Cash Waqf and Preferred Method of Payment: Case of Malaysia Using an AHP Approach Theme: Waqf Collection and Management Strategies

Transcription

1. Research Workshop on Revival of Waqf for Socio Economic Development 2017 on 4th October 2017 . Dhaka, Bangladesh Cash Waqf and Preferred Method of Payment: Case of Malaysia Using an AHP Approach Theme: Waqf Collection and Management Strategies Mohamad Isa Abd Jalil1, (Presenter) Anwar Allah Pitchay2,Sofri Yahya3, 1 Labuan Faculty of International Finance Universiti Malaysia Sabah, Labuan, Malaysia Email: isa@ums.edu.my 2 School of Management Universiti Sains Malaysia, Penang, Malaysia Email: anwarap@usm.my 3 Graduate School of Business Universiti Sains Malaysia, Penang, Malaysia Email: sofri@usm.my ABSTRACT The objective of this research is to study the significance of payment methods among cash Waqf donors in Malaysia. This study used online web survey to collect data. The respondents of the study consisted of cash Waqf donors and we sent the online questionnaire using convenient sampling technique in Penang, Selangor and Johor. An Analytic Hierarchy Process (AHP) method was utilised as the primary analytical device where the method of Aggregate Individual Priority (AIP) – Weight Geometric Mean Method (WGMM) is applied. The findings suggested that the online payment and cash methods were the first and second most preferred means respectively for donors to pay cash Waqf. Meanwhile, the use of postal order and cheque scored the least precedence compared to other Waqf payment methods. Undoubtedly, this paper has certain limitations where the variables, one of the payment methods must be referred to SIRC, unlike methods offered by private bodies such as by debit card and credit card. Thus, future research should add more variables to acquire deeper findings. Cash Waqf trustees or fundraisers would be able to focus on the types of payment methods that obtained high priority rates to meet donor’s expectation. This study can be significantly discerned from both the theoretical and practical perspectives. From a theoretical perspective, this study was expected to fulfil the knowledge gap in the literature of Waqf studies and the AHP methodology. There was still no study that covered the priority of payment methods among Waqf donors. From a practical perspective, this research should help Waqf trustees to understand the behaviour of cash Waqf donors to fulfil their needs. Keywords Cash Waqf, Payment Method, Priority, and AHP Paper type Empirical research paper The present study is sponsored under Fundamental Research Grant Scheme (FRGS) 203.PMGT.6711551
2. _____________________________________________________________________ 1 Introduction Classic Islamic scholars interpreted Waqf as endowments , largely valuable assets that could be perpetually utilised (Otahman, 1982). Ibn Manzur (1990) claimed “Waqf” originated from the Arabic words Waqafa, al-habs or al-man which were translated to mean stop, to hold or resist, respectively. However, in the text of Sharia, the intimate terms for Waqf is Sadaqah and Habs (Mohammad, 2004). Most legal Islamic scholars frequently define waqf as “holding capital and take advantage of its benefits” (Laldin, Mahmud, & Sawari, 2008). As time evolved and financial tools become complex, the definition and concept of Waqf were required to be updated without deviation from the teachings of Al-Quran and Hadith. Monzer Kahf (1998) redefined Waqf as holding an asset to avoid its usurpation for the aim of employing its value continuously for the righteous and charitable purposes. Recently, Malaysian Accounting Standards Board (2014) defined Waqf as the commitment of a specified asset (mawquf) by a settlor (waqif) to the administration of a mutawalli through a legal instrument (waqfiyyah) such that the income or value derived from that asset benefits a stated beneficiary (mawquf alaih) or is utilized for an affirmed purpose. Aligned with previous clarification and permission to use cash waqf in Malaysia, this study will use Mohammad et al., (2005) redefinition of Waqf as the dedication of valuable assets perpetually where the value is subsequently amortised, and its profits and proceeds are later expanded on the welfare of stated beneficiaries. As claimed by Mahamood (2006), the Waqf had been put into practice by Muslims in Malaysia since the beginning of Islam there. Although the official trustee of Waqf in Malaysia is solely the State Islamic Religious Council (SIRC), Waqf is assured under the State List of the Federal Constitution 1957. This action provided every state with their own specific rules and regulations. The Malaysian federal government had endeavoured to coordinate with each state by launching Jabatan Wakaf, Zakat dan Haji (JAWHAR) in 2004 (Jabatan Arkib Negara, 2012). Under the cooperation among SIRC, Jabatan Agama Islam Malaysia (JAKIM), and JAWHAR, a complete set of Waqf land data for every state was recorded. With reference to the Master Plan Study for the Transformation of Waqf Property Development in Malaysia by YWM (2016), it shows the current statistics on Waqf land in Malaysia (revised up The present study is sponsored under Fundamental Research Grant Scheme (FRGS) 203.PMGT.6711551
