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INTERNATIONAL ISLAMIC ECONOMIC SYSTEM CONFERENCE (I-iECONS 2021)
Islamic Social Finance (ISF) Optimalization for Empowerment of the Ummah: From Consumptive to Productive
Imama Zuchroh
Faculty of Economics, Malangkuçeçwara School of Economics (MCE), Malang 65124, Indonesia E-mail: [email protected]
Abstract
The purpose of this study is to provide an analysis of the role of Islamic Social Finance. Indeed, the conventional role of social finance is actually not much different, but in Islamic social finance it is subject to sharia principles. It is hoped that the positive impact for the community from Islamic Social Finance is greater. Considering that people's awareness of their obligations is getting better, the supporting facts are that currently Indonesia is the 4th largest country and the largest Muslim population in the world, the majority of Muslims are rich in natural resources and Waqf, some of the potential of Islamic teachings to empower Muslims, the nation and the state. And this fact is supported by indications that the number of funds collected and managed by state institutions (BAZNAZ) is increasing. While the Islamic social finance sector is broadly composed of traditional Islamic institutions based on philanthropy e.g. zakat, shadaqah and Waqf. Islamic philanthropy holds great potential to be developed into productive assets, which in the end is not only able to support religious social services, but is also directed to support various initiatives and goals of social justice. In addition, of course, ISF is an enormous economic potential. And so that the greater positive impact of the ISF can be played out, distribution to the Ummah through Micro Islamic Financial Institutions will be more targeted. Because it is a business constraint from people who are hit by capital can be helped. So that the role of Islamic social finance will be more productive for the people.The methodology used in this research is literature research, because there has been quite a lot of research in this field.
Keywords: Islamic Social Finance,, Empowerment, Islamic Philanthropy
1. Introduction
In Bentall's article entitled "The Quranic Injunction to Alms giving", 1999. It states how Islamic philanthropy is conceptualized. That is contained in the Qur'an Q. 9:60 which states that the following parties have the right to enjoy religious alms: (1) the poor/al-fuqara; (2) the poor and very poor/al-masakin; (3) administrator / amylin; (4) those whose hearts are inclined to [the truth]/mu'allafah qulubuhum; (5) those who are bound/riqab; (6) in debt/gharimin; (7) struggle in the way of Allah/fi sabilillah; and (8) traveler/Ibn Sabil (Benthall: 1999, 30).
Basically, this verse refers to the obligation of zakat which means "purifying", "growing" and "cleaning"
property from the rights of others. Zakat purifies not only the wealth of the giver but also his heart and mind from stinginess, greed and all other selfish tendencies. The term zakat is also used interchangeably with "sadaqah"
which is usually used for voluntary and non-obligatory donations of property. This religious order is intended to create justice among the people, especially in the distribution of wealth. This basic teaching shows that wealth in the Muslim community should be distributed among the poor and needy and should circulate among the rich.
Contemporary scholars reinterpret the distribution of zakat or sadaqah according to the social needs of the community.
Therefore, the distribution of zakat is flexible because it follows the urgent and changing needs of society and most Muslims allow the expenditure ratio to vary according to these evolving social needs. Because social needs develop and vary from place to place, zakat recipients are different from the actual needs around the place where zakat funds are collected. Thus, the religious aspect of the need for zakat is not seen as the main target for distribution of funds.
In Islam, the purpose of zakat is to relieve the poor who need financial assistance. This is related to understanding that a person does not enjoy ownership of the property owned. Muslims are required to seek and spend their wealth according to the will of Allah. "O you who believe, spend some of the good that you work for,
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and from what We produce for you from the earth, and do not spend what is bad from it" (Q. al-Baqarah 2: 267).
This religious injunction strongly supports the fact that the poor are entitled to the wealth of the rich. This is according to Cohen, in his article "Charity and Poverty in the Past Times", 2005, is the basic idea that wealth should circulate only among the rich. And for Amy Singer, this, or recognition of the rights of the poor in society has two main consequences: protection of the poor and equitable distribution of wealth in society, which was written in her research entitled "Giving Practices in Islamic Societies", in 2013.
