Dr.

Azman Mohd Noor

Assoc. Prof. Dr. Azman bin Mohd Noor is a senior lecturer at Institute of Islamic Banking and
Finance (IIiBF), International Islamic University Malaysia (IIUM). His areas of expertise include
Islamic law of Transactions, Islamic Banking and Capital Market, Takaful and Retakaful, Zakat
Management and Calculation. He has been supervising MA and PhD students in the field of
Islamic Banking and Capital Market at Department of Fiqh, IIiBF since 2006. Dr. Azman is
currently the Deputy Chairman of Al-Rajhi Bank Malaysia Shariah Board and a member of Shariah
Committee of Bank Rakyat Malaysia Berhad and Etiqa Family Takaful Berhad. He had served as
Shariah Committee Member of SME Bank 2012-2014, Shariah advisor to Kenanga Capital Sdn
Bhd 2013-2016 and Shariah Committee Member of MNRB Retakaful 2009-2011.
Awareness Programme on
Waqf-linked Unit Trust Fund

Presented by:
Dr. Azman Mohd Noor
IBFIM’s Panel of Subject Matter Expert

1
LEARNING OUTCOMES

At the end of the programme, the participants will be

able to:
• Explain the essential components of waqf contract,
concepts, principles and the potential issues of waqf
that is featured in investment instruments
• Explain the Shariah requirements for Islamic Funds
with waqf features based on Securities Commission’s
Guidelines on Unit Trust Funds

2
 TABLE OF CONTENT

Topic 1 : The Shariah Concept of Waqf

Topic 2 : The Waqf Unit Trust Guidelines

3
 TOPIC 1

THE SHARIAH CONCEPT

OF WAQF
• Definition of waqf
• Main characteristics of waqf
• Legal basis of waqf
• Pillars of waqf
• Shariah and legal issues of waqf structured
in investment instruments

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 DEFINITION OF WAQF

Waqf is derived from Arabic root verb

“waqafa” means ‘causing a thing to stop
and standstill’1.

Another meaning is detention, holding or

keeping.

Technically, In Islamic Law, waqf is defined as

(habs al-asl wa tasbil al-manfaah) holding
ownership of certain assets or belongings
whilst utilising and disributing its
manfa’ah/benefits to charity purposes, or
identified beneficiaries.
1Sources: Murat Cizakca (1998) & Mohd Asyraf et.al(2013) 5
 MAIN CHARACTERISTICS OF WAQF

Inalienable Perpetual Tasbil/Charity

“Habs al asl” According to the majority of “tasbil al-manfa’ah”

Once an asset/property
declared as waqf
(endowment) for
philanthropic purposes the
ownership is no longer
transferable.
Muslim jurists, the duration
of the waqf should be
unlimited. This will ensure
no confiscation of the
property by the government
or individual to ensure its
continuous and perpetual
philanthropic contributions.
The yields or the usufructs
derived from waqf asset are
solely for the benefit
beneficiaries (specified or
non specified) as intended.

Source: Md. Shahedur Rahaman Chowdhury, et.al. (2011)

6
 LEGAL BASIS OF WAQF

Transmitted Evidence: The ḥadīth of Ibn ʿUmar, may Allah be pleased with them both, that says:
‫ فكيف‬،‫ أصبت أرضا مل أصب ماال قط أنفس منه‬:‫أصاب عمر خبيرب أرضاً فأتى النيب صلى اهلل عليه وسلم فقال‬
‫ ًوال يوهب وال يورث‬،‫ أنه ال يباع أصلها‬:‫ فتصدق عمر‬.»‫ «إن شئت حبّست أصلها و تصدقت هبا‬:‫تأمرين به؟ قال‬
‫ أو‬،‫ ال جناح على من وليها أن يأكل منها باملعروف‬،‫يف الفقراء والقرىب والرقاب ويف سبيل اهلل والضيف وابن السبيل‬
.‫يطعم صديقا غري متمول فيه‬
ʿUmar acquired a piece of land in Khaybar. He came to the Prophet (peace be upon him) seeking
his advice about it, saying it was the most valuable property he had ever owned. The Prophet
(peace be upon him) told him, “If you like, you may hold back the property and give its produce as
charity.” ʿUmar made a charitable donation of it, declaring that the property must not be sold or
given as a gift or inherited. [He devoted its produce] to the poor, [his] relatives, to the
emancipation of slaves, in the way of Allah, and for guests and wayfarers. And [he added that]
there is no blame on the one who administers it to consume from it according to what is
customary or to feed a friend without appropriating it as [his own] property.” Ṣaḥīḥ al-Bukhārī and
Ṣaḥīḥ Muslim

7
 WAQF MANAGEMENT IN MALAYSIA

In Malaysia, according to the laws of the administration of Islamic affairs in the states,
the Islamic Religious Councils (IRCs) have become the sole authority on waqf. The
IRCs specialise in managing the awqāf and everything related to their affairs. That
includes the management and investment of their funds and the disbursement of
their revenue in accordance with the stipulations of the waqf founders in ways that
achieve the Shariah objectives of waqf.

