Financing Social Enterprises Through Cash Waqf

This research explores the potential of cash waqf in generating capital revenue in carrying out social-based investment through social enterprises. Looking closely into two different concepts (i.e., social enterprises and waqf), this research appreciates the understanding on the modern business model of social enterprise and the innovative version of religious social finance (i.e., cash waqf). Depending on qualitative methodology and analytical review, the discussion of this research is developed. These approaches are considered suitable and pragmatic for the suggested business model of social enterprise. Here, an innovative business model with a combination of social enterprise operation and cash waqf is introduced. It has the potential to stimulate further research to innovate religious social finance instruments to current and modern business models. This research proposes a business model of social enterprise that combines cash waqf in its operation for sake of generating capital revenue. Simultaneously, such a business model has the potential to expand the cash waqf in meeting social objectives of the social enterprise. As research findings, it is found that even though waqf is derived from a religious traditional philanthropic instrument, its innovative version of cash waqf can be utilised in generating capital revenue for social enterprises. As long as the required principles of cash waqf as provided under Islamic law is fulfilled, a combination of cash waqf in the operation of social enterprise can be carried out.

The Role of Zakat to Alleviate Poverty of Refugees in Malaysia

Zakat plays an important role as part of the Islamic socio-economic system. Zakat is said to be one of the financial tools to alleviate poverty apart from micro financing and micro credit. However, it is found that most of the benefits are only offered to the citizens of Malaysia and not the other untapped communities from other countries especially the refugees that seeks our government's protection. Hence, if the existing zakat recipients who are the citizens still unable to avoid from the unruly poverty, let alone the untapped group, especially the refugees. With the majority of refugees hailing from Muslim countries, Muslims around the world fulfilling zakat, a major pillar of their faith, can play an important role in alleviating their suffering and restoring their dignity as human beings. The realization of the incredible philanthropic Islamic social finance such as zakat, which can potentially exceed $300 billion a year, has driven United Nations High Commissioner for Refugees (UNHCR) to launch a Zakat Program in late 2016, namely Refugee Zakat Fund. Currently, the approach by zakat institution to help refugees are less proactive, given that most of the approach are made by the non-government organization (NGO) such as UNHCR Malaysia and local non-government organizations. The issues are very important to be solved as Islamic social finance has a huge potential mechanism to reduce poverty. Hence, the objectives of this study are (1) to explain the role of zakat in eradicating poverty among refugees for improving their socio-economic well-being, (2) to explore the issues and challenges of zakat administration in Malaysia especially in helping refugees, and (3) to explore the issues and challenges of UNHCR in managing refugees' zakat funds. This study adopted qualitative approach by conducting interview with five experts in relation to Islamic social finance especially on the issues of zakat management. These experts have vast experience in Islamic finance and in Shariah. In general, the findings suggest that (1) zakat can play a crucial role in providing assistance to those in need without exception to fulfil both Maqasid Shariah and Sustainable Development Goals (SDGs); (2) one of the challenges facing the zakat institution is their managements are inefficient and a lack of transparency in terms of how the funds are collected, managed, and distributed, and hence, the adoption of technology is important for effective and efficient zakat system; (3) UNHCR must take important care on governance aspects in order to manage and administer zakat funds for refugees to improve the trust of zakat payers and recipients. This study may contribute to the enhancement policies in relation to both zakat and refugees made by both federal and state government by harmonizing the policies to solve the issues on poverty of the refugees, especially in Malaysia.

Achieving the Sustainable Development Goals

The purpose of this study is to explore the role of Islamic social finance towards realising financial inclusion in achieving nine of the seventeen goals of sustainable development goals (SDGs) which are SDG1, SDG2, SDG3, SDG4, SDG5, SDG8, SDG9, SDG10, and SDG17 in the 2030 agenda for SDGs, as propagated by United Nations Member States in 2015. Then, a critical analysis is made to explain the possible contribution of Islamic social finance in achieving financial inclusion which is aligned with SDGs that brings balanced to the physical, emotional, mental, and spiritual of the community in supporting overall economic growth which finally combats the economic impact of the COVID-19 pandemic. Further research and empirical studies can be conducted to explore the relationship between Islamic social finance, financial inclusion, and SDGs which in tandem with Maqᾱṣid al-Sharῑ῾ah to equip ourselves in unpredictable economic hiccups during COVID-19. The results may also motivate the financial industries to promote Islamic social finance products and corporate social responsibilities as well as enhance the development of Islamic social finance towards achieving financial inclusion in fulfilling SDGs which soon will provide significant social impacts as the results will enable new initiatives by industries and policy makers to develop Islamic social finance in attaining financial inclusion to achieve SDGs which is seen as being parallel with Maqᾱṣid al-Sharῑ῾ah especially in resolving economic issues of COVID-19.

