EFFECTIVE MODEL FOR MALAYSIAN HIGHER

EDUCATION

FAHMI SHEIKH OMAR DIRECTOR OF DEVELOPMENT & SPECIAL TASKS

UNIVERSITI ISLAM MALAYSIA, CYBERJAYA

WAQF

“But seek, through that which Allah has given you, the home of the Hereafter; and [yet], do not forget your share of the world. And do good as Allah has done good to you. And desire not

corruption in the land. Indeed, Allah does not like corrupters” (QS Qasas 26:77)

MAIN OBJECTIVE OF WAQF

Definition of Waqf has been covered many a time elsewhere, so I am not going to elaborate on that.

To me, Waqf is an Islamic endowment which serves…. as a bridge

between the benefactors and the beneficiaries to provide solutions & bring to both success

in this world and in the hereafter.

WAQF IS THE ISLAMIC EQUIVALENT OF BENEFICIAL ENDOWMENT

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WAQF BENEFECTORS

WAQF BENEFICIARIES

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WAQF’S MOTIVATION IS THE HEREAFTER

➤ The greatest motivation to Waqf donors is that their donation - whatever the amount may be - will provide them with heavenly rewards on a perpetual basis, ie. even after their deaths until Judgment Day.

➤ Based on that, all Waqf funds strictly adheres to the principle of Perpetuity.

➤ Organisations managing waqf donation must always ensure: ➤ the original sum or value grow or at

least retained. ➤ the donation be acted upon and benefited

at the soonest. ➤ The two most practical applications of waqf

management to adhere to the principle of Perpetuity are low-risk investment and property acquisition/ development.

➤ In Malaysia, to avoid from going into the hands of questionable parties, all Waqf donations are centrally coordinated by the Ruler of every Malaysian state, and administered under the respective states’ Islamic Religious Councils.

images courtesy UIM

ا تحبون وما لن تنالوا البر حتى تنفقوا مم تنفقوا من شيء فإن اهلل به عليم

Never will you attain the good [reward] until you spend [in the way of Allah ] from that which you love. And whatever you spend - indeed,

Allah is Knowing of it.

(QS Ali Imran 3:92)

APPLICATIONS OF ISLAMIC ENDOWMENT (WAQF)

healthcarereligious community careeducation

➤ Generally speaking, endowment is an economic preposition to shift the burden of financing from public coffers, as well as to avoid high cost of for-profit initiatives. At the same time, endowment helps to lower direct costs to beneficiaries.

➤ According to Hamid (2015)1, Waqf is not limited to religious purposes only and historically it has been utilised to cover different needs such as education, healthcare, national security, commercial and business activities, transportation facilities, shelter and food for the needy and poor. The list goes on.

➤ However, more structured applications of Waqf can historically be seen in education, religious, healthcare and community care.

EDUCATION WAQF➤ In the educational sphere, Islamic

endowment funds or Waqf are normally put in investments and their returns widely used for operational, academic, research as well as developmental support in:

➤ pre-schools, primary schools and secondary schools

➤ religious/ tahfiz schools

➤ universities (colleges, university-colleges, universities, post-graduate universities)

➤ Most waqf initiatives are undertaken by non-governmental organisations (NGOs) and individuals. However, any initiatives with Waqf branding attached to it are closely monitored by the religious councils of their particular states.

images courtesy Google

HIGHER EDUCATION ENDOWMENT➤ In several countries, endowment contributes

significantly by playing a micro-economic role for certain higher learning institutions (or universities).

➤ Several universities in the United Kingdom, United States, the Arab world, Turkey and South-East Asia - especially not-for-profit establishments - depend on endowment funds on top of tuition fees and business unit revenues for sustainability.

➤ In MALAYSIA especially starting in the 2000s, endowment is considered more and more strategic for many public & private universities, in their quest towards reducing financial dependencies on public fund and capital injection.