The laws of the states dictate that the Council [of that state] has the right to appoint
any person or entity to manage the assets of the waqf on its behalf. Nevertheless,
the Council shall remain the sole custodian of the assets of the waqf and may at any
time dismiss that person or entity as it deems fit for the interest of the waqf and its
assets.

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 PILLARS OF WAQF
• The basic element of waqf include: the form of donation, the waqif
(donor) and the donated property.
• 3/1 The form of the waqf
 3/1/1 The form of the waqf comprises “offer” only, as it does not
necessitate “acceptance”. When a legally competent beneficiary
rejects a waqf that has been earmarked for him, his rejection has to
be concurred to, yet the waqf shall still remain valid. In this case the
waqf or the share of the rejecting beneficiary if beneficiaries are
many should go to charitable purposes.
 3/1/2 Formation of Waqf can take place verbally, in writing or in any
form of disposition which is normally considered as indicating it.
 3/1/3 Waqf can be declared as effective standing from a future day
as when the donor declares his property to become waqf starting
form next year.
• 3/1/4 In principle Waqf should be eternal. Nevertheless, temporary waqf
is also permissible when the donor desires to get back his property after
specific period.
AAOIFI Waqf standards
9
 TYPES OF WAQF PROPERTIES
3/4/3/1. Waqf is permissible in real estate along with permanent furniture
and fittings.

3/4/3/1. Waqf is permissible in movable assets, whether such movable assets

are part of a real estate or independent.

3/4/3/2. Waqf is permissible in money. The income generated from utilization

of the money is to be spent, while retaining the principal amount. Utilization
may include for instance, Shariah based lending as well as permissible
investments like Mudarabah where the profit share owned by the waqf goes
to beneficiaries.

3/4/3/4. Waqf is permissible in Shariah accepted shares and sukuk. In this

case, the income earned by shares or sukuk is to be sent on the waqf
beneficiaries. In case of liquidation the shariah ruling on istibdal (exchange of
waqf property) should be applied.
(AAOIFI Waqf Standards)

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 SHARIAH ISSUES FOR WAQF STRUCTURED
INSTRUMENTS

1. Validity of Cash Waqf

2. The Understanding of the Concept of Cash Waqf, where the
cash itself is the subject matter of Waqf
3. Potential permissible feasible Investment means of Waqf
asset.
4. Validity of Temporary/Limited by Time Waqf
5. Istibdal
6. Capital Protection of Waqf investment

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 POTENTIAL CASH WAQF MODEL

Cash Waqf
Waqf Institution (WI)
Financing
Investment Fund (Qard
Fund al-Hasan)

Trade Borrower 1 Borrower 2 Borrower 3

Income generated

Beneficiaries Expenses

Operational Expenses Reserves

12
POTENTIAL MODEL FOR CASH WAQF

XX%

13
 POTENTIAL CASH WAQF MODEL
(MICRO FINANCING)
WI can be entrusted with cash waqf or collect cash for waqf from the
public for this particular cash waqf fund.

WI can be entrusted to give loans (qard hasan) for personal and

family needs such as for marriage, pursuing education and for
WI welfare projects.

As borrowers settle the payment of their loans, the repaid amount

can be once again loaned to another. This will be repeated
whenever an amount is available in the given fund.

The cash can be maintained perpetually provided compensations for

Cash Waqf losses and the market fluctuations are planned and paid.

As the financing fund will be disbursed at interest free, minimum

Financing services charge may be imposed.
Fund

14
 LEGAL CHALLENGES

1. The administration of waqf in each states may differ based

on their legal provision and procedures.
2. Not all states have particular enactments for waqf.
3. Only a few states allow cash waqf.

