Good Governance in Islamic Finance a Mechanism for Socio- Economic Development in

Kano

By

Nura Abubakar Gwadabe

Department of Islamic Studies

Faculty of Humanities

Yusuf Maitama Sule University, Kano.

Being Paper Presented at the National Conference on Kano: Politics, Economy And Society from
the Earliest Times to the Present. Organized by the Faculty of Humanities, Yusuf Maitama Sule

University, Kano. 15th to 17th April 2019

Abstract

The management of Islamic finance specifically Waqf plays significant role in the socio- economic
development of Muslim Ummah by narrowing the social distance and reducing the income
inequality in the economy. Waqf is one of a social finance instruments that had been practiced in
Islam since the time of Prophet Muhammad (pbuh). The practice of Waqf is prevalent for the
funding of public goods, religious activities, education and health services. With the increasing
clamoring for the revival of Waqf institutions, more attention has been accorded to the good
governance and best practices of Waqf by scholars and other stake holders. The aim of the study
is to obtain a better understanding of the problems related to Waqf governance. There are different
kind of Waqf properties, which were not utilized properly or were missing due to mismanagement
of such properties. This situation highlighted the main problems in the administration of Waqf in
Kano, which are the inefficient management of Waqf assets besides unsystematic Waqf
management system within Kano state to cater the various categories of Waqf.

Administration of Waqf should be strengthened in order to encourage people to practice Waqf in

a broader concept. The growing concern of mismanagement in these institutions such as fraud and
inefficiency may discourage the potential Waqf donors to support such practice. Align with the
revival of Waqf practice; a call for good governance and best practices of Waqf institutions in
Kano emerges. The paper focuses on the governance of Waqf institutions by proposing a
governance framework in Islamic philanthropy institutions in Kano. in order to obtain a clearer
picture of the problem at hand, a qualitative primary data is collected by using depth interview as
the tool and was executed during a case study on Kano State.

Key Words: Governance, Waqf, Islamic Finance and Social Wellbeing

Introduction

In Arabic 'governance' means al-hakimiya that identifies a higher degree of moral social order

to which all decision-making structures and 'authority' ought to submit. Good governance

may contribute to an efficient organization. The Quran & Sunnah gave an outline of governance
under different circumstances. Laws established by the Holy Quran and sayings and practices of
the Prophet Muhammad (pbuh) emphasizes habitual practice, customary procedure, action, norm,
and usage sanctioned by Islamic tradition. Islam emphasizes justice as fairness, non-discrimination
and equity in order to ensure balance and harmony in every aspects of life e. It is stated in the verse
of Al Quran that says 'O ye who believe! Stand out firmly for justice, as witnesses to Allah, even
as against yourselves, or your parents, or your kin, and whether it is (against) rich or poor: for
Allah can best protect both".1 The leadership is summoned to act in fairness, justice and bring good
to the well being of the ummah. Therefore it is important of new policies being imposed on Islamic
organization, on the basis of public interest (al-masalih al-mursalah), be it profit or non-profit as
long as it comply with shariah law and conforms to the public well being.2 The term
“governance” is derived from the Latin word gubernare which literally mean “direct”,
“rule” or “guide” 3. In the broad sense, governance refers to the relationship between the
governors and the governed based on the decision making by individuals to those in
authority 4

According to Iqbal and Lewis (2009), the conception of governance has been used in various
contexts such as monetary governance (the making of monetary policy), economic
governance (to ensure the smooth of market economy), public governance (ensuring efficiency in
the public sectors) and corporate governance (ensuring the effective functioning of market
and enterprises). 5

The Islamic principles of good governance

Choudhury and Alam assert that tawhid is the epistemological foundation of Islamic good
governance. Actually, tawhid is the very foundation of Islam upon which other principles depend
on. 6 Hence, in the context of governance an individual must seek the guidance from the Creator

1
Surah An Nisai 135
2
Better Governance in Islam. Dhaka Courier September 10, 2011 Saturday
3
Hyndman, N and McDonnell, P., “Governance and charities: an exploration of key themes and the development
of a research agenda,” Financial Accountability & Management. Vol.25, Iss.1, (2009): 5-31
4
Lewis. M.K., “Islamic corporate governance”, Review of Islamic economics. Vol.9 No.1, pp. 5-29(2005).
5
Iqbal, Zafar and Lewis, M.K., “An Islamic perspective on governance”, Cheltenham: New horizon in
money and finance(2009
6
Choudhury, M.A and Alam,M.N. “Corporate governance in Islamic perspective”, International journal of Islamic
and Middle Eastern finance and management, Volume 6, No 3 (2013),180-199
of the universe in fulfilling the obligation to the society. Tawhid will lead humankind to be aware
that their existence on the earth is as the khalifah (vicegerent or representative of God) 7