This principle for philanthropy denotes the highest concern for human dignity and therefore the philosophy that economic rights and philanthropy promote harmony among people as they enjoy life and justice together. Because it is a social pillar of Islam that aims to direct individuals towards a common goal, the main purpose of zakat is to create justice and eliminate class differences (Benthall, 1999: 36).
Glory than “Islamic philantropic” has been proven, while the expression “Islamic social finance” has become widespread in recent years, it is a “New-Old” financial philosophy that has historically been proven to overcome social challenges (Qardawi,1999). Even though Islamic social finance is an emerging instrument in contemporary financial science and systems, Islamic social finance tools have been instrumental in the alleviation of poverty and socioeconomic development for over 1 400 years. Many literatures showed that the management of Baitul Maal during the time of the Caliph Abu Bakr originally served only to distribute the treasures alone, but in the second year of his leadership also serves as a place to store various wealth owned by the state. Baitul maal is used to finance the interests of the state and the welfare of its people. At the time of Umar bin Khatab being the caliph of Abu Bakr after his death, the wealth or treasury owned by the state in the baitul maal increased very significantly, as much of the flow of funds from the conquered countries such as Kisra and Qaishar. At the time of the Caliph Usman bin Affan, the wealth of the country more abundant when compared with the two previous Caliphs. Where the area is conquered more so that the state treasury more and more, so that the country is getting stronger and prosperous, even baitul maal when his government can finance the navy that controls the Mediterranean Sea.
Caliph Ali bin Abi Talib budgeted funds used to help the Muslims in need of help.
Now then where Islamic finance growth as an alternative and way of life particularly for those who believe in the application of Islamic tenets in finance. According to a Global Islamic Finance report from 2019, Islamic financial assets worldwide reached 2.591 trillion US dollars, while the rate of increase of global Islamic finance has remained at about 12.46% every year for the last 10 years (Azmi,2019), however, last year growth was only 2% (Islamic Finance Outlook 2020, 2020).
At the same time, sustainable, responsible and impact investing, also known as socially responsible or ethical investing, has progressed about two and half times from 13.3 trillion US dollars in 2012 (first report) to 30.7 trillion US dollars at the start of 2018 (GISA,2019).
Social finance or impact investing is an approach to managing investments that deliver a social and environmental dividend as well as an economic return. Islamic finance can be considered a subcategory of socially responsible investing. However, there is a basic difference between the two meanings in terms of conceptual ideas:
the guiding principle of Islamic finance is based on religion, while impact investing believes in the concept that returns to society should be ethical and sustainable.
Despite the differences in the guiding concepts of these investment categories, Islamic social finance can contribute towards sustainable investing as well as Islamic financial inclusion through the following fundamental principles: governing property, wealth creation and charitable distribution.
2. Literature Review
There are several previous studies that focus on Islamic Social Finance. Broadly speaking, the conclusions of some of these studies admit that the role of Islamic Social Finance is quite large. Some of the studies are listed in the following Table.
Table 1. Finding Of The Reviewed Source
No Author Tittle Focus Study Finding
1. Umar Habibu Umar, et.al (2021) The potential of Islamic social finance to alleviate poverty in the era of COVID-19: the moderating effect of ethical orientation.
Islamic social finance The study showed that by direct relationship, the awareness and knowledge of Islamic social finance instruments have a potentially significant positive contribution to poverty alleviation
2. Paolo Pietro Biancone1 and Maha
Radwan (2019) Social Finance and
Financing Social Enterprises: An Islamic
social finance This paper provides insight into how Islamic finance provides a valid financing
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Finance Prospective tool for social finance
through the mobilization of private funds allocated from
investors seeking investments that generate social and economic value.