15
Thank You

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16
 Dr. Aznan Hasan

Dr. Aznan Hasan is an Associate Professor in Shariah at Institute of Islamic Banking and Finance
(IIiBF), International Islamic University Malaysia (IIUM). He is currently the Chairman of Shariah
Committee for Maybank Islamic Berhad, Bank Pembangunan Malaysia Berhad and Etiqa Takaful
Berhad. He is also the Deputy Chairman of Shariah Advisory Council of Securities Commission
Malaysia, a Board member of Higher Shari’ah Authority of UAE Central Bank and a member of
Shariah Board of Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI).
Dr. Aznan had served as member of Shariah Advisory Council of Bank Negara Malaysia for two
terms (2006-2008, 2010-2013). He was also the Chairman of Shariah Advisory Board of ACR
Retakaful MEA, Bahrain and SEA, Malaysia, where he was instrumental in the setting up of ACR
Retakaful model from a Shariah point of view. He is also a member of the Shariah Advisory Boards
of ABSA Islamic Bank (South Africa), FNB Bank (South Africa), Yasaar Limited (London), HSBC
Amanah (Dubai), and Standard Chartered (Global). He also serves as a member of the Shariah
Advisory Board/Shariah Committee for Amanahraya Berhad, Employee Provident Fund and
Sedania As-Salam Capital Sdn Bhd. He also serves as a Shariah consultant/adviser to Maybank
Investment Bank, Hong Leong Islamic Bhd, Public Investment Bank Bhd, Malacca Securities Bhd,
Jupiter Securities Bhd, Inter-Pacific Bhd and Amanah Hartanah Bumiputra. Dr. Aznan is a
registered Shariah Advisor for the Islamic Unit Trust Schemes and Islamic securities (Sukuk),
Securities Commission of Malaysia.
Awareness Programme on
Waqf-linked Unit Trust Fund

Presented by:
Dr. Aznan Hasan
IBFIM’s Panel of Subject Matter Expert

1
LEARNING OUTCOMES
At the end of the programme, the participants will be
able to:
• Explain the essential components of waqf contract,
concepts, principles and the potential issues of waqf
that is featured in investment instruments.
• Explain the Shariah requirements for Islamic Funds
with waqf features based on Securities Commission’s
Guidelines on Unit Trust Funds.

2
 TABLE OF CONTENT

Topic 1 : The Shariah Concept of Waqf

Topic 2 : The Waqf Unit Trust Guidelines

3
 TOPIC 2

THE WAQF
UNIT TRUST GUIDELINES
• Structure of unit trust fund with
waqf feature
 •StructureEligible
of unitRecipient(s) of waqf
trust fund with waqf feature
monies derived from any unit trust fund
• EligibleThe future of waqf;
Recipient(s) opportunity
of waqf monies derived from
and fund
any unit trust challenges

 The future of waqf; opportunity and challenges

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Preamble: Waqf and ICM (1)
 Waqf has long been regarded as a very important instrument of
Islamic economic
 Unfortunately, the development of waqf has been hindered for
various reasons, one of very crucial matter is the issue of funding.
 In the classical eras;
 Istibdal
 Hukr/Hikr – Long lease or perpetual lease use
for renting or leasing.
 Ijaratyn – two leases.
 Irshad
 etc

 Developing waqf means:

 Developing existing assets
 Creating new assets

5
Preamble: Waqf and ICM (2)
Funding for development of waqf assets can
use various mechanism, among others:
Internal funding: self funding using various
classical and modern mechanism
External funding which can take various forms

Of late, capital market instruments have been

applied and considered for the development
of waqf assets.

6
Islamic Capital Market Instruments
Suitable for Waqf Development
• Shares
• Sukuk
• Islamic Fund Structures & Collective Investment
Schemes (CIS)
– Various Fund structures
– Islamic Unit Trusts
– Islamic REITs
– Islamic VC & PE
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8
9
 Shariah Resolutions Regarding
Waqf Unit Trust
• It is permissible to endow shares (that are
Shariah compliant), sukuk, intangible rights,
benefit and unit trusts, as they are all assets
recognised by Shariah. International Islamic
Fiqh Academy, Resolution No. 81 (7/19).

