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Waqf Administration in Malaysia

Since the Prohibition Enactment 1911 was applied in most of the states of the Malaysian Federation, by the time it was repealed in 1978, the modern Malaysian waqf system was in shambles. Not only the system itself, but also the attitudes of the ordinary Malay Muslims were negatively affected. The notion that waqfs could be an important agent of economic change and the basis of economic prosperity had become totally alien to the Malay Muslims. Muslims at all levels had come to consider that the waqfs were an ancient and decadent institution mainly for the upkeep of the cemeteries and some mosques.

At the twilight of their rule in Malaya, the British dealt a final blow to the Malay waqfs by initiating a process of massive centralization, which once started tended to continue even after the independence with its own momentum. A series of laws enacted in the fifties (Perak in 1951 and 1965; Selangor in 1952; Trengganu in 1955; Malacca in 1959; and Johor in 1978) drastically centralised the Malaysian waqf system. Among the pertinent clauses the following particularly attract attention:


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  1. The Council of Islamic Religion or the Majlis Ugama Islam dan ‘Adat Melayu is the sole trustee of all waqf properties

  2. All documents pertaining to waqf properties must be kept by the Council

  3. The Council must take the necessary steps to transfer the ownership of all waqf properties to itself

  4. All moneys received from specific waqf properties must be used according to the purpose for which such properties were intended

  5. All moneys received from general waqf properties must be kept in the general fund of the Majlis or Bait al-mal (Alhabshi, 1987: 123).

Steps have been taken to ensure that the ownership of all waqf properties is transferred to the State Religious Councils but this is not a smooth process and some difficulties are being encountered. The Councils are placed directly under the Sultan of each state. In those states without sultans, the waqfs are put under the Yang Di Pertuan Agong, the King.

The actual wording of the law includes the statement; “Notwithstanding any provision to the contrary, the Majlis … shall be the sole trustee of all awqaf, whether waqf khas (family waqfs) or waqf am … (charitable waqfs)”. The expression “notwithstanding any provision” means that despite the instructions in the waqf deed, the Majlis shall be the sole trustee. Thus, in a dramatic move, the age old and universal institution of trusteeship, mutawalli, appointed by the founder is simply eliminated. This argument is clarified in Perak, where, the Control of Wakf Enactment, 1951, provides that the State Executive Council may remove any trustee, appoint a new trustee or new trustees, or appoint the Majlis to administer the trust of such waqf (Ibrahim, 1965: 287). Thus, it seems that the traditional mutawalli appointed by the founder has been replaced by the Majlis or Majlis appointed individuals.

Moreover, the property affected by such trust, waqf or nazr am shall be vested in the Majlis. The income of a family waqf, if received by the Majlis, shall be applied by it in accordance with the lawful provisions of such waqf khas (Ibrahim, 1965: 283-85).

The income of every waqf shall be paid to and form part of the General Endowment Fund or Bayt al-Mal which is administered by the Majlis. The capital property and assets of a waqf shall not generally form part of the Bayt al mal but shall be applied in pursuance of such waqfs and held as segregated funds. If over time it is no longer possible to carry out the exact provisions of any waqf, the Majlis shall manage the waqf funds as close as possible to the original purpose of the waqf or the Majlis may in such a case, with the approval of the ruler, decide that such property and assets shall be added to and form part of the Bayt al mal.

All of the above indicate clearly the excessive degree of centralization that has taken place in the Malaysian waqf system. The Majlis is declared to be the sole trustee for all the waqfs, including the family waqfs; all the waqf properties are vested with the Majlis; and separately held capital is supposed to finance the purpose of the awqaf. But how can this be done if the income is collected by the Bayt al mal? This is reminiscent of the Ottoman situation in the nineteenth century, with the Awqaf-ı Hümayun Nezareti collecting the waqf revenues and redistributing 1/4 of these funds as “aid” to the awqaf. In fact, the picture is so similar to the Ottoman application that it is as though the British Embassy in the Ottoman Empire informed the British Government in India, which then applied the same measures in British Malaya. Although, conjectural, this is a hypothesis worth examining.

Under these circumstances, the position of the mutawalli is also quite confused. It is not even clear if this millennium old institution has disappeared altogether in Malaysia. If the Majlis is declared to be the sole trustee of all the waqfs, including the family waqfs, what indeed happens to the mutawalli? Although, the Johor Waqf Enactment Act (no.5) declares that alienation of the waqf land is null and void and if any land is subjected to a waqf, the usufruct thereof shall belong to the beneficiaries.

