Abstract
Purpose This paper aims to present the viability of unit trust waqf (Islamic endowment) as an alternative asset class for waqf creation. Design/methodology/approach This paper starts with the conceptual exploration of the literature in the areas of waqf. The sources of the literature cover authentic sources of the Qurʾān and ḥadīth, as well as secondary sources such as books, journal articles and online resources. Findings This paper provides the conceptual framework of five models of unit trust waqf and their investment management parameters. Originality/value The novelty of this paper lies in its attempt to highlight the importance of waqf investment strategy in ensuring sustainable returns for waqf. It does so by introducing the conceptual models of unit trust waqf as viable mechanisms to pool more cash waqf from individual investors. The sustainability of the capital waqf assets in the form of unit trusts is maintained through the parameters for its application proposed towards the end of the paper.
Highlights
The institution of waqf is one of the socio-economic institutions in Islam that encourages Muslims to be creative and innovative in generating revenues and providing various goods and services for Muslim societies (Abdel Mohsin, 2013)
4/3 – In the event capital deterioration has occurred in previous years, the returns generated in the succeeding years must be used to purchase new units to restore the initial value of unit trust waqf funds 4/4 – The mutawallī must ensure that management fees and other expenditures are paid before returns can be distributed to the beneficiaries 4/5 – Some investment profits may be retained as a capital reserve for the purpose of reinvestment 4/6 – All promotion and marketing activities related to unit trust waqf investment must be actively conducted 4/7 – Various forms of incentives may be provided to investors or waqifs such as subsidizing management fees and providing tax rebates
Unit trust waqf is an Islamic financial innovation which could bring tremendous benefits to the waqf institution in Malaysia and other countries, besides those it provides for the waqf beneficiaries
Summary
The institution of waqf is one of the socio-economic institutions in Islam that encourages Muslims to be creative and innovative in generating revenues and providing various goods and services for Muslim societies (Abdel Mohsin, 2013). Diversification of waqf sources by venturing out into the contemporary forms of wealth like cash and shares could increase the flexibility of waqf and public participation in it This can be done through investing waqf proceeds in the less volatile and balanced unit trust portfolios, whose underlying assets are mostly fixed incoTmheisapnadpsetrabfulertahsesretpcrleassesnestssuhcohwaswsÁauqkfūaksanadsmocoianleyfinmaanrckeetvienhsitcrluemceanntsc.ontribute as a complementary alternative to governments and private-sector financial institutions which cannot undertake many socially desirable projects because of lack of funds or commercial non-viability. Unit trust waqf models take into consideration some prudent and balanced investment strategies that are closely linked to the very objective of Islamic endowment, which is to safeguard the principal amount of waqf funds while generating sustainable returns to the beneficiaries. Step 3: The fund manager is responsible to invest the endowed units and manage the investment portfolio
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