Designing simple productive waqf models for Indonesia
Ascarya Ascarya
University of Darussalam Gontor, Ponorogo, Indonesia and Institut Agama Islam Tazkia, Bogor, Indonesia
Muhamad Nadratuzzaman Hosen
Syarif Hidayatullah State Islamic University, Jakarta, Indonesia, and
Siti Rahmawati
Bank Indonesia, Jakarta, Indonesia
Abstract
Purpose–Productive waqf is one type of ethical business/investment, which should comply to Islamic law, with so many models to choose from. The purpose of this study is to determine factors of simple productive waqf, propose several simple productive waqf models and select the best simple productive waqf models appropriate to be adopted by waqf institution in Indonesia.
Design/methodology/approach– This study applies the analytic network process, includingfield survey, focused group discussion and in-depth interview, with two groups of respondents, namely, expert and waqf practitioner.
Findings–The results show that the determinants of simple productive waqf in Indonesia are the waqf institution, productive waqf asset to be developed, how tofinance the productive waqf, how to manage the productive waqf and the compliance of productive waqf. Proposed productive waqf models include cash-waqf and self-managed model, Islamic bankfinancing and self-managed model, Sukuk and external partnership model, cash-waqf and external partnership and cash-waqf þ co-financing and external partnership.
Moreover, the best simple productive waqf model is cash-waqf and self-managed model, followed by cash- waqf and external partnership, where they could achieve the most in all socio-economic variables, well-being compliance and moral/ethics within the theory of unity of knowledge, Tawhid.
Research limitations/implications – The simple productive waqf models proposed are not exhaustive, since there are so many variations of the model. Moreover, the case and respondents are all Indonesian, so that the results are possibly only applicable to Indonesia.
Practical implications–To increase the probability of successful productive waqf development, waqf institutions could apply cash-waqf and self-managed modelfirst, while other models could be applied in staged in line with waqf institution experience.
Social implications–The successful development of productive waqf could increase the social programs provided by waqf institutions to the society.
Originality/value–Productive waqf development is desperately needed due to many unproductive waqf lands in Indonesia, while studies have been limited, and there is no study discussing the productive waqf model appropriate for Indonesia.
Keywords Indonesia, Waqf, Cash Waqf, Productive Waqf Paper typeResearch paper
Introduction
Waqf (plural“awqaf,”Islamic endowment) is an ethical instrument of Islamic socialfinance (ISF), in addition to zakat, infaq and sadaqah. It was once dominant as one of the cornerstones of the economy but was then largely forgotten, to have since been newly
Waqf models for Indonesia
Received 3 July 2020 Revised 11 October 2020 26 October 2020 3 November 2020 1 September 2021 Accepted 11 December 2021
International Journal of Ethics and Systems
© Emerald Publishing Limited 2514-9369 DOI10.1108/IJOES-07-2020-0101
The current issue and full text archive of this journal is available on Emerald Insight at:
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revived in the present. Imam Zufar, in the 8th century AD, advised that waqf should be invested in businesses, coupled with a profit-sharing mechanism (mudharabah), to generate profits that could then be used for the benefit of waqf beneficiaries (Cizakca, 1998, p. 34). At that time, however, there were no applications for such a suggestion in the economy.
Waqf as Islamic perpetual charity is characterized by all the blessed properties of charity and moral sustainability across the entirety of social actions, derived from Al-Qur’an (Choudhuryet al., 2019), which could solve the great untapped problems, such as poverty, hunger, inequality, lack of empowerment in gender issues, human resource development and sustainable ethico-economic future, in accordance with the theory of unity of knowledge, Tawhid.
During the time of the Ottoman Empire, waqf was successfully implemented over the long period of time, and poverty could be reduced (Ahmad, 2015, p. 63). There was a subsequent period of decline in waqf after the fall of the Ottoman Empire. Waqf assets were destroyed by the government and altered by the secular system around the time of the abolishment of the Ottoman Caliphate in 1924. Discussion on waqf is of great interest to many, as waqf is one of the key components of ISF, inseparable from Islamic Commercial Finance (ICF) within one unified Islamicfinancial system.
With its inherent characteristic, waqf will result in the long-term accumulation of capital, which will, in turn, improve the financial capability of individuals or management organizations, thereby contributing positively to improving the welfare of the ummah or community (Ismail Abdel Mohsin, 2013). The use of waqf is not limited to reducing poverty;
it can also contribute to creating economic growth, improving socioeconomic welfare and increasing holisticfinancial inclusion. Moreover, productive waqf involving more parties, if managed with professional management, is capable of maintaining the stability of the financial system (Ascarya, 2017).
Waqf could be grouped into social waqf, productive waqf or integrated social and productive waqf (Ascaryaet al., 2020), as also mentioned by Shiraziet al.(2015, p. 12) that waqf can be used in various social and commercial aspects, from education tofinance.
Productive waqf could be considered as ethical business/investment, since it has to comply with Islamic law, not only it must free fromriba(usury),gharar(unclear transaction) and maysir(gambling) but it should also uphold other Islamic ethical system (Sadeq, 2002).
Productive waqf could also use to overcomefinancial, ethical and human capital deficiencies faced by the conventionalfinancial institutions (Haneefet al., 2015). There are two types of productive waqf, namely, simple (classic) productive waqf with straightforward/simple process with less parties involves; and innovative productive waqf with more complicated process with more parties involved, including built-operate-transfer (Ismail Abdel Mohsin, 2013). Almost all productive waqf in Indonesia still adopt simple productive waqf model.
Several countries that have developed waqf have been able to use it to solve their socioeconomic problems ethically. Because of its great benefits, many Islamic countries have built departments or ministries to administer the waqf institutions in their respective countries (Shiraziet al., 2015, p. 14). One such example is Egypt, where waqf is regulated by legislation and its administration is properly carried out by the Ministry of Waqf (Wizaratul Awqaf). Egypt has seen substantial growth in the management of waqf (Khalilet al., 2014, p. 73). Since there are a variety of forms of productive waqf, so many benefits can be derived from the results. Waqf in Egypt is invested in various sectors, including the industrial, agricultural andfinancial sectors (Khalilet al., 2014, pp. 74–75).