3. SMMS Azman and ERAE Ali
(2019) Islamic Social Finance
And The Imperative For
Social Impact Measurment
Islamic social finance the paper finds that despite the tremendous growth of the Islamic finance industry, little is known about how Islamic finance institutions measure their social values, and how they report their social impact.
Findings from Habibu's research conducted in Nigeria, the role of Islamic Social Finance is quite large, especially during the pandemic era. Assistance through Islamic microfinance institutions not only gives hope to the community but also makes the business continuity of the community which is the object of their research about 400 respondents through electronic questionnaires continue (Habibu,2021). The amount of funds collected from Islamic Social Finance was large enough that researchers from Turin University, namely Paolo Pietro Biancone1 and Maha Radwan (2019), found findings from their research that it also attracted investors. This matter making the role of Islamic Social Finance not only for Muslims, however, the exact measurement of the impact of Islamic Social Finance still has to be an object of research in the future because based on the findings of the study of Azman and Ali (2019) entitled "Islamic Social Finance And The Imperative For Social Impact Measurment "gets the extraordinary growth of Islamic finance that is not matched by the impact report of Islamic Social Finance.
Therefore, the role of Islamic Social Finance is still interesting to explore, in this study, try to explain the role of ISF more productively through Islamic Microfinance.
3. Methodology and Data
In this presentation, one of the methods used in this research review. This is because many studies have been carried out and research has been carried out in the scope of various types of microfinance applications. The purpose of this study is to recap the different findings related to maximizing the use of Islamic social funds, namely infaq, zakat, sadaqah, and Waqf in different perspectives, so that a suitable mechanism is found to be applied. It covers multiple perspectives to fill gaps in the integration of social funds and microfinance in the context of poverty alleviation. Several world-famous papers have carried out more in-depth research for a very long time in search of the truth.
4. Results and Discussions
As for Indonesia, with the highest number of Muslim populations in the world, Islamic social funds are thus very useful. Islamic finance also promotes socioeconomic empowerment using social tools – Zakat (almsgiving), Waqf (endowment) and Sadaqah (voluntary) – which have been adopted and applied even outside the Islamic world. All these tools of Islamic social finance are associated with philanthropic giving but have different forms and definitions (Hassan M,2017). Zakat is an obligatory and mandatory payment of income, whereas Waqf refers to charitable giving as a charitable endowment trust (IFQ,2018). Moreover, Sadaqah has more of a charitable and voluntary nature and means giving something to the needy without the expectation of return. These instruments are used to provide education and healthcare, develop infrastructure, and maintain social welfare provisions for the poor and destitute, albeit in a mostly informal structure (Jouti,2019).
This study sheds light on how to optimize the Islamic social fund benefit for improving quality of life, not just by injecting money or to feed people them who are poor but to provide them with business skill and Islamic social funds can be used to sustain the fund while enabling the poor for generating income by integrating the fund with economics activities. Further, the evolving of fully-fledged Islamic Financial Non-Bank Institutions, particularly Islamic Microfinance Financial Institutions (IMFIs) are one of the myriad ways in change from consumption pattern to productive.
Here are the data for income from Islamic social fund in the form of zakah, infaq and sadaqah received by BAZNAZ (The National Board of Zakat Republic of Indonesia). While from Table 2 depicts the fund channeling to the asnaf (people who qualified to receive the zakah). The fund received is higher than the disbursement hence it means that there is potential to maximize the fund usage for broader coverage.