Impact of Financial Inclusion on Poverty Through Islamic Microfinance in Mauritania

Poverty is a severe problem, particularly in third world countries. Since reducing poverty is the first goal of Sustainable Development Goals of the United Nations, it is the concern of numerous organizations and governments. This chapter is a conceptual paper that discusses the effectiveness of microfinance in eradicating poverty. The main purpose of this chapter is to present the current situation of poverty in Mauritania and the prospect to alleviate it through Islamic microfinance and financial inclusion. It also attempts to propose new suggestions for the Mauritanian government to alleviate poverty and increase people's wellbeing. It has been concluded that Islamic microfinance can reduce poverty in Mauritania. Thus, this research recommends policymakers and managers of Islamic microfinance to enhance the outreach of microfinance institutions to reach a large segment of vulnerable people. This study is among the pioneers in the field of Islamic microfinance in Mauritania, so it fills up this gap in the literature and adds new theoretical discussion to the topic worldwide.

Waqf Utilization and Governance Practices

There has been an increased public interest and awareness in waqf practices which is one of the most effective social finance instruments in Islam. History has proven that good governance practices affect the effective use of waqf property which has become one of the mechanisms for wealth creation in a country. Unfortunately, most of institutional mutawalli are facing challenges in their governance practices, leaving the waqf properties not fully utilized for the benefit of society. Thus, this chapter aims to examine in-depth the utilization of waqf property and governance practices of an institutional mutawalli under State Islamic Religious Councils (SRIC) in Malaysia. A qualitative method applied in this case study where formal and semi-structured interview conducted on a focus group involving those in leadership positions such as CEO and the top management of the institutional mutawalli. The first part of discussion is on governance practices of the institutional mutawalli, followed by discussion on their experiences and current execution in utilizing the use of waqf properties. This study identified the crucial characteristic in the waqf property. Several recommendations are made on how to improve the effective use of waqf property and best governance practice that can be implemented to help the institutional mutawalli attain their growth performance.

The Role of Zakat During Pandemic Crisis and Post Recovery

The COVID-19 pandemic suddenly claimed its existence with thousands of fatalities reported worldwide in just a few months. It has caused great concern and panic resulting to total halt in all activities, particularly the economic sector. The lockdown has caused global economic contraction which has led to forecasted economic recession for the year 2020. Islamic social financing sees this phenomenon as an increase in the numbers of the needy and something has to be done. In Islamic social financing, certain instruments have been identified as tools to mitigate the turmoil facing people who are badly affected by the pandemic. Zakat, sadaqah, qard al-hasan, and infaq can play significant roles especially in providing financial aids to the needy. Zakat in particular has the potential to ease the financial situations for its huge collection recorded. This study employed the document analysis approach to examine the possible role zakat can play during and after the turbulence caused by the pandemic. The findings from the analyses revealed that Islamic social financing via its instruments like zakat, sadaqah, infaq, and qard al-hasan are able to offer and provide financial assistance during and post crisis, in this case the COVID-19 pandemic in various sectors like the education, social, and humanitarian, as well as in the medical sector. The responsible party should continue to provide efficient and hassle free channel for zakat payers to continue paying zakat as it does help in providing sufficient funds and also eradicate poverty in a community that may be caused by any crises alike. The effective and efficient distribution programs are also equally important in ensuring the objective of zakat is achieved in helping the needy.

