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Selasa, 06 April 2010

Mobilization Efforts of Cash-Waqf Fund at Local, National and International Levels for Development of Social Infrastructure of the Islamic Ummah

Beyond the Malaysian Twin Towers: Mobilization Efforts of Cash-Waqf Fund at Local, National and International Levels for Development of Social Infrastructure of the Islamic Ummah and Establishment of World Social Bank.

Prof. Dr. M.A. Mannan
Founder Chairman
Social Investment Bank Ltd

Presentation at the International Seminar on Awqaf 2008
-Awqaf: The Social and Economic Empowerment of the Ummah

Jointly Organized:● Department of Awqaf, Zakat and Hajj ,
Prime Minister’s Department ● Johor Corporation ●Institute of Islamic Understanding Malaysia ● Kumpulan Wakaf An-Nur Bhd.

Venue: Persada Johor International Convention Center Johor Bahru .

Date: 11-12 August, 2008
(9-10 Syaaban 1429H).

In the Name of Allah, Most Gracious, Most merciful

“….Verily never will Allah change the condition of a people until they change it themselves
(with their own souls)…..”-Al-Quran, 13.11

“A man’s work ends upon his death except for the three things:
(a) contribution to knowledge (b) on-going charity and (c) faithful child”- Al Hadith

Table of Contents

Page No.
Abstract: 3

01. Preamble 4-5
02. The New Frontiers of Islamic Voluntary Sector: An overview 5-7
03. Social Investment Bank and Cash-Waqf Certificate 7-9
04. Implications of Cash Waqf Certificate and Criteria of Allocative efficiency 9-13
05. The Operational Guidelines of Cash Waqf Certificate as adopted by Three Islamic Banks in Bangladesh. 14
06. Utilization and Growth of Cash-Waqf Accounts and Deposits of Social Investment Bank from 1997 to 2007. 15-17
07. Cash-waqf: local challenges and global opportunities: Introduction of Cash-waqf Scheme by Islamic Banks in Bangladesh, Indonesia and Muslim Communities in the USA: A brief Empirical Survey. 18-20
08. Agenda for Action 20-21
09. Conclusion: Key Messages 21-22

1) A Sample copy of the Cash-waqf Certificate as introduced by Social Investment Bank , Dhaka, Bangladesh since 1997.
2) A sample copy of Cash-waqf Account Opening Form.
3) One-page Resume.


The paper will unfold new frontiers of Islamic Voluntary Sector with special reference to the floating of Cash-Waqf Certificate as a financial instrument by Social Investment Bank in 1997 as an innovation in the history of Islamic finance. This new frontier is in the direction of monetizing Islamic Voluntary Sector, accumulation of Social Capital and National Wealth for implementing strategic social investment program that reinforces family values, family heritage and stimulates economic, social and moral foundation of a caring society. Cash-waqf Certificate provides new opportunities to transfer liquid asset and make connection with one another on a global scale and opened up new possibilities for developing Social Capital Market for the first time in the history of Islamic Voluntary Sector Banking. At the end, paper stressed the need for global mobilization and creation of Cash-Waqf fund towards eventual establishment of World Social Bank in the private sector to expand as well as open up new frontiers of human freedom that includes freedom from educational, social and economic deprivations.

Beyond the Malaysian Twin Towers: Mobilization Efforts of Cash-Waqf Fund at Local, National and International Levels for Development of Social Infrastructure of the Islamic Ummah and Establishment of World Social Bank.(1)

Prof. Dr. M. A. Mannan (2)

01. Preamble
Malaysian Twin towers reflect the pride and prestige of Malaysia in particular and the Islamic Ummah in general. It also reflects the mature fruits of western development. It does not reflect sowing the seeds of development. What is needed now is a massive investment in Research and Development (R&D) in the Ummah. It is true, though that knowledge is a common heritage of mankind. There is no harm in borrowing the knowledge and know-how. Muslims borrowed from the Romans. Europe borrowed from the Muslims. In the contemporary period, Muslims are borrowing from the West. The challenge of bankruptcy of the Muslim World in the field of education, science and technology, health and research as well as the level of general economic deprivation of the masses have reached at the level of global crisis.

(1)This paper is expected to add to Dr. M.A..Mannan’s earlier following major works, which author has revisited his works in writing this paper along with contemporary Muslim thinking:
i. Islamic Economics: Theory and Practice (revised edition) published by Hodder and Stroughton, Mill Road, Dunton Green, Sevenoaks, Kent, U.K. (1986). This Award-winning book was first published in Pakistan (1970), reprinted over 20 times, and translated over nine languages.
ii. The Making of Islamic Economic Society, published by International Association of Islamic Bank, 47 Opuba Street, Helipolis, Cairo, Egypt (1984).
iii. The Frontier of Islamic Economics, published by Idarah-i-Adabiyat-Delhi, 2009 Qasimjan Street, Delhi-7, India (1984).
iv. Economic Development and Social Peace in Islam, published by Ta-Ha Publishers, 1 Wynne Road, London, SW9 OBB, U.K. (1989).
v. Understanding Islamic Finance: A study of the Securities Market in an Islamic Framework Islamic Research and Training Institute (IRTI) of Islamic Development Bank (IDB), Jeddah, Saudi Arabia (1993).
vi. Structural Adjustment and Islamic Voluntary Sector with special Reference to Awaqf in Bangladesh, IRTI/IDB, Jeddah, Saudi Arabia, 1995.
vii. Lecture on “New Frontiers of Islamic Banking in the 21st Century with Special Reference to Non-Formal and Voluntary Sector Banking”, presented at the Second Annual Harvard University Forum on Islamic Finance, Harvard University, Cambridge, MA, USA, October 9-10, 1998.