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Table 2. National Fund Collection based on the Fund Type (Badan Amil Zakat Nasional 2016, 2017, 2018)
Fund Type 2016 % 2017 %
Maal Alms-Individual Income 2.843.695.144.686 56.68 2.785.208.957.779 44.75
Maal Alms-Institution 620.546.547.627 12.37 307.007.314.242 4.93
Fitrah Alms 273.975.100.183 5.46 1.101.926.162.357 17.7
Individual Infaq 858.631.089.706 17.11 1.651.254.048.632 26.53
Infaq/CSR/PKBL Badan/Shadaqoh 142.867.215.300 2.85 113.629.148.360 1.83
Social Religion Fund 277.336.514.452 5.53 265.345.638.101 4.26
Other’s Fund 241.514.997 0 0 0
TOTAL 5.017.293.126.950 100 6.224.371.269.471 100
Fund Type 2018 %
Maal Alms-Individual Income 3.302.249.700.640 40.68 Maal Alms-Institution 492.422.843.634 6.07
Fitrah Alms 1.112.605.640.958 13.71 Tied Infaq and or Shadaqoh 963.154.055.758 11.87 Untied Infaq and or Shodaqoh 1.439.878.355.805 17.74 Social Religion Fund 692.939.298.007 8.54
TOTAL 8.117.597.683.267 100
Table 3. Fund Channeling based on Asnaf (Badan Amil Zakat Nasional 2016, 2017, 2018)
No Asnaf 2016 2017 2018
Amount % Amount % Amount %
1 Fakir Miskin 2.137.613.944.379 72.93 3.356.325.642.451 69.06 2.459.628.416.537 63.3 2 Amil 209.233.041.289 7.14 518.647.467.254 10.67 440.536.648.274 11.34 3 Muallaf 17.403.367.642 0.59 97.156.889.988 2.00 17.061.510.766 0.44
4 Riqob 4.278.727.729 0.15 21.827.062.720 0.45 1.478.837.467 0.04
5 Gharimin 16.435.575.105 0.56 40.772.744.732 0.84 32.875.372.661 0.85 6 Fi Sabilillah 524.865.496.303 17.91 755.062.496.814 15.54 896.893.187.209 23.08 7 Ibnu Sabil 21.379.958.163 0.73 70.363.020.484 1.45 37.156.093.806 0.96 TOTAL 2.931.210.110.610 100 4.860.155.324.445 100 3.885.630.066.721 100
From the aspect of distribution, the number of distributions for 18 years are: from 2001 s.d. in 2018 amounting to Rp. 836,512,139,145.00. Average amount the distribution per year is Rp.46,472,896,619.17. Lowest dispensing on in 2001 amounting to Rp0 or nothing has been disbursed because in the initial conditions the establishment of BAZNAS. The highest distribution in 2018 was IDR 234,934,754,552.00. A significant increase occurred in 2005 of Rp15,542,697,991.00 after the Tsunami in Aceh. The development of the number of distributions from year to year continues to experience enhancement. Improved distribution Zakat will certainly increase the benefits of zakat to mustahik. Increase in number distribution of BAZNAS is also in line with program innovations that include 5 (five) program areas, namely: education, economy, health, humanity and propaganda and advocacy.
Chapra said in Islamic Economic Thought and the New Global Economy, 2001, that important to remember that if the goal of Islamic finance is to gain development for society, the focus should go beyond the economic variables because development intertwines with social goals, namely alleviating poverty, increasing the quality of life and boosting chances for better education and health. Indonesia’s awqaf system has been supported by issuing Law No. 41 of 2004 on awqaf and Government Regulation No. 42 of 2006 on the implementation of a new paradigm about awqaf; there is an emphasis on waqf empowerment that is productively giving social benefit (the welfare for the society).
The findings of Obaidullah and Khan contained in their research entitled, Islamic Microfinance Development:
Challenges and Initiatives, 2012 found that the poor need special instruments, tools for them, to meet their needs for the availability of a convenient and inexpensive financial institution, Microfinance Institutions (MFIs). And this is in line with research from the Institute of Education, University of London entitled, “Do poor people's access to formal banking services raise their incomes?” by Pande, Cole, Sivasankaran, et al. 2012. Under such a situation, financial inclusion for every level of society should be the main goal, and it should be the goal of financial institutions. In addition, it should also be remembered that Islamic banks have socio-economic objectives as
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outlined in Maqasid Al-Syariah (Ahmed, 2012), to participate in the process of achieving the goal of alleviating poverty.
