What the State Waqf Boards in India may Learn from Majlis Ugama Islam Singapura

The State Waqf Boards in India and the Majlis Ugama Islam Singapura (MUIS) in Singapore have a similar role to play in the preservation and development of waqf properties. Both are state agencies created by law entrusted with a range of similar responsibilities. Both permit (unlike Malaysia for example) private mutawallis to manage awqaf. In this blog I seek to draw a line of comparison between the two.

The following exhaustive list of functions of state waqf boards as envisaged by Indian law (Section 32-2) point towards a central role for them in making the mutawallis accountable for achieving the objectives of the waqf:

  1. to maintain a record containing information relating to the origin, income, object and beneficiaries of every waqf;
  2. to ensure that the income and other property of awqāf are applied to the objects and for the purposes for which such awqāf were intended or created;
  3. to give directions for the administration of awqāf;
  4. to settle schemes of management for a waqf, provided that no such settlement shall be made without giving the parties affected an opportunity of being heard;
  5. to direct (i) the utilization of the surplus income of a waqf consistent with the objects of waqf; (ii) in what manner the income of a waqf, the objects of which are not evident from any written instrument, shall be utilized; (iii) in any case where any object of waqf has ceased to exist or has become incapable of achievement, that so much of the income of the Waqf as was previously applied to that object shall be applied to any other object, which shall be similar, or nearly similar to the original object or for the benefit of the poor or for the purpose of promotion of knowledge and learning in the Muslim Community:
  6. to scrutinize and approve the budgets submitted by mutawallis and to arrange for auditing of account of awqāf;
  7. to appoint and remove mutawallis in accordance with the provisions of this Act;
  8. to take measures for the recovery of lost properties of any waqf;
  9. to institute and defend suits and proceedings relating to awqāf;
  10. to sanction lease of any immovable property of a waqf in accordance with the provisions of this Act and the rules made thereunder; provided that no such sanction shall be given unless a majority of not less than two-thirds of the members of the Board present cast their vote in favour of such transaction; and provided further that where no such sanction is given by the Board, the reasons for doing so shall be recorded in writing
  11. to administer the Waqf Fund;
  12. to call for such returns, statistics, accounts and other information from the mutawallis with respect to the waqf property as the Board may, from time to time, require;
  13. to inspect, or cause inspection of, waqf properties, accounts, records or deeds and documents relating thereto;
  14. to investigate and determine the nature and extent of waqf and waqf property, and to cause, whenever necessary, a survey of such waqf property;
  15. to determine or cause to be determined, in such manner as may be specified by the Board, market rent of the waqf land or building
  16. generally do all such acts as may be necessary for the control, maintenance and administration of awqāf.

Section 32 (4) specifically deals with the role of the Boards in developing awqaf properties. Where the Board is satisfied that any waqf land has the potential for development as an educational institution, shopping centre, market, housing or residential flats and the like, it may serve upon its mutawalli a notice requiring him within such time, but not less than sixty days, as may be specified in the notice, to convey its decision whether he is willing to execute the development works specified in the notice. Section 32 (5) further states, that on consideration of the reply, if any, received to the notice issued under sub-section (4), the Board, if it is satisfied that the mutawalli is not willing or is not capable of executing the works required to be executed in terms of the notice, it may, take over the property, clear it of any building or structure thereon, which , in the opinion of the Board is necessary for execution of the works and execute such works from waqf funds or from the finances which may be raised on the security of the properties of the waqf concerned, and control and manage the properties till such time as all expenses incurred by the Board under this Section, together with interest thereon, the expenditure on maintenance of such works and other legitimate charges incurred on the property are recovered from the income derived from the property”

In Singapore, the Majlis Ugama Islam Singapura (MUIS) is responsible for overseeing all the religious affairs of the Muslim community in Singapore, such as the administration of zakah, halal certification, management and administration of waqf, hajj, mosques and madrasah. Chapter 3 of the Administration of Muslim Law Act, Singapore 1999 that deals with waqf asserts that it is the “Majlis that shall administer all waqf, whether waqf `am or waqf khas, all nazr am” (section 58-2) and “all such property shall if situated in Singapore vest in the Majlis.” (Sec. 59) However, the institution of mutawalli is not completely redundant and irrelevant in Singapore. As it says, “the trustees of the waqf or nazr am appointed under the instrument creating, governing or affecting the same shall, subject to the provisions of this Act, manage the waqf or nazr am” (58-4) MUIS is also entrusted with management of Bayt al mal, a community corpus fund for Muslims. With respect to waqf, MUIS has the following responsibilities:

  • Management of waqf funds
  • Distribution of waqf income
  • Upgrading of waqf properties
  • Promote creation of new waqf

What I aim to highlight in this blog is the way MUIS has come up with several innovative ways to develop waqf assets and enhance their income in a Shariah-compliant manner. The following numbers are based on a research study by Dr Shamsiah Bte Abdul Karim who currently serves the MUIS.

