The Investment of Waqf Properties and Infrastructure Development

Abstract

The main objective of this paper is to measure the infrastructure gap and recognize the role of Islamic finance with special focus on waqf in both economic and social infrastructure development. In spite of huge potentiality of waqf assets, little has been invested in these properties to support infrastructure particularly social one. Waqf can be established in many forms depending on its purpose or nature of its outcome. However, all forms of waqf could support economic and social infrastructure development thus fulfill the society’s needs adequately. Moreover, waqf has a greater role in countries with high levels of financial exclusion and social deprivation as it can play a critical role in protecting the poor and vulnerable against unexpected threats such as unemployment, hunger, illness, flood, and other catastrophes. Generally, there are three major constraints, which hinder the effectiveness of waqf funds in line with the current and emerging financial needs of IDB member countries. They are (i) inadequate awareness about the role of waqf in addressing socio-economic difficulties in many IDB member countries; (ii) insufficient widely accepted Shariah-compliant products to integrate these Islamic redistributive institutions (i.e., waqf and zakat) to inclusive development; and (iii) lack of innovative products to use waqf funds under certain programs such as Poverty Entrepreneurship Schemes that can be used for creating employment opportunities. At the country level, governments need to play critical role in mobilizing resources generated by waqf endowments. Specifically, they need to develop a supportive legal and regulatory framework and “proactive” policy targets on usage, access, and quality of waqf and zakat. At the IDBG level, the bank needs to play more active role in supporting the efforts of its member countries to explore the relevant policy, legal, regulatory, and institutional interventions necessary to expand the part of Islamic redistributive institutions in engendering new source of finance for socio-economic infrastructure development. Specifically, the bank may consider (i) creating a common platform to enhance dialogue among member countries to with the aim of promoting knowledge and increasing awareness on the role of waqf in socio-economic infrastructure development; (ii) identifying successful case studies and good Islamic redistributive income practices anywhere in the world and having exchange of visits and technical cooperation among member countries in the form of reverse linkage initiative; and (iii) supporting the development of widely accepted Shariah-compliant products related to Islamic redistributive institutions including waqf and zakat to support inclusive development.