The Existing Models for Agribusiness on Waqf Lands: A Review

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The International Islamic Economic System Conference – The 9^th I-iECONS 2021

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INTERNATIONAL ISLAMIC ECONOMIC SYSTEM CONFERENCE (I-iECONS 2021)

Norfaridah Ali Azizan

Faculty of Business and Management, Universiti Teknologi MARA (Selangor Campus), Malaysia

Sharifah Faigah Syed Alwi

Arshad Ayub Graduate Business School, Universiti Teknologi MARA, Shah Alam, Malaysia

Husniyati Ali

Faculty of Business and Management, Universiti Teknologi MARA (Selangor Campus), Malaysia

Amirul Afif Muhamat

Faculty of Business and Management, Universiti Teknologi MARA (Selangor Campus), Malaysia E-mail: [email protected]

Abstract

This study reviews the existing models for agriculture that are available in the literature. A pragmatic model needs to be formulated because latest report in 2018 shows that approximately 87% of waqf lands in Malaysia are underutilized. Agriculture becomes the focal point for this study since it offers the relevant solution to address the issue. Moreover, if the waqf trustee is willing to push extra miles, agribusiness has potential to offer more because it covers the upstream and downstream of agriculture activities.

Keywords: waqf; agribusiness; agriculture; endowment; lands

1. Introduction

Waqf can be categorised into specific waqf and general waqf in which the former is waqf property that must be developed based on the waqif (endower) wishes whereas for the latter, the waqif does not specify any activity to be carried out on the endowed property. Waqf lands in Malaysia is simply like a coin that has two sides – potentials and problems. The underutilised waqf lands are estimated to be around 26,100 from 30,000 hectares or 87% as at 2018 (Kamarudin, 2019). Another statistic by Omar (2016) revealed that 60% from the total waqf lands in Malaysia are categorised as specific waqf which means that the waqf trustee is bound to the waqif (endower) wishes.

Nevertheless, Ali Azizan, Muhamat, Syed Alwi, Ali and Abdullah (2021) have suggested agribusiness to be the relevant economic activity to be carried out even for the specific waqf lands. Likewise, agriculture is able to increase the household income of the B40 (Ali Azizan, Syed Alwi, Ali & Muhamat, 2020). The essential part is to make sure the right model is chosen when developing the waqf lands for agribusiness.

2. Existing Models

Previous studies have suggested that the agriculture activities on the waqf lands can be developed in the forms of:

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389 i. debt-based instrument (build, operate and transfer) ii. equity-based instrument

iii. self-financed instrument such as lease or ijarah, cash waqf and waqf shares iv. Islamic securities instrument

Mohd Nor and Mohammed (2009) suggest that to solve the underdeveloped issue of waqf lands, the management should match the development initiative for the waqf lands according to the land status. Their study suggested to use the Islamic muamalah contracts according to the activities that being planned for the waqf lands.

Figure 1: Muamalah contracts for agriculture activities on the waqf lands Source: Mohd Nor and Mohammed (2009)

Shafiai and Moi (2015) propose three basic partnership schemes based on al-muzara’ah and al-musaqah concepts which can be considered as joint-venture between the landowner and the farmer. The duo emphasised that the muzara’ah is a partnership between the landowner and the farmer from the beginning until harvesting the period;

while the musaqah is more on a partnership to cultivate the trees or plants. It can be concluded that the main difference between these two concepts is the muzara’ah concerns on the use of lands while the musaqah is on the pledged “trees or plants”.

Figure 2: Alternative 1 Source: Shafiai and Moi (2015)

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390 Figure 3: Alternative 2 Source: Shafiai and Moi (2015)

Figure 4: Alternative 3 Source: Shafiai and Moi (2015)

The option 1 is when the landowner provides land (in al-muzara’ah) or trees (in al-musaqah), tools, seeds and animals while the farmer contributes in term of the effort or workmanship. Whereas in option 2, the landowner provides land (in al-muzara’ah) or trees (for al-musaqah) while simultaneously, the farmer manages the rest of the process. In the option 3, the landowner provides the land (for al-muzara’ah) or trees (in al-musaqah) and seeds, while the rest of activities are on the farmer.

3. Concerns on The Models

The crux of the issues for the models is to what extent the waqf trustee wants to be involved in the agriculture project because it will expose the waqf trustee to the risks which might be beyond the capacity of the waqf trustee.

The main risks are business and financial risks which the former can range from the moral hazard and improper strategy while the latter can be in the forms of market risk, interest (profit) rate risk, inflation etc.

Next would be in term of securing the market for the agriculture produce. This is another critical issue that needs to be considered for any party in the agriculture activities. Without securing the market, produce such as crops or livestock cannot be sold. This situation can hit the profit margin of the business and eventually lead to loss and closure of the business.

Another aspect is in term of expertise to be involved in the agriculture activities. If the trustee is interested to involve in agriculture without having necessary expertise, then that can lead to business catastrophe. On the other end, by totally rejecting agriculture from the potential development for the waqf lands, then waqf trustee has limiting potential earnings that can benefit the beneficiaries and ummah as a whole.

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Likewise, this study suggests to refer to the recent study by Ali Azizan, Muhamat, Syed Alwi, Ali and Abdullah (2021) on the Anchor Company Models that they had suggested to be able to address the concerns raised above.

4. Conclusion

This study reviews several models which are relevant for agriculture activities that have been highlighted in the previous studies. In addition, concerns on the models are also being raised in the article so that relevant stakeholders can consider them when planning for the development of waqf lands for agriculture. It is important to emphasise again that agriculture has the potential to revitalise the waqf lands so that the underutilised waqf lands will be able to generate income that can be channelled to the beneficiaries, and at the same time to ensure the original intention of the waqif (endower) is preserved.

Acknowledgement

We would like to express our gratitude to the Faculty of Business and Management UiTM for the research grant awarded (600-IRMI 5/3/DDF (FPP) (006/2019) that has assisted us in this research.

References

Ali Azizan, N., Muhamat, A.A., Syed Alwi, S.F., Ali, H., & Abdullah, A.Q.C. (2021). Revitalising Waqf (Endowment) Lands for Agribusiness:

Potentials of the Anchor Company Models. Journal of Agribusiness in Developing and Emerging Economies, https://doi.org/10.1108/JADEE-05-2021-0128.

Ali Azizan, N., Syed Alwi, S. F., Ali, H., & Muhamat, A. A. (2020). Potentials of waqf (endowment) lands for lower income group (B40 Segment) through agribusiness activities. The Empirical Economic Letter November(Special Issue).

Kamarudin, K. (2019). Tanah wakaf boleh dimanfaatkan untuk kumpulan B40, Bernama.com. Retrieved from http://www.bernama.com/bm/news.php?id=1738830

Mohd Nor, N., & Mohammed, M. O. (2009). Categorization of waqf lands and their management using Islamic investment models: the case of the state of Selangor, Malaysia. Paper presented at the International Conference on Waqf Laws & Management: Reality and Prospects, IIUM.

Omar, I. (2016). Memahami konsep wakaf demi ummah, from https://news.uthm.edu.my/ms/2016/08/memahami-konsep-wakaf-demi-ummah/

Shafiai, M. H. M., & Moi, M. R. (2015). Fitting Islamic Financial Contracts in Developing Agricultural Land. Global Journal Al-Thaqafah, 5(1), 43-49.