(2) Founder Chairman, Social Investment Bank Ltd. (SIBL), Dhaka, Bangladesh. Home address: 97, Suhrawardi Avenue (Biswa Road), Baridhara, Dhaka-1212, Bangladesh Tel: 8811241 (Res), 8821654 (Res), Fax; 880-2- 8821654 (Res); E-mail: Web:
The lack of human and social capital infrastructure, colonial era bureaucratic set-up, pervasive corruptions, lack of political, social will and national commitment in the field of economies, education, health and research have placed more than half of one billion Muslims the darkness of illiteracy and ignorance and poverty.

An average of hardly 4% of the GNP of Muslim World spent on education against that of 7% on defence. The total number of universities in the Muslim World, irrespective of their quality, is not beyond a mere 400. A recent survey shows that, only three out of every hundred adults were found not being able to attend any school in the industrialized world, in the Muslim World as many as 77% of the population aged 25 and above, had never been to any school. This figure is even higher than that of the rest of the Third World countries where it was found to be 64%. The survey further reveals that the Muslim World has: the lowest school-going population, that is 47 per every 100 children aged 5-19, the highest student/teacher ratio, which is 88 students per teacher, and the lowest enrolment in higher education, which is just 8 per 100 in the age-group, 20-24. In most of the Muslim African countries, it is below 1% of the adult population. Very few Muslim countries have created basic institutions in the field of Research and Development (R&D). At present, the Muslim World has the lowest number of manpower in the field of science and technology. Viewed from this perspectives, Cash-Waqf can be seen as a process of expanding and unfolding the frontiers of human freedom that includes freedom from educational economic and social deprivations. This is only financial instrument in the Islamic voluntary finance, capable of reaching to each and every Muslims.

02. The New Frontiers of Islamic Voluntary Sector: An Overview
Given the revolution in information technology, the new frontiers of Islamic voluntary sector finance can be opened up towards the direction of monetizing Islamic voluntary sector finance, thereby, paving the way for globalization of this sector. In this process Islamic Banks should open up the new frontiers of Islamic voluntary sector by re-activating and institutionalizing the role of Islamic Socio-Economic institutions and various voluntary and obligatory tools of redistribution of income through innovative financial instruments and management of fund such as Waqf Properties Development Bond, Cash-Waqf Certificate, Zakat Certificate, Hajj Saving Certificate, Trust Fund and so on.

Despite the fact that many of the activities of the Islamic voluntary sector which may include the institutions such as Zakat, Awqaf, Mosque, Hajj, Islamic non-profit charitable Trusts and Foundations do not come under the conventional calculation of GNP, these institutional activities need to be reviewed and analyzed in the light of the challenge and change, Muslim societies are facing today in the wake of great transformation in East-West relationship. Through securitization, the activities of the voluntary sector can be integrated into the mainstream of economic activity, resource mobilization, savings and investments and eventual development of social capital markets. Viewed from this perspective, the need for securitization of Islamic Voluntary sector can hardly be overestimated.

The process of institutionalizing the role of Zakah in several Muslim Countries such as Libya, Jordan, Pakistan, Malaysia, Sudan, Kuwait, Bangladesh started in 70s and 80s, except Soudi Arabia where Zakah law promulgated on 07 April,1951.(5) Evidence suggest that, there is an immense scope of utilization of Zakah Fund in lawful ‘Mudarabah Projects’ as a financial partner. Zakah revenue redistributes wealth into consumption flows for the poor, raises their productivity, reallocates ex-ante saving by checking the tendency to hoard idle cash, and stimulates production through inter-sectoral allocation of resources. Islamic Banks can very well float Zakah certificates. Similarly, Hajj affairs can be viewed as one of the significant socio-economic institutions of Islam Tabling Hajj of Malaysia which has been in operation since 1963 is viewed as one of the most successful experiments in the management of Hajj affairs in Islamic Ummah, although this model has not been replicated in other Muslim countries(2). Mosque can serve as an agent of social development.

