Revitalizing Cash Awqaf as a core of impact investing ... · MUAMALAH Dealing MALIYAH Related with wealth GHAYRU MALIYAH Unrelated with wealth INTEGRATED Although there are clear

Revitalizing Cash Awqaf as a core of impact investing instruments

DR . I MAM T. SAPTONO

VI CE CHAI RMAN OF I NDONESIA AWQAF B OARD

hig

hFi

nan

cial

Ret

urn

Social Return

Imp

act

Flo

or

Financial Floor

Low

HighLow

Source: Adapted from Monitor Institute (2009) via Rockefeller Foundation (2011)

Philanthropy/Altruism

TradisionalInvestor

Low Impact & Low Financial Returns

Impact Investment

Impact First

Financial First1. There is a dichotomy in traditional

business, namely the separation of financial return and social return, in which both trade off is occurred between the two

2. So far, we are still busy creating possible products which may suitable

3. The biggest challenge is how to change the dichotomy paradigm by changing traditional business concept (financial business model) into “celestial” business concept. This is because in Islam the right and appropriate business exist only in a green quadrant (impact investment)

The Paradigm of Trade Off between Financial Return and Social Return

Transaction in Islam

In principle, Islam doesn’t separate social and commercial transaction, because both are using same basic parameter which is mashlahat.

3

SHARIAIslamic Law

IBADAHRites

MUAMALAHDealing

MALIYAHRelated with wealth

GHAYRU MALIYAHUnrelated with wealth

INTEGRATED

Although there are clear profitable (commercial) and non profit (

social) purposes, each valuable cent should lead to one goal

which is uphold of syariah, for the benefit of mankind on earth

and afterlife (mashlahat).

Abu Ishaq Al Shatibih has formalise this benefit in a Syariah

maqoshid terminology ( Syariah purposes) which encompass the

care over religion (hifdz ad diin),care of spirit/soul (hifdz an-

nafs),care of mind (hifdz al’aql), the care of offspring (hifdz an

nasb) and the care of wealth (hifdz al maal) .

hig

hFi

nan

cial

Ret

urn

Social Return

Imp

act

Flo

or

Financial Floor

Low

HighLow

Source: Adapted from Monitor Institute (2009) via Rockefeller Foundation (2011)

Philanthropy/Altruism

TradisionalInvestor

Low Impact & Low Financial Returns

Impact Investment

Impact First

Financial First

dharuriyah

Tah

sin

iyah

Y

X

Z

M2

M1M0

M = mashlahah (benefit)

Islamic Perspective

The Linkages among maqosid, maslahah & instruments

Tahsiniyyat

(The embelishm

ents)

Hajiyyat

(The complements)

Durruriyat

(The essentials)

Rel

igio

n

Life

Inte

llect

s (m

ind

)

Lin

eag

e (O

ffsp

rin

g)

Wea

lth

KPI of Maslahah Islamic Financial Instrument

The economic cushion

The economic savior

WHAT’S NEW? : CREATING SHARED VALUE (2006)

Creating Shared Value (CSV) is a concept in business strategy that emphasize the importance of ttaking into account the social issues and needs in company’s strategic design. CSV is the development of corporate social responsibility concept (CSR).This concept were first introduced by Michael Porter dan Mark Kramer in 2006.

CSVconcept was based on the idea of interdependence correlation between business and social welfare. Porter has critisized there always been gaps between business and social

The Social Responsibility of Business is to Increase its Profits" in The New York Times Magazine (13 September 1970) – Milton Friedman

Trickle-down economics is a myth. Enriching corporations - as the TPP would - will not necessarily help those in the middle, let alone those at the bottom - Stiglitz

CSR = KONSEP MEMBAGI SISA MAKAN MALAM

Sales XXXCOGS XXX Gross Profit XXX Overhead XXInterest XXEBT XXTax XNet Profit XX

Who’s interest

Shareholders

Community

?

ACTUAL PROBLEMS incompatibility between current developed business framework with Islamic model

Current Traditional/Conventional

Approach & Regulation

• Paradigm• Infrastructure• Organization• Regulation & Legal

Framework• Products

The Awqaf Case : “Has been systematically undermined & destroyed”

Cut offCut off

Traditional awqaf i.emosque, graveyard, school, etc

Waqf was the main vehicle for financing both commercial as well as public ventures, a role that has been replaced by banks and other financial institutions (Hodgson, 1974; Kuran, 2001).

