Law Revision Key to Indonesian Waqf Sector Great Reset

By: Fahmi M. Nasir 

Ph.D Student in Waqf Law and Governance at Ahmad Ibrahim Kulliyyah of Laws International Islamic University Malaysia 

In the last few weeks, four important events recognized the need to transform the waqf sector in the country. 

First is the launching of the National Waqf Movement (Gerakin) by Vice President Ma’ruf Amin. The movement, which is part of the national coordination meeting of the Indonesian Waqf Board (BWI) 2020 agenda, aims to widely promote waqf among Indonesians. 

Second is the National Webinar on the urgency to revise the Indonesian Waqf Law Organized by the National Committee for Islamic Economy and Finance (KNEKS). 

The third is the virtual statement by Vice President, Ma’ruf Amin and the Minister of Finance Sri Mulyani Indrawati on October 24, after the opening of the National Strategic Webinar on Indonesia Towards the Center for World Halal Producers. Sri Mulyani stating that the potential of cash waqf is very big and estimated that it could reach up to 217 trillion rupiahs from 74 million of the middle class of the population alone. 

In a similar vein, Ma’ruf Amin mentioned that he will initiate the National Cash Waqf Movement (GNWT) to encourage the utilization of cash waqf which can be invested and developed for the long term to help our national financial system.

The fourth event where waqf again taking centre stage was during the forum on ‘Sharia finance gaining momentum in Indonesia’s economic recovery’ where Ma’ruf Amin stated that he would lead 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. 

While we applauded all initiatives above, we should take note of the failure of the National Cash Waqf Movement (GNWU) launched by President Susilo Bambang Yudhoyono back in 2010 and the failure of the existing law on waqf to develop the waqf sector exponentially, to ensure that this time the waqf movement and waqf development will be successful. 

To achieve a better outcome, the time has come for our waqf sectors to undergo great reset through law revision.

In my observation, some important issues such as the provisions of a survey on waqf assets, tax incentives, and the structural and institutional reform of waqf governance should be added to the existing law. 

First, a census on waqf is very crucial in mapping the current problems and status of waqf assets. The census will be able to give a clear picture of the real value of waqf properties in Indonesia. It also will provide the database of waqf properties across the country which in turn could influence the development and the governance of waqf in the future. It will also attract many investors to develop waqf properties as now the real value and the potential of the assets has been established. 

It is also important to look at the experience of India, the only country that has conducted a proper survey of waqf properties. The survey in India only takes place after mandated by the Indian Waqf Act 1995 (Amended 2013). 

Syed Khalid Rashid (2011) highlighted that statutory provision is a must for waqf survey. He illustrated further that the survey has successfully reveal concealed waqf properties by mentioning before the survey, the number of official waqf assets was 100,000. However, by 2003 survey discovered that the number of assets hiking to 332,000, and when the survey completed the total is expected to exceed 375,000.

The Indian experience should be enough incentive for us in Indonesia to include the provision of the census in the Waqf (Amendment) Bill. At the same time, the provision of the census in the law could enforce allocation for this purpose in the national or local budget to solve the perennial problem of shortage of funds that might hinder the census take place. 

Second, the inclusion of tax incentives could encourage more people to create a new waqf. While for the existing waqf, the tax exemption could be given when the majority of their revenues, say 80% as practiced in Turkey, is for public purposes. The incentive for nazirs could be increased to 12.5% of the profit from managing and developing waqf assets instead of 10% as stipulated in the existing law. All of these incentives could boost the development of waqf sectors and increasing the ability of waqf to be a major provider for social services that are currently financed by the state. 

The next pressing matter is waqf governance. Overlapping tasks and responsibilities between the Ministry of Religious Affairs (MORA) and BWI should be resolved immediately. The institutional structure of BWI should also be revised. While the existing number of BWI commissionaires is too big, they are also not working full-time in discharging their tasks. Thus, the time has come for the law to mandate BWI commissioners to work full-time and to reduce their numbers.

The same goes for how BWI appointed their representatives at provincial levels. The normal practice of appointing the people from the MORA office and people closely associated with them at respective provinces should be ended immediately. 

BWI commissioners at provincial levels should be selected through a rigorous process involving local government and local parliament. The candidates should have the necessary skill sets to develop waqf properties. 

Last but not least, there is also the need to regulate several new developments like various waqf products such as Cash Waqf Linked Sukuk (CWLS), waqf shares, waqf insurance, the issue of liquidating (tawriq) waqf assets, etc., the provision of Waqf Core Principles (WCP) on waqf governance, Financial Accounting Standard (PSAK 112) on waqf accounting, and the advancement of new technologies like blockchain as well as the CSR allocation for waqf development and family waqf in the new law.

All in all, the law revision represents a timely opportunity to reset our waqf sector to fulfil a huge promise and to turn the massive potential into a reality.*