3. to 15 November 2013 ) where the total Waqf land are is 30,888.89 acres equivalent to 14,356 lots. The contributions and the roles of Waqf to the Muslim Ummah are undeniable. From the time of Prophet Muhammad (pbuh), through the period of Khalifah arRasyidin, and to this day, Waqf has provided humanitarian aid across borders of religion, race, age and geography. Among the things that received positive effects from Waqf were Islamic religion affairs and sustainability, poverty relief, education development, health care enhancement, national debt reduction, and the promotion of fiscal development. For this reason, the sustainability and continuity of Waqf must be maintained as well as possible. According to Taylor and Anderson (2008), the fundraisers (in this case, the Waqf trustees) must understand the behaviour and the trend of donors as they are the primary sources of charity (Waqf institution). Therefore, the main objective of this research was to examine the priority of payment method among cash Waqf donors in Malaysia. The significance of this study could be discerned from theoretical and practical perspectives. From a theoretical perspective, this study was expected to fill the knowledge gap in the literature of Waqf studies and an Analytic Hierarchy Process methodology. There was still no study on the priority of payment methods among Waqf donors, or even general donors. From a practical perspective, it was anticipated that this research would help Waqf trustee to understand the behaviour of cash Waqf donors and then fulfil their needs. 2 Problem Statement Despite the success story and contribution of Waqf globally and specifically in Malaysia, the issues of the insufficient fundings to develop idle Waqf lands are still one of the primary subjects in literature (see Saifuddin et al. 2014). Mohd Ali et al. (2015) reported that there are 11,091.82 hectares of Waqf lands of which 92.8 per cent are still undeveloped in Malaysia. However, there are numerous efforts by the authority and proposals by academic scholars had been forwarded to reduce the problem of idle Waqf lands. One way to handle Waqf lands in Malaysia was to introduce a cash Waqf scheme (JAKIM, 1982). States Islamic Religious Council (SIRC) had appointed mutawalli (sole trustee) to collect, manage and distribute cash Waqf to develop the available Waqf lands. Nevertheless, the collection of cash Waqf is still below the satisfactory level The present study is sponsored under Fundamental Research Grant Scheme (FRGS) 203.PMGT.6711551
4. according to Pitchay (2015). The cash Waqf collection comparison between states showed imbalance and fluctuation. Some states such as Selangor, Penang and Johor demonstrated high volume of cash Waqf collection, while others such as Melaka, Kedah and Perlis did not fare too well. Previous literature had pointed out several factors that influenced donors to stay committed to their donation. Sargeant and Woodliffe (2005) found that payment methods significantly persuaded donors to retain their contribution. The researcher noticed that there was still no study covering payment methods and cash Waqf in Malaysia. Therefore, this paper tried to suggest a solution to increase cash Waqf collection by proposed payment method which should be prioritised by SIRC based on the Analytic Hierarchy Process (AHP) empirical study. 