UNIVERSITY-INCOME GENERATED THROUGH WAQF Dato Prof Dr Noor Inayah Yaakub
Takaful in Malaysia developed as component of comprehensive Islamic financial system operating in parallel with conventional financial system Islamic financial system Islamic banking Takaful Dual syst em Conventional financial system Islamic money market Four main pillars Islamic capital market Dual Financial System The mandate for developing dual financial system explicitly codified in Central Bank of Malaysia Act 2009 Comprehensive Islamic Ensure Financial sustained System industry viability via optimised synergies from interlinkages Underpinned by : Strong & diversified players Wide range of products & vibrant financial market BANK NEGARA MALAYSIA CENTRAL BANK OF MALAYSIA 2
Governance Prudential Market Conduct Regulatory and Supervisory Framework in Malaysia... Regulatory & Supervisory Framework Objectiv es Preserve financial stability & public confidence Prevent risk of contagion & systematic failure Ensure good market practices Promote high standard corporate & Shariah governance BANK NEGARA MALAYSIA CENTRAL BANK OF MALAYSIA Takaful Operational Framework Supervisory Assessment & Intervention Leveraging on established field of Pragmatic approach to regulation conventional system Separate rules to address takaful industry peculiarities o o o Shariah-compliant in all aspects of the takaful operation Balance between interests of shareholders & participants Separation of funds between shareholders & takaful fund Regulatory Efficient framework and forward for looking insurance supervision broadly applicable under Risk-Based but requires Supervisory adaptation Framework to be more takaful-attuned Legal framework being strengthened by Islamic Financial Services Act to enable more comprehensive regulation and supervision of the takaful industry 3
Shariah Governance Shariah as overarching principle in Islamic finance Shariah Advisory Council (SAC) of BNM Manageme nt Board Shariah Compliance Risk Functions : Review Managemen t Audit Research Shariah Governance Framework Shariah Parameters Shariah Resolutions & Rulings Shariah Committe e (SC) Foster Shariah innovation whilst promoting stability in marketplace via harmonization of Shariah interpretation Proper governance provides assurance on Shariah compliance & confidence on takaful operation: 1. SAC s legislative stature as highest authority accorded under Central Bank of Malaysia Act 2009 2. SC of takaful operator accountable on decision, views & opinions 3. Board & senior management with sufficient expertise & capability on takaful (Islamic finance) issues 4. Function of Shariah risk management, research, review & audit to provide check & balance 5. SC member of another takaful operator shall not be appointed avoid conflict of interest & maintain info confidentiality 6. Shariah parameters provide guidance on main features, principles & rulings 7. Institutionalise mutual respect by recognising differences of Shariah interpretations BANK NEGARA MALAYSIA CENTRAL BANK OF MALAYSIA 4
( A 50 years Journey ) Global demands in Islamic Finance Related-Impacts on Malaysia * 1963-1983 Establishment of Lembaga Tabung Haji Branding of Islamisation in the context of Transaction, Bank Islam, IIUM, Takaful Act 1998 Hong Kong Univ: House of Lords in England in Union Eagle case : 5 minutes late to complete the purchasing price was considered detrimental to the seller (Lord Lytton): Compared with Islamic Law of transaction 2000 Legal Education Association of England & Wales: Web-based learning for Islamic law Subjects as a core subjects for legal education in commonwealth countries 2004 Islamic Bank of Britain was set up 2002-2005 Research 400 decided court cases in England on disputes between H & W in banking Guarantee transactions where a husband is assumed to have exercised some undue influence over the wife. 2006 Prime Minister Depart on the prospects of Malaysia as the Hub for Global Islamic Finance with multi-racial populations 2008 Kyoto Univ, Japan offered a research grant on Comparative studies of the remedies offered by Islamic Banking to customers of non Muslims in Japan
2010 Obama appoints Shariah Specialist for White House 2011 MOE Research grants on Earning Profits in Islamic Banking- Comprehension on Differences with Interests gaining for multi-racial population 2012 IFSAM in Limerick Ireland: Management-Re-imagined (critical management issues in Islamic Finance)- Yale Univ Conference 2013 2013-2015 Profit Sharing using Islamic finance scheme for Commercialisation of university s research (Steven institute of Technology, USA & ISIS innovation Centre, Univ of Oxford (the fusion of dual legal systems tru-out commonwealth countries)
Current trends lncongruity of Academic Research with lndustry in lslamic Finance: National Issues Current debates PERPADUAN: Kewangan Islam & Kesepaduan Sosial Wasatiyyah (Finance and Social Cohesion) HARMONISING THE WORLD TRU WISDOM Amalgamation between knowledge + Wisdom
Voluntary Waqf Waqf means to stop, to withhold the thing (e.g. the house is withheld for the mosque, which means that the revenue of the rent of the house is withheld to spend on the mosque). Waqf is a financial charitable institution established by withholding one's property to eternally spend its revenue on fulfilling certain needs depending on the choice and conditions made by the founder Once the property been created as waqf, it can never be given as gift, or to be inherited, or sold. It belongs to Allah and the corpus/waqf property always remains intact. The Global University in Islamic Finance