Furthermore, from a historical perspective, the institution of Waqf which is one of the most powerful element of Islamic Voluntary Sector has, among others, played a significant role in furthering the cause of Islamic education, health and research through establishment of Schools, Hospitals, Madrasas, Mosques and public libraries.
In the context of 21st Century, Islamic Banks must therefore work for Securitization of Islamic Voluntary Sector. It is to be noted here that in the voluntary sector, Social Investment Bank is in

(1) I.A. Imtiazi and others- Management of Zakah in Modern Muslim Society, IRTI/IDB, (1989),P-27.
(2) M.A.Mannan- Islamic Socio-economic Institutions and Mobilizations of Resources with special reference to Hajj management of Malaysia, IRT/IDB, (1996),P-31.
the process of developing the following financial instruments with different sets of rules in conformity with Shariah:
a) Zakat Certificate
b) Quard-e-Hasana Certificate (specific and general)
c) Waqf Properties Development Bond (specific and general)
d) Family Waqf Certificate
e) Mosque Properties Development Bond (specific and general)
f) Hajj Saving Certificate
The value of all these Bonds and Quard-e-Hasana Certificates can be guaranteed by the Bank against surrender of the instrument on maturity. A noted earlier that the process institutionalization of Zakah and Hajj managements have began in several Muslim countries. Quard-e-Hasana certificate scheme has been gaining ground among Islamic Banks in Bangladesh, Malaysia, Sudan, Iran. For example “A good share of saving in Islamic banks of Iran is representing as Qard Al-Hassan, which is deposited just for good deed and receiving profit. The Bank Keshavarzi of Iran has introduced a credit scheme on profit of these funds called “Hazrat Zeynab Project” since 1994. This is similar to micro finance financial facilities which give interest free loans which cost only a service charge, to women who undertake household expenses and act as the head of their family in rural areas of Iran. These loans are for starting new self-employed jobs as entrepreneur” (3).

However, in this paper we shall however deal with Cash-Waqf Certificate as already operationalised by Social Investment Bank of Bangladesh which will open up global opportunities.

03. Social Investment Bank and Cash-Waq Certificate
Targeting poverty Social Investment Bank, established in 1995 under Banking Companies Act of Bangladesh, represents a paradigm shift in Islamic Banking and Finance. It operates on a three Sector integrated Banking Model in one: Formal Corporate Banking, Non Formal Banking and Micro-finance for the poor in non-corporate sector and Islamic Voluntary Sector Banking.

(3) Abbas Arabmazar- Hazrat Zeynab Project An Application Of Qard Al-Hassan Fund For Poverty Alleviation Of Rural Women In Iran, presented at the First International Conference on Islamic Finance in Brunai 17-19 April, 2007
In the process of organizing Social Capital Market operations in the Voluntary sector of the Bank, it has for the first time in the history, introduced 'Cash Waqf Certificate' scheme. It also aims at empowering the family of the rich for the sake of social investment and welfare.

A research study entitled, Structural Adjustments and Islamic Voluntary Sector with special Reference to Awqaf in Bangladesh written by the author and published by Islamic Development Bank, Jeddah, in 1995 showed that "Cash Waqf" is also recognized in Islam. Its
use can be traced to the Ottoman era as well as in Egypt. But the use of Cash Waqf as financial instrument is indeed an innovation in Islamic Social Finance. Cash Waqf provides an unique opportunity for making investment in different religious, educational and social services. Savings made from earning by the well-off and the rich people of the society can be utilised by purchasing Cash Waqf Certificate. Income earned therefrom will be spent for different purposes like the purposes of the Waqf properties itself.
Historically speaking, the immovable assets mainly in the form of landed properties is the predominant feature of Awaqf. It follows then that one of the main characteristics of Awaqf is their low degree of liquidity. Liquidity as defined by economists refers to the transferring of funds into cash money within a short period of time and at a reasonable cost. We know that landed property even in the case where it is legally permissible to be sold or replaced by another, such as giving up a landed property it takes a considerable amount of time and expenses to be transferred from landed property into liquid cash. Therefore, we can safely consider low liquidity as a distinctive feature of the Awaqf properties. Even when we want to invest in Awaqf properties e.g. constructing a building on a piece of Waqf land with a view to leasing it, this will entail the availability of liquid cash money that would enable us to transfer Waqf from one shape to another. In this context, raising fund through sale of Cash-Waqf Certificate for development of Awaqf properties assumed a special significance in the 21st century.
Another significance of the Cash-Waqf Certificate lies in the fact that it has broken the age old barrier that the privilege of making Waqf belongs to only to the rich. Since Cash-Waqf Certificate as introduced by Social Investment Bank is expressed in terms of a small denomination of Tk. 1000/- (US$ 15 approximately), it has become affordable to a large section of the Muslim population; it can also be expressed in even smaller denominations also. Seen in this light, Cash-Waqf Certificate Scheme can be seen as a movement of social reconstruction and development in which vast majority of the population can participate.
Attempts should then be made to popularize the role of Waqf in the country including cash Waqfs which can be instrumental in transferring savings of the rich to those entrepreneurs and members of the public in financing various religious, educational and social services in Muslim countries. Cash -Waqf can work as supplement to the financing of various social investment projects undertaken by Islamic Banks which can eventually emerge as Waqf Bank. Even today, for example, cash Waqf in Bangladesh, is extremely important in terms of mobilization of fund for the development of Waqf properties.
According to 1986 census of Waqf estate, there are 150,593 Waqf estates in Bangladesh having multipurpose uses. According to 1983 mosque census, there are 131,641 mosques in Bangladesh out of which 123,006 mosques are Waqf properties. Out of the total Waqf estates 97,046 are registered, 45,607 are verbal and the rest 7,940 are Waqf by tradition. Out of this large Awaqf estates, only 13,200 Waqf estates are under the administrative control of Waqf Administrator out of which 10,683 Waqf estates are of mixed nature. As noted earlier that Cash-Waqf Certificate can empower multigenerational family heritage.
04. Implications of Cash Waqf Certificate
As a part of extending three Sector Model Banking services towards the achievement of corporate objectives of Social Investment Bank Ltd. (SIBL), SIBL introduced Cash Waqf Certificate, a new product for the first time in the history of Banking in its Voluntary sector Banking as mentioned earlier. Cash-Waqf can be seen as a social assignment replacing income tax in many Muslim countries. A great part of direct tax can be converted to social assignments and Cash-Waqf Certificate can partially substitute a substantial part of the income tax for financing strategic social projects in education, health, social welfare activities proposed to be undertaken by the rich. What is needed is a political will. Together, a new beginning can be made for a participatory economy and a caring society.