➤ The first fully endowment-based universities in Malaysia is an Islamic education outfit called the Muslim College of Malaya (trans. Kolej Islam Malaya or KIM), established in 1955 in Klang, Selangor. KIM is now rejuvenated and endorsed by the Council of Malay Rulers as Universiti Islam Malaysia (UIM) in 2010. Its present campus is in Cyberjaya.

➤ Before we talk more about Waqf in Malaysia’s higher education, let’s first look at the rest of the world.

images courtesy UIM

UNITED KINGDOM➤ Endowment is not a culture in the rest

of European higher learning institutions, but in the UK it is widely practiced.

➤ Private universities with large endowments (more than £100m) include Cambridge, U of Glasgow, U of Liverpool, Imperial College London, London School of Economics and Univ College London.

➤ Public universities with large endowments (more than £100m) include Oxford, U of Edinburgh, U of Manchester and King’s College London

➤ We have no data for not-for-profit institutions which depend largely or solely on endowment in the U.K.

images courtesy Wikipedia

UNITED STATES

➤ Endowment is much bigger and more widely practiced in the US by both private and public universities compared to the rest of the world.

➤ Private universities with large endowments (more than USD10Bil) include Harvard, Yale, Princeton, Stanford, MIT, Northwestern, Univ of Pennsylvania.

➤ Public universities with large endowments (more than USD8Bil) include Univ of Texas System (14 U’s), Texas A&M System (8 U’s), Univ of Michigan, Univ of California System.

images courtesy Wikipedia

➤ Al-Azhar University is arguably the oldest Waqf establishment in the world since the year 972.

➤ Its total waqaf fund status is unknown, but estimated to be in access of USD10 billion at any given time. Alumni and governments continue to support the fund.

➤ Free education has been offered to all its local and international students, including provision for accommodation, stipends, allowances and salaries for the lecturers and staff. Malaysian students have also been given a free air ticket to return to Malaysia on completion of their studies there.

➤ The tremendous impact of waqf education at the Al-Azhar University was clearly proven when the Egyptian Government became completely reliant on its waqfs as a macro-credit support in times of need for the survival of the State in previous years.

➤ Besides al-Azhar, there are many other examples of universities in other countries that benefit from the waqf assets, such as the University of Al-Qurawiyin in Fez, Morocco; the University of Al-Muntasiriyyah, Iraq; the University of Cordova, Spain; the King Abdul Aziz University, UAE; and the Islamic University of Indonesia (UII).

EGYPT

➤ In Turkey only two categories of universities exist:

➤ Public Unviersities

➤ Private and non-profit Universities (termed as ‘Vakif Universitesi’ or Foundation)

➤ There are about 68 Vakif universitesi and the number continues to increase. Waqf funds are used to subsidise scholarships for the students, and also for capital investment, staff salaries and the operational costs of the University. There is also a small needs-based scholarship programme; however, the benefits are largely for academic merit (Mahamood, 2015).

➤ According to Othman (2016), Turkish model of waqf universities is productive, accumulative, self-sufficient and sustainable due to its strong support from its foundation and shareholders.

TURKEY

➤ In Malaysia there are two types of universities.

➤ Public Universities (Universiti Awam or UA). UA are fully owned and run by the Ministry of Higher Education.

➤ Private Universities (Institusi Pengajian Tinggi Swasta or IPTS). IPTS ownership include state governments, state and federal authorities, corporate foundations, public trustees, public-listed companies, and private companies or individuals.

➤ Both UAs and IPTSes can run their own endowment funds, but they need the state religious authorities approval to run a Waqf fund.

➤ In Budget 2016, the Ministry of Finance (MOF) announced a deep budget allocation cut (between 5 to 20%) for public universities, prompting the MOHE to come up with innovative solutions on how UAs can generate income through other revenue streams such as Waqf.

➤ In Malaysia all matters and types of Waqf are centralised at and coordinated by the relevant state religious councils:

➤ land ➤ cash

MALAYSIA

➤ Each state religious councils has different approaches to Waqf, but some common denominators are:

➤ perpetuity principle

➤ non-transferablity

➤ original conditions set by the waqf contributor must be honoured (if any)

➤ cash waqf is only for low-risk investment and direct use for buying other landbanks to be designated as waqf land, and for waqf land’s property development only.