However, underdevelopment through the passage of time has made them “dysfunctional” through its inflexibility as a trust (Kuran T. , 2004).

... ... How ironic that contemporary reformers want to promote ‘civil society’ institutions, when authentic Islamic models, honed over centuries of service, have been systematically undermined and destroyed.”(Alawi, 2009)

i..e awqafcorporation, initial waqif offering, awqaf bank, sukuk linked awqaf, etc.

How to overcome Incompatibility perception between celestial instrument and mechanism of conventional market

❑ Increase people’s literacy on syariah economic paradigm

❑ Minimizing gap between shariah practical & concept with institutional aspect and positive regulation as well : institutional innovation, harmonizing of regulation (i.e institutional, incentive system such as tax and subsidy, etc) and strengthening capacity of organization

❑ Encourage the birth of contemporary fatwa ulama to accommodate the modernization of civilization and technology

❑ Product innovation becoming more simple, flexible , compatible and innovative

❑ Infrastructure discrepancy: increase people’s access in transaction through technology platform such as e-ZISWAF, fintech, blockchain

❑ Create eco-system of ZISWAF

Returning back the Syariah maqoshidparameters as the KPI for formal Syariah financial institutions (i.ebanking, insurance, stock market, etc)

Encourage product innovation and development syariah instrument, to accommodate umat problem thesedays. Especially on ijtihad area by developing comtemporer fatwa

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WE ARE NOT RE-INVENTING THE WHEELBEGIN FROM STORY OF ISLAM GOLDEN ERA

T H E G O L D E N E R A O F I S L A M 8 0 0 - 1 4 0 0 M

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UMAR ABDUL AZIS(lead 818-821M)

Start from zakat and waqf, start from family

• Nobody entitled to receive zakat, someone with debt but honest and modest, are paid for, and one who wants to get married will be covered by country.

• Umar instructed “ Look for ordinary men who pays jizyah dan kharaj. IF lack of capital , give them loan for them to cultivate their land.We will not require the return but wait until 2 years or more.”

• “ Give back all your jewelries and assets to the treasury fund, or we shall divorce.” The wife replied “ For the sake of Allah, I didn’t choose a companion who is more noble thatn you, Amirul Mukminin. Here all my jewelries and diamonds..” Later Khalifah Umar bin Abdul Azis receive the jewelries and submit them to Baitul Mal

Yusuf Qaradhawi (1995) “Islam tips in overcomePoverty (Musykilah al-Faqr wa Kaifa ‘Alajaha al-Islam)

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Almost 75% of all plantable land in Daulah Khilafah Turki Usmani are wakaf land

Half (50 %) of land in Aljazair, during French colonial in the middle 19th century , were waqf land

During the same period, 33% of land in Tunisia were waqf land

In Egypt, up until 1949; 12,5% of farmland were waqf land

Year 1930 in Iran, approximately 30 % from planted land were waqf land

During 15-16th century,there were records of 233 certificated waqf land with 890 building on it in Palestine and there were only 92 certificated private land with 108 building . Records of 64 schools managed by waqf institution and the quantify are larger compare to mosque.

What we have achieved

Modern Awqaf Assets

Infrastructure (i.eHejaz Railway)

Vakiff Bank

Infrastructure (i.eAin Al AzziziyahDrinking Water)

Property (i.eZam-zam Tower)

Infrastructure (i.eLarkin Central Bus Station)

Universities

Hospitals

Financial Institutions

Corporations

Plantations

Transportation (Aeroplane)

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DA

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AK

AF

IND

ON

ESIA

POTENTIAL AWQAF IN INDONESIA

Waqf Tengku Habib Bugak from Aceh who donate his land and residence near Masjid Haram in year 1800M. Until now, Acehnese Haj receive additional living cost from the above waqf.

Presidential aircraft RI 001, the government owned Presidential plane post independence, were bought from Acehpeople gold waqf .

Presidential aircraft RI 003, the government owned Presidential plane post independence, were bought from West Sumatera people gold waqf.

Land where Stadion Senayan were built, and half of gold used to build “fire top”of Monas monument in Jakarta, were waqf fromTeukuMarkam

Role of Waqf in Building a Nation

DPR Plenary Building were built on land belongs to founder of PondokDarunnajah

Role of Waqf in Building a Nation (continued )

Islamic Boarding school and University Gontor

University and Hospital Sultan Agung Semarang

Islamic University Malang

Indonesia Islamic University -Yogyakarta

Several RSU PKU Muhammadiyah

PERFORMANCE OF NATIONAL WAQF

CASH WAQFSince its declaration by Presiden SBY in 2010, the cash waqf has not yet developed.Data at LKS PWU (receiver banks) shows insignificant changes with trend to stagnate until March 2018 ,amount collected only Rp199 Billion.

