WAQF of Securities
Challenges & solution proposal
Hamed Soltaninejad
CEO, CSDI
H.Soltaninejad@csdiran.com
CSDI FUNCTIONALITIES
Registry
Corporate
Actions
Clearing and
Settlement
Risk Mgnt
Central
Securities
Depository
of IRAN
OUTLINE
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Introduction to waqf
Waqf functions
Efficiency challenges of traditional waqf
Controversial issues in waqf
Waqf in capital markets
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Challenges and opportunities
Best practices
Capital market considerations
Proposed solutions
INTRODUCTION TO WAQF
• Definition of Waqf
• To stop, contain or to preserve.
• Voluntary, permanent, irrevocable dedication of
Wealth to Allah.
• The waqf is a system that stems from the idea of
institutionalizing voluntary giving in order to
guarantee sustainability.
• …..A waqf is Sadaqah Jariyyah, continuing charity
• A Capital Gift to Allah.
INTRODUCTION TO WAQF
• Forms of Waqf
• Economic Assets : Income producing assets
• Yields or manfaat
• Social Assets: fixed or capital assets
• Principal itself or eine
INTRODUCTION TO WAQF
• General types of waqf
• Religious waqf :Mosques and real estates confined for providing revenues to spend
on mosques' maintenance and running expenses the category of religious waqf.
• Philanthropic waqf: It aims at supporting the poor segment of the society and all
activities which are of interest to people at large such as libraries, scientific research, education, health
services, care of animals and environment, lending to small businessmen, parks, roads, bridges, dams, etc.
• Family waqf: waqf for one's own family and descendants.
CHARACTERISTICS OF WAQF
• Perpetuity : remaining waqf for ever
• Permanence of stipulations of waqf founder:
fulfillment of conditions specified by the founder
• Management of waqf: mutawalli as administrator
WAQF FUNCTIONALITIES
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Economic Roles
Social Roles
Wqaf institution
Islamic financial modes for awqaf
Role in poverty alleviation
Making synergy
Social Entrepreneurship
CHALLENGES OF TRADITIONAL APPROACH
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Inefficiency
Development Barriers
Moral Hazards (due to lack of transparency)
Weaknesses
– Mainly old and existing waqf prosperities
– Government control and centralization
– Two narrowly focus on mosque and school
– Trustee (Mutawalli) weaknesses
NECESSITY OF AUGMENTATION
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Reforming the management
Reconstructing the procedure (ijtihad)
Corporate governance structure
Waqf literacy improvements
CONTROVERSIAL ISSUES
• Property substitution(Ibdal and Istibdal)
 Different views
 Prevention(habs) of principal or properity itself (Ein)
• Cash Waqf (credit waqf)
• Waqf of securities
• Waqf of other financial instruments
WAQF OF SECURITIES
• Different Approaches
• Shariah Compliance Solutions
• Consensus Approach
PREVIOUS EFFORTS IN SECURITY WAQF
• Cizakca: Incorporated cash waqfs and
mudaraba, Islamic non-bank financial
instruments from the past to the future
• Elgari: Waqf-based microfinance: Realizing the
social role of Islamic finance
• Kahf: Innovative modes for financing the
development of waqf properties
INNOVATIVE METHODS
• Current Situation in I.R. Capital Market
– Account for principal
– Account for yields
• Innovative Methods
– Revitalization of waqf
 Sukuk AL- INTIFA'A
 Sukuk AL- Mosharake
MUSHARAKAH TRANSACTION MECHANISM
Waqf Asset
Manager
Period profit
(30%)
Developer
1.Wakaf
land
4. Undertakes to
buy Musharaka
share on periodic
basis
A
B
Lease/
forward lease
Musharakah
C
Period profit
(75%)
2b.Capital
Investor
2a.Capital
SPC
3. Issue Sukuk
Musharakah +
periodic profit
Sukuk
•Waqf Asset Manager (WAM) enter into lease agreement with
ABC Property Management including 2 years forward lease
• WAM and Special Purpose Company (SPC) enter into a
musharakah venture to develop waqf land for a period of say 6
years – profit sharing ratio determined 70:30
•WAM Contribute land to the mushatakah
•SPC Contribute cash as capital to build commercial building on
the waqf land
•The musharakah appoints the WAM as an agent to develop the
land. The WAM may appoints developer to build the building,
then when it was ready to lease the building ,the return will
distributed according to the ratio
•The WAM will undertakes to buy at pre-agreed price the
musharakah shares of the SPC on periodic basis and at the end
of 6 years, then SPC would no longer have any shares in the
musharaka
MUTUAL FUNDS AS WAQF CARRIERS
• Mutual fund specifications
– Mutual and securitized
– Comparable with market performance
– Professional management
– Attractiveness
– Better supervision
– Suitable for new waqf projects
MUTUAL FUNDS WAQF
• Models
1. Waqf of cash
2. Waqf of mixed cash and securities
3. Conditional waqf of securities
• Challenges of Models
1. Rare acceptance of Jurisprudents (shaz)
2. 2& 3 – some Jurisprudents don't believe
holistic Ibdal and Istibdal
INVESTMENT FUNDS WAQF
• Opportunities
– Better Portfolio management
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by professional mutawalli (trustee)
– Feasibility of ibdal and istibdal
– Better Administration and supervision
– Joining benefits of securitization
– Challenges
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Again challenge of Ibdal and Istibdal
Necessity of different funds for different purposes
Prevention of fund’s share transaction
Mandatory listing of public investment funds in some
countries
COMPARISON OF PROPOSALS
Proposal
Two accounts
Mutual Funds
Investment Funds
Challenges
• Decreases the market liquidity
• Corporate governance
problem
• Misuse of accounts
• Risk of delisting
• Restricted Ibdal and istibdal
• Necessity of conditional waqf
• Restricted Ibdal and istibdal
‫والسالم علی عبادهللا الصالحین‬