AN INNOVATIVE WAQF PROPERTY SMART PARTNERSHIP IN LAND

DEVELOPMENT: LESSON FROM WAKAF SEETEE AISHAH, MALAYSIA 1

Nur Azlin Ismail2

Ismail Omar, PhD
Universiti Tun Hussein Onn Malaysia

Mohd Noor Ropiah Abu Bakar

UDA Holdings Berhad

Abstract

In a way, waqf property can be seen as a permanent protection

instrument or retaining wall for the ummah. However, in principle,
venturing into waqf property is risky and pressures not only due to
the market volatility risks but also devoted to securing capital assets
that produce an ever-increasing flow of revenues (manfaat) to serve
the objectives of the wakif. This paper offers an insight of a success
innovative waqf land development known as Seetee Aishah Waqf.
The smart partnership between Majlis Agama Islam Pulau Pinang
(MAINPP as the sole trustee) and UDA Holdings Berhad (UDA) as
the land developer had originated an innovative and contemporary
approach that benefited the public and agencies involved in the
smart partnership scheme. The main finding provides three
innovative orientations; the application of cross-sector partnership,
the revenue allocation as distribution strategy and the establishment
of foundation for waqf zurri. The finding derived from the study
discussion may pave the way forward for the strategic management
approaches of handling waqf property worldwide especially in
Malaysia.
Waqf, Innovation, Asset Allocation, Philosophies

1. BACKGROUND

Property is an important asset class in waqf institution globally. Indeed, most

definitions of waqf have reflected the property per se.(Hasan, 2008.) Thus, an
innovative approach in waqf properties development would be a critical driver in
ensuring waqf becoming an important and broader socioeconomic vehicle ((Ali,
Ahmad, and Mahdzan, 2015). This success value is extremely important to overcome
the revenue shortcoming that would violate either the principle of property investment

1 Paper submitted to 1st World Islamic Economics & Finance Conference (WIEFC2018)
2 Corresponding author azlinphduthm@gmail.com
or even the waqf itself (Ismail Omar, 2017). Therefore, the significant disparity
between the size and the revenue of waqf as presented in Figure 1 is generally terrified
as it would hinder the waqf sustainability in the long run.

[Figure 1: Disparity of waqf size and income globally

Sources: Salahat, 2017

The evolvement of waqf property development had attracted the Muslim

scholars’ concerning the callous treatment of waqf as it had seen as a new investment
category (Thomas et al. 2016). Most waqf literatures have emphasized heavily on waqf
land development as parts of strategic investment. There are a few studies that
discussed on waqf properties investment including income and rental issues (Mat Rani
and Ismail 2012; Sadr and Souri 2010; Ngah 1992). Nevertheless, research should
also be done by looking properly at sustaining the developed waqf property financially,
functionally and physically within the diversification of risky business in property
investment. Shatzmiller (2001) remarked examination on the status of the waqf need
to be done after several generations as the waqfiyyah unable to solely portray its
sustainability. Thus, the main purpose of this study is to explore the impact of an
innovative smart partnership of waqf land development in promoting waqf
sustainability.

2. LITERATURE REVIEW

2.1 THE GLOBAL WAQF PROPERTY SCENARIOS

Majority of legal scholars in all generations uphold three main characteristics of

Waqf asset; Perpetuity, Inalienability and Irrevocability. Mohammad and Mar Iman
(2006) claimed perpetuity cause a shortcoming of cash, as the waqf asset neither
could be sold nor aggressively sought financing. Therefore, in general, holding and
bearing a great number of waqf property is not so profitable. In fact, it grasps with a
different form of costly challenges and risks for each of its life cycle (Omar et al., 2016).
It is the accountability of the trustee to value-add the waqf assets even it was not
required by the waqif (Al Buhuti 2000;Al-Tarabulsi 1981). As a result, the trustee is not
only accountable to fulfil the deeds but also liable to bear any transactional and holding
costs that is associated therein. Moreover, waqf trustees in general, are weak in
providing sinking funds for property management and maintenances (Abas and Raji,
2017).

The capitalization of cash waqf is another scenario serving the accumulation in

waqf properties (Sulaiman and Hassan, 2016). Although Alias (2011) asserted limited
knowledge and access by the trustee had forced property becoming the choice of cash
waqf conversion. The truth is property offers a range of different quality as waqf
instrument. Imam Hilal asserted the mauqufa (inalienability) as excellence quality of
mauquf protection. Besides inalienability, a property also is perpetuity as compared to
high liquidity of cash waqf. Most interestingly, the property is a hedge against inflation
(HAI) since the average appreciation rate in property investment is always higher
compared to inflation (Omar Ismail, 2016).Therefore, it would continuously be
beneficial to the community at large (Ellias, Kadir, and Haron 2015).

