The potential of Waqf for Social Change

While there are a great number of literature produced on the legal and religious aspects of Waqf, insufficient bandwidth is advocated in harnessing its role and optimizing its impact to the society at large. Statistics compiled by the Malaysian Wakaf Foundation and Department of Wakaf, Zakat and Haj (JAWHAR) in the Prime Minister’s Department reveal that out of the 30,000 hectares of Waqf land throughout the nation, only 13 percent has been developed so far.

So we are still a long way from activating Waqf as a catalyst for economic growth and social change. Waqf as a tool for social change and an economic driver is not a lofty aspiration. It has been done before throughout history, in fact during the ottoman times, Waqf has an unrivaled financial power and social and economic influence.

What is Waqf?

In its economic context, the Waqf could be defined as diverting funds and other resources from current consumption and investing them into productive and prospective assets which generate revenues for future consumption by individuals or society at large. Waqf is therefore a unique combination between the act of saving and the act of investment.

It functions by re-allocating current resources from consumption whilst simultaneously putting them in the form of productive assets that increase the accumulation of capital within the economy.

In line with the principle of perpetuity in Waqf, the assets of Waqf may not be sold or disposed of in any form. It should remain within the Waqf domain perpetually. Should there be a new Waqf, it will be added to that existing bucket. Therefore, the assets will continue to increase and at the same time, they are not permitted to decline due to the prohibition in consuming the assets or to leave them idle by any action of neglect or transgression.

The dynamism of the Waqf institution and its mechanism could bring about actionable and tangible contributions to the economic development in these present times. The contributions of Waqf for economic development can be explained, among others, as follows.

In simpler terms, Waqf is an investment by the rich the ROI of which only reach maturity in the next life. In this life, Waqf addresses the social imbalances that exist.

Waqf Reduces Economic Burden

Essentially, Waqf is not a part of government income or expenditure, rather it is a charity given voluntarily by society to serve public interests and enhance their welfare. Having financed by Waqf fund, the government, therefore, can save a great amount of its budget and expenditure which was initially planned for public interests.

This budget then could be effectively channeled to other important development activities. It is in this sense that Waqf institution alleviates the government’s fiscal burden and lightens its responsibility within the economy. With more Waqf funds collected for certain development projects beneficial to the society, the lesser the government’s portion will be for these particular projects.

 Re-distribution of income and wealth

Waqf institution also plays an important role to achieve a just distribution of wealth and income in the economy through its innate voluntary contribution nature by those who are “better-off” within the society’s strata for the general public purposes.

The voluntary approach has a much better result than the redistribution of resources through taxes and government transfer expenditure as the instrument of taxes has a greater implication for its implementation.

Also, a lower tax burden means an enhancement in the consumer’s and producer’s surpluses and a diminution in the “dead-weight cost of the tax”. As a result, lower taxes would have a positive impact on aggregate production while at the same time reducing costs. Therefore, prices to the consumers would decrease and inflationary pressures may be contained.

As Waqf made by the rich provides benefit to the society in general and the poor in particular, this feature serves to alleviate the effects of income and wealth inequality. Different from the short-term impact of government budgetary policies, the institution of Waqf could eliminate the tendency towards concentration of wealth among society.

Poverty eradication

Poverty and income inequality have always been among the most critical and enduring problems that societies face. The institution of Waqf is such a perpetual charity in the Islamic system. Through Waqf, long-term assets that generate income flows can be created and preserved. These assets obviously help the process of production and creation of wealth.

Waqf can play an important role in poverty alleviation by specifically targeting the poor as major recipients of its benefits. As an illustration, Waqf may also be formed with the specific purpose to disseminate knowledge and coaching skills in entrepreneurship development amongst the poor. This can provide a lasting mindset change that can change the financial status for generations to come.

The Ottoman society left the financing of health, education, and welfare entirely to the Waqf system so much so that the following expression emphasizes its central importance: “thanks to the Waqf’s flourished during the Ottoman Empire, a person would have resided in a Waqf house, slept in a Waqf cradle, ate and drank from Waqf properties, read Waqf books, taught in a Waqf school, received his salary from a Waqf administration, and when he died, put into a Waqf coffin and buried in a Waqf cemetery.”

Therefore, almost all of the researches highlight the central importance of the Waqf system on the social, economic, and cultural life of the Ottoman society. Within the Malaysian context, all these vital roles of Waqf would be possible to achieve in these modern times with concerted efforts and sufficient will by all stakeholders to see it through.

Comment Below