➤ Several state religious councils are beginning to be innovative so that waqf landbanks which traditionally were endowed for religious purposes like mosques, graveyards and the likes, can now be developed with commercial and more ‘universal’ social activities like education and healthcare (Integrated Development).

Under this model, a university that has been awarded the administrator(mutawalli) status sets up a unit or department under the management of the university itself . University Waqf Committee is put under the University Board of Directors as one of the Board’s committees. All decision on waqf programs and activities are conducted upon approval by the university management. All accounts and financial management of waqf are under jurisdiction of the university management.

Under this model, a university sets up a waqf office under the University Board of Trustees. The University Waqf Fund is put under the Board of Trustees as a project under the University Foundation (Yayasan) having a separate account and financial management.

PUBLIC UNIVERSITIES ARE MOVING INTO WAQF4

There are three possible GOVERNANCE MODELS to be adopted by public universities in managing waqf. The universities can select any of these models depending on the level of readiness of the universities and the state religious council. The most ideal

model is that of an independent Waqf Board structure as presented in Model 3.

In Model 3, University Waqf Board (UWB) is established as a separate and independent entity from the University. Collaboration and coordination, as well as roles and responsibilities of the UWB are spelled out in a written agreement or Waqf Deeds. UWB members comprise of representatives from both the University and SRIC.

PRIVATE UNIVERSITIES ARE ALSO INTO WAQF

There are few examples of private universities in Malaysia going into waqf but the model used is unclear or different depending on their separate governances. Several state-based colleges (Universiti Sultan Azlan Shah in Perak), foundation-based colleges (eg. International Al-Bukhari University in Kedah) and NGO-based colleges are encouraging Waqf from many benefactors such as alumni, philantrophists and the government.

➤ Private universities can be successful in Waqf endeavours provided:

➤ their operations are not or not significantly funded by federal or state government budget.

➤ they are preferably not owned by individuals or corporations which may abuse waqf contributions for own benefits.

➤ they are seen to be not-for-profit universities.

➤ If these universities are owned and are meant for-profit, a mechanism to separate the governance of waqf and endowment must be implemented to ensure the main principle of perpetuity, non-transferability and others remain.

4 CHARACTERISTICS OF A SUSTAINABLE UNIVERSITY WAQF

FUND IN THE MALAYSIAN

CONTEXT

1. OPEN BOOK REPORTING ON WAQF INFLOW AND

OUTFLOW

➤ Waqf for higher education is rather new in Malaysia. Many philantrophists has yet to buy-in into this alternative. Many expect higher education to be optional compared to school-level or religious education and therefore may priotise islamic donation to higher education as remote.

➤ To increase buy-in from benefactors and to avoid mistrust, transparency by the fund manager is required.

➤ There should be clearer separation of accounting - Waqf, Endowment, Contribution, Operational Revenues, etc.

➤ Regular updates and reporting enable CONTINUOUS ENGAGEMENT with donors and philantrophists.

2. SUSTAINABLE DEVELOPMENT OF WAQF PROPERTIES

➤ Waqf landbanks should be developed soonest to realise the benefits for the donors.

➤ Development of a waqf campus must have multiple purposes, one of which should be economic viability.

➤ For higher education, governments and individuals can offer a non-profit university landbanks for campus development and allow those landbanks to be turned into commercially viable projects as well as for the original intention which is higher education.

3. TRUST AND RELATIONSHIP WITH STATE RELIGIOUS

COUNCILS

➤ In Malaysia, all waqf matters (landbanks and cash) are coordinated by the state religious authorities.

➤ For a university to be waqf-based, it must be appointed as the mutawalli (representative). All waqf lands must be entrusted to the council. All properties built on waqf land are considered waqf in itself and thus, be part of the council’s jurisdiction.

➤ It must report all waqf activities. It must have clear accounting. It must be willing to let all waqf benefits to be shared with the general ummah.