3 3.1 Literature Review Cash Waqf Regardless of the fact that cash Waqf started in Mesopotamia, Greece and the Roman Empire, it only received recognition during the Ottoman Empire in Egypt and was eventually introduced in Malaysia in 1959 under the regulations of Waqf Control, Perak Islamic State Religious Council (Mahamood, 2007). Cash Waqf was critical during that period because the funds received were used to support Islamic expansion in Europe (Cizakca, 2004). The majority of Islamic scholars did not consent to Waqf collection in the form of cash. However, a small number of Islamic scholars approved cash waqf such as Imam Zufar and Imam Ibn Taymiyyah due to Maslahah (public interest), an opinion agreed upon by several contemporary scholars. The definition of cash Waqf differs from Waqf and this study uses the definition of cash waqf from Saifuddin et al., (2014), which is the allocation of some money from one's possessions; establishing a Waqf based on that amount and offering it to the general benefit of people or allocating it to some sectors of the community. The application of cash Waqf differs from other types of Waqf. It is not permissible to lower the value of Waqf assets since it is prohibited to use the property carelessly or leave them to be idle. Cash Waqf can be transformed into capital and then invested, where the gains obtained would then be dispersed among the impoverished. Therefore, Waqf is a collective and ever-increasing investment (Sanusi & Shafiai, The present study is sponsored under Fundamental Research Grant Scheme (FRGS) 203.PMGT.6711551
5. 2015 ) and this is consistent with the opinion of Munzer Kahf (1999), where a Waqf asset may not be sold or disposed of in any form. It should be maintained perpetually, and any new Waqf would be added to the existing Waqf, implying that Waqf assets increased rather than decreased. According to Ismail Abdel Mohsin (2013), there are six types of cash waqf schemes which are compulsory cash Waqf scheme, corporate Waqf scheme, co-operative Waqf scheme, deposit cash-Waqf scheme, deposit product Waqf scheme and waqf-shares scheme. Currently, the application of cash Waqf in Malaysia has improved further through its collaboration with commercial banks such as Bank Muamalat Malaysia Berhad and corporate bodies such as JCorp. Cash Waqf has a number of benefits over fixed asset Waqf. Cash Waqf can be a valuable tool for attracting more funds and generating liquidity. It may be the best tool in Islamic trusts to alleviate poverty, particularly if these trusts can effectively manage the funds (Sadeq, 2002; Mohammad Tahir Sabit Mohammad, 2015). Cash Waqf could also generate more economic stimulus and social improvement; and its investment could be diversified to produce a greater revenue generation opportunities and increase chances for growth (Ammar, 2006). As pointed out earlier by Çizakça (2000), more than a quarter of the cash waqf founded in the city of Bursa during the reign of the Ottoman was reserved for more than a century and 81 per cent of these existing waqf owed their resilience to either reinvestment of profit or receipt of more donations from various other smaller cash waqf. Çizakça (1998) posited that the yields from the cash Waqf were in turn invested in public amenities ranging from education to food support for the deprived. Despite these benefits, cash Waqf in Malaysia remains plagued by challenges, issues and the need for more improvement. According to some studies (Rabitah Harun, Zuraidah Mohamed Isa, & Norhidayah Ali, 2012), several problems are associated with the effectiveness of Waqf administration such as the absence of qualified officers, limited expertise in database management systems, insufficient documentation, lengthy duration of estate registration and irregularities in Waqf rules and regulations. Furthermore, cash Waqf development in Malaysia is still at the formative stage (Osman, Htay, & Muhammad, 2012) making it quite unpopular (Mahamood, 2007). Many Muslims still think that Waqf only entails fixed assets such as lands and buildings. Furthermore, there remains the issue of unsatisfactory cash Waqf collection. The The present study is sponsored under Fundamental Research Grant Scheme (FRGS) 203.PMGT.6711551
6. general purpose cash waqf schemes (Waqf al-Am) have not generated adequate funds to embark on more effective programmes (Alias & Diaw, 2011). Therefore, Mokhtar et al., (2015) suggested the need to adhere to the demands of stakeholders and recommended that the banks be mindful of their limitations as they may weaken customers’ trust in the cash waqf scheme. 