Besides, Cash-Waqf can be used as a strategic investment in alleviating poverty and economic deprivation as well as education, health and research to be discussed later on. By taking part in the scheme one can contribute not only towards development of a Social Capital Market operation, but also sharing in permanent social investment. As deposit of Cash Waqf is made once for all, Bank can safely invest it on a short term investment (i.e., Micro Credit and micro enterprise investment for poverty alleviation etc), medium term investment (i.e.,Cottage Industry, weaving industry etc) and long term Investment (i.e., various heavy industries/factories etc).

These investment activities will result in creation of new avenues of employment opportunities. A large number of unemployed shall have the opportunity for earning their livelihood and thus making contribution to social progress. As noted earlier, there are 150,593 Waqf estates in Bangladesh. All of them are in immovable properties. There is an immense scope for development of such properties commercially through raising fund by selling Cash-Waqf Certificate.

There are many rich people who have the desire to create Cash Waqf at the alter of public good as well as for the benefit of their descendants. But they can not proceed for lack of necessary institutional arrangements for management of cash Waqf. Social Investment Bank provides the necessary institutional support and an unique opportunity for opening Cash Waqf Deposit Account with a view to achieving the following objectives:

Objectives of Cash Waqf :
i. To provide Banking services as facilitator to create Cash Waqf and to assist in the over all management of Waqf;

ii. To assist in mobilization of social savings by creating Cash Waqf with a view to commemorate alive or deceased parents, children and to strengthen the integration of the family relationship of the well-off people and the rich;

iii. To increase social investment and to transform the social savings into capital;

iv. To benefit the general public specially the poor sections of the people out of the resources of the rich;

v. To create awareness among the rich regarding their social responsibilities to the society;

vi. To assist in developing social capital market;

vii. To assist in overall development efforts of the country and to make a unique integration between social security and social peace.

Cash-Waqf supported services as Social and Private good and Criteria of Allocative efficiency
The Waqf -fund supported activities can be divided into social and private good, thereby introducing an interesting area of economic analysis of resource allocation in public finance. Generally speaking, social good is non-rival in consumption as it is difficult to put price tag on social good as its consumption does not reduce the benefits available to others . This is not true in the case of private good where we can put the price tag and exclude others from consuming it. Its consumption is, therefore, rival. “ Putting it differently, the benefits derived by anyone consuming a social good are “ externalized” in that they become available to all others. This is the situation with social goods . In the case of private goods, the benefit of consumption is internalized with a particular consumer and consumption by him excludes consumption by others”.(4) When Waqf - fund supports construction of a ‘bridge’ it assumes the character of social good and when it does support construction of a hospital or a school, it does provide public provision of private good for which price tag can be put .

Thus when total resource generated by Waqf properties can be divided between private and social good or when a mix of social good is chosen , the existence of non - rival consumption changes the condition of efficient resource use from those applicable where consumption is rival. Thus the institution of Waqf is performing an allocation function , however rudimentary way it might be . This allocation function involves not only adjustment of income and wealth, but also adjustment of price of goods and services with which Waqf is associated. Thus it should be possible to make in depth case studies to show how does Waqf supported goods and services
perform allocation, distribution and stabilization function in a modern Muslim state.

It should then be possible to discuss further the implications of the spending of Awaqf revenue under the following three effects:
(a) “Good deed” effect;
(b) “Free rider” effect;

(c) “Income re-distribution” effect.
(4) R.A. Musgrave and P.B. Musgrave: Public Finance in Theory and Practice, McGraw – Hill, 1973, P-7

(a) Good deed Effect:
Historically speaking, once an endowment is made, it is considered to be a good act, because Shariah attributes the quality of “goodness” to it. The satisfaction an individual receives by instituting an endowment is however distinctly different from the results of the act. In economics there is no direct and fixed co-relation between the goodness of the act and its results. This distinction is not generally clearly understood.

Are we merely concerned with the act of endowment? Is it enough to say that the goal of such an act is utility, not the utility of the result the endowment brings about? Should the individual be primarily concerned with satisfaction he desires from the act of going the “good” deed of making the endowment? These are some of the questions which require attention from the viewpoint of Shariah. The fact is that the cost of the endowment is the foregone alternative uses of the funds given up.

