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Innovating a waqf-linked sukuk framework to finance the development of idle waqf land in Malaysia

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Date
2022
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Abstract
The funding conundrum for idle waqf land in Malaysia has been with us for a long time and there is need to find a feasible, effective and adequate solution for the issue. In other parts of the world, sukuk have been used to a limited extent to develop waqf land. Although Malaysia is a leading jurisdiction for sukuk issuances, we have not seen it happen here. The objectives of this study are to: examine the legal and regulatory framework in Malaysia to develop waqf land; investigate the existing constraints facing the development of idle waqf land in Malaysia; evaluate the replicability of existing sukuk structures used in other parts of the world to develop waqf land in Malaysia; and propose a framework for waqf-linked sukuk in Malaysia considering its unique legal and regulatory framework for waqf. This research adopts a qualitative research method. Further, interviews have also been conducted with subject matter experts to understand and explore the practical aspects of the research topic. The findings of this research indicate that there are several constraints facing the development of waqf land in Malaysia including non-uniformity of the administration and management of waqf across the states, lack of governance in waqf administration and critically, dearth of funding. Due to the unique legal framework and waqf governance in the country, the sukuk models used so far in other jurisdictions to finance the development of waqf land cannot be fully replicated in Malaysia. However, it is found that a potential solution in the form of a unique waqf-linked sukuk as a means to raise financing for the development of idle waqf land in Malaysia is viable. The proposed waqf-linked sukuk framework is designed to facilitate the issuance of a waqf-linked sukuk within the existing laws and regulations governing sukuk in Malaysia, and is designed to appeal to the widest range of investors to ensure the highest possibility of a successful issuance. It also introduces the concept of cash waqf, at the option of the investor, to the capital and returns of the sukuk, to address the challenge of sustainability of funding of the waqf institution. The waqf-linked sukuk framework represents a potential framework to be relied upon by the stakeholders in the waqf ecosystem in Malaysia to support the funding requirements related to the development of idle waqf land. Positive outcome is expected from the implementation of this framework. This is due to the advantageous nature of utilizing sukuk to raise funding in an efficient and sustainable manner. Additionally, this dissertation opens the door for more research to explore sukuk as one of the main instruments to finance waqf projects.
Keywords
Waqf-linked sukuk , Waqf land , Malaysia
Citation
Mohamed Ismail, M. A. (2022). Innovating a waqf-linked sukuk framework to finance the development of idle waqf land in Malaysia (Doctoral dissertation). INCEIF, Kuala Lumpur. Retrieved from https://ikr.inceif.org/handle/INCEIF/3768
Publisher
INCEIF

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