The Centralized Zakat Management System in Solving Zakat Management Issues in Malaysia

Zakat is the third pillar of Islam and often associated as a tool to alleviate poverty. Proper execution, processes, and management of zakat from collection to distribution of zakat should result in the alleviation of poverty and improvement in quality of life for the less fortunate. However, in a Muslim majority country such as Malaysia, where not only is zakat collected regularly, with multiple zakat bodies taking on the role of managing zakat, the issue of poverty remains. This indicates a flaw within the existing zakat management system whereby there is either a lag between the funds collected and funds distributed, or the zakat management is inefficient. The chapter studies the current practices of zakat collection and disbursement in Malaysia while highlighting the relevant issues. Subsequently, developing a conceptual framework of a centralised zakat management through the enhancement of IT infrastructure. The main objective of the proposed framework is to improve the efficiency of the zakat collection and disbursement by establishing a consolidated database which will be accessible by all zakat authorities and creating strategic partnership with relevant authorities and organisations. These steps will promote the sharing of information, verification of information, and reduce the number of redundancy and conflicting information of zakat recipients. Ultimately, the end goal is to shorten the transaction time of funds from contributors to recipients through a systematic and orderly manner.

Funding Covid-19 Economic Stimulus Through Islamic Social Finance

The COVID-19 pandemic is an unprecedented humanitarian challenge which requires innovative solutions. One apparent challenge among governments is to come up with appropriate funds to finance economic stimulus packages. Such stimulus packages are necessary for the protection and wellbeing of the people and to ensure that the economic operations remain intact. By looking into Islamic economics, various solutions can be explored as offered through Islamic social finance instruments such as zakat, waqf, and sadaqah, as well as its innovative solutions specifically available from the capital market sectors. This chapter explores the potential development of an impact-waqf SRI sukuk for funding economic stimulus packages, with special focus to Malaysia. This chapter proposes a solution in achieving such purpose by referring to the Impact-Waqf SRI sukuk, either based on temporary or permanent cash waqf structure. Returns of investments to investors ultimately depend on the social impact and key performance indexes (KPIs) as achieved from the economic stimulus packages. It is found that the impact-waqf SRI sukuk can be issued either by the government or government-linked company (GLC) and economic stimulus packages can be offered to institutional as well as retail sectors. An option can be given to the investors to waive-off their claims on the capital and returns. Consequently, the government can offer tax rebates or coupons which are equivalent to the value of the waived-off investment.

Integrated Islamic Social Finance Approach

This chapter assesses the Islamic social financial approach by reviewing the concepts of nature, society, and environment of the current social reporting models such as triple bottom line and environmental, social, and governance (ESG) and integrated (corporate) value reporting. These are examined to analyse the limitations of the capital centric and profit motive focus of shareholder wealth approach. Based on the current ‘responsible investor' and ‘social responsibility investment' principles, the view of environment as ‘externality' has impeded the potential realization of social good from an ‘eclectic paradigm' of integrated reporting. An eclectic paradigm is adopted for the integrated Islamic social financial reporting approach by the internalization of environment as part of socio-economic goals to attain social harmony. It offers an opportunity for higher commitment to a more sustainable Islamic social finance development using the principles derived from Infaq, Sadaqah, Hiba, and Waqf. COVID-19 pandemic is particularly unique and to a certain extent has stalled profit motive commercial efforts to activate social funding responses. A more sustainable response is attainable from social market community-based system rather than market-based system. With Islamic social finance approach to COVID-19 pandemic, a more integrated, inclusive, and sustainable reporting is proposed.

Issues and Challenges Facing Islamic Banks and MSME in Financial Inclusion in Indonesia

Financial inclusion has become an important policy for many countries, including the developed and developing nations. Financial inclusion realisation is promoted by the easy and convenient access to financial services, quality of financial services, and efficient and effective utilisation by all segment of society, delivered with fairness and zero discrimination. The achievement of financial inclusion is supported by essential pillars that are interconnected with each other and form a composite economy ecosystem to ensure stability and sustainable development. One of these critical pillars is micro, small, and medium-sized enterprises (MSMEs); the development of MSMEs pillar is deemed crucial due to its capability in absorbing more considerable workforce compared to larger enterprises and contributes significantly to the gross domestic product (GDP). Therefore, the growth of MSMEs pillar will surely reduce poverty, lessen the unemployment, and lower the income disparity. In this respect, since Islamic banking represents the core of the Islamic financial system that encourages entrepreneurship, the institution is expected to take the lead in serving the needs of MSMEs sector and assisting them from all types of financial constraints. The primary objective of this chapter is to explore and investigate the critical issues and challenges of MSMEs financial inclusion achievement through the role of Islamic banking institutions, particularly in Indonesia. The chapter suggests several problems that hamper the role of the Indonesian Islamic banking institution in serving the needs of MSMEs and numerous issues and challenges in achieving MSMEs financial inclusion.