FAQS
FAQs on Waqf
SET 1: FAQ ON WAQF
- What is waqf?
In Islamic law, Waqf is a form of charitable endowment in which property or assets are donated for the use and benefits of the public. The endowment is intended to be perpetual, with the assets held in trust and the income generated from the assets are used for charitable purposes.
- What is the purpose of waqf?
The purpose of waqf is to advance social welfare and ensure the continuity of charitable projects or initiatives. The income generated from the waqf assets can be used to support a wide range of projects, such as education, healthcare, and religious activities. Waqf can also help to alleviate poverty, cultivate community growth, and support sustainable socio-economic development.
- What are the pillars and conditions of waqf?
The pillars of waqf are divided into four:
(i) Waqf donor (Waqif)
- The Waqif can be a natural or legal person and must be legally entitled to dispose of his/ her assets.
- The validity of waqif decision made by a person whose legal competence is limited due to indebtedness shall be subject to the confirmation by his creditors. When the creditors refuse or decline the waqf of the indebted person, the waqf becomes invalid.
(ii) Waqf asset (Mawquf)
The property/ asset should fulfil the following conditions: -- It must be a Shariah-compliant asset.
- The Waqf asset can take various forms such as real estate, money, securities, or any other valuable asset.
- The income generated from the asset’s use will be distributed to identified beneficiaries, while retaining the principal asset.
- The Waqif shall be the sole owner of the asset, with nobody else having a right of disposition at the time of establishing the waqf.
(iii) Beneficiaries of waqf (Mawquf ‘alaih)
- The waqf should not be established for any purposes that is prohibited by the Islamic laws.
- The beneficiaries of waqf can be individuals, groups, or communities in need, both Muslims and non-Muslims.
- It is permissible to make waqf for the benefit of non-Muslims, provided that the cause to be served does not involve activities that are contrary to Shariah principles.
(iv) Waqf statement (Sighah)
- Formation of waqf can take place verbally, in writing, or in any other form of disposition that is normally regarded as indicating it.
- Waqf can be declared effective starting from a future date, such as the date on which the waqf donor declares his/ her assets to become waqf.
- How is waqf different from zakat?
Zakat is a mandatory charity that Muslims must pay annually based on their wealth; whereas waqf is a voluntary donation made for a specific charitable purpose and is intended to provide long-term financial support.
- How is the waqf managed?
The waqf is managed by a trustee or a board of trustees, who are responsible for ensuring that the waqf assets are well-maintained, the benefits are used for designated charitable purposes and any income generated from the waqf is reinvested back into the waqf.
- How is waqf governed in Malaysia?
All waqf affairs fall under the jurisdiction of the State Islamic Religious Councils (“SIRCs”), which serve as the sole trustee of all waqf. At the federal level, the Federal Territory Islamic Religious Council, along with the Department of Awqaf, Zakat and Hajj (“JAWHAR”), which operates under the Ministry of Federal Territories, oversee all waqf-related matters.
- What is the role of the SIRCs in governing waqf?
The SIRCs are responsible for managing waqf assets and ensuring that they are used in accordance with Islamic principles. They also have the authority to establish new waqf and to approve the transfer of waqf assets.
- What is the role of the JAWHAR in governing waqf?
JAWHAR is entrusted with the responsibility of managing and developing waqf assets, offering advice on the establishment of new waqf, and promoting the use of waqf for social and economic development.
- How does waqf promote social welfare and socio-economic development?
Waqf assets can be used to fund and support social welfare initiatives and programmes that benefit the communities. Such initiatives include the development of education, health and social sectors that provide essential services to underserved communities. To a certain extent, waqf funds may be used to provide financial assistance in the form of interest-free loans to establish small businesses that can create job opportunities and stimulate local economies.
SET 2: FAQ ON REAL ESTATE INVESTMENT TRUST (“REIT”) AND EXCHANGE-TRADED FUND (“ETF”) WITH WAQF FEATURE
- What is an Islamic REIT and an Islamic ETF with waqf feature?
