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Islamic Economics and Finance
What is Cash Waqf?
The potential for Indonesian cash waqf is around US$11bn per year, and is a source of funding for not only the development and sustainability of human resources, but also for infrastructure development.
In the Maliki school, cash waqf is defined as “the process of dedicating cash as waqf for the purpose of lending it to those designated as the beneficiaries without interest”. Zufar Ibn al-Huzail of the Hanafi school defined it as “the process of dedicating cash as waqf and investment of same so that the profits are used for the waqf’s stipulated charitable deeds”. Al-Huzail’s clarification on the Maliki definition means that the cash waqf may be invested, with the proceeds of that investment utilised for societal development such as benevolent loans. Using investment profits rather than the initial waqf capital for loans means that it can operate in perpetuity even if the beneficiary suffers a loss.
Cash waqf was successfully practised in the Ottoman Empire, and has more recently been used in several Gulf countries as an alternative to interest-bearing loans for financing the poor in society that are otherwise unbankable. For example, 19% of the cash waqf in Bursa during the Ottoman Empire between 1555 and 1823 survived for more than 100 years. Furthermore, in 2005 the Malaysian National Fatwa Council passed a…
