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Professionalising Waqf in Malaysia – Issues and Challenges

February 15, 2019
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Professionalising Waqf in Malaysia – Issues and Challenges

By Zharif Agil

Governance is a key aspect for the development of Waqf in Malaysia. It provides for public trust in Waqf institutions and therein can be a platform for greater participation from society on Waqf initiatives. However, there are several key issues in the governance of Waqf institutions and these key issues can be summarised into the following areas.

  1. Lack of independence between the trustee and the manager of the Waqf assets. Currently, a department within the state religious council called Majlis Agama Islam manages all aspects of Waqf. This structure creates a conflict of interest given that the Majlis Agama Islam is both the sole trustee as well as the manager to the Waqf assets. Independence is a critical aspect of the governance of the Waqf as it provides a check and balance on the management of the Waqf.
  2. Lack of accountability by the trustee. The role of the Majlis Agama Islam as the sole trustee of Waqf is prescribed in the Waqf enactment of each state. This enactment provides descriptions on the powers and responsibilities of the Majlis Agama Islam. However, it does not provide for the liability of the trustee on any mismanagement. Liability of the trustee is important in driving the behaviour and manner of management of the Waqf.
  3. Lack of competency of the Waqf managers. The management of Waqf requires specific competencies in asset management, real estate and finance. However, given that Waqf is managed within the Majlis Agama Islam, the backgrounds of the Waqf managers are in religious studies. This lack of competency may result in under performance of the economic returns of the Waqf assets.
  4. Lack of transparency and disclosure by the Waqf institutions. The financial statements and reports on the performance of the Waqf assets are not reported to the contributors. Contributors will not be able to ascertain if the Waqf assets are being utilised appropriately. Transparency on the management of the Waqf assets would provide confidence and trust to the public on its utilisation.

Recommendations for Action

These issues may be resolved by creating a separate entity dedicated to Waqf management. This separate entity should have a Board of Directors that comprises both independent and non-independent directors. The management of the separate entity that looks after the day-to-day operations of the Waqf must comprise individuals with the right competency and background.

Perhaps, Malaysia might consider modelling our Waqf management based on the Singapore model. Similar to Malaysia, the Majlis Ugama Islam Singapura handles all aspects of Waqf. However, a subsidiary called Warees Investments Pte Ltd (Warees Investments) was established with the task of managing and investing in Waqf properties. The employees of Warees Investments comprise individuals with backgrounds in architecture, project management and construction, and includes both independent and non-independent directors in the Board of Directors.

This new structure will professionalise the management of Waqf to maximise the social and economic benefits of Waqf to Malaysia.

This is the executive summary of a case study written by Zharif Agil, as a requirement for the MIA Islamic Finance Mini Pupillage Programme.

You might also be interested in these articles on Waqf: Reviving Takaful-Waqf Product in Malaysia: Issues and Challenges by Nurul Hidayah Zailani and Waqaf Saham Larkin Sentral: Pioneering Initial Public Offering of Waqf Shares by Rasmimi Ramli and Mohd Lukman Mahmud.

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