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Cash Waqfs in Malaysia and Singapore

In Malaysia the waqf system is greatly complicated by the fact that there is no federal law subjecting all the waqfs to the same rules and regulations. Although we will present a summary of the organisational structure of the Malaysian waqf system later, it should suffice here to note that in Johor and the Federal Territory it is possible to establish waqfs in the form of cash funds and bank accounts (Top, 1991: 122). In the rest of Malaysia also, with the exception of foodstuffs and plants, the waqf may be of either immovable or movable property (Gordon, 1975: 277). Thus we have the basic Shafi’i condition that the corpus should not be consumable.

Another interesting application in Malaysia can be observed in the field of high finance. The revenues of the Religious Departments of various states, which are partially constituted of waqf revenues, have been invested in the Islamic Bank Malaysia and the Takaful Co. Actually, 25% of the equity of the Islamic Bank Malaysia has been provided by these religious departments. As for the Takaful Co., in 1991 the paid up capital of this company was equal to RM 10,000,000. Half of this amount was owned by the Islamic Bank mentioned above and the other half by the religious departments (Gordon, 1975: 141).


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Thus what we have here is the investment of waqf revenues as equity finance with the newly established Islamic financial institutions. At this point we wonder if this arrangement can be called a modern cash waqf. Bearing in mind that unlike the situation in Turkey where the privately endowed cash of the historical cash waqfs was pooled together and formed the equity of a huge bank, Vakıflar Bankası, thus losing their judicial personality in the process, in Malaysia the cash invested was not endowed, did not have judicial personality to start with, and belonged to the Public Treasury, bayt al-mal. The returns generated by the Malaysian Islamic Bank regularly accrue to the Islamic Departments and are used for the benefit of the Islamic community. Moreover, the invested cash belonging to the Religious Departments has perpetual character since we may assume that the departments would not normally withdraw their cash. But despite these similarities, we cannot consider this arrangement as cash waqf in the classical sense, since the endowed cash is not privately owned, mulk. But the arrangement is certainly interesting and demonstrates the capability of the Islamic financial institutions to evolve.

Another interesting case, Ashabee v. Mohammad Hashim, demonstrates the validity of cash waqfs in Malaysia. Accordingly, a bequest for $400 was made for the maintenance of the testator’s wife and to be spent for “kandoories”. The endowment was deemed void on the grounds that it was not known how much of the return of the $400 was to be spent for the wife and how much for the “kandoories”. It is noteworthy that the rejection was due to the obscurity and not due to the nature of the capital endowed.

For Singapore we have more detailed information. First of all, in Singapore an endowment is defined as any endowment in land or money to be given in support of any Muslim mosque or school or for charitable purposes (Gordon, 1975: 288). According to the 1995 Annual Report of the Majlis Ugama Islam Singapura (MUIS), the supreme authority in Singapore for all Muslim affairs, there are altogether 47 waqfs that are registered. Eighteen out of these appear to be (or should be) cash waqfs, i.e., 38%. This is because, the annual report of MUIS indicates that these waqfs do not have any fixed assets and do not earn rent. Their income is in the form of returns from cash investment either in the form of bank deposits or dividends from securities or reassessment of securities.

Recent research by Khatijah Shaik Abu Bakar, a Singaporean graduate student at ISTAC, however, has revealed that these eighteen waqfs are in a transitory stage: they were originally real estate waqfs but were acquired by the state of Singapore. The state paid cash as compensation. Thus we are talking about a case of forced ibdal. It would be of great interest what the future will bring to these waqfs. They may become fully-fledged cash waqfs if they begin to utilize the returns generated by their cash corpus for their original purpose. They may also be engaged in a further istibdal and convert their cash into new real assets. What is needed here, however, is the recognition that the cash deposited by the state still constitutes a waqf, an important legal procedure possible in Iran.

The total value of the assets of these transitionary waqfs amount to S$1,054,263. Since the total value of all the registered awqaf in Singapore is equal to S$92,885,669, they constitute a mere 1% of the total value of the registered awqaf in 1995. The explosion of land values in Singapore can explain this discrepancy. This means that while real estate waqfs have become enormously rich, cash waqfs’ growth rates were indexed to the prevailing rate of interest. The following example should illustrate the point: when the MUIS had 4 town houses built on a plot of the well known Jabbar Waqf at a cost of $1.6 million, the annual rental income from the property shot up 126 times from $500 to 63,000 (Ibrahim, Z., 1994: 72).

It might be appropriate to summarise a special case here: the Muslimin Trust Fund Association of Singapore founded on the 31st August 1904. The association was founded by cash donated by the famous Alsagoff and Co. and various other Muslim businesses and individuals. The total amount of cash donated amounted to $ 864.47 and was intended for the financing of burials of poor Muslims, the support of the Muslim orphans, the support of the Alsagoff School, etc. The original fund was expected to be supported further by alms giving, sadaqa, in the mosques. It was stated in the Objects of the Association that the alms boxes placed in the mosques would be opened once monthly and the money found was to be utilised as follows:

  1. 2.5% of the total would be handed over to the Imam of the mosque for the upkeep of his mosque

  2. 97.5% would be deposited to an account to be opened with the Hong Kong and Shanghai Banking Co., in Singapore to the credit of the association

  3. The deposited money (plus the interest?) was to be used for the purposes of the association stated above.

In the year 1965 the association had an outdoor dispensary, an Arabic school, an orphanage and managed 5 mosques (Ibrahim, 1965b: 47-49).

Thus, in both Malaysia and Singapore cash waqfs exist but in each they are in a dormant state. Another common point between these countries is the excessive centralization of their waqf systems. As in Turkey, a dramatic and sweeping move of wiping off their judicial personalities and merging them into a huge bank has not taken place. It is nevertheless true that all the Malaysian and Singaporean waqfs, whether cash or real estate, have been affected by massive centralization and so we will now turn our attention to this universal phenomenon.

 

Source: Murat Cizakca, A History of Philanthropic Foundations: The Islamic World From the Seventh Century to the Present. Republished with permission.