➤ Such free-flowing relationship is key to ensure success.

4. INVEST! INVEST!

➤ According to Mahamood (2015), in Turkey, waqf universities are not permitted to engage in investment as their establishment was based on a foundation of non-profit institution. The income of the university should be used solely to improve the university in terms of scholarships, research and any capital investment required.

➤ Such model may be suitable in Turkey but not sustainable in Malaysia as cash waqf must remain perpetual and only its benefits can be used for scholarship, research even operations. Hence, cash waqf investment is necessary.

➤ Waqf investment in bourses and equity markets must be partaken in low-risk portfolios. Investment in properties should preferably be prioritised firstly towards an expansion to the university’s core business, then in high-potential commercial and residential areas, or in plantation projects with reasonable turnover. All these steps are necessary to maximise benefits without compromising values.

➤ The role of Chief Financial Officers or Bursars in universities becomes more challenging due to the need to invest, divest and re-invest waqf fund effectively.

WAQF MODELS FOR

HIGHER EDUCATION

WHY THE NEED FOR A MODEL?

➤ Waqf/ endowment models or structures are necessary to provide contributors with the birds-eye view of how waqf/ endowment is being governed and managed for a university.

➤ Waqf models also serve as the guiding framework to improvise the university’s waqf policies and procedures as time goes by.

➤ There are limited types of beneficial waqf / endowment hence the practicality of such models can be easily understood.

➤ There are primarily two types of models: governance model and business/ management model.

TYPES OF WAQF/ ENDOWMENT SUITABLE FOR A UNIVERSITY

Monetary Books

Unit Trusts

Building/ Property

Land (vacant/ agro)

Others

WAQF GOVERNANCE MODEL FOR HIGHER EDUCATION

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Waqf & Endowment business development/ fund-raising see next

page

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UNIVERSITY WAQF/ ENDOWMENT MANAGEMENT (BUSINESS) MODEL

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R E V E N U E S & R E T U R N S

LAND / PROPERTY TITLES

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Campus Development

PROPERTY DEVELOPMENT

Campus Management

PROPERTY ACQUISITION

Commercial Development

Leasing

ACCOUNTING

Utilisation/ Budgeting

Reporting

PROMOTION/ BUSINESS

DEVELOPMENT

Customer Services

Performance Reporting

INVESTMENT

Portfolios

Re-investment

BOOKS & KNOWLEDGE

MGMT

Database/ Cataloguing

Book Disposal

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BENEFICIARIES

CONCLUSION: FUTURE OF WAQF IN MALAYSIA’S HIGHER EDUCATION

➤ Waqf has potential for exponential growth in Malaysia due to a number of reasons:

➤ clearer understanding assisted by deeper research and findings by the academia community on waqf and endowment.

➤ renewed interests by many quarters in the potential of waqf as an alternative Islamic economic tool.

➤ government’s commitment to make higher education available to all and therefore the need to contain the costs towards getting a degree.

➤ rigorous promotion and waqf fund-raising activities by waqf authorities and representatives (mutawalli).

➤ Waqf and endowment success in the future depend greatly on the continuous trust by the beneficiaries towards the universities handling the funds. Regular reporting

➤ The government can assist by introducing a 3rd category of universities - waqf/ endowment-based university category.

REFERENCES1.Abdul Hamid, Mohamad, Wisdom in Strategic Ventures and Alliances of Waqaf Funding for Higher Education. La Sagesse (Wisdom in the Islamic World), 1/2015. 39-45.

2.Mahamood, Siti Mashitoh & Ab Rahman, Asmak, Financing universities through waqf, pious endowment: is it possible? University of Malaya. 2015. 446.

3.Othman, Shaya’a, Managing Waqf for Educational Development. International Institute for Islamic Thought. Feb 2016.

4.Malaysia’s Ministry of Higher Education, Enhancing University Income Generation, Endowment & Waqf , Sept 2016, 39.

5.Sheikh Omar, Fahmi, Universiti Islam Malaysia. 2016.

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