What is equally important for the individual who makes endowments is to evaluate the results or consequences of such endowments particularly when they are intended to make provision for public goods designed to help the community. Do different types of public good tend to yield different results? Some kinds of broader public goods bring more “goodness” of its results of the contributed dollar to be equal. For example, there is more goodness for most persons in the act of providing schooling facilities for orphans than that in providing toys for them. There is probably also more good in building a hospital for the poor than establishing a college of liberal arts, likely to produce educated unemployed or constructing a bridge in a community which can afford to construct the same, given collective effort. The point we are making is that at a given level of social expenditure on public good out of Waqf-supported properties, attempt should be made to maximize the utility of the results. It is, therefore, imperative that once a person desires to make an endowment he should be provided with necessary “advisory services” in respect of different uses to be given to endowment so that the resources generated from them can be better utilized to attain predetermined socio-economic objectives.

(b) Free-rider Effect:
Any theory of expenditure of Waqf fund must try to minimize the ‘free rider effect’ particularly when such fund is directed to providing a public good which is indivisible. In the context of an Islamic economy , this ‘free rider effect’ will take place when contribution of a dollar will result in an increase in the total provision of the public good less than a dollar as other individuals would tend to lower their voluntary contribution. We have evidence to show that Waqf-financed education was indeed for children of both rich and poor parents. Since the beneficiaries of education cover children of those who could otherwise bear their education expenses, it tends to create the problem of “free-rider effect”. Although it was not immediately visible in simple agricultural societies of the middle ages, the issue of “free-rider effect” needs to be taken rather seriously in a much more complex society of today. In the middle ages, the wealthy and rich did compete with one another in contributing to the Waqf supported schools. The related educational development was possible due to Waqf grants by the successive rulers. The socio-economic realities of contemporary period are not the same as we found in early days of Islam.

c) Income re-distribution effect:
It is also important to examine the income re-distribution effect of the Waqf. The net income re-distribution effects and income transfer payments cannot be analysed in isolation. It depends on the impact of all public taxation and spending activities on various income groups. Generally speaking, the disbursements of Waqf funds should play an important role in any vertical income re-distribution. The disbursement of Waqf fund needs to be coordinated so that its re-distribution effects in favor of the poor are not cancelled out. It is to be noted that one of the important ways to achieve the vertical re-distribution is to make the public provision of certain key services particularly public education for the poor. Historically speaking, a close look at the operation of the Waqf shows a considerable horizontal income distribution from one earning class to another earning class. It is important to see the total effect of its spending in relation to other public expenditure in a modern Muslim state. It is generally alleged that in the past this institution of Waqf was responsible for industrial backwardness of Muslim communities, because a large amount of resources was diverted for purposes other than development activities. It is also argued that it led to the fragmentation and sub-division of agricultural holding, thereby retarding the process of modernization of agriculture in Muslim countries. It is also criticized on the ground that mismanagement of Awqaf properties led to the decline of total revenue of concerned countries which could have been utilized more effectively for other purposes. It is to be examined how far these criticisms are valid in the context of present day situation. Cash-Waqf offers better scope for utilization of Awaqf resources indeed.

05. The operational Guidelines of Cash Waqf Certificate as adopted by Three Islamic Banks in Bangladesh

The guidelines, governing the operation of the Cash Waqf Certificate as introduced by Social Investment Bank are as follows:
i. Cash Waqfs shall be accepted as endowment in conformity with Shariah. Bank will manage the Waqf on behalf of the Waquif;

ii. Waqfs are done in perpetuity and the Account shall be opened in the title given by the Waquif;

iii. Waquif will have the liberty to choose the purpose (s) to be served either from the list of 32 purposes identified by SIBL as noted later on or any other purpose(s) permitted by shariah;

iv. Cash Waqf amount will earn profit at the highest rate offered by the Bank from time to time;

v. The Waqf amount will remain intact and only the profit amount will be spent for the purpose(s) specified by the Waquif. Unspent profit amount will automatically be added to Waqf amount and earn profit to grow over the time;

vi. Waquif may also instruct the Bank to spend the entire profit amount for the purpose specified by him/ her.

vii. Waquif will have the opportunity to create Cash Waqf at a time. Otherwise, he/she will declare the amount he/she intends to build up and will start with a minimum deposit of Tk. 1000/-(US $15) one thousand only (or equivalent foreign currency)(5). The subsequent deposits shall also be made in thousand or in multiples of thousand;

viii. Waquif shall also have the right to give standing instruction to the bank for regular realization of Cash Waqf at a rate specified by him/her from any other a/c maintained with SIBL;

ix. Cash Waqf shall be accepted in specified endowment receipt voucher and a certificate for the entire amount shall be issued as and when the declared amount is built.

x. The principles and Shariah based rules of Cash Waqf Account are subject to amendment and review from time to time.

(5) Islamic Bank of Bangladesh starts with a minimum deposit of TK.50,000(US $725 approximately)

06. Utilization and Growth of Cash-Waqf Accounts and Deposits of Social Investment Bank

The thirty two purposes for utilization of Cash-Waqf fund as indicated below shows the diverse areas of investment by Social Investment Bank. Other Islamic Banks in Bangladesh adopted similar SL perhaps for utilization of Cash waqf fund. Although this is not exhaustive, these social investment activities will create a base for perpetual social capital and help developing credit program that reinforces family values and stimulate social and moral foundation a caring society.