Another example is Singapore. There, the business sector participates in optimizing the development of productive waqf assets through various excellent waqf management initiatives. The Islamic Council of Islamic Affairs of Singapore (MUIS) has a major stake in
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building a productive waqf paradigm in Singapore. MUIS’s waqf assets are managed by Warees Investments Pte Ltd, MUIS’s real estate subsidiary company. With the Waqf Revitalization Fund and Institutional Investments Initiative, by 2017 Warees has managed 156 property waqf with a total worth of SGD 769 million (wares.sg).
In Malaysia, previously waqf assets have not been seriously developed and recorded despite the presence of Islam in the country ever since the 10th century. Over time, however, the government has come to realize the importance of waqf as assets and investment, and the Malaysian federal government established the Department of Waqf, Hajj and Zakat (JAWHAR) in 2004 and the Malaysia Waqf Foundation in 2008 to encourage the management of waqf with Majlis Agama Islam Negeri (Ismail Abdel Mohsin, 2013, p. 57).
An innovative waqf development effort in Malaysia is Corporate Waqf formed by the Johor Corporation, with Waqaf An-Nur Corporation as the nazhir. This waqf fund is open to individuals, companies and public companies listed as members, and the proceeds from the share dividends are given to the mauquf‘alaih (Ismail Abdel Mohsin, 2013, p. 87).
Turkey, with its Waqf Directorate General, manages a number of waqf assets in the form of investments in Ayvalik and Aydem Olive Oil Corp., Tasdelen Healthy Water Corp., Auqaf Guraba Hospital, Taksim Hotel (Sheraton), Turkish Is Bank, Aydin Textile Ind., Black Sea Copper Ind., Construction and Export/Import Corp. and Turkish Auqaf Bank. In addition, in 2016, Waqf Bank became the seventh-largest bank in Turkey. Waqf in Turkey has played an important role in the socio-economic development of the Muslim society (Saad et al., 2017).
In the meantime, waqf in Indonesia has just started to be developed since the stipulation of Waqf Act No. 41 in 2004, although waqf has been practiced by Indonesian Muslims since the entrance of Islam to Indonesia (Hasanah, 2011), and the emergence of Islamic Sultanates and Kingdoms even before and during the Dutch occupation. Nevertheless, most land waqf in Indonesia have been left unmanaged and unproductive. The development of productive waqf has been initiated by several waqf institutions, including Dhompet Dhuafa, Global Wakaf, Rumah Wakaf, Wakaf Al Azhar, Sinergi Foundation, Wakaf Daarut Tauhiid, Yayasan Wakaf Bina Nurani Bangsa, Wakaf Nahdlatul Ulama, Wakaf Muhammadiyah, etc.
Productive waqf have also been developed by almost all Pesantren (traditional Islamic boarding school) in Indonesia, such as Pondok Modern Darussalam Gontor, who has built so many businesses needed by pesantren based on waqf, to be self-sufficient and provide affordable goods and services to the surrounding community.
In this regard, it is necessary to conduct research to design models of ethical productive waqf management in accordance with the conditions in Indonesia and to identify the relevant productive waqf criteria. However, related studies in this topic have been almost non-existence, except integrated waqf-based Islamic microfinance model (IWIMM) developed byHaneefet al. (2014 and2015), integrated cash waqf enterprise investment (ICWME-I) model by Thaker et al. (2016, or Waqf-Ventura Capital Syariah (WVCS) developed by Tanjung (2018). Therefore, the objectives of this study are to investigate important factors of effective productive waqf in Indonesia, propose models of simple productive waqf to be implemented feasibly in Indonesia, as well as determine the best model among those proposed models.
Analytic network process (ANP) method is used to be able to capture interconnectivity among the various variables that would interrelate to explain productivity and sustainability (according toChoudhury and Hoque, 2004) of simple productive waqf models and to determine the best alternative model to achieve well-being within the theory of unity of knowledge, Tawhid (according toChoudhuryet al., 2019).
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The rest of this paper will be organized as follows. The second section will discuss waqf in classical and modern era. The third section will explain the methods used in this study, i.e.
ANP. Section four will present the results and discussions of the study, while thefifth section will provide the conclusion of the study and recommendations for immediate stakeholders.
Literature review
Waqf (plural = awqaf) comes from the root word waqafa-yaqifu-waqfan. The word has the meaning of stopping, holding, staying still or standing. Waqf in a meaningful way means protecting the principal of an asset and providing its benefits to other parties (Yaacobet al., 2015). Another opinion defines waqf as the activity of holding an asset and preventing its consumption to produce its benefits repeatedly for philanthropic purposes (Azizet al., 2014).
Thus, it can be concluded that waqf is an ethical mechanism of withholding principal assets so that they can be managed in such a way that the benefits can be obtained by the beneficiaries in the context of philanthropy.
The“rukun”or pillars of waqf consist of four elements. First, waqif as the party that donates waqf assets. Waqif must be a human being who is sensible and virtuous. Second, the mauquf or waqf asset was originally owned in full and was legally owned by the waqif before being donated. Third, the existence of the mauquf‘alaih or the purposes of the benefit of waqf. These objectives must be detailed and clearly stated in the waqf pledge (Yaacob et al., 2015).
The fourth pillar is the pledge of waqf (shighah). Waqf activity is marked by the existence of a waqf pledge, which is a statement that the waqif as the initial owner of the waqf assets relinquishes ownership rights over these assets and makes the assets belong to Allah (Yaacobet al., 2015). Then, the management of these assets is handed over to nazir, as thefifth pillar Abdullah (2019b), to be managed according to Shariah principles and the initial purpose of waqf.
Abdullah (2019b)explained that thesefive pillars of waqf (waqif, mauquf, nazir, mauquf
‘alayh and sighah) have similarity with the five components of English Trust (settlor, property, trustee, beneficiary and declaration, respectively). However,Abdullah (2019b) further stated that waqf as an institution has three distinctive features which are inherently attached; perpetuity, irrevocability and inalienability, where these three attributes of waqf are clearly different from English Trust or secular charity institution.
Ambroseet al.(2018)stated that traditional waqf was mostly managed by individual nazir who received trust from the waqif, where the waqif chose someone as nazir due to good character, such as adalah (moral soundness) and kifayah (physical capability).