Amanah (trust) Allah has created everything and He assign His creatures as a trustees by blowing
divine spirit in to him. Human beings are the trustees of Allah, and then we need to utilize the
resources and perform according to the will of Allah.8 amanah basically means a contract between
God and man since it is mentioned in the Qur’an that God has given the trust to the mankind where
the heavens, the earth and mountains refused to accept because they were afraid of the heavy
burden (Qur’an33:72). Moreover, the Qur’an has reminded the believers not to betray the amanah
entrusted on them (8:27). The concept amanah will determine the individual’s relationship
with the society. If an individual really understand the concept of amanah, the issues
regarding the rights and responsibilities can be resolved. The fulfillment of amanah would
bring to adalah (justice). Adalah therefore constitutes the second principle of good governance

Adalah (justice) The importance of adalah has been revealed in following Qur’anic verse
“Allah commands justice, the doing of good, and liberality to kith and kin, and He forbid all
shameful deeds, and injustice and rebellion. He instructs you, that ye may receive admonition”
(Qur’an, An-Nahl 16:90) adalah in Islamic economic scheme is aimed towards achieving social
welfare. Adalah principle leads Muslims to work with full objectivity. It is very
crucial because there is always potential conflict among the member of the society.
Likewise, this conflict could occur in the context of manager and staff. Therefore, Islam
encourages those who are entrusted with amanah to deal with people within the concept of justice
or adalah. However, sometime it is difficult to achieve a just system due to subjective decision of
human being.9

At- Taqwa (God Consciousness) Allah’s knowledge is absolute, if we are performing our duties
with the sense that Allah is watching us and we have fear towards Him, we will discharge our

7
Philips, A.A.B., “The fundamentals of tawheed (Islamic monotheism)”, Riyadh: International Islamic Publishing
House, (1994).
8
Hakim, R. & Syaputra,E. “ Business As Al-amah and the responsibilities of Islamic Business Managers” La-Riba:
Jurnal Ekonomi Islam. Vol.vi, no. 2, December 2012 pg. 199-210.
9
Shahul Hameed Mohamed Ibrahim, “The need for Islamic accounting: Perception of MalaysianMuslims
accountants and academicians on the objectives and characteristics of Islamicaccounting”. Unpublished Phd thesis.
University of Dundee, UK (2000)
responsibility with due care and perform within the framework of sharia. Therefore, we will not
deviate from the teachings of Islam.

“But as for him who fear (kawf) standing before his lord, and restrain himself from impure evil
desires and lusts”. (79:40).

Accountability- in Waqf institutions, the trustees are accountable to the donators since trustees
have accepted the responsibility given by the donators. Furthermore, in Waqf donors are donating
for the sake of Allah, once the assets was declared as Waqf, these assets are not under the control
of the donators, and virtually the new owner is Allah.

It is important to note that good governance is vital for the betterment of the institution of Waqf.

accountability is an aspect of corporate governance, if there was no other hadith except the hadith
of Ibn al-Llutbiyyah. it would suffice. To this effect, al-Bukhari narrated on the authority of Abū
Humayd al-Sā‘īdī that the Prophet (PBUH) employed a man called Ibn al-Lutbiyyah from the tribe

of Al-Asad for zakāh collection and when he came back he told the Prophet (PBUH):

“This is yours while this (another one) was given to me as a gift.” In a swift disapproval of this
(by claiming it was given to him as a gift) the Prophet (PBUH) gave a sermon in which he censored
the action of this man: “Why has he not stayed in his mother’s house to see who will give him the
gift?”10

Waqf

The word waqf originated from the Arabic Language which is “waqafa-yaqifu-waqfan” which is
derived from the verb ( ‫ وقف‬. (Literally it means “detention’, “to prevent”, “to restrain”. According
to al-Haddad, waqf originated from Arabic word “qaf” which means stop and to prevent, which
actually means to restrain the rights of the donor or the waqif to the property whether in continous

Ownership or in consumption. It is to be given as charity in the way of the Almighty Allah. In

other words, waqf property is being transferred in terms of ownership from the donor to Allah swt