Education of orphans
Uplifment of absolutely poor Educational development Village health care & sanitation Setting disputes
Providing informal education Providing informal education Legal aid to deserving women
Rehabilitating handicapped Physical Education Arranging dowryless marriages
Supporting local culture & heritage Supplying pure drinking water Public transportation & plantation
Rehabilitating beggars Conducting Dawah activities Assistance to non-Muslims
Student Scholarship Protecting anti-social activities

Rehabilitation of destitute women Suppording vocational education Establishing hospitals, clinics etc. Public utility services
Education in neglected area Mosque development project
Uplifment urban slum dewellers Financing Educationa institution Graveyard development project
Educatiing deserving descendants Research in health sector Eidga development pruject
Projects for memory of father/mather
Establishing educational chair
It appears that the Cash-Waqf Certificate scheme, introduced by Social Investment Bank Ltd. (SIBL) offers an unique opportunity at the Institutional level to drive social benefits and divine blessing for life here and hereafter.
Building a Caring Society:
The fund established through Cash Waqf will be invested which will ensure social security for the poor and social peace for the rich. Eventually, Cash Waqf would create a bridge of mutual care and compassion between the rich and the poor, thereby, contributing to the process of social harmony and co-operation. The fact of the matter is that Cash Waqf Certificate Scheme is likely to bring about wide a ranging economic and social benefits to the society as a whole.
At this stage it is intersting to report that Social Investment Bank introduced Cash Waqf Certificate on experimental basis in December, 1997 and it was formally launched on 12th January, 1998. Since then the growth of number of Accounts and deposits are very encouraging, indeed as indicated in the Table-I below:
Showing the growth of Cash Waqf Accounts and Deposits since-1997
(Bangladesh Taka in Thousand)
Item 1997 1998 1999
2000 2001 2002 2003
2004 2005 2006 2007
(as on May)
Nos. of A/C
(Cumulative) 21
1586 2623 3042
Amount deposited (Taka) 39 1,249
13815 14273 14513

(Tk. 68.5=1 US$ as on 30-04-2007)
Source: Annual Reports of Social Investment Bank (SIBL), 1998 to 2006 and Non-Formal Banking Division, SIBL,Head Office, 15, Dilkhusa C/A, Dhaka
07. Cash-waqf: local challenges and global opportunities: Introduction of Cash-waqf Scheme by Islamic Banks in Bangladesh, Indonesia and Muslim Communities in the USA: An empirical survey.

As noted earlier, that Social Investment Bank in the process of organizing Social Capital Market operations in the Voluntary sector of the Bank, had for the first time in the history, introduced ‘Cash Waqf Certificate’ scheme in 1997. It also aims at empowering the family of the rich for the sake of social investment and welfare. Cash waqfs can be instrumental in transferring savings of the rich to those entrepreneurs and members of the public in financing various religious, educational and social services in Bangladesh. Cash Waqf can work as supplement to the financing of various social investments projects undertaken by Islamic Banks which can eventually emerge as Waqf Bank. Even today, cash waqf in Bangladesh, is extremely important in terms of mobilization of fund for the development of Waqf properties.

The successful implementation of Cash Waqf Certificate Scheme by SIBL showing impressive growth of Accounts and Deposits encouraged the Islamic Bank of Bangladesh to introduce Mudaraba Waqf Cash deposit Accounts in 2003, on the similar rules and regulations as adopted by Social Investment Bank with an exception that Islamic Bank of Bangladesh requires minimum of TK. 50,000/-(i.e, US $725 as on 14.06.2007) as initial deposit whereas Social Investment Bank requires TK. 1000(i.e, US $15) as initial cash waqf. The main justification of smaller initial deposit is to encourage larger number of people to participate in creating Social Capital Market on national scale. The whole spirit of Cash-waqf fund mobilization is to involve largest number of people in a society for building social infrastructure as well as generating social awareness for creating a caring society.

The Al-Arafa Islamic Bank, another Islamic Bank of Bangladesh introduced the Cash-waqf exactly in terms of Social Investment Bank Ltd in 2004. As a result, all the three major Islamic Banks of Bangladesh introduced the Cash-waqf scheme. The remaining two Islamic Banks and other Conventional Banks with Islamic widows in Bangladesh are expected to introduce this scheme as a part of social capital mobilization drive. It is to be mentioned that Islamic Banks in Bangladesh having over 250 branches, throughout the country accounts for at least 15% of the total deposits and employment in the Banking sector of Bangladesh.

Bank Muamalat, the first Islamic Bank of Indonesia introduced the Cash-waqf scheme following a presentation on the subject by the author in early 2001. One-weak intensive course for Training of the Trainers on Local, National and Global Management of Cash-waqf fund was also organized by Muamalat Institute of Bank Muamalat in Novmember,2001. This was perhaps the first training course on Cash-waqf ever organized by an Islamic Bank in the history of Islamic Banking and Finance. This training Course co-ordinated by the author generated a widespread interest on the subject