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 Remarks
• Application of waqf in Unit Trust relates a lot
to the practice of cash waqf.
• Needs to differentiate between cash waqf for
the purpose of investment in Unit Trusts and
waqf of Unit Trusts.
• AAOIFI  Differentiating between:
– Waqf on assets )‫(األصول املوقوفة بأعياهنا‬
– Investment waqf (‫)األوقاف االستثمارية‬

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 AAOIFI Shariah Standard
ِ ‫ يف رشإء أأصول فإن تكل إ أل‬،‫• إذإ إستُ ِمث َرت إلنقود إملوقوفة‬
‫ وجيوز‬،‫صول ال تكون وقف ًإ بعيهنإ ماكن إلنقد‬
ِ ‫لالستامثر إلأ‬
‫ ويكون إ ألصل إملوقوف هو إملبل ُغ إلنقدي‬،‫كرث مصلح ًة للوقف‬ ِ ‫بيعهإ‬
‫ وال أأثر لتغري إلقوة إلرشإئية عىل قمية إ ألصول‬،‫• يُ َعد إلنقد إملسمى وقت إلوقف هو إ ألصل إملوقوف‬
.‫ وجيوز للوإقف أأن يشرتط أأن جزء ًإ من ريع إلوقف يلحق إ ألصل إلنقدي إملوقوف‬،‫إلنقدية إملوقوفة‬
• If the cash waqf is used to purchase assets, that assets shall not take the
place of cash as waqf. Hence, it is allowed to sell the assets, for the purpose
of investment in other better assets better and the original amount of cash
waqf shall remain the waqf (not the assets)
• The invested cash amount at the time of waqf shall be the waqf. There shall
be no effect of (declining) purchasing power of the cash money (the subject
matter of cash waqf) in deciding what is the actual cash invested (at the
later time). However, it is allowed for the waqif to stipulate that portion of
the return from the investment of the waqf shall form part of the original
amount of cash waqf.
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Conceptual Framework of Waqf
Unit Trust Model

13
Model 1: Waqf on the Unit Trust

14
Model 2: Temporary Waqf on Unit Trusts

15
Model 3: Cash Waqf to Purchase
(or subscribe to) Unit Trusts

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Model 4: Waqf of Dividend

The dividend will be

subject of waqf. It can
be directly distributed
to the beneficiaries or
and partially be used to
purchase new Unit to
be subject of waqf

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Model 5

18
 The Overall Structure
PEWAKAF

Mewakafkan
AAA

MODEL 3 MODEL 1 MODEL 2

WANG UNIT AMANAH UNIT AMANAH

TUNAI (SECARA KEKAL) (SECARA SEMENTARA)
BENEFISIARI
Dipulangkan kepada WAKAF
Disyaratkan
pembelian Unit pemilik asal selepas
Sebagai
tempoh tertentu
Amanah Pemegang
Amanah: UNIT AMANAH PELABURAN
MAIN YANG AKTIVITI SEMULA
KEUNTUNGAN
DIWAKAFKAN PELABURAN (PEMBELIAN
UNIT AMANAH
Diuruskan
YANG LAIN)
MODEL 5 oleh:
Fi pengurusan diwakafkan untuk
membeli unit amanah UNIT AMANAH
(TIDAK DIJADIKAN
PENGURUS
DIWAKAFKAN) SEBAGAI
DANA
WAKAF TUNAI
Jumlah Keuntungan
yang dipersetujui
sebagai milik
PELABUR pelabur

MODEL 4

Hanya mewakafkan keuntungan

(sebahagian atau semua)

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 Proposed Parameters For
Consideration
• Parameters for Shariah compliance and
legality
• Parameters for Supervision and oversight
• Parameters for Risk Management
• Parameters for sustainability

20
 Regulatory Updates
• In November 2020, SC has launched a new framework to
facilitate the offering of Islamic funds with waqf features to
enable the growth of Islamic social finance segment
• The framework is applicable to existing and newly launched
unit trusts and wholesale funds
• It sets out eligible waqf recipients and disclosure requirement
in order to promote transparency of investors investment and
the waqf distribution
• Revisions have been made to:
– Guidelines on Unit Trust Funds: New Chapter 14 and new Appendix 1
of schedule E
– Guidelines on Unlisted Capital Market Products under the LOLA
Guidelines: New Chapter 6
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 Cont’d
• The facilitation, at present are in two areas:
– Allow the unitholders to retain their right over the
units purchased and to waqf all or part of the
distribution of income received.
• The waqf is on the dividend (model 4)
– Setting out the eligible waqf recipients.
• (a) any state Islamic religious council (SIRC); or
• (b) any institutions or organisation authorised by the
SIRC to act as a mutawalli (waqf administrator) or
collection agent for waqf purposes.
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 Conclusion

• Waqf Unit Trust is an Islamic financial

innovation which could bring tremendous
benefits to the practice of waqf, especially the
beneficiaries.
• Suitable models and parameters are needed
to ensure feasibility and sustainability of Waqf
Unit Trusts.

23
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