LAND of WAQF

More than 74 become mosque or mushala , 5% cemetery and 13% Islam boarding and regular school.

REAL AMOUNT TO BE BELIEVE LARGER CONSIDERING SOME NADZIR STILL HOLD THE OWNERSHIP CERTIFICATE TO LATER USE IT AS BANK COLLATERAL

LAND WAQF

# piece of land

Certificated to awqaf deed

Not yet certificated

Total area

435.395 288.429 146.966 4.1 billion m2

10 generous countries’World Giving Index

2018

Ch

ari

ties

Aid

Fo

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da

tio

n, O

cto

ber

20

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Generation Z & Religion Conciousness

Survey Deloitte shows half of world youth opinioned that religion gives bad impact to the world

Varkey’s Survey involving 20.000 milenial in 20 countries shows differently, with highest happiness rate from religion impact in Indonesia

• 85% Moeslem, with avg spending USD 5-10 per day

• 63 % segment consists of conformist, universalist dan rasionalist (27% segmen apatis are taken out)

• 2,5% spending on waqf per year from 5% spending ZISWAF (donation/philantrophy)

• Come up with potential cash awqaf USD 2,7-5 bio/year or IDR 40,5 – 75 trilyun/year

Midle Class Muslim by Yuswohady

What I got ?

Islam is more important

I don’t care

Anything must be Islam

Considered to be taken out

waqf

Temporary money waqfor perpetual

LKS PWU (bank)

Non LKS PWU (nazhir FWP)

PARTNER NAZHIR

management & development

of national and international

scale waqfassets

NAZHIR

FINANCE MINISTRY

Mauquf Alaih(beneficiaries)

Utilize SBSN fund for government project specifically social and public service

Funding on social project

Payment of couponCoupon distribution according to MoU

Distribution of benefit towards beneficiaries

BI, BWI, MoF and Religious Dept1. Keep transparency and

governance2. Provider waqf information

system 3. Government partner in

monitoring project utilization as the WLS funding result.

4. Public education on WLS related matters

Money waqf

Repayment WLS (temporary)

Placement

MoU

Instrument SBSN of investment

SBSN

Due date of SukukRepayment

1

2 3

4

6

5

1st

Wave o

f

Benefit

2nd Wave of

Benefit

WAKAF LINKED SUKUK

Publishing structure of sukuk linked waqf OFFEREDProto Type where Bank Syariah act as Publisher of Sukuk Linked Wakaf

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Islamic Bank as

a Sukuk Issuer

Investor

Waqf Land/

Country Land

Nadzir

Manager

Mauquf Alaih

Social-

Productive

Waqf f Asset

Customer

12

3

4

5

24

PT HYDRO RETAILINDO(75% shares owned by Global Waqf Corp)

200 Unit ConvinientMart in Jakarta

PR

OFI

T M

OTI

VES

Empowering Community

EmergencyPurposes

NORTH - LOMBOKPT TRIHAMAS FINANCE SYARIAH(~10% shares owned by Global Waqf Corp)

GWC

How Awqaf Corporate Works, case Global Wakaf Corp -ACT

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Challenge in developing

national waqf

Stakeholder

Wakif

Nazir

• Adjustment of UUPT, UUPM, UU Wakaf, dan PBWI to accommodate the use of waqf instrument in formal business management

• Change of share owner status through waqf has not yet recognised in UUPT

• Tax Incentive• Infrastructure national waqf Information System• Support of National Syariah Banking System ( ie: funding

regulation waqf asset, etc)

• Literature and curriculum about national waqf• Product innovation• Information system and waqf reporting• Payment accessibility, blockchain

(regulation, infrastructure,etc)

• Profesionalism and nazhir transparancy →WCP (Waqf core principle)

• Suitability of object and waqf asset management• Supervision system and reporting• Coaching nazhir

26

"

JAZAKALLAH

“….. And there are those who bury gold and silver and spend it not in the way of Allah. announce unto them a most grievous penalty. On the Day when heat will be produced out of that (wealth) in the fire of Hell, and with it will be branded their foreheads, their flanks, and their backs - "This is the (treasure) which ye buried for yourselves: taste ye, then, the (treasures) ye buried!"" (QS. At-Taubah [9] : 34-35 )