It is clear that the actual management of the waqf property is vested with the Majlis and not with the mutawalli who was often a family member. Under these conditions of extreme centralization, no wonder, the Muslims in Malaysia refuse to endow their properties as waqf.

Actually, there is further legislation centralising the system even more; it is decreed for instance that the State Executive Council may provide for the powers to be given to the Majlis to investigate any waqf and to call for the accounts of any waqf and to provide for the offences for failure to supply accounts and cede possession of the assets of any waqf (Perak Control of Wakaf Enactment , 1951, no.8).

In Malacca and Penang it is provided that all movable or immovable property that was vested in the Muslim and Hindu Endowments Board before the commencement of the

Administration of Muslim Law Enactment shall now be vested in the Majlis, thus confirming the above arguments for these states as well. All rights, duties, powers of the Muslim and Hindu Endowments Board in respect of endowments in land or money given for the support of any charitable purposes, shall be vested in the Majlis. (Malacca Administration of Muslim Law of Enactment, AMLE, 1959, section 9; Penang, AMLE, 1959, section 9). These legislations are also interesting in that they permit cash waqfs in Malaysia. In Singapore also an endowment is defined in sections 6/1 and 6/2 of the Administration Muslim Law Act, 1968 as any endowment in land or money to be given in support of any Muslim mosque or school or for charitable purposes, thus in effect legalising cash waqfs.

Malacca appears to enjoy the best administrative set up. For, only in Malacca is it possible to observe a specialised committee dealing with waqf affairs. In most states, there is no such body and waqf affairs are left to the discretion of officials not properly trained in waqf management. Statistics about the extent of waqf property are inadequate in all the states. Moreover, since most waqf lands have been endowed for Muslim cemeteries, it has been estimated that only ten percent of the waqf lands in Malaysia has income generating potential (Alhabshi, 1987: 127). Most of the waqf properties that could generate income are in the form of residential buildings and agricultural land. The former and urban waqf lands have substantial rent yielding potential, however, this has been frustrated by the Rent Control Act.

The Rent Control Act, 1948 froze the incomes of all waqf properties in Malaysia for many years (Another legacy of the colonial rule, the Rent Control Act was formulated in 1948 and became effective in all the states from 1966. The rent controls are being abolished only now, in 1996-97). Thus, with their basic revenues frozen, the Malaysian waqfs were also hit financially. (Top, 1991: 59, 191).

Another reason why rents are so much lower than the market rates is long term leasing (66 to 99 years). In fact, a strong correlation between the low rents and long term leasing has been convincingly demonstrated by Othman Alhabshi (1987: Table 4).

Moreover, in Malaysia it is possible to detect some discrimination against the waqfs as well. For instance, whereas the local authorities have been exempted from the Rent Control Act, the Majlis, which controls the waqfs, has been subjected to it. Consequently the Majlis continues to receive from some of the properties it rents a monthly rent as low as RM 1.00!

Discrimination can be observed in the fiscal policy area as well: while waqf revenues are subjected to all the restrictions of the Rent Control Acts, they are not given any tax breaks. Indeed, with the exception of the cemeteries, all waqf lands are subject to land tax. To add to the confusion, these tax rates are not uniform across the country. Under these circumstances, we should not be surprised that in the state of Malacca, during the period 1985-89, the waqf system suffered a deficit (Top, 1991: 137).

Since in Malaysia there are three major ethnic groups, Malays, Chinese and Indian, each believing in a different religion, the Rent Control Act had extra-ordinary repercussions. This was because the land and the buildings (waqf properties) generally belonged to the Muslims and the tenants were Chinese. Since, the Rent Control Act transferred a huge income from the owners to the tenants, the situation was explosive. Nik Abdul Rashid b. Abdul Majid has explained the situation in a dramatic statement:

“If thirty years ago the Chinese rented waqf lands in Taiping at RM 1,00 per month, thirty years later it was still RM 1,00. Within that period the Chinese tenants had amassed millions of ringits of profits but our income on the waqf property remains RM 1,00” (Top, 1991: 67).

These ridiculously low revenues are directly reflected in the Majlis budgets. The Majlis of the Pulau Penang, for instance, could collect RM 325,000 as revenue and had to spend RM 268,890. The arrears, moreover, amounted to RM 70,000. Thus the Majlis had very limited means to spare for the development of the waqf properties it controlled.

