KUALA LUMPUR: Waqf, a charitable endowment in the form of funds or properties, has the potential to ease the federal government’s fiscal deficit burden and can act as an instrument to reduce the country’s spending and gradually minimise funding gaps.
It could also complement fiscal policy as waqf helps to alleviate the financial burden among the needy; and if implemented correctly to reach certain economies of scale, it could ensure economic prosperity for all, said Bank Muamalat Malaysia Bhd chief economist and social finance head Dr Mohd Afzanizam Abdul Rashid.
“That way, it may reduce the need for the government to introduce new taxes in order to address the widening fiscal deficits and debt burden,” he said to Bernama.
Malaysia’s fiscal deficit is expected to consolidate further in 2023 to 5.0 per cent of gross domestic product (GDP), falling to RM93.94 billion from RM99.48 billion in 2022.
Prime Minister Datuk Seri Anwar Ibrahim has given assurance that the government could achieve the target of reducing the country’s fiscal deficit to 5.0 per cent of the GDP in 2023 and to 3.2 per cent in 2025.
Waqf landscape in Malaysia
In Malaysia, waqf takes many forms, including funding mobile clinics and tahfiz institutions, land endowments for the construction of public amenities such as mosques and schools, or purchases of wheelchairs, hemodialysis machines, busses and even water filters.
Additionally, Securities Commission (SC) chairman Datuk Seri Dr Awang Adek Hussin said waqf has the potential to be an important Islamic social finance instrument to achieve socioeconomic development goals in addressing poverty, unemployment, as well as financing of healthcare, education and infrastructure development.
“As the economy evolves, the application of waqf features in Islamic finance products have shown that it can deliver the desired impact on the community while combining the search for profit or reasonable returns with a greater sense of purpose as dictated in Islam,” he said.
It is estimated that the value of waqf assets globally ranges from US$100 billion to US$1 trillion making Islamic social finance a potential source of funding to address the sustainability funding gap, which is estimated at more than US$1.7 trillion annually.
In Malaysia, waqf assets are estimated to be worth more than RM1.3 trillion, said Awang Adek.
“However, according to statistics from Yayasan Wakaf Malaysia and the Department of Waqf, Zakat and Haj, only 13 per cent or about 30,000 hectares of waqf land in the country is developed as of 2019, and even then, it is traditionally allocated to religious institutions or schools.
“The low utilisation rate shows the tremendous untapped potential of waqf in catalysing socio-economic development and in broadening investment opportunities for those seeking to invest in waqf-linked instruments or products,” he said.
Is it only for the Muslims?
Mohd Afzanizam said waqf is different from zakat (tithe), as anybody can contribute to waqf and the recipients can be Muslim and non-Muslims.
Zakat is one of the five pillars of Islam and is compulsory for Muslims who meet the requirements.
Many communities, regardless of their race and religion, have benefitted from waqf projects for education, healthcare and transportation, including waqf of dialysis and ultrasound machines to hospitals, he said.
“In a nutshell, waqf is an inclusive strategy for economic development that capitalises the philanthropic philosophy that would benefit all mankind,” he said.
Waqf and value-based intermediation
Introduced in 2017 by Bank Negara Malaysia, the VBI aims to re-orient Islamic finance business models towards realising the objectives of Shariah that generate positive and sustainable impact on the economy, community and environment through practices, processes, offerings and conduct.
It also emphasises minimisation and prevention of negative impact arising from the Islamic banking industry’s practices, conduct and offerings, and promotes a more holistic observation of Shariah beyond mere compliance to ensure Islamic banking offerings and practices not only comply with Shariah requirements but also achieve its intended outcomes.
Mohd Afzanizam said the VBI is in line with Bank Muamalat’s shareholders’ expectations for sustainable returns and the safeguard of long-term interest while adhering to Islamic tenets.
He cited the bank’s Wakaf Muamalat as an example of a noteworthy VBI initiative, where cash waqf collections are used for charitable purposes such as purchases of medical equipment and provision of affordable education.
“The intended outcomes of VBI, which culminate in the triple bottom line of people, planet, and profit/prosperity, are compatible with the United Nations Sustainable Development Goals (SDGs).
“However, one of the greatest challenges in achieving SDGs and similar sustainable initiatives is the lack of financial resources, and the enormous funding gap, which was further exacerbated by the COVID-19 pandemic, cannot be filled solely by the government and financial institutions,” he said.
Thus, he stressed that there is an urgent need to mobilise all possible resources, particularly waqf, to ensure that the VBI fulfils its intended purpose. – BERNAMA