Meanwhile,Abdullah (2019b)said that nazir could be the manager of waqf or could appoint someone to be the manager of waqf operation. However,Shulthoni and Saad (2018)argued that the role of nazir has often been questioned when nazir could not maintain and manage the productive waqf profitably, which could also make the principle of waqf assets deteriorated.Yaacobet al.(2015)also argued that the critical point to build waqf system is waqf manager, where some literature showed the low accountability of waqf managers due to several reasons, such as unqualified human capital, insufficient resources to maintain and to develop the waqf properties, mismanagement of waqf funds and lack of transparency in waqf governance.
For Muslim society, waqf is common knowledge in terms of al-Hadith, but they do not have much knowledge in practicing waqf, because they always listen from Islamic scholar about shadaqah, zakat and infaq, meanwhile there is no specific verse mention in the Holy
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Quran about waqf, but the Holy Quran strongly emphasizes the concept of wealth redistribution (Abdullah, 2019a;Cizakca, 1998).
There are many Al-Hadith mention the story of waqf which can be used as references in Islamic law and Islamic teachings. First, the story of Abu Thalhah, where Abu Thalhah dedicated his date palm garden in Bairuha, close to the mosque in Madinah, to be managed by his close relative. Then Abu Thalhah gave part of the harvest for his relative Hasan bin Tsabit. Then, the practice of waqf by Zaid bin Haritsah was in the form of giving a Sabal horse to Prophet Muhammad (peace be upon him = PBUH), which then gave the horse to Usamah bin Zaid, with the intention that the horse could be used as a mount during the war.
Finally, the famous story of the well of Ruma in the city of Madinah that never dried. The well was owned by a Jew named Ruma. During one dry season, all the wells in Madinah dried up, except the well of Ruma. Therefore, the people of Madinah had to buy water from Ruma, who sold the water at high price, since his well was the only one that did not dried.
Moreover, the water of this well tasted similar to the Zamzam water in Makkah. Eventually, Uthman bin Affan purchased the well of Ruma and donated it to be a waqf for Muslim community. Nowadays this waqf is still maintained until now by the government of Saudi Arabia through Ministry of waqf (Cizakca, 1998;Abdullah, 2019a).
One important waqf development in the modern era is cash waqf, which has been around since the Prophet’s (PBUH) time, due to its flexibility. However, because there are two different opinions, where one group considers cash waqf as lawful and the other group considers cash waqf as unlawful, cash waqf has previously not been popular until current era where cash waqf has become increasingly popular in any waqf development. Cash waqf could be used tofinance various social and commercial facilities producing various private and public goods and services, as also stated by Ismail Abdel Mohsin (2013), such as education, health care, infrastructure and commercial activities.
There are two types of cash waqf, namely, direct cash waqf and indirect cash waqf (Ismail Abdel Mohsin, 2009). Direct cash waqf is cash waqf intended for specific purposes, productive or unproductive, for example, building mosques, free schools, or building office centers, commercial hospitals, etc. meanwhile, indirect cash waqf is waqf in the form of money/cash whose its specific purpose or designation has not been stipulated, where the principal must be maintained and the returns/profits from cash waqf investment could be used to provide benefits for the beneficiaries. Thus, indirect cash waqf would be used for productive purposesfirst, and then the profit generated could be used to finance social programs from the society.
In Indonesia, at the previousfive decades, waqf development was mostly related to the development of mosques, graveyard and schools or traditional schools, also known as Pesantren. These awqaf were built to full-fill the basic needs of Muslim society in Indonesia, where Indonesian government was not much involved in regulating by law (Nasution, 2007).
Nowadays, Indonesian government has significant roles in developing waqf after Indonesian parliament issued the Waqf Act No.41 in 2004.
In May 11, 2002, Indonesian Council of Ulama (MUI) issued fatwa regarding with indirect cash waqf following HanafiSchool. The characteristics of the indirect cash waqf according to the MUI fatwa are as follows:
Cash waqf (Waqfal-Nuqud) is a waqf done by a person, group of people, institutions or legal entities in cash.
Included in the definition of cash are securities.
Cash waqf legality is allowed (jawaz).
Cash waqf can only be distributed and used for things, which is allowed by Shariah.
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The principal value of cash waqf must not be decreased and must be maintained its sustainability, it must not be sold, granted and/or inherited.
In March 10, 2020, Indonesian Government and Indonesian Waqf Board (2020) launched cash waqf linked Sukuk (CWLS), SW001. The initial idea of this Sukuk came from Central Bank of Indonesia supported by Ministry of Finance. This Sukuk is non-tradeable and will due on March 10, 2025. This was a special productive waqf effort to use funding from cash waqf for building and buying medical equipment of Eye Hospital in Banten Province [1].
While Indonesia introduced innovative CWLS, Malaysia introduced the first socially responsible investment (SRI) green Sukuk model based on‘Istisna(manufacturing sale) and Ijarah(leasing) issued by Tadau Energy Sdn Bhd tofinance the construction of large scale solar photovoltaic power plants in Kudat, Sabah. In this line,Zain and Muhamad Sori (2020) proposed Musharakahbased green SRI Sukuk for the development of waqf properties/
assets in Malaysia.
Some of the challenges in managing waqf according to Laallamet al. (2020), among others, include lack of accountability, lack of funding, mismanagement and lack of trained labor, where intellectual capital is among the most important for the efficiency and effectiveness of waqf institution operation. Meanwhile, Osman and Agyemang (2020) highlighted the need of beneficiaries/public involvement to improve the waqf management and ensure that the beneficiaries receive the benefits effectively.
Moreover,Rahmaningtyas and Herianingrum (2017)opined several main obstacles to develop productive waqf in Indonesia. First, the assets of waqf could not be used as collateral, since Indonesian government regulation intended to protect asset of waqf in line with Islamic law and accordance with Agrarian law no.5/1960. Second,financial institution, such as Islamic bank could not be a nazir or mutawalli of waqf, which is regulated in government decree no.42/2006. Third, social institutions, such as waqf institutions, lack of professionals in social business, as well as in commercial business.
