Uberization of Indonesian Waqf Sector to Harness its Enormous Potential

 

By: Fahmi M. Nasir

Ph.D Student in Waqf Law and Governance at Ahmad Ibrahim Kulliyyah of Laws

International Islamic University Malaysia

On October 28, The Jakarta Post conducted a timely webinar on “Sharia finance gaining momentum in Indonesia’s economic recovery”, where the Keynote Address for this forum was delivered by the Vice President of Indonesia, Ma’ruf Amin.

As a keen student of waqf, I am very glad that the forum has highlighted the important role that the waqf sector can play in sharia finance. 

The Vice President stating that in the social funds like zakat, infaq, sadaqah, and waqf, Indonesia has yet to make the most of its huge potentials and not been able to fully utilize this fund to be an alternative source of fund for social welfare. Thus, he would lead a National Cash Waqf Movement (GNWT) to raise the fund which will be put into the endowment fund of the ummah, where the proceeds will be used to finance social and educational programmes for the welfare of the community. 

Sutan Emir Hidayat of KNEKS, later on, highlighted that in terms of assets, waqf land in Indonesia is larger than an area of a country like Singapore. He added that waqf has the potential to be used for productive development programmes and the proceeds from waqf assets can be distributed to benefit the poor and help the small and medium enterprises (SMEs).

Eddie Omar Davis of IsDB while agreed waqf in Indonesia has a huge asset but reminded that so far we have not been able to materialize it especially in the context of Covid-19. For example, there is a need to build a hospital in an urban area but the land is so expensive. He is suggested that we could utilize waqf land or waqf fund to build hospital and health care services. Of course, he added, this great opportunity can only take place if the right business model could be developed. 

As far as I am concerned, this challenge should be addressed immediately to deliver successful waqf development. Waqf development in general consists of three types i.e. development, rejuvenation or renovation, and acquisition. First, when we have waqf assets in the form of land, then the most appropriate approach is to raise a fund to develop that land into schools, hospitals, or commercial buildings. Second, where waqf assets are in the form of buildings or schools that are in dilapidated conditions, then the right approach is to raise a fund to renovate the existing asset. Lastly, when there are existing assets like schools, hospitals, and commercial buildings that are running properly and making a profit, we can raise a fund in the form of cash waqf to buy those assets and turn it into waqf assets.

Currently, among the biggest challenges in developing and optimizing the massive potential of waqf in Indonesia is the scarcity of financing since waqf institutions here are mostly unbankable and hardly have access to financial institutions.

The question is how do the assets especially in the form of land and properties attract capital for the development as waqf cannot be liquidated, transferred, or used as collateral, and having acute poor governance problems? What kind of business model that could be suitable to develop our waqf sectors and harness its enormous potentials?

Finterra, a fintech company has developed a blockchain-based platform called Waqf Chain as the solution to unlock waqf potential. According to Hamid Rashid (2018), Finterra has identified that for a successful waqf project there should be six major collaborators that can be categorized into two profiles, affiliate partnership, and enterprise partnership. Waqf Chain is bringing all of the collaborators on board in executing any waqf development projects.

In the affiliate partnership, there are three stakeholders involve i.e. waqf board, auditor, and estate manager. As a trustee to waqf, the board needs to make sure that the asset utilization is executed properly. They need to ensure that the endowed asset is used with the right intent. The auditor comes into the picture as the independent third party observer and checker. Their role is to ensure proper governance in place and to ensure the established internal controls are implemented. The estate manager is appointed by the board to manage all aspects of the project such as administrative, financial, operative, and asset upkeep.

On the other hand, at the enterprise partnership, there are also consist of three stakeholders i.e. developer, fund manager, and insurance provider. As the appointed developer, there is a certain timeline that needs to be observed. Most projects are run in phases, and this will also affect the timing of funds released by the fund manager. The fund manager will need to oversee job completion in each phase and distribute work based on the updated development phase. The coverage by the insurance provider gives assurance and acts as a back-up in preparation for unforeseen circumstances.

The formula presented by Finterra could be a game-changer to harness the enormous potential of waqf. Waqf stakeholders should embrace the ‘Uberization of Waqf’ to take up the challenge to develop the massive potential of waqf assets which in turn will allow waqf to play an important role in the social and economic development of the society in Indonesia in particular and to play a key role in Indonesia’s economic recovery as envisage by our Vice President.*