Waqf has been playing an important social finance role in improving the welfare of Muslim societies for centuries. Recently, the financial technology (Fintech) has started penetrating every branches of financial system offering better services. Hence, waqf institutions could use this opportunity to comply with the wave of Fintech to improve the efficiency and enhance the transparency of operations. Understanding the importance of waqf, this chapter aims to clarify the concept of waqf from the perspective of Islamic jurisprudence, define its Shari'ah framework, and provide waqf classifications; and, finally, it reviews the existing applications of waqf models. The study should serve as guidelines for further development of waqf models in light of the latest technological advancements.
TopSection 1: Introduction
The idea of waqf is as old as humanity. Muslim jurists argue that the first waqf ever made is the sacred building of Ka'bah in Makkah (Kahf, 2015). The Noble Qur'an mentions that it is the first house of worship set for people:
“Indeed, the first House [of worship] established for mankind was that at Makkah - blessed and a guidance for the worlds.” (Qur’an, 3:96).
Waqf has great importance for society. While spending in the sake of God, one gets great reward as long as waqf lasts, even after the death. Abu Hurayrah (may Allah be pleased with him) narrated that the Messenger of Allah (peace be upon him) said: “When a man dies, his acts come to an end, but three: recurring charity, knowledge by which people benefit, or a pious son, who prays for him (for the deceased).” (Sahih Muslim, 1255/3).
Waqf is a form of social finance. For ages, waqf has been playing a significant role in social welfare, especially among Muslims, by alleviating the poverty, supporting orphans and widows, building mosques and hospitals, spreading knowledge, strengthening family ties, and contributing for the betterment of the whole community. In order to perform these activities, the first legal entity - waqf foundation - was created, which had its own personality that is independent of the waqf managers (mutawallis) with its own rights and responsibilities as well as engagement in financial contracts. As any other entity, waqf foundation has its own assets which are obtained mostly through waqf contributions. They may include immovable assets such as land, buildings, equipment, and movable assets as cash, investment certificates, Sukuk, etc.
Due to such importance of waqf, it is essential to examine it from the primary and secondary sources of Islamic jurisprudence. It is also meaningful to examine the existing modern application of waqf and opportunities for further development. Therefore, in this chapter, we will describe the concept of waqf from the Shari’ah perspective and examine various modern waqf models in practice.
TopSection 2: The Concept Of Waqf And Its Legality
According to ISRA’s compendium (ISRA, n.d.), the word ‘waqf’ in Arabic literally means “to retain or hold back”. Technically, waqf has been defined as:
“to make a property the inalienable property of its owner while making its yield and usufruct a charitable donation to specified beneficiaries.” (ISRA, n.d.);
“…holding Maal (an asset) and preventing its consumption for the purpose of repeatedly extracting its usufruct for the benefit of an objective representing righteousness/philanthropy.” (Kahf, 1998).
In other words, the definitions can be summarized as retaining an asset for distribution of its usufruct to beneficiaries.
The definition is universal as defines the essence of waqf: conservation of the asset and distribution of its usufruct for charitable ends. It emphasizes the importance of continuous holding such as protection from being consumed either through sale, providing as collateral, or transferring in the form of gift and inheritance. Meanwhile, the usufruct of that asset is to be distributed to philanthropic purposes as per conditions specified by the founder.