However, waqf, with its unique characteristics andflexible usage for social and ethical commercial activities, could be a solution to provide and develop social goods and services, as well as to provide and develop public goods through social waqf. This roles of waqf could help the government in most Muslim-majority country which mostly have limitations in resources and capacity to develop their countries (Shaikhet al., 2017). In addition, waqf could also be used to provide competitive private goods and services through productive waqf, since there are no shareholders who ask for returns/profits in the case of commercial investment using waqf (Ascaryaet al., 2020).
Studies on productive waqf models are many, but mostly focus on cash waqf models which have been discussed in the introduction, including IWIMM byHaneefet al.(2014, 2015), ICWME-I by Thakeret al. (2016)and WVCS byTanjung (2018). Earlier, various common models of cash waqf has been discussed byIsmail Abdel Mohsin (2013), including waqf shares, deposit cash-waqf, corporate waqf, cooperative waqf and cash-waqffinancial institution. Factors of these cash waqf models include: nazir as waqf institution, waqif as waqf donor, cash waqf as source of fund orfinancing, investment as waqf asset and mauquf
‘alaih as beneficiaries of waqf return benefits. Meanwhile, Ascarya et al.(2020) discuss models of social waqf, productive waqf and integrated social and productive waqf. They elaborate general productive waqf model, where they expand various source of funds or financing, various kind of productive waqf assets or facilities, constructor of waqf asset, various possibility of productive waqf management. Moreover, Ascarya and Tanjung (2021) discuss the implementation of various waqf model in healthcare, including social healthcare waqf, productive healthcare waqf and integrated social-productive healthcare waqf.
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Methodology
Analytical network process
ANP developed by Thomas L. Saaty in 1996 was the extension and generalization of previously developed AHP in 1980, which could be described as a general theory of relative measurement with absolute scale to solve multidimensional problems in multi-criteria decision-making setting of tangible and intangible criteria based on the judgments of the experts in the field (Saaty, 2004; Saaty and Vargas, 2006). ANP is also considered as psychophysical theory of measurement, where judgments about subjective feelings and understanding are essentially not very different than and depend on judgments about the physical world in which one acquire one’s experience and understanding (Saaty, 2008).
ANP is structured in influence nonlinear network of clusters and nodes or elements contained within the clusters having outer and inner dependence among their elements (see Figure 1, right), representing researcher’s understanding of theflow of influences, which is required to make complex and risky decisions (Saaty and Vargas, 2006;Saaty, 2008). The ANP deals with dependence (outer and inner), since the world is found to be far more interdependent than we think using our way of thinking and acting.
In other words,“ANP is a general tool that is helpful in assisting the mind to organize its thoughts and experiences and to elicit judgments recorded in memory and quantify them in the form of priorities, and allow for representing diverse opinions after discussion and debate”(Saaty and Vargas, 2006).
Steps of analytical network process research
ANP research includes three phases, including model construction, model quantification and results analysis (seeFigure 2). Phase 1 will be started with literature review of related studies and in-depth interview and/or focused group discussion with experts and practitioners’respondents to produce summary of research questions, ANP model and ANP network. Subsequently, Phase 2 will construct pair-wise comparison based on ANP network, survey to respondents (experts and practitioners) and compile all the answers.
Finally, phase 3 will prepare the data to be inputted into the Superdecisions software, run the complete ANP network, obtain the results to be presented and analyzed.
Data
ANP method requires primary data collected from pair-wise questionnaire distributed to two groups of respondents, including expert and waqf practitioner. Number of persons in
Figure 1.
Linear network of AHP and nonlinear network of ANP
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each group should be sufficient to conduct regular focused group discussion (FGD), which generally between 6–12 participants, while 6–8 participants are considered sufficient (Nyumba et al., 2018). Meanwhile, for small FGD, it could include only 3–5 persons (Rabiee, 2004), if the expert in the field of study is scarce, or if researcher intends to have extended in-depth discussion. Therefore, this study surveyed 9 experts and 13 waqf practitioners (seeTable 1). The experts include academicians, waqf regulators and observers, while waqf practitioners include experienced practitioners from major waqf institutions in Indonesia, including Tabung Wakaf Indonesia (TWI)–Dompet Dhuafa, Global Wakaf, Wakaf Al Azhar, Inisiatif Wakaf, Rumah Wakaf, Sinergi Foundation, Wakaf Nahdlatul Ulama, Wakaf Muhammadiyah, Yayasan Wakaf Bina Nurani Bangsa, Wakaf Salman and Wakaf Daarut Tauhiid.
Respondents in in-depth discussion/FGD for the Phase 1 used more respondents to acquire more knowledge and information, while respondents for Phase 2 used seven most experienced experts and waqf practitioners from previous phase.
Results and discussions
Determinants of productive waqf model
The results from Phase 1, model construction, show that the determinants or factors of productive waqf model are (seeFigure 3): type of waqf institution (including, individual, organization, social legal entity, commercial legal entity and cooperative); type of waqf asset (including, small business facility, residential building, office building, large commercial center and mixed social-commercial facility); type of waqffinancing (including, cash waqf, cash waqf þ co-financing, Islamic bank financing, international financing and Sukuk issuance); type of waqf management (including, self-managed, subsidiary, internal-external partnership, temporary external partnership and permanent external partnership); type of Figure 2.
Steps of ANP research
Table 1.
Data of ANP research
No. Expert panel In-depth/FGD ANP Background
1. Expert 9 7 Academician, Regulator
2. Waqf Practitioner 11 7 Major Waqf Institutions
Total 20 14
Source:Authors
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waqf benefits (including, profitability, asset increase, outreach to donor/waqif and credibility improvement); and compliance (including, Shariah compliance, institutional regulation compliance, waqf regulation compliance, land regulation compliance and regulatory differences compliance).
Proposed simple productive waqf models
A simple waqf model is a straightforward and uncomplicated model for the development of ethical productive waqf involving several main parties. These are a nazir as the holder of a waqf land trust, the waqif as the donor providing the direct cash waqf, a contractor as the party that construct building on the waqf land and/or a co-financing provider such as an Islamic bank as a financing and external management company as the manager of a building or property.
Based on the identified factors of productive waqf model resulted from Phase 1 model construction, there are many possibilities of simple productive waqf models. There are, at least 25 model based on the combination of waqffinancing and waqf management. Based on focused group discussion on Phase 1, five most preferred models will be discussed and included in ANP analysis.