Such development projects are usually financed by borrowing from the financial institutions, which bring us directly to the highly important question on the relationship between the waqfs and financial institutions. Although the Majlis of Penang has borrowed successfully from the Malaysian Development Bank (MDB) and also from the Majlis

Amanah Rakyat (MARA or the Council of Trust for the Indigenous, Bumiputra, People), a combined total of RM 7.5 millions, it failed to borrow from the Islamic Bank. The details of these transactions are as follows:

  1. The Majlis borrowed RM 5 millions from the MDB at 5% interest. This amount was borrowed for erecting a 7 storey building on waqf land

  2. The Majlis also borrowed RM 2.5 millions from the MARA for erecting another building on waqf land. There was no interest involved, but the Majlis had to agree to mortgage the waqf land to MARA for 30 years. This transaction was completed and the building was erected which yielded total monthly revenue of RM 13,200.

When the Majlis wanted to free this building from MARA’s mortgage, it approached the Islamic bank. MARA was asking RM 5 million for the original RM 2.5 millions it had invested. So, the Majlis decided to approach the Islamic bank and ask them for a loan. The bank agreed to buy the building from MARA for RM 5 millions but demanded from the Majlis RM 11 millions. The Majlis was supposed to make a down payment of RM 183,333 and pay the rest to the Islamic bank in monthly instalments of RM 61,112 for 180 months. The Majlis was quick to reach to the conclusion that the Islamic bank was asking a 120% profit and decided to cancel any relationship that it might have had in the future with this “interest free” bank (Abdel Rahman, 1997: 14; Top, 1991: 141).

This frustrating experience the Majlis had with the Islamic bank is all the more striking if we consider the fact that the Malaysian waqfs are indirect shareholders of this bank because the revenues collected by the religious departments, which are partially constituted by waqf revenues, have been invested in the Islamic Bank Malaysia and the Takaful Co.. To be more precise, 25% of the equity of the Islamic Bank Malaysia is owned by the religious departments of various states. As for the Takaful Company, of the total paid up capital of RM 10 million, half was owned in 1991 by the religious departments (Top, 1991: 141). Furthermore, the Islamic Religious Council has been a significant investor with the Islamic Bank Malaysia; it has deposited M$ 1,065,500 into the investment account of the Islamic bank. These frustrating experiences aside, some successful ventures have also been brought to conclusion and waqf lands have been profitably developed by funds provided by MARA (Alhabshi, 1987: 134). All in all, the Majlis, in comparison with the Islamic bank, has enjoyed a better relationship with MARA.

The federal structure of Malaysia also presents certain problems for waqf management: Each state has different problems stemming from different size, quantity of waqf properties etc. Given these differences, 5 major problem areas common to all the states have been identified. These are:

  1. The objectives and the functions of the administrators are not clear

  2. The organisational structure is inefficient

  3. Waqf officers are not properly trained

  4. Lack of concrete plans and actions to develop waqf properties

  5. Lack of financial support to implement waqf projects (Ngah, 1992: 39-40).

That all of the above have hindered the endowment of waqfs by Malay Muslims is demonstrated by research, which has shown that most waqf lands in the state of Johor belong to the state. The implication is clear; Muslims of Johor rarely constitute waqfs on an individual basis. This is a striking conclusion for a state where the great sultans of Johor had once endowed huge estates and thus provided an example to ordinary citizens. Therefore the culprit cannot be the Muslims of Johor but rather the impact of colonialism, secularisation, and the waqf system that has discouraged Muslims from endowing their properties. To these reasons we may also add the high cost of land that imposes a substantial opportunity cost upon the founders.

But serious discouragement to waqf endowment can also be found in the procedure as well. For instance, in Selangor, Negri Sembilan, Kelantan, Trengganu, Pahang, Malacca, Penang and Kedah, it is provided that a waqf cannot encompass more than one third of the property (unless in Kelantan it is sanctioned and validated by the ruler, or in Trengganu it is sanctioned and validated by all beneficiaries) (Gordon, 1975: 282). In this way, the amount of property a founder may wish to endow is limited to only one third of his/her total property. It goes without saying that this rule clearly violates the basic principles of Islamic waqf law and is yet another relic of the British influence.

Another important impediment pertains to the illegal settlements in waqf lands. When such settlements do occur, there is little co-operation between the trustee, the Majlis, and the authorities. In the state of Johor, the Enactment for the Administration of Religious Affairs, Johor, no. 14/78, section 50 charges illegal intruders and settlers into the waqf property a maximum fine of RM 1,000 or six months’ of imprisonment (Top, 1991: 179). Since illegal settlements continuously occur, it is clear that these measures are not sufficient. A well-known example of such an illegal settlement in waqf property occurred in Penang. The so-called Wakaf Kampong Makam with its seven acres of land in the middle of George Town had been illegally settled. The Majlis of Penang reacted to this situation and ordered the settlers to move out. Due to the lack of cooperation between the authorities, this order was not obeyed by the settlers. As a result, the Majlis has not been able to develop this property as it was originally planned (Abdel Rahman, 1997: 8).