Examples of Transformations:

  1. Duku Road (Residential): from S$200 per month to S$2400 per month
  2. Wakaf Kassim (Mosque/Commercial/Residential):  from S$110 per month to S$47000 per month

A financial innovation involves the issue of musharakah bonds to finance development of waqf properties. The property in question is a mixed complex comprising a mosque, a commercial complex and 103 rooms of service apartments. The project located at Bencoolen Street needed a total financing of S$35 million for its development. It was considered an economically viable project in view of its good location.

To raise the capital for this project a musharakah bond was structured in the following manner. Shamsiah Bte Abdul Karim, Contemporary Shari’a Compliance Structuring for the Development and Management of Waqf Assets in Singapore, Kyoto Bulletin of Islamic Area Studies, 3-2 (March 2010)

Wakaf Syed Omar Ali Aljunied (Bencoolen)

  1.  Mal and (iii) Warees Investments Pte Ltd (a wholly owned subsidiary of MUIS to handle waqf properties) to build the mixed development at Bencoolen Street. Under this the waqf contributes land (valued at S$4.2 million) and capital amounting S$0.52 million. The Baitul Mal provides the necessary amount needed to develop it i.e. the S$35 million by issuing musharakah bonds of 5-year maturity to investors and Warees provides a nominal amount of S$1, and their expertise.
  2. An ijarah (leasing) contract is executed between the musharakah or the Special Purpose Vehicle (SPV) and Ascott International Pte Ltd as lessee for a period of 10 years thus ensuring steady stream of income. The lease period is longer than the bond maturity in view of an option to investors to renew the bond after 5 years.
  3. As per the musharakah agreement, revenues from rentals are to be divided according to a pre-agreed ratio. As the rental income is pre-determined, the investors through the Baitul Mal now earn a steady stream of income of 3.03 percent.
  4. The waqf gets a brand new mosque with doubled capacity and four stories of commercial properties to provide income for the mosques to maintain and run its operation.
  5. Since Baitul Mal bears most of the risk to undertake the S$35 million investments it brings in, it receives the service apartments with a 99-year lease.
  6. Warees Investments Pte Ltd will receive a nominal investment return and professional fees for managing the development.

bencoleean

Thus, the structure has enabled the waqf to raise required funds through the capital market in order to expand the capacity of the mosque and also to receive a steady income.

The success achieved by MUIS in transforming and significantly enhancing the incomes of awqaf assets in Singapore may be attributed to several factors, including good governance by MUIS that directly manages 68 waqf assets and indirectly through mutawallis’ additional 33 waqf assets. MUIS appoints mutawallis for privately managed awqaf, approves any development or re-development or purchases by them. It holds the title deeds of all including privately managed awqaf. The other contributing factors are: innovative financing and enhanced professionalism and expertise (through public – private sector collaboration). The latter enables (MUIS) to focus on its regulatory functions with increased standards of efficiency, effectiveness and flexibility. As an outcome, there have been significant increase in cash flows for the awqaf making them more responsive to market demands in terms of provision of intended benefits.

Observers also attribute success to a very progressive fatwa that accords permissibility to give waqf property on lease for up to as long as 99 years without transferring the ownership to the lessee; and also to completely sell off waqf properties and replace them with purchases of new, higher yielding free-hold properties (istibdal).

From a risk management perspective, the sukuk risk was mitigated by sovereign guarantee, MUIS being a government agency.

Are the above success factors present in case of Indian state waqf boards? A 30-year lease permitted by Indian laws is perhaps long enough to attract private capital. Here too, the backing of the states may provide for the risk mitigation mechanism. What is perhaps lacking is a will to move ahead.

Interestingly, MUIS in Singapore may not need any more sukuk issues, as it seems to have developed its entire portfolio of awqaf assets by now. Can the Indian State Waqf Boards afford to continue in their apathy and indifference and ignore the exciting opportunities presented by the market and the environment?

Mohammed Obaidullah | April 04, 2014

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