Although Islamic Banks have sharia principles with a socio-economic role to eliminate poverty among the community (Chapra, 1990), this role cannot be assigned to Islamic banks as a single institution because there is a demand and profit-sharing relationship whose profile does not match the profile of the poor. It should be noted that CSR is carried out by almost every company, which is mandatory, but for Islamic banks, they should do more social actions or social roles to alleviate poverty, improve welfare. However, the responsibility carried out by Islamic Commercial Banks is to provide competitive profit sharing, even though it has risk sharing as well, to funding customers. If Islamic Banks decide to invest more in financing the poor, the risk will be higher than financing the rich because it will lead to reputational risk which, in the bigger picture, can cause a domino effect for the bank as it loses its reputation in front of customers. So, this could be the answer that IMFIs can help reduce poverty due to non-strict policies to provide more profit sharing. So, to maximize it, it is worth implementing a full-fledged IMFIs as part of a pilot project and as part of helping poor people to generate income.
4.1 Current Development of Islamic Microfinance Financial Institutions (IMFIs)
One of the meanings of microfinance we quote from Elwardi's research, The role of Islamic Microfinance in Poverty Alleviation, 2015. Microfinance means providing loans to the poor, especially those who are included in financial exclusion. The IMFI lends a small amount of money, which is extended at a reasonable rate and returned through weekly or monthly payments. Funds used in IMFI itself can then use Islamic social capital as a connecting network (Hassan, 2014), namely zakat and waqf (Ahmed, 2004). Therefore, the role of zakat and waqf can be maximized because they can be used continuously, not only for consumption as well as for recycling (Wilson, 2007). So that it can maximally produce wealth which in other words is a productive fund (Chowdhury, 2009), which is financed by zakat. Thus, the role of zakat in alleviating poverty can be achieved (Ahmed, 2004) through integrated microfinance. It is undeniable that this scheme can overcome the trade-off problem in microfinance products.
There are great opportunities for IMFIs to develop. More specifically, as stated by Mohieldin, Iqbal, Rostom in their research entitled The Role of Islamic Finance in Enhancing Financial Inclusion in Organization of Islamic Cooperation (OIC), 2011. Countries. That potential Microfinance is still quite large, where almost all OIC countries, Islamic financing instruments, only take part in a small portion. For example, in Syria, the percentage is only 3%. However, microfinance generally has rapid growth which is mostly concentrated in Indonesia, Bangladesh, and Afghanistan, but the regulatory and accounting frameworks are not yet integrated.
Still in the study, that the characteristics of Islamic microfinance are quite similar to conventional MFIs, but MFIs always try to adapt to sharia principles from day to day which is further justified by the fact that instead of charging interest, the institution tries to charge fees. administrative fees and profits as interest are prohibited. The Table 4 below lists the differences.
Table 4. Differences between Conventional MFI and Islamic MFI The Differences between Conventional MFI and Islamic MFI
Category Conventional MFI Islamic MFI
Liabilities External funds, savings of clients External funds, savings of clients, Islamic Charitable Sources
Assets (Mode of Financing) Interest-based Islamic Financial Instruments Financing the Poorest Poorest are left out Poorest can include by integrating
zakah with microfinancing Deduction at the inception of the
contract
Cash has given No deduction at inceptions Target group Part of the funds deducted at
inception
Family
The objective of targeting women Women Ease of availability Liability of the loan (when given
to woman)
Recipient Recipient and spouse
Work incentives of employees
Monetary Monetary and religious
Dealing with default Group/centre pressure and threats Group/centre/spouse guarantee, and Islamic ethics
Social Development
Program Secular (or un-Islamic)
behavioural, ethical, and social development
Religious (include behaviour, ethic, and social)
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Now, although the characteristics of independent MFIs are more accommodating for the poor, several banks have released their microfinance products to spread their market, namely Misr Bank in Egypt, Tadhamon Islamic Bank in Yemen. In particular, Noor Islamic Bank and Emirates Post Holding Group in the UAE are also planning to establish financial services that are explicitly focused on low-income customers (Mohieldin, Iqbal, Rostom, et al. 2011).