Cash waqf and self-managed.This Model 1 is initiated by the nazir, as the holder of the waqf land trust previously donated by a waqif, who will develop the waqf land at relatively little cost. To build productive waqf facility on the waqf land, the nazir must either raise a new direct cash waqf. After the necessary funds are collected, the nazir enters into a property development contract with a building contractor and pays fees in accordance with the progress of construction. Following completion of construction, the nazir manages the rental and maintenance of the building. The net profit derived from rents is used for social and reinvestment programs (see Figure 4). For example, the waqf land on which a commercial building, shop-house, rental-house or others are built.
The advantages of Model 1, among others, are its ease of implementation, it is the least expensive option, there are only few parties involved (the nazir, wakif and contractor), and the profits from the building management can be used to finance various social programs and to reinvest in productive waqf. The weaknesses of Model 1 are the length of
Figure 3.
Identified factors from model construction and ANP model
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waqf fund-raising required to collect the required amount and the inclusion of a less effective nazir as the manager of the building, who, compared to the other models, is less professional with less experience. Example of this model includes Rental-House Griya Sakinah – Dompet Dhuafa in Jakarta, Multi-Function Building – Daarut Tauhiid in Bandung and Sheikh Zayed Tower in Abu Dhabi.
Islamic bankfinancing and self-managed.This Model 2 is similar to Model 1, but it has to be built quickly and it has a relatively moderate budget to build the productive waqf facility, so that it could use Islamic bankfinancing with Murabahah, Ijarah, Istishna’or Musharakah Mutanaqisah contracts. Following the completion and operation of the facility, the proceeds from the lease/rent wouldfirst be used to repay the Islamic bank, while the remainder could be used for social program and reinvestment (seeFigure 5). In the early years as long as the financing was not paid off, social programs became limited and reinvestment might not be possible.
The advantages of Model 2 are that it is easy to be implemented, few parties are involved (only the nazir, Islamic bank and contractor), and it is possible to quickly meet its funding needs. Its disadvantages are that it is expensive, there is a need for other collateral because the waqf land cannot be used as collateral, there is a less effective nazir as the manager of the waqf facility (who, among the others, is less professional and has less experience), and the proceeds from the waqf facility must first be used to pay off installments of the financing, meaning there is a reduction and/or delay to the benefits received by the mauquf
‘alaih. These models are widely used by educational foundations to build or expand school buildings due to the large demand for integrated Islamic schools.
Sukuk and external partnership.This Model 3 is similar to Model 2, but the considerable cost of building the waqf facility is met by issuing Sukuk Ijarah, Sukuk Al-Intifa’or others,
Figure 4.
Model 1 cash-waqf and self-managed
Figure 5.
Model 2 Islamic bank financing and self- managed
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since the nazir in this model, as a credible institution, is eligible to issue Sukuk, as was the case with MUIS (Majelis Ugama Islam Singapura) that issued the Sukuk Musharakah in 2006. Financing through Sukuk is cheaper than Islamic bankfinancing, but it does require the credibility of the nazir as a Sukuk-issuance. Therefore, the Sukuk-issuing institution is usually different party than the nazir (as in the case of MUIS above). Large productive waqf facility requires more sophisticated and professional management, so that nazir would be better to hire external management to manage the facility. Since the cost is lower, the benefits of this model are better than those of Model 2. The social programs and reinvestment could be carried out sooner (seeFigure 6).
The advantages of this model are that it is easy to implement for a bonafide nazir, and it can quickly fulfill its funding needs. The weaknesses of this model are that it is quite expensive (but cheaper than Islamic bankfinancing), not all nazir can issue Sukuk, there are more parties involved (nazir, underwriter, investor, Sukuk contractor and external management), and the profit share from the waqf facility arefirst must be used to pay the coupons and Sukuk principal, meaning the benefits for the mauquf‘alaih are reduced and/or delayed.
Cash waqf and external partnership.This model has similarity with Model 1 in terms of financing the waqf facility using cash waqf, but it differs in the management by using professional external management to solve the problem of inexperience nazir, so that the productive waqf facility could be efficiently managed and generate profits. The drawback is that the profits generated have to be shared by the nazir with the external partner (see Figure 7).
Figure 6.
Model 3 Sukuk issuance and external partnership
Figure 7.
Model 4 Cash waqf and external partnership
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for Indonesia
However, nazir would never be able to manage the variety of productive waqf in different business sectors professionally, so that it would be natural when a nazir manages more and more waqf facilities, he/she would prefer to collaborate with external partner to manage some of the waqf facilities. Example of this Model 4 is DD Futsal and Café in Jakarta, which is owned by TWI-Dompet Dhuafa, but it is managed by Omega Nusantara Cooperative.
Other example is AKA Medika Sribhawono Hospital in Lampung, which is also owned by TWI-Dompet Dhuafa, but it is managed by AKA Mitra Perdana.
Cash waqfþco-financing and external partnership.This model is similar with Model 4 with an addition of co-financing to complement insufficient cash waqf as source offinancing of a considerable productive waqf facility. Co-financing would be better than Islamic bank financing, since no collateral is needed and profit/risk/loss would be shared between both parties using profit-and-loss sharing contract. The benefits of this model are thatfinancing needs could be meet in shorter time, while waqf facility would be managed professionally (seeFigure 8).
However, there are some drawbacks, including profits must be shared with external partner and co-investor, so that the nazir may not be able to provide social programs for mauquf‘alaih immediately.
Overall, productive waqf could provide socio-economic benefits to the society in various ways. In micro level, productive waqf could lower cost of production of goods/services, since waqf has no shareholder who ask for return. Productive waqf could also lower cost of financing for Islamicfinancial institution (IFI) using cash waqf as source of fund or equity (Ahmed, 2007). Productive waqf could increase consumer surplus, producer surplus and supply of public goods (Muljawanet al., 2016), so that productive waqf could increase socio- economic activities, increase economic growth, reduce unemployment, alleviate poverty, and at the end could improve the well-being of the society.
Moreover, when productive waqf is used for IFI, including microfinance, it will reduce mismatch, reduce liquidity risk, minimize bubble, so that it will improve IFI’s stability and sustainability (Ascarya, 2017), where subsequently in macro-level will improvefinancial and economic stability.