in Indonesia. Eventually, Majelis Ulama Indonesia, the Supreme Religious Body of Indonesia issued a “Fatwa” recognizing positive role of Cash-waqf in accumulation of Social Capital of Islamic Ummah” on 11 May,2002(28, Shafar 1423 H). As a result, a number of other Islamic Banks and organizations Indonesia, started institutionalizing the Cash-waqf scheme. In this context, it is pertinent to mention that “Indonesia has a long history of mobilizing the Islamic Voluntary Sector. For example, Muhmmadiyah, a private sector, Islamic organization, established in 1912 in Indonesia, has been able to mobilize and institutionalize Islamic Voluntary sector resources, particularly in the area of education, health, religion and social welfare. It is evident from the fact that Muhammadiyah is currently looking after or managing over 12,000 schools from kindergarten to university, 4,000 mosques, 12 hospitals, 120 maternity centers, poly-clinics, 271 mother and children centers, 3 nursing academics, 13 nursing schools, 134 orphanages, 34 units of family welfare and a number of small cooperatives throughout Indonesia. Muhammadiyah, whose name is derived from the Prophet Muhammad (peace be upon him), has demonstrated beyond doubt that the Islamic voluntary sector can be institutionalized to serve the people at the grass-roots level”(6)
It is to be mentioned here that even in the U.S.A. there is a movement to mobilize Cash-waqf fund to support various social welfare activities. The Muslim Society of Memphis USA, established a Cash-waqf Endowment Fund in 2004 through monetary contributions by members of the society to provide financial stability and to have a permanent source of income to the Muslim Society of Memphis. The strength of the endowment would be in the number of its supporters and not in the size of their donations.

6) M.A. Mannan, Economic Development and Social Peace in Islam. Published by TAHA Publishers Ltd, 1, Wynne Road, London, SW90BB, UK (1989) P-122-123.

This endowment is designed to grow with a broad-based and continuing support with a participation of a minimum of just $10/ a month or more in a manner that will not distract anyone from supporting major fund raising activities. Donation will be invested as Cash Waqf or Trust Fund, for the first five years: all the income will also be reinvested for the Fund to grow. After five years, only the income earned from the investment of these funds will be utilized for the following purpose such as (a) establishment of new mosques, maintenance of old mosques, Islamic centers and cemetery, Healthcare Institutions , Islamic education, seniors housing and shelter house etc. This is indeed a very laudable effort of the Muslim Community of Manphis in the U.S.A. which can serve as an example to other Member-countries of Islamic Development Bank(IDB) and Muslim Communities in non-member countries of IDB.

08. Agenda for Action

It becomes evident from preamble that there is an urgent need for global mobilization and creation of Cash-waqf fund mainly through sale of Cash Waqf Certificate to support development of human and Social Capital infrastructure of the Islamic world in particular and disadvantaged people of the world in general. Cash-Waqf can be seen as a process of expanding and unfolding the frontiers of human freedom that includes economic and social deprivation. What is needed is to rediscover Islamic socio-economic values and revive Islamic Institutions in the 21st Century. Islami Banks and Islamic Voluntary Organizations must explore this opportunity for mobilizing this social capital.
As such, the following three implementable Action Plan deserve serious consideration.

I. Global Mobilization and Creation of Cash-Waqf fund: This International Seminar on Awqaf 2008 should make call a for global mobilization and creation of Cash-waqf fund by each of local Islamic Banks and Islamic Voluntary organization of the Ummah.

II. Forming a Confederation of Islamic Voluntary Organizations: This International seminar may make a call to form a confederation of interested Islamic Voluntary Organizations. The purchase and sale of Cash Waqf Certificates provide new opportunities to transfer liquid asset and make connections with one another on global scale and opened up possibilities for greater variety of pluralism in the expression of Muslim identities and re-construction Islamic Ummah, and in the services of mankind as a whole. Private sector initiatives should be considered to be vital in this area.

III. Formation of an International Board of Trustees:
This International seminar may call for formation of an International Board of Trustees under the chairmanship of Honorable Prime Minister of Malaysia, involving existing efforts for mobilization of cash-waqf fund world-wide. This Board of Trustees may be entrusted to prepare a Comprehensive Action Plan that includes establishment of Global Cash-Waqf Fund and identification of the areas for conducting joint strategic and futuristic social investment of Islamic Ummah for eventual establishment of World Social Bank in the private sector. Cash waqf certificate of Social Investment Bank of Bangladesh is a building block and can easily connect individual initiatives on a global scale.

09. Conclusion: Key Messages
Evidence suggests that there is a considerable mismanagement and misuse of Waqf properties, despite their contribution to social development over time. But the Cash Waqf Certificate Scheme of Social Investment Bank of Bangladesh is an epoch making event. As this Cash Waqf is generally managed by the Bank, it has its transparency, liquidity and accountability, it is a perpetual deposit and its profit can be invested in a wide spectrum of social investment. Besides the 32 areas identified by a number of Islamic Banks in Bangladesh, the Waquif or subscriber can select one or more sectors according to his wishes in conformity with Shariah. Money for Cash Waqf can be deposited at a lump sum or by installment. Bank shall manage Cash Waqf on behalf of the Waquif. This ensures appropriate utilization of the fund of the Waquif in terms of its goals and objectives. Bank’s 32 sectors/areas of investment include diverse social investment activities having enduring value which in its ultimate analysis, will create a base for perpetual social capital and help developing credit program that reinforces family values and stimulate caring society. The Holy Quran has emphasized the virtues of charity in life on earth and life hereafter. The Cash Waqf Certificate offers an opportunity to get the divine blessing and to have a rewarding social and spiritual experience and internal peace. Viewed from this perspective, it becomes social and moral imperative on the part of the well-to-do to come forward and investment under Cash Waqf Certificate Scheme for his own benefit indeed. This will certainly pave the way for a new dimension of social development. Cash-Waqf fund can be spent for the welfare of Non-Muslim also, thereby paving the way of serving the humanity at large.

