Development of Waqf assest through Islamic banking in Malaysia

Abstract

The research addresses the development of waqf assets through Islamic banking in Malaysia. After a successful journey in providing Islamic financial services, Islamic banks in Malaysia have recently opted to venture into waqf to fulfil their social responsibility without completely compromising the commercial goals. This research aims at highlighting the integral framework between Islamic banking and waqf in Malaysia, with a special focus on two Islamic banks, Bank Islam and Bank Muamalat, as the prime stakeholders in this nascent sector. The research also aims at highlighting both positive and negative aspects of the new experience as well the challenges lying ahead. In terms of methodology, the research adopts a qualitive approach employing the inductive method to trace primary and secondary data on the topic and the descriptive method to describe the integrative frame of the waqf-banking intermediation. The research also adopts the analytical method to evaluate the feasibility of the framework in the Malaysian context. The research found that the new experience of waqf-banking intermediation is very promising due to the ample encouragement provided by the regulators and the appetite that the two banks have shown so far. However, the researcher is of the view that it is too early to conclude that the experience is successful due to the small size of the sub-sector in terms of assets and instruments, let alone the challenges that lie ahead. The research has also concluded that the best framework to pursue this cause is the Value Based Intermediation (VBI) recently championed by the Central Bank of Malaysia as it is wider than Socially Responsible Investment (SRI) . The research has recommended, among other things, the drafting of specific legislation and guidelines to govern the relationship between Islamic banking and waqf. These should regulate the rights and responsibilities of each sector when they undertake joint activities that simultaneously seek to achieve profit-making and charitable objectives.