Analytical network process results
The ANP model and factors of simple productive waqf model will be evaluated in Phase 2 and Phase 3 of ANP method, and the results will be presented here.
Figure 8.
Model 5 Cash waqfþ co-financing and external partnership
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Analytical network process network. The ANP network is built based on ANP model in Figure 3, comprising objective, criteria and alternative model cluster, as well as six sub- criteria, including Waqf Institution, Waqf Asset, Financing, Waqf Management, Waqf Benefits and Waqf Compliance. The ANP network can be seen inFigure 9.
All clusters and their elements are interconnected and interdependent among them, so that it forms circular causation which bears a resemblance to IIE (interactive, integrative and evolutionary)-process-oriented circular causation and continuity model proposed by Choudhury and Hoque (2004). Waqf as intercausal socioeconomic model interconnected with all clusters and elements (“everything”), including well-being in the objective and Shariah compliance in the Waqf Compliance as sub-law of Tawhid suggested byChoudhury et al.(2019), as well as other variables of socio-economic,financial and moral/ethics.
Objective of simple productive waqf model.Table 2shows the ANP results of objective cluster. The most important objectives of developing productive waqf agreed by all respondents are Economic Well-being (0.281) and Social Well-being (0.227), followed by Spiritual Well-being (0.196). Meanwhile, the least important objectives are Environmental Well-being (0.147) and Financial System Stability (0.149). These results show high consistency with inconsistency less than 1%. Moreover, all respondents show high agreement with significant Kendall’sWat 1% level.
Figure 9.
ANP network of determining the best simple productive waqf model
Table 2.
ANP Results on objective Objective
Respondent
Priority
Expert Practitioner ALL
1 Economic Well-being 0.295 0.252 0.281 1
2 Social Well-being 0.237 0.195 0.227 2
3 Environmental Well-being 0.141 0.167 0.147
4 Spiritual Well-being 0.195 0.199 0.196 3
5 Financial System Stability 0.133 0.188 0.149
Inconsistency 0.0115** 0.0063*** 0.0089***
Kendall’sW 0.6776*** 0.3300 0.4038***
X2 18.9714 6.6000 19.3833
p-value 0.0008 0.1586 0.0007
Waqf models
for Indonesia
Experts and waqf practitioners mostly have similar views on the objectives. Slight difference occurs on social well-being and spiritual well-being, where waqf practitioners slightly prefer spiritual well-being over social well-being. However, expert group shows high agreement with significant Kendall’sWat 1%.
Main factor of simple productive waqf model.Table 3shows ANP results on the main factors/criteria cluster. The most important main factors of simple productive waqf agreed by all respondents are Waqf Institution (0.191) and Waqf Asset (0.189), followed by Waqf Benefits (0.184) and Waqf Management (0.178). Meanwhile, the most unimportant factors are Waqf Compliance (0.127) and Waqf Financing (0.131). These results of main factor show high consistency with inconsistency less than 1%. Moreover, all respondents also show high agreement with significant Kendall’sWat 1% level.
Experts view that Waqf Asset (0.205) is the most important factor, followed by Waqf Institution (0.179) and Waqf Benefits (0.179), while waqf practitioners view that Waqf Management (0.196) is the most important factor, followed by Waqf Institution (0.188) and Waqf Asset (0.182). Although both groups have slightly different preferences, both groups show high agreement with significant Kendall’sWat 5% level.
Overall, Waqf Institution and Waqf Asset are stand out as the most important factors of simple productive waqf model agreed by all respondents and by both groups as the best three, although Waqf Benefits and Waqf Management are not far behind the first two factors. Moreover, Waqf Compliance and Waqf Financing are two most unimportant factors agreed by both groups of respondents.
Element/determinant of simple productive waqf model.The most important elements/
determinants of simple productive waqf model is Cash Waqf (0.05) fromfinancing factor, followed by residential building (0.048) and office building (0.047) from Waqf Asset factor, as well as organization (0.044) and social legal entity (0.043) from Waqf Institution. Next important elements/determinants are internal-external partnership (0.041) from Waqf Management and Shariah Compliance (0.40) from Waqf Compliance. These results of the elements/determinants of simple productive waqf model show high consistency with inconsistency less than 1%. Moreover, all respondents also show high agreement with significant Kendall’sWat more or less 1% level (seeTable 4).
Although Waqf Institution and Waqf Asset are the two most important main factors, the most important element comes fromfinancing factor, namely, Cash Waqf, which means that the experts and practitioners agree that Cash Waqf is the most important elements, followed by two elements from Waqf Asset and two elements from Waqf Institutions.
Table 3.
ANP results on the main factor/criteria
Main factor/criteria
Respondent
Priority
Expert Practitioner ALL
1 waqf Institution 0.179 0.188 0.191 1
2 waqf Asset 0.205 0.182 0.189 2
3 waqf Financing 0.142 0.115 0.131
4 waqf Management 0.174 0.196 0.178
5 waqf Benefits 0.179 0.181 0.184 3
6 waqf Compliance 0.122 0.138 0.127
Inconsistency 0.0087*** 0.0054*** 0.0066***
Kendall’sW 0.3213** 0.5562** 0.4106***
X2 11.2449 13.9048 24.6389
P-value 0.0467 0.0162 0.0002
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Experts view that the most important elements/determinants of simple productive waqf model are office building (0.046) and residential building (0.043) from Waqf Asset factor, social legal entity (0.042) from Waqf Institution factor and Asset Increase (0.042) from Waqf Benefits factor, followed by Islamic Bank Financing (0.041) from Waqf Financing factor, as well as Shariah (0.041) and Institutional Regulation (0.041) from Waqf Compliance factor.
Meanwhile, waqf practitioners view that Cash Waqf (0.061) from Financing factor and Residential Building (0.051) from Waqf Asset factor are the most important elements/
determinants of simple productive waqf model, followed by Temporary Eternal Partnership (0.045) from Waqf Management factor, Office Building (0.045) from Waqf Asset factor and Shariah (0.45) from Waqf Compliance factor, as well as Organization (0.43) from Waqf Institution factor.
The best simple productive waqf model.Finally, the best simple productive waqf models agreed by all respondents are Cash Waqf and self-managed model (0.243), as well as Cash Waqf and external-partnership model (0.222), followed in a considerable distance by Sukuk
Table 4.
