We can expect to see a lot of variation coming out of the Waqf space in the next five years, IsDB Treasurer Mohamed Sharaf said at the inaugural Waqf at Islamic Capital Market Conference held at the Securities Commission Malaysia on the 20th July 2023.
While the arguably strenuous regulatory environment in some jurisdictions and the lack of financial sustainability of Waqf projects are curtailing the growth of space, “eventually, the ecosystem [will be] learning from each other from different jurisdictions,” Mohamed predicted.
Mohamed views that with the evolution of the Waqf sector and the maturity of the Islamic finance space, we need to stop equating Waqf with philanthropy.
Currently, a lack of financial sustainability and viability has resulted in the failure of several Waqf projects. While Waqf is a social finance instrument, Mohamed opines that the importance of financial sustainability of a Waqf asset or project cannot be under-stressed.
“Good wishes are not enough. Sometimes you want to work [on a project] but you need to make sure that it’s economically feasible, it’s bankable by commercial standards so that we achieve this financial sustainability,” Mohamed noted.
Not only is financial sustainability important for securing Waqf contributions by providing investors with a degree of certainty, but it is also a sound indicator for the ultimate success of a Waqf project.
Financial sustainability, according to Mohamed, is signified by both the yield that investors can expect to receive for the project as well as the cost of the implementation of the project since if there is a cost overrun, the Waqf itself eventually fails.
Mohamed cited the IsDB’s Awqaf Properties Investment Fund (APIF) as both a good example of a financially sustainable Waqf project as well as an integrated approach to Waqf by ensuring that the project is overseen by experts in the Shariah and financial space.
ISFI previously reported that APIF is currently looking at diversifying the fund to include a small portion of the financing to be channeled toward commercial-driven projects.
According to Dr Hurriyah El Islamy, CEO of HGC Firm and a previous member of APIF’s supervisory committee, the diversification of APIF is driven by the hope to increase the competitiveness of the fund’s return on investment.
According to Mohamed, central to the successful implementation and administration of Waqf assets are third-party reporting and governance. This view is in tandem with Dr Daud Bakar’s special talk which opened the conference. The transparent and sound reporting of financially sustainable Waqf projects will contribute to the projects securing further funding by clearly highlighting and measuring the social impact of the project.