Mention the word Waqf and most people will think of a mosque, a Madrasah, a charitable organization or other religious institutions, buildings or land. This perception is correct, but not entirely complete.
The Waqf has been in existence even before the rise of Islam, but Islam gave it its legal status. When the prophet Muhammad first migrated to Madinah, he built the Quba’ mosque as Waqf, to serve as a place of prayer for Muslims. The Prophet and his Companions continued to bequeath other property as Waqf: including land for travellers, wells for drinking water, weapons for self-defence of the nation and many others.
As Islam spread and grew, the institution of Waqf expanded to include almost all the socio-economic needs of Muslims. Waqf grew to encompass not only traditional mosques and Madrasahs, but also public infrastructure such as roads, universities and other institutions of learning, agricultural land, and even money.
What is Waqf?
It is “the holding and preservation of a certain philanthropy – Sadaqah (charity) – with the intention of prohibiting any use or disposition of the property outside the specific purposes to which the property is dedicated, in such a way that it cannot be bequeathed or sold”. Although most forms of Waqf have been traditionally movable or immoveable physical properties, the cash Waqf is an innovation presumed to have been created in the 15th-16th century under the Ottoman Empire.
How is Takaful used together with the Waqf?
The Wakalah-Waqf model has been developed for this purpose. As the name implies, it is a combination of the Wakalah model for Takaful with a Waqf. It is already being successfully used by re-Takaful operators in Pakistan and South Africa, and by Swiss Re ReTakaful. The Wakalah-Waqf model’s main value proposition is that it resolves the issue of ownership of the Tabarru’ fund. This issue has been a main point of disagreement between Shariah scholars. The model works similar to a pure Wakalah model in most aspects. However, a cash Waqf is created to serve as a separate Shariah entity that will be the center of the relationship between the participants and the Takaful operator. Briefly, here is how the model works:
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The rights and obligations of all parties are spelled out in the Waqf deed or fund rules, and will be agreed to by all participants who wish to become a member of the fund.
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Members of the fund agree to relinquish a certain amount of money without condition as Tabarru’, and will receive benefits in accordance with the fund rules.
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Any surplus sharing and distribution will also be specified in the fund rules.
In this case, ownership of the Tabarru’ clearly belongs to the Waqf. Thus, any ambiguity is removed as a Waqf has the ability to accept ownership of an asset. Since the Tabarru’ is an unconditional donation, participants lose any rights of ownership to their contributions. However, the relationship is not fully unilateral, as the participants’ rights to any benefits and surpluses are clearly spelled out in the fund rules.
It is important to note that while the Waqf gains ownership of the Tabarru’ contributed by the participants, the value of the Waqf itself does not increase. Therefore, the Tabarru’ can be used for claims payments and surplus distribution.
Advantages of the Wakalah-Waqf model
The Wakalah-Waqf model for Takaful has its advantages. While the main value proposition of the model at present is its ability to resolve the issue of ownership, the institution of Waqf has been used to great advantage in meeting society’s many socio-economic needs. Scholars are currently looking at how Waqf can rejuvenate its role as a contributor to the development of a country or society.
Likewise, the potential use of Waqf in various other aspects of Takaful has yet to be fully explored. Issues that can be looked into include developing pension products, defining other types of benefits that would otherwise be difficult under the Wakalah model, and linking these benefits to charitable uses, to name a few.
Conclusion
Takaful and Waqf are complementary, in the sense that they both provide benevolent relief or benefits to beneficiaries, albeit through different instruments. Perhaps it is time for practitioners and scholars to more closely study the relationship between Takaful and Waqf, to produce a truly Shariah-based solution to society’s needs.
Fidrus Sukor is a client manager at Swiss Re ReTakaful, and he can be contacted at
[email protected]