10
Al-Bukharī, Ṣaḥīḥ al-Bukharī, vol. 2, 130-1; vol. 3, 159; vol. 8, 130; vol. 9, 70.
and to be given in the way of Allah as in charity. It is a very important instrument in the economy
of the Muslims since it is promised to be given the consent from Allah swt.11

Literally, Waqf means to stop, contain, or to preserve. In shari’ah, a waqf is a voluntary,

permanent, irrevocable dedication of a portion of one’s wealth – in cash or kind - to Allah. Waqf
denotes to gift of money, property or other items of charity, which have been held and well
maintained for the confined benefit of certain charity and philanthropy. Zakaria, Abd Samad &
Shafii defined waqf as private ownership or asset in any form that has been put under injunction
from any form of deal including sale, inheritance and heirloom, hibah(grant) and wasiyyah(will),
at the same time as its physical source remains whole and unaffected.12

Waqf as perpetual charity according to the legacy of the Qur'an and Sunnah presents the
groundwork of the field of sustainability and wellbeing using the precept of balanced and
participatory interaction. Such a systemic tripartite relationship is the actual Islamic inter-causal
and Maslaha (wellbeing) elements of the highest Islamic worldview of unity according to the
Qur'an and the Sunnah. Treating Waqf otherwise as endowment does not address this central key
point of the Islamic unified worldview.

Waqf Governance

Good governance in awqaf institution is all about ensuring the accountability of

mutawalli. From the basic Islamic perspectives (Ikhlas, amanah, adala, and shura) some
governance could be derived. Ikhlas drives the mutawalli to target the perfection in
managing Waqf assets for the sake of Allah’s satisfaction at first then the society. Second principle
of good governance is amanah, which impels mutawalli to manage waqf assets as trustee to
Allah and beneficiaries and consider this waqf property as trust. Adala principle is very
important in the process of distribution of waqf revenue between the beneficiaries. Mutawalli have
to act with justice (adala)in determine the Waqf revenue rate for beneficiaries and himself.

11
al-Haddaad, Ahmad Abdul Aziz (2008). Min Fiqh al-Waqf (From the jurisprudence of the waqf). Islamic Affairs &
Charitable Activities Department
12
Zakaria, A.A.M., Abd Samad, R.R. & Shafii, Z. (2012). Venture philanthrophy – Waqf practices and its
implementation scenario in Malaysia. International Journal of Business, Economics and Law, 1, 108 – 115.
Last principle is shura, it shall be the basis of decision making process. Mutawalli has
to involve representatives for all related parties in the decision making process.

Governance of Waqf is vital to promote the level of transparency and accountability that is
Important for a sector reliant on the confidence and trust of its stakeholders. Waqf, as other Players
in non-profit sector survived on self-regulation and, with minimal or even without External
oversight.13

In conjunction with the Islamic governance, Waqf as they functioned in the past should be an
important institution within the ideal independent non-state welfare system, hence, remains an
important institution for ideal governance. With a constructive role in providing revenue for civil
society, Waqf could fuel the sense of empowerment of individuals and accordingly constantly
cultivate an atmosphere of benevolence in society, hence helping once again to detach society from
the state. Historically, Waqf was institutionalized as the rich wanted to keep away money from
‘non-good governance of the state’ as Waqf gave them an opportunity to keep their wealth away
from arbitrary confiscation by the state14

The Application of Waqf governance in Kano State is timely to ensure accountability so that waqf
institutions could be revived and its potential could be further promoted in the State.

Good governance in awqaf institution is all about ensuring the accountability of

mutawalli. From the basic Islamic perspectives (Ikhlas, amanah, adala, and shura)some
governance could be derived. Ikhlas drives the mutawalli to target the perfection in
managing waqf assets for the seek of Allah satisfaction at first then the society. Second principle
of good governance is amanah which impels mutawalli to manage waqf assets as trustee to
Allah and beneficiaries and consider this waqf property as trust. Adala principle is very
important in the process of distribution of waqf revenue between the beneficiaries. Mutawalli have
to act with justice (adala)in determine the waqf revenue rate for beneficiaries and himself.

