Legal Constraints to the Development of Waqf Professor Habib Ahmed

Presentation Plan Introduction Legal Regimes and Waqf The Way Forward The Gambia Bangladesh Malaysia The Way Forward

Introduction The voluntary sector is increasingly playing an important role providing many social goods and services Third sector is increasingly playing an important role (1999-$1.1 trill. , 4.6% GDP in 22 countries) Islam instituted the institution of waqf—historically played a very important role Recent expansion of the third sector has not included growth of waqf institutions The legal environment under which NPOs and waqf operates are examined to understand the disparity in growth

Law and Waqf Some papers have criticised the rigid legal (fiqh) doctrines for stagnancy of waqf supremacy given to the deed Mutawalli can only act according to the stipulations incorporated in the waqf deed irrevocability of the waqf Fiqh doctrines appear to be relaxing In contemporary nation states, laws/statutes add another layer of legal complication

Law and Organizations Literature discusses the impact of legal environment on organizations New Institutional economics—Constructive legal environment: Law provides building blocks of the organizations Determines the types of organizations that may exist Laws affect transaction costs and determine the composition and growth of different types of NPOs Efficient models of organizations grow, inefficient ones are weeded out

NPO Organizational Formats Types of NPOs in any country depend on the laws and legal jurisdictions Associations Trust Charitable (nonprofit) Corporations Foundations Waqf Philanthropic Waqf for General Public (social waqf) is the focus in this presentation

Waqf-Introduction Waqf—”Stand still, hold still, not to let go” (Maliki- habs) Waqf established by founder (waqif) by dedicating an asset for benefit of a defined group Waqf deed determines: Objectives for which waqf is created Way(s) its revenues/fruits/services can be used Management process and procedures of succession of managers (mutawalli) 7

Fiqh of Waqf Zarqa—other than the concept of birr, everything in waqf is under the realm of ijtihad Some flexibility in fiqh related to waqf Waqf of movable properties (books, cash, etc. ) In certain cases waqf can be exchanged/ substituted (istibdal) IFA Resolution (April 2009) Types of assets that be made waqf—moveable item, benefit, money, sukuk, shares, services. Waqf can be permanent and temporary Waqf can be limited to time specified by founder

Waqf in Nation States The flexibility of fiqh has no direct impact on waqf sector In nation states, national laws determine the types of organizations Establishment of waqf will depend on: Existence of waqf law Efficiency of waqf law Implications of other related laws Role of government in waqf

The Gambia: NPOs Laws NPO laws Membership in Associations Charitable companies under the Companies Act 1955 (Registrar of Companies, Department of Justice) A registered charitable company can register as NGO under the Non-Government Organization Decree 1996 Membership in Associations The Association of Non-Government Association The Gambia Supreme Islamic Council General Secretariat for Islamic and Arabic Education in The Gambia Due to absence of law, waqf cannot be established legally

Bangladesh: NPO Laws Laws of Formation of NPOs Societies Registration Act 1860 (Registrar of Joint Stock Companies, Ministry of Commerce) Trust Act 1882 (Deed Registrar, Sub-registry’s Office) Voluntary Social Welfare Agencies Ordinance 1961 (Ministry of Social Welfare) The Companies Act 1994 (Registrar of Joint Stock Companies, Ministry of Commerce) Waqf Ordinance 1962 (Administrator of Waqf, Ministry of Religious Affairs)

Bangladesh: Waqf vs. Trust Laws Features Trust Waqf Enrollment with Government Body No Yes Annual payment to Government Body Submission of Accounts to Government Body Manager’s discretionary power restricted Manager can be discharged by govt. body Restrictions on manager other than deed Limitations on upgrading/changing asset

Malaysia: Legal Framework Constitution of Malaysia—the Sultan is the Head of the religion of Islam in every state and the King represents this role in federal territories and states without Sultans All matters related to Islamic Affairs, including waqf are under the purview of either the Sultan or the King State Islamic Religious Councils (SIRC) in each state is entrusted to deal with Islamic matters

Malaysia: Waqf Law In most states, laws related to Islamic matters/waqf govern the waqf In most cases, the laws stipulate SIRCs to be the ‘sole trustee of waqf assets’ Waqf assets are registered in the name of SIRCs (shown as proprietors) SIRCs hold all legal documents, including title, of the asset SIRCs makes rules related to administration and distribution of income of the waqf asset

Malaysia: Other Legal Constraints While waqf is dealt with at the state level, some federal laws constrain operations of waqf The National Land Code (NCL)1965 cover all provisions related to land NCL has no specific provisions related to waqf land (a section on trust exists) Most land is given leasehold and not freehold titles (constraining perpetuity feature) Waqf treated as any other land—can be disposed or used for other purpose Dispute related to (waqf ) land adjudicated in federal civil courts (not state Shari’ah courts)

Legal Regimes of Waqf Countries Waqf Law Inefficient Waqf Law Other Legal Constraints Role of Govt. The Gambia No n/a Bangladesh Yes ? Somewhat Malaysia Dominant

Waqf and Legal Regimes Waqf laws are necessary Without waqf laws, waqf-type institutions can be formed, but there are some limitations Some of the principles of waqf may not be fulfilled Waqf law by itself is not sufficient—what is needed are efficient laws If waqf law has higher implicit/transactions costs, other NPO formats will be opted Role of government in waqf—though the objective was good, it is an obstacle in the growth of waqf sector

The Way Forward While fiqh of waqf is getting flexible, it will have no impact on growth of waqf unless national laws are changed The growth of the waqf sector will depend on the efficiency and flexibility of waqf laws to meet the demands of contemporary times Waqf was a private sector institution and should remain so