ANP results on the detailed element/
determinant Element
Respondent
Priority Expert Practitioner ALL
Waqf
Institution (0.191)
1 Individual 0.032 0.029 0.028
2 Organization 0.040 0.043 0.044 4
3 Social Legal Entity 0.042 0.038 0.043 5
4 Cooperative 0.032 0.029 0.029
5 Commercial Legal Entity 0.022 0.030 0.025
Waqf Asset (0.189)
1 Small Business Facility 0.028 0.019 0.022
2 Residential Building 0.043 0.051 0.048 2
3 Office Building 0.046 0.045 0.047 3
4 Large Comm. Center 0.034 0.026 0.029
5 Mixed Social and Com Facilities 0.019 0.026 0.023 Waqf
Financing (0.131)
1 Cash Waqf 0.038 0.062 0.052 1
2 Cash WaqfþCo-Financing 0.039 0.035 0.039
3 Islamic Bank Financing 0.041 0.016 0.021
4 International Financing 0.022 0.019 0.020
5 Sukuk Issuance 0.025 0.032 0.031
Waqf Management (0.178)
1 Self-Managed 0.034 0.016 0.020
2 Subsidiary 0.030 0.040 0.036
3 Intern-Exstern Partnership 0.038 0.042 0.041 6
4 Temporary Ext-Partnership 0.032 0.045 0.039 5 Permanent Ext-Partnership 0.033 0.025 0.031 Waqf
Benefits (0.184)
1 Profitability 0.040 0.033 0.038
2 Asset Increase 0.042 0.035 0.039
3 Waqif Outreach 0.025 0.021 0.023
4 Mauquf’Alaih Outreach 0.032 0.035 0.034
5 Credibility Improvement 0.029 0.042 0.035
Waqf Compliance (0.127)
1 Shariah 0.041 0.045 0.040 7
2 Institutional Regulation 0.041 0.033 0.037
3 Waqf Regulation 0.039 0.037 0.037
4 Land Regulation 0.029 0.033 0.035
5 Regulation Differences 0.013 0.017 0.016
Inconsistency 0.0136** 0.0071*** 0.0092***
Kendall’sW 0.2111* 0.3512*** 0.4294***
X2 35.4593 50.9269 91.8760
p-value 0.0619 0.0072 0.0000
Waqf models
for Indonesia
and external-partnership (0.185), Cash Waqfþco-financing and external-partnership (0.176) and Islamic Bank Financing and self-managed (0.173). These results of the best simple productive waqf model show high consistency with inconsistency less than 1 (one) percent.
However, all respondents show low agreement and insignificant Kendall’sW, meaning that even the results are robust, all respondents have different views on the priority of thefive- simple productive waqf models, while practitioner shows significant agreement (seeTable 5).
In the meantime, experts view that the best model is Cash Waqf and Self-Managed (0248), followed by Islamic Bank Financing and Self-Managed (0.228), while waqf practitioners view that the best model is Cash Waqf and Self-Managed (0.277), followed by Cash Waqf and External-Partnership (0.229). The results of both groups (expert and waqf practitioner) show high consistency with inconsistency less than 1%. However, expert group shows low agreement, while waqf practitioner group shows high and significant agreement at 1%.
Overall, experts and waqf practitioners undisputedly agree that Cash Waqf and Self- Managed (0.243) is the best simple productive waqf model. Meanwhile, for the second-best model, experts prefer Islamic Bank Financing and Self-Managed (0.228), while waqf practitioners prefer Cash Waqf and External-Partnership (0.229). Interestingly, Islamic Bank Financing and Self-Managed is the least preferred model by waqf practitioner, while Cash Waqf and External-Partnership is the least preferred model by experts.
Discussions
Objective of simple productive waqf model. The results of this study show that simple productive waqf can be used to achieve several objectives, especially economic well-being, social well-being and spiritual well-being. These three objectives are agreed by expert group. waqf practitioner group, as well as all respondents, as can be seen in previous Table 2andFigure 10below.
These results are supported by several studies, such asAscarya (2017), Haneefet al.
(2014,2015) andSadeq (2002). ISF with Islamic social instruments, including zakat, infaq, sadaqa, waqf, etc., is considered as the effective ethical instruments to improve socio- economic condition of the poor (mustahiq) and to alleviate poverty, through social program and development program stated by Ascarya (2017). Haneef et al. (2014, 2015) also mentioned that IWIM model could be used for poverty alleviation and human resource development. More specifically, Sadeq (2002) specified waqf could be used as effective instrument of poverty alleviation and socio-economic development through making endowment of waqf and administration of waqf. Moreover,Ascarya (2017)also pin-pointed
Table 5.
ANP results on the simple waqf model
Simple waqf model
Respondent
Priority
Expert Practitioner ALL
1 Cash-Waqf and Self-Managed 0.248 0.277 0.243 1
2 I-Bank Fin. and Self-Managed 0.228 0.110 0.173
3 Sukuk and External-Partnership 0.178 0.173 0.185 3
4 Cash-Waqf and External-Partnership 0.166 0.229 0.222 2
5 Cash-WaqfþCo-Financing and Ext-Partnership 0.181 0.212 0.176
Inconsistency 0.0031*** 0.0013*** 0.0022***
Kendall’sW 0.1520 0.5380** 0.1382
X2 4.2571 10.7600 6.6333
p-value 0.3723 0.0294 0.1566
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that social program financed by Islamic social finance could resulted in social impact including religious improvement.
Main factor of simple productive waqf model.Four main factors of simple productive waqf model stand out, including Waqf Institution, Waqf Asset, Waqf Benefits and Waqf Financing, as can be seen in previousTable 3andFigure 11below, with high and significant agreements in the three groups (expert, waqf practitioner and all respondents). For experts, Waqf Asset is the most important main factor, while for waqf practitioners, Waqf Management is the most important main factor. The importance of waqf institution as nazir of waqf has been confirmed by many, includingIsmail Abdel Mohsin (2013).
However, expert actually selects waqf asset and practitioner selects waqf management as the most important main criteria, while overall waqf institution comes out as the most important main criteria, although their scores are only slightly different, indicating that these three main criteria are among the most important criteria to be considered when determining simple productive waqf model to be adopted by waqf practitioner in Indonesia.
