Unlocking value of waqf sector in Indonesia for socio-economic development

Fahmi M Nasir / Pic BLOOMBERG

On Oct 14, 2018, 2 new milestones of waqf development in Indonesia — WCP and CWLS — were launched in Nusa Dua at the 2018 IMF and World Bank annual meetings

As A keen observer of waqf in Indonesia, I follow closely the development and the achievement in this sector last year. There were many initiatives taken by waqf stakeholders, government and private sectors alike, in order to push and expedite the development of waqf nationwide.

On Oct 14, 2018, two new milestones of waqf development in Indonesia — Waqf Core Principles (WCP) and Cash Waqf Linked Sukuk (CWLS) — were launched in Nusa Dua, Bali, at the prestigious forum, the 2018 International Monetary Fund (IMF) and World Bank Annual Meetings.

Having a robust standard for waqf governance like WCP and a progressive waqf product such as CWLS could be a significant step towards realising the potential of waqf, as well as reviving this institution to play an important role in the socio-economic development of the society.

However, it appears to me that the waqf stakeholders have failed to unlock the value of waqf. This is based on the massive assets and huge potential of waqf sectors in our country which were not yet developed and managed properly. Ironically, we even did not know the true value of waqf assets as no comprehensive census of waqf assets was conducted in Indonesia.

We only noted that a figure of US$60 billion (RM246 billion) was mentioned as the market value of registered waqf land in Indonesia. This estimation was given by Azmi Omar, former DG of Islamic Research and Training Institute (IRTI) at Islamic Development Bank (IDB) during last year’s forum on waqf and blockchain in Kuala Lumpur. Similar estimation was also given by Minister of National Development Planning Bambang Brojonegoro in 2016 during the 41st Annual IDB Meeting in Jakarta.

It is against this backdrop, if my observation is correct, that some important steps should be taken to unlock the value of waqf in Indonesia.

Among others are waqf census, structural reform of the Indonesian waqf board, revision of Waqf Law No 41/2004, having pilot projects at provincial level and embracing the technological innovation.

Fahmi and Ihsan (2018) has highlighted that the existing literature on waqf often mentions the big potential of waqf assets, but no precise data is available so far.

The sole reason for this situation is because no census has been done. Bambang in his speech during the inauguration of National Syariah Finance Committee (KNKS) directors last week highlighted that among the immediate tasks that are awaiting KNKS is the census of waqf land.

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 governance of waqf in the future.

It will also attract many investors to develop waqf properties as now the real value and potential of the assets have been established.

The next pressing matter is BWI as a body that was given huge responsibility to revive the waqf institutions nationwide by carrying out various functions as a regulator, facilitator, motivator and other supporting roles.

As far as I am concerned, BWI commissioners are not working full-time in discharging their tasks unlike, for example, the General Elections Commission or Corruption Eradication Commission. Looking at the challenges and opportunities in the waqf sector, the time has come for BWI commissioners to work full-time.

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

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

As a guidance, we should look at how Warees of Singapore is recruiting their staff. Most of their staff are professionals in various fields such as finance and accounting, real estate, engineering, architecture, economics and statistics, Islamic finance and Shariah, business administration, marketing, construction management and project management.

This is the secret of the exponential development of waqf sector in Singapore. BWI should embrace this practice as it has a proven track record.

The other step that should be taken immediately to unlock the value of waqf is by having a pilot project in every province nationwide.

Take Aceh for example, they have many plots of waqf land which are waiting to be developed to reach their true potential. In Banda Aceh alone, waqf land can be easily developed and increased the value of waqf assets  in manifold immediately.

Every year, there would be roughly 11,000 of new students registered at Syiah Kuala University and Ar-Raniry State Islamic University. This is a huge market to provide student accommodation.

A development of a modern student accommodation which consists of hostel for student, commercial and office lots at the waqf land there would immediately solve the problem of proper accommodation for thousands of students, while at the same time increasing the value of waqf assets.

I am wondering what would happen to the waqf sector if waqf land in Banda Aceh were developed and managed properly by those who are great in creating and unlocking the value.

This might be a game changer in the waqf sector that can easily replicate in other provinces in our country.

Another significant change that will unlock the value of waqf is having a revision towards Waqf Laws No 41/2004. Provisions such as census, tax incentive, selection of BWI commissioners and waqf tribunal, to name a few, should be added to the existing law.

Inclusion of census in the waqf law could enforce allocation for the purpose in the national or local budget.

Meanwhile, the inclusion of tax incentive could encourage more people to create a new waqf. As for the selection process, the inclusion in the law will ensure that only the right people with the right talent are taken onboard to be given huge responsibility of developing and unlocking the value of the waqf sector in our country.

Last but not least, the addition of waqf tribunal as a means to solve waqf disputes will ensure that any dispute in waqf matters will be resolved quickly and at minimum cost.

As we are now in the Industrial Revolution 4.0 era, the waqf sector in Indonesia should embrace the technological development especially blockchain.

The technology of blockchain could offer the solution to the problematic documentation of waqf assets, while at the same time may address the perennial problems of lack of funding for waqf development in Indonesia.

I hope that waqf stakeholders in Indonesia would put their effort to unlock the value of the waqf sector to its fullest potential as this will definitely bring a positive and profound impact for the revival of waqf, which in turn will play a big role in the effort to contribute towards a betterment of the Indonesian society.

  • Fahmi M Nasir is the founder of the Centre for Study and Consultancy of Waqf, Jeumpa D’Meusara . He can be reached through fahmi78@gmail.com and https://www.facebook.com/fahmi.m.nasir. The views expressed are of the writer and do not necessarily reflect the stand of the newspaper’s owners and editorial board.