An Islamic REIT or an Islamic ETF with waqf feature is a listed fund that enables investors to retain their ownership rights over the units purchased while donating all or a portion of the income distribution from their investment in the REIT or ETF for waqf purposes i.e. channelled to waqf initiatives.
- What is the typical structure of REIT or ETF with waqf feature?
- Who can buy/ invest into REIT and/ or ETF with waqf feature?
Any individual (including non-Muslims) or institutional investor can conveniently buy/ invest in REIT and/ or ETF with waqf feature via the stock market. To invest in these funds, both retail and institutional investors must have an active Central Depository System (“CDS”) account and a trading account maintained with a broker to invest.
- What are the identified waqf initiatives and/ or projects?
The initiatives and/ or projects identified by the waqf recipient/ administrator (mutawalli) include, but are not limited to, those that benefit the social welfare of a community. Examples of such initiatives include the establishment of schools, mosques, hospitals, and orphanages that help alleviate poverty and foster community growth.
- Who is responsible for determining the selection of waqf initiatives and/ or projects?
The appointed waqf recipient/ administrator (mutawalli) oversees the screening, selection, and approval of identified waqf initiatives and/ or projects.
- How can investors obtain information on the waqf initiatives and/ or projects?
Investors can obtain information on the waqf initiatives and/ or projects, including information on the waqf recipient/ administrator (mutawalli) and the progress of such waqf initiatives and/ or projects from the fund management company’s website.
- Who are eligible waqf recipients for listed REIT or ETF with waqf feature?
Under the Securities Commission Malaysia’s Guidelines on Islamic Capital Market Products and Services, waqf distributions must solely be channelled to the following recipients:
(i) Any State Islamic Religious Council (“SIRC”);
(ii) Any institutions or organisation authorised by the SIRC to act as a mutawalli (waqf administrator) or collection agent for waqf purposes. - How much of the income distribution from the REIT and/ or ETF with waqf feature will be apportioned to be channelled to waqf recipients for waqf purposes?
The percentage of income distribution apportioned for waqf purposes varies from one fund to another and is subject to the respective waqf arrangement. The percentage of income distribution apportioned for waqf purposes will be disclosed in the product prospectus and other relevant disclosure as set out in the document offering.
- What should I do before investing in a REIT and/ or an ETF with waqf feature?
Investors are advised to understand the following before investing:
- Information regarding the REIT and/ or ETF with waqf feature and the underlying product
- Investment objective and strategy
- Income/ dividend distribution based on distribution policy stated in the REIT’s deed and ETF’s prospectus
- Fees and charges associated with buying and selling of the REIT and/ or ETF with waqf feature
- Trading information related to the REIT and ETF with waqf feature
- Information about the management company
- What are the benefits of investing in a REIT and an ETF with waqf feature?
There are several benefits of investing in a REIT and an ETF with waqf feature, such as:
- Supporting the development of waqf assets and initiatives and/ projects in Malaysia
- Earning a return on investment that is compliant with Shariah principles
- Diversifying one’s investment portfolio and managing investment risk
- Contributing to the betterment of society and promoting Islamic values
For more information on REIT and ETF products and Guidelines on Islamic Capital Market Products and Services, please visit the following links:
A detailed FAQ on general REIT product
https://www.bursamalaysia.com/reference/faqs/securities/faqs_on_real_estate_investment_trust
A detailed FAQ on general ETF product
https://www.bursamalaysia.com/reference/faqs/securities/faqs_on_exchange_traded_funds
Guidelines on Islamic Capital Market Products and Services
https://www.sc.com.my/api/documentms/download.ashx?id=7279989d-00f8-4ebc-8c18-fbf6c260ab1a
Frequently Asked Questions – Guidelines on Islamic Capital Market Products And Services
https://www.sc.com.my/api/documentms/download.ashx?id=64333e59-90d6-4e63-a27a-103b8ef904ca