3.2 Payment Methods Sargeant and Woodliffe (2005) defined payment methods as the type of payment employed by donors and identified it as a precursor of passive commitment. They also discovered that respondents feel that the availability of alternatives is a key factor that drives their level of commitment to an organisation. The level of commitment may differ by nature of the contractual agreements that govern the relationship in the commercial sector. Commitment might vary depending on whether a contributor had chosen to give only a series of ‘cash’ gifts, or decided to provide a regular gift through a direct debit or standing order (Sargeant & Jay, 2011). Sargeant and Jay (2011) pointed out that from the donors’ perspective, paperless direct debit and direct debit reduce the number of stages and time involved in making a regular gift commitment. The general public has witnessed the notable transformation in the approaches taken by individuals to organise themselves and connect with each other. The advances in internet connection significantly altered the way humans conduct daily affairs, including business dealings and money transfers (Boersma & Burgers, 2013). These changes will continue with technological development through time. All parties including donation and charities, conventional or Islamic have witnessed the spread of this trend. This trend has also affected the method of payment among consumers and donors. The previous empirical research shows that in the case of consumer study, consumers do have different preferences on payment methods by regions. According to First Data and Market Strategies International (2011), consumers in Germany, Middle East and Poland prefer cash method while Australian consumers prefer credit cards and UK consumers prefer debit cards. Moreover, empirical study also shows that the consumer preferences of payment methods change over time. For instance, Foster et. al. (2013) exhibit the increase of use in debit cards from only 10 per cent in 1992 to The present study is sponsored under Fundamental Research Grant Scheme (FRGS) 203.PMGT.6711551
7. 80 per cent in 2010 . Statistics by European Central Bank (2012) showed that the use of cheques declined while the use of card payment increased from 2000 to 2011. However, studies on the types of payment used or preferred by customers, particularly donors are too insufficient. The literature from some organisational reports exceeded journal articles. Past studies had focused on types of payments by retail customers (Angrisani, Foster, & Hitczenko, 2013; Angrisani, Kapteyn, & Schuh, 2012; Foster, Schuh, & Zhang, 2013; National Automated Clearing HouseAssociation, 2000; Wright, 2002), bank payments (Schreft, 2006) and international payments (First Data & Market Strategies International, 2011; Sirpal, 2009). Cash payments by consumers, which had increased sharply in 2009, further increased by another 3 per cent in 2010. Consumers’ credit card payments arose by 15 per cent, reversing more than half from the 2009 decline, but the steady downward trend in paper check payments by consumers continued. Debit cards and cash advanced to comprise the two major shares of consumer payments, and end user implementation of all types of prepaid cards increased remarkably (38.2%) in 2010. Mobile banking and mobile payments by consumers continued to show moderate increases through the end of 2010, in line with early stages of technology adoption (Foster et al., 2013). From the charities perspective, only two reports are available on types of payment utilised by donors. Blackbaud (2012) carried out a general survey in the UK, US and Australia, and discovered donors from the UK and Australia preferred cash as a method of payment while US donors preferred the cheque. Text messages or SMS was found to be the least preferred mode of payment in all three countries, while credit or debit card was the most selected method after cash. However, in 2013 Blackbaud reported a different position. The study analyzed 17 types of contribution channels: check out donations, online donation, purchase of proceeds, honor/tribute gift, pledge, street canvassing, mailed check/credit card, email, third party vendor, door to door, phone, mobile text, will/planned gift radio/tv, social networking site online ad, and stocks, bonds, property. The study found that the American donors from Gen X, Gen Y and Boomers preferred to check out donations while mature donors preferred credit cards. Studies have also focused on the reasons customers or donors preferred a particular method of payment. For example, Galushkin et al., (2014) studied the The present study is sponsored under Fundamental Research Grant Scheme (FRGS) 203.PMGT.6711551