The problem faced by conventional microfinance institutions is also encountered by Islamic Microfinance Institutions, namely facing conditions of limited funds to mobilize and serve customers. IMFI needs more operational funds to keep the poor afloat in developing their business and increase their confidence to be independent. Solving problems using IMFI capital may be difficult. In other words, large funding is needed to help IMFI help to make this happen. And the role of BAZNAS (The National Board of Zakat Republic of Indonesia) is very much needed. IMFI based on Islamic social funds can reduce the ratio of borrowers to keep the IMFI sustainable. Usually, the IMFI uses the profits it receives to run the IMFI. So with the help of Islamic social funds, capital needs can be fully provided to those in need.
5. Conclusion
In fact, the glory of Islamic philanthropy has long begun, when the caliph of Umar Abdul Aziz is a fact of how the role of Islamic social finance has provided considerable benefits. This potential can now be developed, this can be seen from the acceptance data of Islam Social Finance by BAZNAS. The number of receipts from zakat, infaq, shadaqah continues to rise. However, there is a gap between distribution for consumption, social finance can play a long role and distribution for more useful things or production. So that through Islamic microfinance the role of Islamic social finance can be more real.
References
Ahmed, H. (2004) Role of Zakat and Awqaf in Poverty Alleviation. Jeddah.
Ahmed, H. (2012) The Islamization of Economies and Knowledge: A New Institutional Economics Perspective. American Journal of Islamic Social Sciences. 29 (4), 1–27. p
Al Qardawi, Y (1999) Fiqh al zakah: A comparative study of zakah, regulations and philosophy in the light of Quran and Sunnah. Valume 2. - Jeddah: Scientifc Publishing Centre King Abdulaziz University, - 345 p.
Azmi S./ Global Islamic Finance Report. Artifcial intelligence and innovation in Islamic fnance - London, 2019.- 264 p.
Benthall, Jonathan. (1999) Financial Worship: the Quranic Injunction to Alms giving,” in The Journal of the Royal Anthropological Institute,Vol. 5, No. 1. 36.p
Chowdhury, A. (2009) Microfinance as a Poverty Reduction Tool — A Critical Assessment. Economic & Social Affairs DESA Working Paper No. 89. (89), 1–13.
Cohen, Mark R. Charity and Poverty in the Past Times, in the Journal of Interdisciplinary History, vol. 35, no. 3 (Winter, 2005), 347-360.p Elwardi, D. (2015) The role of Islamic Microfinance in Poverty Alleviation: Lessons from Bangladesh Experience. Munich Personal Repec
Archive.
Global Sustainable Investment Alliance (GISA) (2019) - Australia.
Hassan M. and Shirazi N. S. (2017) Social tax and transfers for poverty alleviation: a case for low- and middle- income countries // Handbook of Empirical Research on Islam and Economic Life.. 253.p
Islamic Finance Outlook 2020 / Standard &Poor’s Global (2020). - UAE, Dubai, 111.p
Islamic Finance Qualifcation (IFQ) / Chartered Institute for Securities & Investment. – (2018) - 8th ed. London: CISI. - 280 p
Mohieldin, M., Iqbal, Z., Rostom, A. and Fu, X. (2011) The Role of Islamic Finance in Enhancing Financial Inclusion in Organization of Islamic Cooperation (OIC) Countries. Policy Research Working Paper 5920.
Obaidullah, M. and Khan, T. (2011) Islamic Microfinance Development: Challenges and Initiatives. [Online]. Available at:
doi:10.2139/ssrn.1506073.
Pande, R., Cole, S., Sivasankaran, A., Bastian, G.G., et al. (2012) Does poor people’s access to formal banking services raise their incomes?
EPPI-Centre, