Legal Constraints to the Development of Waqf

1
Legal Constraints to the Development of Waqf

• Professor Habib Ahmed

2
Presentation Plan

• Introduction
• Legal Regimes and Waqf
• The Gambia
• Bangladesh
• Malaysia
• The Way Forward

3
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
  waqfhistorically 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

4
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

5
Law and Organizations

• Literature discusses the impact of legal
  environment on organizations
• New Institutional economicsConstructive 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

6
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

7
Waqf-Introduction

• WaqfStand 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
8
Fiqh of Waqf

• Zarqaother 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 waqfmoveable item,
  benefit, money, sukuk, shares, services.
• Waqf can be permanent and temporary
• Waqf can be limited to time specified by founder

9
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

10
The Gambia NPOs Laws

• NPO laws
• 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

11
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-registrys
  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)

12
Bangladesh Waqf vs. Trust Laws
Features Trust Waqf
Enrollment with Government Body No Yes
Annual payment to Government Body No Yes
Submission of Accounts to Government Body No Yes
Managers discretionary power restricted No Yes
Manager can be discharged by govt. body No Yes
Restrictions on manager other than deed No Yes
Limitations on upgrading/changing asset No Yes
13
Malaysia Legal Framework

• Constitution of Malaysiathe 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

14
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

15
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 landcan be disposed or
  used for other purpose
• Dispute related to (waqf ) land adjudicated in
  federal civil courts (not state Shariah courts)

16
Legal Regimes of Waqf
Countries Waqf Law Inefficient Waqf Law Other Legal Constraints Role of Govt.
The Gambia No n/a n/a n/a
Bangladesh Yes Yes ? Somewhat
Malaysia Yes Yes Yes Dominant
17
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 sufficientwhat is
  needed are efficient laws
• If waqf law has higher implicit/transactions
  costs, other NPO formats will be opted
• Role of government in waqfthough the objective
  was good, it is an obstacle in the growth of waqf
  sector

18
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