2.2 THE NEEDS OF AN INNOVATIVE WAQF PROPERTY DEVELOPMENT

Several studies highlighted deficient in mutawwalli capability and capacity

being one of the main reason for abundant undeveloped waqf land (Mohammad, Mar
Iman, and Omar, 2005; Hassan and Shahid, 2010; Chowdhury, M. S. R. Chowdhury,
Muhammad, and Rushdan, 2012;(Ibrahim and Ibrahim 2013Mohammad et al. (2005)).
These deficiencies are quiet serious as Azmi, Muhamad, and Kamarudin (2014)
exposed there is case where the federal government revoke the financial assistance.
Yet, some MAINS is still operated by less than five staffs who accountable to attempt
all the waqf matters.3 within the state. As a consequences Ali et al. (2015) suggested
it’s about time for to venture on strategic management approach in dealing with waqf
land development. This idea was match with the suggestion from Rashid (2012) who
also proposed a new strategy for waqf property development

Although many efforts and strategies such as Built Operates Transfer and waqf
Irsod had being implemented in enhancing the waqf property development
(Chowdhury et al., 2012) , Ismail and Possumah (2014) reminded waqf properties are
an inter-generational wealth distribution mechanism that underlies by; ‘continuously
usufruct-giving’ and ‘immovable things’ philosophies. It is, therefore, waqf property is

3
The result from the interview with MAINs
confronting a global market fluctuation risks that may affects its open market
investment value in the global market. As such, asset allocation in redistributing risks
is vital.

2.3 MITIGATING WAQF AND PROPERTY INVESTMENT RISKS – ASSETS

ALLOCATION STRATEGY

Abdul Karim (2012) suggested in being perpetuity, an asset allocation strategy

could be employed in matching the property investment horizon with waqf property
philosophies as performed by WAREES4 in Singapore. Especially in successfully
utilizing sukuk intifa’ and sukuk musyarakah in their property portfolio for investment
and reinvestment purposes. The idea also was supported by Suhaili (2016) who noted
asset allocation strategy is necessary to meet waqf property liquidity needs .Sharpe
(1992) defined assets allocation is an investors’ portfolio allocation for major assets
classes which is relevant to waqf property in Malaysia.

Yet, since each waqf asset is stipulated by an independent deed, therefore the
asset allocation based on waqf profile is highly recommended to safeguard the
endower wish (Osman et al. 2012;Alias, 2011; Alias, 2012) even Bahari and Abd
Rahman (2012) asserted that waqf is shield and must be highly protected from any
type of risk (especially the market volatility). Currently, majority of waqf assets
allocation in many Muslim countries except for Singapore are administered in an old
school way (Osman, Htay, and Muhammad; 2012) on the reason to preserve the
principal value of waqf (Ellias, Kadir and Haron, 2015).

2.4 RESEARCH METHODOLOGY

This study adopts qualitative research approach. In providing an empirical insight on

an effective and efficient waqf land development, it is necessary to find how does waqf
development operational framework and the distribution revenue policy used by the
current practitioner. The successful project of Wakaf Seetee Aishah is referred to. The
instruments for data collection are a meta-analysis, related document analysis,
observation and unstructured interviews. The respondents chosen are based on
purposive sampling technique such as the officers from legal department in Majlis
Agama Islam Negeri, the key person in UDA Waqf as well as the banking officers.

4Endowment asset management companies that wholly owned by Islamic Religious Council of Singapore (MUIS),
 3. CASE STUDY: WAKAF SEETEE AISHAH PULAU PINANG MALAYSIA

In Malaysia although only 11.34%5 of waqf land had been developed, property
is dominating 81.35%6 from the total value of waqf asset worth RM951.84 million7.
One of the effective and efficient waqf land development project is Wakaf Seetee
Aishah (WSA). The WSA land is 9.86 acres of padi field donated by Seetee Aishah Bt.
Haji Mahmood on 30 September 1901. Seetee Aishah requested the benefit from the
WSA land be used for the traditional religious activities during Ramadhan, paying and
supplying the kerosene for all mosques in Permatang Pauh and, sending alms to
Mecca and umrah and any philanthropic activity or for the benefits of the descendants
of Saedah and Family8.

3.1 WSA INNOVATION 1

1: THE USE OF CROSS SECTOR PARTNERSHIP

This waqf land is strategically located at the intersection of Malaysia North-

South Federal Highway and Butterworth-Kulim highway and nearby to Carrefour and
Tesco hypermarket. Thus, MAIN Pulau Pinang (MAINPP) believed the value of the
benefit derived from this waqf land could be raised by having an innovative
development approach. Therefore, in August 2007, a joint venture between MAINPP
and UDA (figure 2) was established and sealed in upgrading the WSA land from padi
field into approximately RM 24 million (commercial properties and housing areas). This
innovative development had shifted the perceptions of waqf from just as merely
religious or philanthropic products to a successful profitable venture. It is a proof that
waqf can produce and generate income as well as filled the complexity needs of
modern life without sacrificing the waqf deed. Omar (2015) highlighted the capability
of waqf in generating security of income or the flow of return in the form of rental and
capital appreciation could act as ‘hedge against inflation’ in property investment.