It should be noted that waqf compliance and waqffinancing are the two most unimportant main criteria that all respondents have agreed. Compliance has become unimportant since waqf management has to follow Islamic jurisprudence and all related regulations, while waqf financing has become less important than other main criteria since any waqf, including productive waqf, could at least be financed by waqf collection and could be combined with other commercialfinancing when needed and feasible.
Element/determinant of simple productive waqf model.Even though waqf institution, waqf assets, waqf benefits and waqf management are the four most important main criteria in determining the priority or best simple productive waqf model, cash waqf, one of the elements of waqffinancing, has come out as the most important element outweighed other elements of most important main criteria (seeFigure 12).
Figure 10.
Objective of simple productive waqf model
Figure 11.
Main criteria of simple productive waqf model
Waqf models
for Indonesia
Cash waqf has always been thefirst choice tofinance any waqf project, including productive waqf, since waqf project naturally will be built by collecting waqf, including cash waqf as the mostflexible type of waqf tofinance various needs (Ismail Abdel Mohsin, 2013). The next most important elements are residential building and office building, as elements of waqf asset, since these two assets are considered simple and, most importantly, low risk, which is the most important requirements of waqf management to maintain the value of waqf facilities (Abdullah, 2019b). other most important elements are organization and social legal entity, as elements of waqf institution, since these two types of waqf institutions are the most applied types of waqf institution in Indonesia managing simple productive waqf, which have gained trust from the Muslim society. For example, our 11 waqf practitioners’ respondents comprise of 9 social legal entity (foundation) and 2 organizations.
The best simple productive waqf model.Finally, expert and practitioner have agreed on the best simple productive waqf model, namely cash waqf and self-managed model (see Figure 13), since this is the true and feasible simple productive waqf, which could be adopted by any waqf practitioner and have been adopted by almost all waqf practitioners in Indonesia. For example, Wakaf Al-Azhar manages rental house at Bella Cassa Residence, while TWI-DD manages rental houses Rumah Sewa Griya Sakinah. This best simple productive waqf model has been evaluated to be able to achieve the most in well-being, compliance (including Shariah compliance as sub-law of Tawhid) and other socioeconomic variables.
Meanwhile, expert and practitioner have different views on the second most important simple productive waqf model, where expert chose Islamic bank financing and self- managed, focusing on additionalfinancing, while practitioner chose cash waqf and external partnership, focusing on improving waqf management. Both models are feasible models applied by waqf practitioners in Indonesia, depending on the real conditions of the waqf
Figure 12.
Element of simple productive waqf model
Figure 13.
Best simple productive waqf model
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project. For example, Wakaf DT manages Dormitory usingfinancing from Islamic bank, while TWI-DD collaborates with Omega Cooperative to manage DD Futsal and Café.
Productive waqf, when managed professionally according to Shariah and waqf governance, it will always grow, develop and expand to provide various micro and macro socio-economic benefits (such as,Muljawanet al., 2016) to the Indonesian majority Muslim society. The productive waqf model adopted could be customized to the conditions and needs of the surrounding community.
Conclusion and recommendation Conclusion
The most important main factors of simple productive waqf model agreed by all respondents are Waqf Institution (0.191) and Waqf Asset (0.189), followed by Waqf Benefits (0.184) and Waqf Management (0.178), while Waqf Compliance (0.127) and Waqf Financing (0.131) are the least important factor.
The most important elements of simple productive waqf model agreed by all respondents are Cash Waqf (0.052), residential building (0.48) and office building (0.47), followed by organization (0.044), social legal entity (0.043) and internal-external partnership (0.41), while the least important elements are regulation differences (0.16), internationalfinancing (0.020), self-managed (0.020) and Islamic Bank Financing (0.021).
Therefore, the determinants or factors of simple productive waqf model are cash waqf as source of fund to develop residential building or office building, managed by waqf organization or waqf foundation in collaboration with professional external partner.
Moreover, the best simple productive waqf models agreed by all respondents are Cash Waqf and self-managed (0.243) and Cash Waqf and external partnership (0.222), followed by Sukuk and external partnership (0.185), while Bank Financing and Self-Managed (0.173) and Cash Waqfþco-financing and external partnership (0.176) are the least preferred models.
Therefore, the most preferred simple productive waqf model is the onefinanced with cash waqf fundraising, so that there is no commercial or externalfinancing involved, while the management could be self-managed or external-partnership.
Simple productive waqf model is the most feasible productive waqf model which could be immediately applied by waqf institution, especially for those who just started to manage productive waqf, which could achieve the most in all socio-economic variables, well-being compliance and moral/ethics within the theory of unity of knowledge, Tawhid. Meanwhile, property sector is considered as the least risky business appropriate for waqf asset, since the waqf principal should not decrease.
Recommendation
Waqf institution should start managing ethical productive waqf to be able to provide social waqf facilities and social programs needed by the community, and it could start with the simple productive waqf model in real estate or property sector, or any sector waqf institution most familiar with. Therefore, waqf institution could revive unproductive waqf land registered by Indonesian Waqf Board. Waqf institution could start with the simplest and most preferred model, namely, Cash Waqf and Self-Managed. If the waqf institution has limited knowledge and experience in managing productive waqf, it could opt for Cash Waqf and External Partnership model in the beginning.
The government and regulator must provide support and incentive to waqf institution to develop and manage productive waqf by providing training and certification for nazir as productive waqf manager, providing feasible unproductive waqf land to be transformed
Waqf models
for Indonesia
into productive waqf facility, and providing necessary regulations to ease the development of productive waqf.
Since the waqf literacy of Muslim society is still low, the government and regulator must also provide structured education and socialization to the society to encourage giving waqf as a way of live through education system and various multimedia, especially digital media and social media.
This study has limitations, so that further researches are needed to provide more appropriate productive waqf models to be implemented by waqf institution. The determinants of productive waqf model could be extended to include recent development offintech and the new normal in the wake of Covid-19 outbreak. The method could use different one, such as structural equation modeling (SEM) and/or add Delphi method before ANP or SEM method to improve the robustness of model construction.
Note
1. djppr.kemenkeu.go.id/page/load/penerbitancash-waqf-linked-sukuk-sw001-10maret-2020
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