Waqf in the Hadith )إذا مات االنسان انقطع عمله إال من ثالث صدقة جارية وعلم ي نتفع به وولد صالح يدعو له(. The Prophet (s) said: When a man dies his acts come to an end, except three things, recurring charity, knowledge (by which people benefit), and pious offspring, who pray for him. The Global University in Islamic Finance
Kinds of Waqf There are two kinds of Waqfs: Immovable property Includes land, fields, farms, or buildings such as mosques, schools, hospitals, or basic infrastructures such as bridges, roads, water supply etc. Movable property Includes cattle, books, money/cash, crops and weapons, shares of Joint-Stock Company, etc. The Global University in Islamic Finance
DEFINITION OF CASH-WAQF The terms, waqf, habs, tasbil mean to stop, to restrain i.e. devoting in the way of Allah The confinement of an amount of money by a founder(s) and the dedication of its usufruct in perpetuity to the welfare of society The Global University in Islamic Finance
Beneficiaries of Cash-Waqf Waqf Khayri, Waqf Am (Public Waqf) is a cash endowment made by the founder to support the general good and welfare of society, the poor and the needy. Waqf Ahl, Waqf Khas al-waqf al-dhurri and waqf al-awlad are all the same and refer to family waqf/specific waqf. Waqf Mushtarak (combined Public and Family Waqf) is a cash waqf created by a founder to support both the public and his family or specify certain persons, group of people or needy areas. The Global University in Islamic Finance
Characteristics of Cash-Waqf Irrevocability: This means that once the founder created the cash-waqf he cannot revoke it back, however, he/she can benefit from its investment/revenue. Perpetually: Once the cash-waqf is created it must be perpetual. This will ensure regular and continual support from the cash-waqf to financing needy areas in the Muslim society. Inalienability this means that once cash is created as waqf no one can ever become the owner to alienate it, i.e. it becomes a frozen asset. It cannot be the subject to be given as gift, inheritance, or any alienation whatsoever. The Global University in Islamic Finance
Investment of Cash-Waqf Mudarabah (partnership) has been recommended by earlier Muslim jurists. The latest fatwa issued by Fiqh Academy Islam, agreed that cash waqf can be invested in any shari ah compliant mode of investment, such as Mudharabah, Murabaha, BBA, Musharakah, Istisna, etc. The Global University in Islamic Finance
Can Non-Muslim Create Cash-Waqf? The Shafie School permitted the creation of waqf from a non -Muslim even if it is for the benefit of a Mosque. He based his opinion on the following hadith : The Prophet (pbuh( said Allah will not oppress any Muslim from his good deeds, as he gives it in this world and he will be rewarded in this world and in the hereafter. But for the non- Muslim he will be rewarded for all his good deeds only in this world The Global University in Islamic Finance
Waqf for Education UNIVERSITI AL- AZHAR, MESIR UNIVERSITI Cambridge, UK UNIVERSITI Harvard, USA UNIVERSITI OXFORD, UK
Objectives Waqf in Higher Education 1) To strengthen the knowledge ecosystem by way of waqf for education; 2) To recommend the flexible mode of financing, investment and higher learning development by way of waqf for education; 3) A potential of Waqf Legislation (Waqf Act) for Higher learning Institutions in Malaysia
Current Development on Waqf for Education in Malaysia At the Central level Research Wing: A new niche for research by the MOE 2013 introduced ie: Science of Waqf education Higher Learning Institutions in Malaysia should give serious attention in generating money for the institution by way of Waqf for education
Transformation of the Role of Waqf in Waqf concept redefined Higher Learning Institutions in Malaysia the inter agencies codification system for waqf in Malaysia The need of waqf corporate to strengthen the ecosystem of knowledge The accommodation for students of Higher learning inst by way of waqf Strategic Planning and entrepreneurship invites the waqf for education Holistic model for financing and investment for Universities trough Waqf concept
Waqf concept redefined to include waqf for education 1 6 A CODIFIED SYSTEM FOR DATA on WAQF FOR MOE Corporate waqf and HEis 2 Rooms for Collaborations with Financial Institutions 5 Accomodation Financing For Students Investments FOR Students Entrep/SHIP 3 Financing & Investments 4
Future Collaborations between Higher Learning Institutions and Islamic Financial Institutions on WAQF FOR EDUCATION FINANCING AND INVESTING CONCEPT ON WAQF FOR THE DEVELOPMENT OF HIGHER LEARNING INSTITUTIONS Islamic Financial Institutions Mudharabah and Musyarakah on the Endowment fund for eg The rules and procedures of Shariah for the Waqf instruments in the context of education
Future Prospects SOCIAL IMPACT & WAQF WAQF FOR EDUCATION MARKS THE NATIONAL UNITY Waqf Act-Bank of Waqf Integrated IT Sytems for the Waqf For Education-MOE-BANKS
The revisit of Waqf Concept to extend into the sphere of Education Waqf for education Roles of Islamic Financial Institutions 1 2 3 4 (beyond 2020) Endowments from Islamic Banks to the universities by way of Muamalat denotes the expansion of Mudharabah n musyarakah investment and financiang needs a flexible parameters by the Central Bank Codification of Shariah rules and procedures across the country on Waqf for education with the Ministry of Higher Learning Education
The issues are: 1. The clarification on how to develop the waqf according to the Islamic scholar's opinion (Shariah issues); 2. Legislation obstacles (Legal issues); and 3. The problem of Baitul Mal's administration that is inefficient and unsystematic (human resources and management issues).