Key Messages: Cash-waqf Certificate can easily connect individual initiates of different Muslim countries and Muslim minorities in non-Muslim countries at the local national and global scale and open up great prospects, possibilities and potentialities for greater variety of pluralism in the expression Muslim solidarity and reconstitution of socio-economic infrastructure of Islamic Ummah. We should work for establishment of World Social Bank for managing this fund. In this context, a group of Indonesian Bankers in collaboration of Social Investment Bank made a Dhaka Declaration in 2000 to work for establishment of such a World Social Bank with its headquarters in Jakarta, Indonesia.


1) A Sample copy of the Cash-waqf Certificate as introduced by Social Investment Bank Dhaka, Bangladesh since 1997.
2) A sample copy of Cash-waqf Account Opening.
3) One-page Resume.

Prof. Dr. M. A. Mannan*M. A. Econ. (R. U.)’60, M. A. Econ. (Michigan), Ph. D. Econ. (Mich. U.S.A.)’73 Certificate in Dev. USA.

Over 48 years’ experience of money, banking, finance, economic planning, civil administration, teaching, and research in several universities and countries around the world including Australia, Bangladesh, Pakistan, Papua New Guinea, Saudi Arabia, U.K. and the USA; a pioneer in the field of Islamic Economics, Banking and Finance; Research Professor, King Abdul Aziz University, Jeddah, Saudi Arabia, (1978-84); Commissioned as Consultant, Islamic Development Bank (1978) and Asian Development Bank, Consultant in the areas of Development, Monetary Economics, Public and Islamic Finance; Visiting Professor/Scholar, Georgetown University, USA in early 80s’. Served about 13 years at the highest professional position of Senior Economist/Chief Economist in Islamic Development Bank (IDB), Jeddah, Saudi Arabia (1984-96). Founder Chairman: a) Social Investment Bank Ltd. (SIBL); Targeting Poverty, approved in 1994, b) Bangladesh Social Peace Foundation (BSPF) (A Non-profit Trust) and c) Holistic Family Health Clinic (HFHC) (A Non-profit Organization), Dhaka, Bangladesh; Started career as University College Professor and as a Member of the then East Pakistan Civil Service and Central Superior Service of Ex-Pakistan in 1963-64; served as Asst. Financial advisor and Asst. Chief of Planning Commission of Ex-Pakistan in early’60s.

His major works in Economics, Islamic Economics, Banking and Finance include: (i) An Introduction to Applied Economics, (Dhaka -1963), (ii) Economic Problems and Planning in Pakistan, (Lahore:1968), (iii)Academic award winning book: Islamic Economics-Theory and Practice (Pakistan - 1970) (revised Edition UK 1986): “Internationally recognized” first text book on the subject. Reprinted over 20 times, translated in dozen of foreign languages, including Arabic, English, Bengali, Turkish, Bahasa Malaysia, Bahasa Indonesia, (iv) The Making of Islamic Economic Society (Cairo-1984), (v) The Frontiers of Islamic Economics, ( India -1984), (vi)Economic Development and Social Peace in Islam, (UK-1989), (vii) Understanding Islamic Finance (IDB, Jeddah-1993) (viii) Structural Adjustments and Islamic Voluntary sector with special reference to Bangladesh (IDB, Jeddah-1995), (ix) The impact of single European Market on OIC Member countries (ed), (IDB, Jeddah-1996), plus numerous articles/papers and reports mainly on Economic development, Economics of Education and underdeveloped countries, General and Islamic economics, Money Banking and Finance.

Placed as one of TOP FIVE ISLAMIC ECONOMISTS IN THE MUSLIM WORLD published in a book entitled, Contemporary Islamic Economic Thought, Malaysia (1995). Enlisted in ‘WHO’S WHO IN THE WORLD’ (since 8th edition: 1978-88, Macmillan USA) as economist, educator, consultant, Islamic economist. Also included in ‘FIVE THOUSAND PERSONALITIES IN THE WORLD’ 2nd edition 1990, ABI, USA and Men of Achievement, Cambridge, UK (1989). Traveled over 50 Countries.

Dr. Mannan, born in 1938, a Bangladesh national returned to his country after living 33 years abroad taking pre-mature retirement from Islamic Development Bank, in 1996: married with two children: Wife, Nargis Mannan, MA, International Award winning Copper Artist and Director, Social Investment Bank Ltd. Daughter, Dr. Reshmi Mannan, BSc.(LSE), Msc (Oxon) MS (NY), Ph.d. (USA): Son, Dr. Ghalib Mannan, M.B.Bch.(UK), MD (USA) Fellow (USA):

Mailing Address: “Megh Mallar”, 97 Suhrawardy Avenue (Biswa Road), Baridhara, Dhaka- 1212. Tel: (880-2) 8811241 (Res.), Tel & Fax: (880-2) 8821654(Res), E-mail: . Web:

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