Developing Awqaf: Challenges and Opportunities

By Dr Hisham Dafterdar, CPA
Chairman, Awkaf Australia

All through Islamic history, the waqf system has been at the forefront of all aspects of Islamic public life. A lot was said and written about the role played by awqaf in social, cultural and economic development. Indeed, a great deal of scholarly work can be found on the topic of awqaf development. Although the system works well in theory, in practice there are still problems that hamper development. The prevailing lack of literature points to awqaf risk management, and dealing with constraints and challenges. In recent years the progress of the sector has been hampered by numerous challenges. Some of the challenges are internal and relate to human, technological and physical factors, and some are external relating to the legal, political, and economic environment. Both internal and external challenges can have a negative impact on the organization and the awqaf sector generally. Nonetheless, overall significant progress has been made and the institution of waqf remains resilient and as relevant today as ever before.

Identifying challenges should help awqaf institutions to respond and overcome adverse events. Because challenges and their underlying causes can be detected with some accuracy, a waqf organization has a chance of eliminating them and preventing them from recurring. Internal challenges are to a large extent controllable and remediable at the organization level. External challenges on the other hand can be managed by taking control of the situation, building a roadmap and moving forward. Regardless of the mission, managing a waqf organization is much harder than managing a commercial company of comparable size. Aside from the common issues that companies face, awqaf organizations face some additional challenges that are specific to the sector. The most common challenges relate to leadership, staffing and development financing.

The most common challenges relate to leadership, staffing and development financing.

Awqaf organizations are led by nazirs who are known for their piety, honesty and fairness, but many of them lack management and communication skills. No one goes to the university to become a waqf nazir. The leadership power of nazirs rests with their hierarchical position within the organization as opposed to their ability to manage. Communication skills are essential for nazirs. They also need to develop expertise that enables them to balance the limited resources of their awqaf against the infinite needs of beneficiaries.

Finding and retaining the right people is a major challenge. It is an observable fact that workers in awqaf differ significantly from those at for-profit companies. Manpower in awqaf is comprised of passionate but less qualified employees who work for a lower salary, and volunteers who offer their services for no financial rewards. Working in awqaf is not likely to be the first choice for a qualified job seeker. There are reasons for this. First of all, the benefit packages do not match those paid by the private sector. Secondly the hierarchical structure in awqaf is comparatively flat which means that prospects for promotion and career enhancement are limited. On the other hand, awqaf take the relaxed view that formal tertiary qualification is desirable but not essential, and that employees and volunteers are ideologically driven by the waqf’s religious message and intrinsically motivated by its core values.

Staff turnover in awqaf has always been high. The key does not lie in high salaries, as there will always be an employer offering more. Rather it is in fostering pro-social behavior, teamwork, acknowledgement and recognition. Such a strategy is bound to keep staff engaged, focused and committed.

Another major challenge faced by awqaf is mobilizing development finance. Awqaf social operations put a strain on cash flow. There are also concerns about accountability and transparency of the flow of money to and from awqaf organizations. The ambiguity regarding financial resources and dependency on unpredictable sources of funding are hurdles for development. To date large areas of prime awqaf land remain undeveloped, and many buildings are in bad repair due to lack of funds. Donations can support but do not fund development. Financiers need securities. The security taken by financiers is largely confined to the assets they finance. The condition of inalienability, while it protects waqf properties from claims or liquidation, it has to some extent hindered development. Some critics went as far as accusing inalienability of being a condition that locks in valuable assets in unproductive condition.

Awqaf have the means to raise capital and mobilize development financing. There is a variety of Islamic financing modes that are suitable for awqaf. The mode of financing will depend on the type of the project, the amount and the tenor. Some of the appropriate Islamic modes of financing include murabaha (cost-plus deferred sale) and Ijarah (leasing) and istisnaa (construction financing). Awqaf can also partner with private sponsors in a build-operate-transfer (BOT) agreement for the larger projects.

The issues that affect companies in the broader economy affect awqaf as well. In addition, there are issues relating to Shariah and legal compliance, asset preservation and development, social welfare, benefit distribution and the like

Awqaf cannot operate as if in a vacuum. The issues that affect companies in the broader economy affect awqaf as well. In addition, there are issues relating to Shariah and legal compliance, asset preservation and development, social welfare, benefit distribution and the like, that the awqaf factor finds as key components of their overall performance. Every challenge is an opportunity for a creative solution. Challenges can give awqaf a chance to improve their systems, strengthen their corporate governance and make the best of their limited resources.