Methods of Development : 1. Credit based finance; 2. Joint venture or equity and income sharing; and 3. Self-financing.
Waqf & Islamic Finance Integrating Waqf with the Financial Sector While there are different issues related to development of waqf, here we examine how it can benefit by integrating with the financial sector Waqf and the financial sector Demand side (input to waqf) Supply side (output from waqf)
Waqf and Demand for Services from the Financial Sector Inputs for development of waqf institutions Financing Financing from financial institutions (FIs) Financing from raising funds from the market Management Services Issues in financing The benefit from waqf asset should continue Cannot use waqf asset as collateral Cannot sell waqf asset
Financing from FIs Like any other enterprise, waqf assets can be developed by investments Example Awqaf Properties Investment Fund An entity financing the development of awqaf properties worldwide Came up with innovative financing mechanism (Built-Operate-Transfer)
Waqf Financing Through Sukuk Cannot sell waqf assetcannot issue ijarah sukuk Sukuk al IntifaaZamzam Towers in Makkah Waqf land leased land to Binladin Group for 28 years to build complex (4 towers, mall hotel) Bin laden leased the project to Munshaat Real Estate Projects for 28 years Manshaat raised 390 million issuing sukuk al intifaa (time-share bond) for 24 years by selling usufruct rights
Waqf Financing Through Sukuk (2) SingaporeMusharakah sukuk used to raise 60 million to develop 2 projects Waqf provided the land, the investors (sukuk holders) provided the funds for investment, and Warees managed the project. In one case, a new mosque was built with attached commercial property earning 200,000 annually
Services Provided by Waqf Management Organization 1.Services of Mutawalli 2.Custody Services 3.Estate Management Services 4.Investment Management Services 5.Advisory Services
MANAGEMENT OF WAQF FUND CASH WAQF DONATION FROM PUBLIC/INDIVIDUAL/COOPERATIVE/COMPANY (All cash Waqf to Selangor Waqf Corporation are entitle tax relief under sub-section 44(6) of Income Tax ACT 1967.Allowable deductions from Income Aggregates for Individual/ Cooperative (7%) and Company(10%). However Cooperative also entitle tax relief by paying dividend under section 65A & 65B.Original official MAIS receipt must be submitted for tax declaration). AIR RITHS WAQF AIRLINE S FUND MANAGED BY PWS 70% DIRECT COST FOR AIRLINE OPERATION 30% OPERATION COST & OTHERS MAINTENANCE LEASING OF AIRCRAFT HUMAN CAPITAL OFFICE RENTAL FUEL TAX OTHERS This fund is managed through joint management committee (JMC) comprised of Selangor Wakaf corporation reps & Air Rith s Rep THE FIRST AIRLINE OF WAQF CONCEPT AN INNITIATIVE BY SELANGOR WAQF CORPORATION / PERBADANAN WAKAF SELANGOR 34
Project Structure PRODUCT WAQF AIRLINES AIRLINE OPERATOR/ SPV INITIATOR Appointed Company for WAQF Airlines AIR RITHS SDN BHD SELANGOR WAQF CORPORATION (PERBADANAN WAKAF SELANGOR (PWS)) ECORITHS TRAVEL & TOUR SDN BHD (ERTT) THE FIRST AIRLINE OF WAQF CONCEPT AN INNITIATIVE BY SELANGOR WAQF CORPORATION / PERBADANAN WAKAF SELANGOR 35
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