13
Cordery C.J., and Baskerville R.F., (2007). “Charity financial reporting regulation: a comparative study of the UK
and New Zealand,” Accounting History, vol. 12(7), pp. 6–27.
14
Kuran, Timur (2001). “The Provision of Public Goods Under Islamic Law: Origins, Impact, and Limitations of the
Waqf System”. Law and Society Review 35, 4: 841–97.
Last principle isshura, it shall be the basis of decision making process. Mutawalli has
to involve representatives for all related parties in the decision making process

Governance of Waqf Enactments in Kano

In Kano State Nigeria, state governments have established zakāh and Hubusi commission since
the year 2003 with State being the second after Zamfara in the region to do so; other states in
northern Nigeria soon followed. Despite this bold effort, unfortunately, the issue of corporate
governance of zakāh and Waqf has yet to be seen as important in the Nigerian zakāh and Waqf
institutions, and this is one of the causes of their underperformance. As the state Waqf, system is
presently going through revitalization; corporate governance also needs to be taken into
consideration for an aggressive development of the institutions as well as actualizing their primary
objectives.

Kano State enactment expressly uses the Maliki terminologies of Waqf, ‘hubusi’, and contains 26
sections, but it is only section 4 which provides for the function of the commission that mentions
collection of ḥubusi along with zakāh from individuals and organizations, as well as the investment

of funds that are not immediately needed. Along with this, section 2 gives an unsatisfactory
definition of hubusi as “Endowment or a voluntary gift of wealth more especially property.” This
definition is very incoherent given the contemporary trend of waqf as envisaged by section 3 of
the Zamfara Zakāh and Endowment Law, 2003. Based on this weakness the Kano State enactment

Cannot allow the commission to do much in collecting zakāh and waqf from individuals and
organizations. it is observed that all the Nigerian enactments provide for such. For example,
pursuant to the relevant sections “Kano State Zakāh and Hubusi Commission law 2003 on the
commission’s powers to relate with all stakeholders in matters relating to zakāh and endowment;
and section 16 which states that “the commission shall within three Months after the expiration of
each financial year, prepare and submit to the governor the annual activities for the preceding year
and statement of account of the commission.

Finding and Discussions

The Study show that of all the Nigerian enactments on Waqf has no provision to the effect of
removing members for not performing their duties properly. This is an issue which must be
addressed if these institutions are to deliver on their mandates. It is virtually agreed upon by jurists
that waqf al-ahli subsequently reverts to waqf khayri that is owned by the public; this was what
prompted Qadhi Tawbah to invoke the right of Shariah courts judges on supervisory role on
awqaf.15 There are scant private awqaf in Nigeria that lack development and their economic
potentials are not known due to a lack of government supervisory roles through Shariah court
judges.

There are challenges faced by Kano State Zakat and Hubusi Commission in managing Waqf assets
and properties in Kano. These challenges could be in the form of minimal revenues generated from
Waqf properties and limitations in the usage of Waqf assets due to the binding legal framework.
Amongst the identified issues in Waqf Unit are;

 Management of Waqf assets are tied to legal instrument

 Waqf am or general Waqf are said to be non-revenue generating assets
 (whilst fund is needed to maintain and to manage these assets)
 Undersized human resource in the management team
 Information technology expert non-available in the commission which entails in data base
compilations issue

Donors themselves are lacking in the understanding of the procedures concerning Waqf. Some of
the donors are having the notions that they are donating their lands (assets) to the commission only
not to Allah swt. In addition, some they prepared to donate by themselves without consulting the
Government established authorities responsible for Awqaf, and therefore after their demise the
property would either be sold by the deceased family as inheritance or left unmanaged.

Conclusion

Waqf administration requires strong corporate governance like the mainstream financial
institutions such as Islamic Banks. The concept of corporate governance has been long established
by the Qur’an and the Prophet (PBUH) in the administration of zakat and Waqf as evidenced in
the above-mentioned verses and the hadith respectively. The Nigerian enactments on zakat and
Waqf have provisions that contain some elements of corporate governance, here is a consensus
among scholars that good governance should be adopted in Waqf management as it is one of

15
Syed Khalid Rashid, Waqf Management in India (New Delhi: Institute of Objective Studies, 2006), 99; IDB-Kuwait
Public Awqaf’s Sample Waqf Law, (2012): 3.
the critical success factors for revitalizing awqaf institutions. Actually, the cornerstone
of good governance in Islam had been laid down by the Prophet and his companion in the
earlier Islamic state. Good governance and accountability had become the basic principle
in every single activity of the earliest Muslim society. Some basic principles of good
governance derived from Qur’an are amanah, adala and shura governance of zakat and Waqf
institutions in the Northern States of Nigeria is very weak and needs rigorous improvement.

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