Shifting our attention to Singapore, we observe the same centralising tendencies there and note that there is a Muslim and Hindu Endowments Board constituted under the previous Muslim and Hindu Endowments Ordinance to administer certain Muslim religious endowments. The Minister may order any waqf to be administered by the Board where it appears to him that,

  1. Any waqf has been mismanaged

  2. There are no trustees appointed

  3. It would otherwise be to the advantage of any waqf that it should be administered by the Board.

The Board has all the powers of a trustee and may appoint or remove any officer of the waqf, receive and collect the income of the endowment. The Board is also given power to require the production of accounts from the trustees or any person who has possession, custody or control of the funds, money or property of any endowment, and has power to require such trustee or persons to appear before the Board and be examined on oath or otherwise.

Thus, in Singapore we have a slightly different situation, rather than eliminating the traditional mutawalli altogether, section 58 (4) of the Administration of Muslim Law Act, 1968 allows the trustees appointed by the founder in the deed of endowment to continue to function, but at the same time confirms the power of the Majlis Ugama Islam Singapura, (MUIS) to appoint and remove any existing trustees. This difference regarding the status of the mutawallis between Singapore and Malaysia is also confirmed by Ahmad Ibrahim:

“The majority of the mosques in Singapore are still administered by trustees under trusts created by wills … and (in) this respect (their) position in Singapore differs from that in the States of Malaya, where it is provided that the Majlis Ugama Islam shall be deemed to be the trustee of all mosques … (Ibrahim, 1965: 47).

An actual court case from the Court of Appeal of Singapore may illustrate how these rules and regulations are actually translated into practice. The case we will refer to is known as the Trustees of the Estate of M. Haji Meera Hussain v. MUIS. The case concerns a waqf endowed by a certain Abdul Rahman b. Muhammad Yunoos, a resident of Singapore, who made his last will in India and died there on 13 October, 1918. The deceased had certain properties in Singapore and he stated in his will that the revenue from these properties should be spent for the upkeep of a mosque in India. In time, a large part of the testator’s estate was lost and only a share in a property in 34 Arab Street remained. This was apparently not sufficient for the maintenance of the mosque in India. Bearing this in mind, the trustees appealed for permission to sell the property in order to construct a new mosque in India.

Although this was approved by the Commissioner of Charities, the MUIS opposed the sale on the grounds that the properties constituting a waqf would automatically be vested in MUIS according to the Administration of Muslim Law Act, 1968, (Cap.3)(the Act). The trial Judge agreed with the respondents and ruled that since the property was vested with MUIS, the appellants had no power of sale. The appellants appealed against this decision.

The case was then referred to the Singapore Court of Appeal and is known as Civil Appeal No.134 of 1994. The court dismissed the appeal and thereby confirmed the respondent’s claim that since the property of the waqf was automatically vested in MUIS, the appellants had no legal title or right to sell the property other than to carry out the waqf as directed under the will. The request to sell the property was also rejected on the grounds that the founder had prohibited istibdal in the waqf deed. This actual court case from Singapore reveals the following points:

  1. It is possible to endow property in Singapore and use its usufruct for the support of a mosque in India

  2. Since the foundation of the endowment, several generations of trustees have been appointed to run the waqf

  3. These mutawallis were permitted to administer the waqf. This permission was also confirmed by the Singapore Court of Appeal showing that the office of trusteeship is considerably more clear in Singapore than in Malaysia

  4. But the mutawallis were not permitted to sell the property both because istibdal was not permitted by the founder but also, and primarily, because the property of the waqf was vested not with the trustees but with MUIS. This point is almost identical to the situation in Malaysia.

To sum up, Malaysia constitutes a fascinating case for the history of waqfs. This is a country where Islamic law was superseded by secular British law, and the waqfs remained dormant for long periods. Moreover, Muslims constitute only about half of the total population. These historical facts notwithstanding, in independent Malaysia Muslims began to challenge British law and insist to be ruled by their own law and institutions. The country is giving birth to a dual legal system. Under these circumstances it is to be expected that the country should go through a thorough waqf reform.

 

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