5 Waqf Property Development Transformation Master Plan Study in Malaysia 2016

6 The calculation is based on the cost of the project for property in the based on Waqf Property
Development Transformation Master Plan Study in Malaysia 2016 over the estimation of asset waqf
worth in the Zakaria et al. (2014)
7 Based on Malaysia Accounting Standard Board (MASB) Research Paper, Waqf 2014. IN19:

Property, Plant & Equipment (PPE) would be measured at cost on initial recognition & value derived
from
8 Hydzulkifli & Asmak (2012)
Figure 2: Partnership model for Wakaf Seetee Aishah Development Project

The utmost achievement in WSA land development is the ability of MAINPP to fulfil
the request of the late Seetee Aishah after hundred years. MAINPP received the nine
triple-storey shop units as the consideration received for the leased land. By having
the shop unit MAINPP was able to generate a stable rental income. MAINPP also had
received 30% of the profit from the net sales of the double-storey houses. The houses
were sold by UDA at the range of affordable prices between RM 250,000 to RM
400,000 each. The price was lower by 20% from the current market price. Thus, it
provides a greater Muslim opportunity to consume a house. The success of CSP in
the waqfted land of Settee Aishah provides a new insight of viewing waqf in today’s
contemporary world. With reduction in cost of development and increased revenues
from selling, the CSP provides empirical evident that waqf property development using
partnership scheme is worth a while to be considered and undertaken in fulfilling
housing needs of the ummah. The scope and magnitude of contemporary
development of waqfted land provide a forward justification that waqf is still a relevant
socio-economic tool for social alleviation.

3.2 WSA INNOVATION

2: THE WAQF REVENUES ALLOCATION POLICY USED IN WSA

Suhaili (2016) noted asset allocation strategy is necessary to meet waqf property
liquidity needs. In the context of waqf property, assets allocation could be used to
distribute the waqf income (manfaat) between the stakeholders as well as the sinking
fund for the transactional and holding cost of the waqf property. Managing assets
allocation are varies according to the institutions policy and the size of funds held by
foundations, trusts and endowments (Ayuniyyah et al. 2014) This idea also was use
by MAINPP in distributing WSA revenue.
 •Beneficiries •Management

40% 20%

20% 20%
•Sinking Fund •Maintenance

Figure 3 : Waqf revenue policy used in WSA

The MAINPP is engaging with Abdul Karim (2012) suggestion by employing the
asset allocation strategy in distributing the revenue derived from WSA. Basically, the
largest portion of the revenue is being apportion according to the deed of WSA.
Whereas the remaining sixty percent were shared equally between management fees,
WSA maintenance purposes and sinking fund. By having such revenue allocation, itt
was noted that this innovative waqf development tries to sustain the WSA financially,
functionally and physically

3.3 WSA INNOVATION

3: ESTABLISHING FOUNDATION FOR WAQF ZURRI

WSA is sample of comprehensive waqf. In the WSA deed, the waqf khayrri (either
general or specific) and waqf zurri being identified clearly by the late Seetee Aishah.
Thus, one of the beneficiaries is Saedahs’ family. In facilitating the distribution of waqf
revenue to this family, MAINPP had established the foundation. This foundation is
responsible to plan the utilization of the income received. By having this foundation,
MAINPP not only empowered the Saedah decent but also train them to collectively
accountable on the WSA deed. Besides, the use of the MAINPP manpower also could
be saved as it only requires minimal supervision.
 3.4 LESSON FROM WSA

Table 1 : The Social and Economic Impact from WSA

Social Impact Economic Impact
Functionally Transfer of knowledge The smart partnership
between parties involve. utilising the strength and
resources of all parties
involved optimally. All parties
benefited productively based
on their capacity, thus waqf
able to act as socioeconomic
vehicle
Physically MAINPP able to fulfil the deed The status of the land is still
of the waqif (donor). If we look maintaining as waqf land
at the deeds, it combines although it has been revived
between general waqf, to boost the benefit
specific waqf and waqf zurri. A
lot of beneficiaries enjoy the
benefit from WSA
Financially The public especially the 1. The revenue received by
muslim has the affordability to MAINPP had increased
own a house since the house by 420% after WSA
is sold below the market price project
2. UDA is enjoying the
market shares of waqf
land development
besides the profit from
the proceeds.
3. Bank has diversified its
market share of housing
loan where housing loan
is a profitable capital
investment
Source: Authors (2017)
Table 1 shows the summary of key lesson from WSA land development. It is noted
that currently waqf land should be revived according to the contemporary style. The
success of WSA not only because the innovative development module but it also
reflected the strength of wider governance structures within the bandwagon which
relates to internal organisational characteristics. broader policy direction, institutional
settings and regulatory frameworks as presented in Table 1.
 4. CONCLUSION

Waqf property is not only an investment asset but also a retaining wall” to the ummah.
The lack of innovation in developing the waqf land may cause the burdens to the waqf
trustees as well as hindered the waqf in meeting its objectives. The paradox of
innovation success in WSA land development could lead to an example that any
mission which involved collaboration as the leverage platform has given a new identity
and hope. Besides, in Malaysia there are still huge acreage of waqf land banks. It also
signifies that any method which does not contradict with the gist of waqf itself could
have been explored as Islam does not limit creativity. The same paradigm should be
done by the other trustee as the best of waqf is to dedicate things which people need
most.

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