“ The Global University in Islamic Finance ” RE-DISTRIBUTION OF WEALTH PRE-EXAM QUESTIONS PES RE-DISTRIBUTION OF WEALTH Q. 14. How is wealth accumulated and mobilized in Islam? Q.15. What do you understand by the term compulsory sector? How can this sector contribute to the development of an economy? Q.16. What do you understand by the term voluntary sector? How can this sector contribute to the development of an economy?

“ The Global University in Islamic Finance ” Compulsory Zakah  Definition of zakah.  Objectives of zakah  Why it is compulsory?  Who must pay the zakah and to whom to be distributed to?  Its types and role in the economy?

“ The Global University in Islamic Finance ” Types of Zakah 1.Zakah Fitr 2.Zakah Al-Mal (on wealth) 3.Ushr (for agricultural land)

“ The Global University in Islamic Finance ” 2. Zakah al-Mal (Cont.) Zakah al-Mal can be subdivided into Zakah on:  Business  Rental Income  Personal Income  Savings  Gold and Silver  Shares  Livestock  Crop (ushr)

“ The Global University in Islamic Finance ” Jiziah and Kharaj Non Muslims who live in a Muslim country have to pay: JiziahJiziah KharajKharaj

“ The Global University in Islamic Finance ” Jizyah and Kharaj  Definition of jizyah and Kharaj  Why it is compulsory?  Who must pay the Jizyah and Kharaj?  Its types and role in the economy?

“ The Global University in Islamic Finance ” Voluntary Sadaqah  Definition of Sadaqah  Its objective and its role in the society

“ The Global University in Islamic Finance ” Voluntary Takaful/Ta'awun  Definition of Takaful  Its objective and its role in the society.

“ The Global University in Islamic Finance ” What are the Benefits of Takaful/Ta'awun? 1.Fulfils the social obligations towards community and family. 2.Enables financial assistance for the unfortunate and needy. 3.Avoidance of Al-Riba, Al Maysir and Al Ghirar and similar prohibited elements within financial dealings. 4.Promotes moral values, ethical dealings and full disclosure in all its business activities and operations. 5.Protection of lifestyle. 6.Security for the family and the group against misfortune. 7.Through "Tabarru" donations it allows Participants to achieve self-purification and peace of mind.

“ The Global University in Islamic Finance ” Voluntary Waqf  Waqf means to stop, to withhold the thing (e.g. the house is withheld for the mosque, which means that the revenue of the rent of the house is withheld to spend on the mosque).  Waqf is a financial charitable institution established by withholding one's property to eternally spend its revenue on fulfilling certain needs depending on the choice and conditions made by the founder  Once the property been created as waqf, it can never be given as gift, or to be inherited, or sold. It belongs to Allah and the corpus/waqf property always remains intact.

“ The Global University in Islamic Finance ” Waqf in the Hadith (إذا مات الانسان انقطع عمله إلا من ثلاث؛ صدقة جارية وعلم يُنتفع به وولد صالح يدعو له). The Prophet (s) said: When a man dies his acts come to an end, except three things, recurring charity, knowledge (by which people benefit), and pious offspring, who pray for him.

“ The Global University in Islamic Finance ” Kinds of Waqf There are two kinds of Waqfs:  Immovable property Includes land, fields, farms, or buildings such as mosques, schools, hospitals, or basic infrastructures such as bridges, roads, water supply etc.  Movable property Includes cattle, books, money/cash, crops and weapons, shares of Joint-Stock Company, etc.

“ The Global University in Islamic Finance ” The terms, waqf, habs, tasbil mean ‘to stop, to restrain’ i.e. devoting in the way of Allah “The confinement of an amount of money by a founder(s) and the dedication of its usufruct in perpetuity to the welfare of society” DEFINITION OF CASH-WAQF

“ The Global University in Islamic Finance ” Beneficiaries of Cash-Waqf Waqf Khayri, Waqf ‘Am (Public Waqf) is a cash endowment made by the founder to support the general good and welfare of society, the poor and the needy.  Waqf Ahl, Waqf Khas al-waqf al-dhurri and waqf ‘al-awlad are all the same and refer to family waqf/specific waqf.  Waqf Mushtarak (combined Public and Family Waqf) is a cash waqf created by a founder to support both the public and his family or specify certain persons, group of people or needy areas.

“ The Global University in Islamic Finance ” Characteristics of Cash-Waqf  Irrevocability: This means that once the founder created the cash-waqf he cannot revoke it back, however, he/she can benefit from its investment/revenue.  Perpetually: Once the cash-waqf is created it must be perpetual. This will ensure regular and continual support from the cash-waqf to financing needy areas in the Muslim society.  Inalienability this means that once cash is created as waqf no one can ever become the owner to alienate it, i.e. it becomes a ‘frozen asset’. It cannot be the subject to be given as gift, inheritance, or any alienation whatsoever.

“ The Global University in Islamic Finance ” Investment of Cash-Waqf Mudarabah (partnership) has been recommended by earlier Muslim jurists. The latest fatwa issued by Fiqh Academy Islam, agreed that cash waqf can be invested in any shari’ah compliant mode of investment, such as Mudharabah, Murabaha, BBA, Musharakah, Istisna, etc.

“ The Global University in Islamic Finance ” Can Non-Muslim Create Cash-Waqf? The Shafie School permitted the creation of waqf from a non -Muslim even if it is for the benefit of a Mosque. He based his opinion on the following hadith : عن انس بن مالك رضي الله عنه قال: قال رسول الله (ص) " ان الله لا يظلم مومنا حسنة يعطى بها في الدنيا ويجزى بها في الاخرة واما الكافر فيطعم بحسنات ما عمل بها لله في الدنيا حتى اذا افضى الى الاخرة لم يكن له حسنة يجزى بها” The Prophet (pbuh) said “Allah will not oppress any Muslim from his good deeds, as he gives it in this world and he will be rewarded in this world and in the hereafter. But for the non- Muslim he will be rewarded for all his good deeds only in this world”

“ The Global University in Islamic Finance ” II. MODERN APPLICATIONS OF CASH WAQF The last two decades witness the revival of the institution of waqf and the creation of movable waqf i.e. cash waqf in almost all Muslim countries and Muslim minority countries. The followings will highlight nine different cash-waqf models that have been practiced in 15 countries and in 3 international organizations.

“ The Global University in Islamic Finance ” The Role of Waqf in Development The Waqf system had played a vital role in achieving development in the following areas:  Reduces government expenditure  Solve the problem of unemployment  Creates cities and commercial activities  Creates financial institutions.  Enhances the different sectors in the Muslim countries, agricultural, industrial, social and service sectors.