however, at the time of writing this article, there were not many institutions in Malaysia that obtained tax exemptions for waqf contributions. Conditions imposed by the Malaysian Inland Revenue Board that qualifies an institution for tax exemption pertaining to waqf contributions have yet to be met by most waqf institutions in Malaysia All parties involved need to sit down and discuss ways to obtain the best solution so that tax deductions for waqf contributors can be implemented as soon as possible; thereby expanding the amount of zakat collection.
66 CHAPTER 8 CONCLUSION 8.1 OVERVIEW Waqf has shown its great importance and fast-growing relevance in most part of the world, with the rising interest in the many studies on waqf, but the lack of consideration from both developing and developed countries alike, since Malaysia and Indonesia dominate the industry, has created opportunities to scholars in the roles of crowdfunding and waqf in ensuring the sustainability of Crop Micro Takaful Scheme. 8.2 THE ROLE OF CROWDFUNDING IN ENSURING THE SUSTAINABILITY OF CROP MICRO TAKAFUL SCHEME. It is evident that crowdfunding concept has gained more attention to support society-based projects, including the welfare of people. Applying crowdfunding into Crop Micro Takaful Scheme does not only aim to obtain funds, but this practice can spread awareness among the society on food security and the welfare of poor farmers. By involving them into this effort, it could create awareness and roles that should be played by the society. With the recent increase in public awareness towards waqf-based charities, combining it with crowdfunding could be promising. In this regard, crowdfunding can be a useful instrument for connecting individuals to perform waqf. 8.3 THE ROLE OF WAQF IN ENSURING THE SUSTAINABILITY CROP MICRO TAKAFUL SCHEME • Mohd Daud Bakar (1999) believes that the development of waqf property is compulsory. Waqf property must not be kept stagnant without any added value activities. The administrators of waqf are obliged to develop these potential assets so it can benefit not only the related beneficiaries but also the Muslim society as a whole. This development can be done through direct investment in the stock market, unit trust or Islamic Banking investment scheme. CHAPTER 8
Conclusion|67 66 CHAPTER 8 CONCLUSION 8.1 OVERVIEW Waqf has shown its great importance and fast-growing relevance in most part of the world, with the rising interest in the many studies on waqf, but the lack of consideration from both developing and developed countries alike, since Malaysia and Indonesia dominate the industry, has created opportunities to scholars in the roles of crowdfunding and waqf in ensuring the sustainability of Crop Micro Takaful Scheme. 8.2 THE ROLE OF CROWDFUNDING IN ENSURING THE SUSTAINABILITY OF CROP MICRO TAKAFUL SCHEME. It is evident that crowdfunding concept has gained more attention to support society-based projects, including the welfare of people. Applying crowdfunding into Crop Micro Takaful Scheme does not only aim to obtain funds, but this practice can spread awareness among the society on food security and the welfare of poor farmers. By involving them into this effort, it could create awareness and roles that should be played by the society. With the recent increase in public awareness towards waqf-based charities, combining it with crowdfunding could be promising. In this regard, crowdfunding can be a useful instrument for connecting individuals to perform waqf. 8.3 THE ROLE OF WAQF IN ENSURING THE SUSTAINABILITY CROP MICRO TAKAFUL SCHEME • Mohd Daud Bakar (1999) believes that the development of waqf property is compulsory. Waqf property must not be kept stagnant without any added value activities. The administrators of waqf are obliged to develop these potential assets so it can benefit not only the related beneficiaries but also the Muslim society as a whole. This development can be done through direct investment in the stock market, unit trust or Islamic Banking investment scheme. CHAPTER 8 67 • Takaful Operators also can be part in empowering waqf mechanism. Waqf itself can be utilized to strengthen many other new areas including the proposed Crop Micro Takaful Scheme. This is not impossible due to the nature of waqf itself. The vast area of waqf implementation enable the possible utilization in many aspects of life. Waqf can be the main financial institution in ensuring the sustainability of the Crop Micro Takaful Scheme once the general challenges faced by waqf as has been mentioned before is well taken care of. • The potential of waqf in empowering the Crop Micro Takaful Scheme strongly depends on Muslims’ understanding about waqf and the effectiveness of administrating its funds. Hence, without these measures, it would be almost impossible for Crop Micro Takaful Scheme to maximize their functional capabilities. Therefore, in order to maximize the impact of Crop Micro Takaful Scheme on the socio-economy of Muslims, it is necessary for Muslims to understand the concept and function of waqf mechanism in the Crop Micro Takaful Scheme. • The utilization of waqf will pursue the intention of the one who extends it. The cash waqf can be channeled specifically as part of funds in the Crop Micro Takaful Scheme. The size of the cash fund determines the outcome of the administration of waqf itself. Should there be a huge amount of fund, then it is not impossible if the cash fund be formed into commercial projects in which the yield goes back into the specific intention of the waqf donator i.e. to the Crop Micro Takaful Scheme. • The permissibility of cash waqf has lent a strong helping hand in materializing Crop Micro Takaful Scheme. Cash waqf undoubtedly will ease the process of donating money through waqf. Cash can also be invested in a low-risk investment such as fixed deposit. The profit earned can be developed to strengthen the Crop Micro Takaful Scheme. All in all, with the implementation of waqf through crowdfunding will lead to economic empowerment and aim at social transformation of the poor and ensure social justice which eventually achieve Maqāṣid alSharīʽah. Therefore, waqf authorities and zakat institutions must maintain its sustainability and robustness by having in place an appropriate framework and measurement mechanisms in extending waqf-based microfinances to its intended as well as managing its risks, where applicable. Ultimately, with the Waqf Crop Micro Takaful Framework for the sustainability of the product could serve as a good role model in establishing the basis for Waqf practices in other countries.