8. determinants of using a payment card for commercial consumers , while Borzekowski, Kiser, and Ahmed, (2008) carried a research on the use of debit cards for shopping. Crane, Escobar, and Sornette, (2005) studied the motives that drive donors to use gift cards as a payment method. In the field of Waqf research, Pitchay et al., (2015) studied the issues that encouraged the behavioural goals of Muslim employees to contribute to cash-Waqf through salary deductions, while Amin, Abdul-Rahman, Ramayah, Supinah, and Mohd-Aris, (2014) as well as Mohd Isa (2014) analyzed the acceptance of online Waqf in Islamic banking institutions. However, there are still no studies on the payment methods used or preferred by the Waqif. Table 1 shows the types of cash Waqf payment offered by State Islamic Religion Council (SIRC) in Malaysia. It is discernible from the table that most of the mutawalli (trustee) prefer the waqifs to pay Waqf by cash except Negeri Sembilan and Selangor. Many states also offer payroll deduction. The least method offered is a kiosk, cheque and cash collected at the mosque. From the table, credit cards is a method that was not offered by any single one mutawalli, but this method is prevalent at Western. The other payment methods provided by mutawalli, as observed in Table 1, possibly to donate easier for the waqif included mobile transfers and bank drafts. Table 1: Type of Cash Waqf Payment Method Offered at SIRC Malaysia (2015) DIRECT DEBIT YWM* Johor N9 Selangor Melaka Pahang Terengganu Kelantan Perak Penang Kedah Perlis ONLINE PAYROLL DEDUCTION √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ CHECK √ √ POSTAL ORDER √ √ √ √ CASH √ √ √ √ √ √ √ √ √ √ √ √ * Yayasan Wakaf Malaysia Source: Various State Islamic Religious Council Website The present study is sponsored under Fundamental Research Grant Scheme (FRGS) 203.PMGT.6711551 KIOSK SMS √ √ √
9. Thus , this research would use these type of cash Waqf payment method offered by SIRC shown in Table 1 as a variable to measure the priority of payment methods among Malaysian cash Waqf donors. However, the method involving the kiosk will be considered as cash. 4 4.1 Data and Methodology Analytic Hierarchy Process The Analytic Hierarchy Process (AHP) founded by Saaty in mid-1970 is one of the methods for decision support in answering a multi criteria decision-making problem. According to Ciptomulyono (2008), the AHP is based on sets of pair wise comparison of decision makers that is represented on a human being’s intrinsic ability to structure the perceptions hierarchically, comparing pairs of similar things against a given criteria or a common property and judging the intensity of the importance of one thing over another. AHP is well-known as a simple mean to rank the importance of alternatives based on some defined criteria. The aggregate individual priorities (AIP) framework of AHP is one of the methods to obtain the rank-of-priority of certain criteria from a number of people when they are acting on their rights and the researchers’ concern about each result alternative priorities. This research utilised analytical hierarchy process (AHP) because of its effectiveness in evaluating multiple criteria decision-making problems to enable the achievement of the research objective. AHP is a multi-criteria decision-making style that engages pairwise comparison to obtain a scale of preference among a set of alternatives (Saaty & Kearns, 1985). As stated by Bushan and Rai (2004), there are six (6) steps in AHP when involving many respondents: 1. The problem is composed of a hierarchy of goal, criteria, sub-criteria and alternatives. 2. Data are collected from experts or decision-makers corresponding to the hierarchic structure, in the pairwise comparison of alternatives. 3. The pairwise comparisons of various criteria generated at step 2 are organised into a square matrix. The present study is sponsored under Fundamental Research Grant Scheme (FRGS) 203.PMGT.6711551
10. 4. The principal eigenvalue and the corresponding normalised right eigenvector of the comparison matrix give the relative importance of the various criteria being compared. 5. The consistency of the matrix of order n is evaluated (less than 0.1 (Saaty & Vargas, 2001)) 6. The rating of each alternative is multiplied by the weights of the sub-criteria and aggregated to obtain local ratings concerning each criterion. The software automatically calculates the principal Eigen value, normalised Eigen vector, and the Eigen vector (priority weight) at step four (4) and consistency ratio at step five (5) in this research. However, it is important to show the formula and steps to get the result. The normalised principal Eigen vector can be obtained by averaging across the rows of summation with the division of each element of the matrix with the sum of its column of the reciprocated matrix (Teknomo, 2006). Principal Eigen value (