Experiences and Lessons of Cash Waqf in Bangladesh and Other Countries

Abstract

Islam guides us in poverty alleviation based on the principles of justice and equitable distribution of wealth implementable via both the market and non-market mechanisms. Islamic finance provides a model that identifies individual differences not only from the perspective of equitable opportunities for all but also from providing other means for addressing economic problems. This paper takes a deep dive into “Waqf” as a rewarding economic system. We present an alternative view of waqf integrating it as a component of the traditional economic system. We explain how waqf increases aggregate consumption, expenditure, and expand national income. A cross-country review of current state of waqf practices is included for comparative analysis. It helps to grasp a complete understanding of challenges and issues in waqf globally. Lack of trust in waqf managers and institutions is the key factor why, despite being the best social capital model, the practice of waqf is relatively low in Muslim majority countries. Evidence is there that in many cases financial greed takes over the financial objective creating a fear of permanent loss among the endowers. Moreover, investments of waqf fund are not well diversified and not invested properly to generate income to support waqf assets. To get the most out of waqf asset, strategic alignments of waqf funds and stakeholders are necessary at the institutional level. In the final section of this presentation, we suggest a comprehensive legal framework that adequately addresses major financial, agency, and governance issues pertaining to waqf. A waqf friendly legal environment coupled with preferential tax treatment for the endowed funds is crucial in achieving the intended goal of Islamic finance through waqf as its vehicle.

This is the keynote address given at the 2017 Waqf Conference in Dhaka on November 4, 2018, at Hotel Sonargaon.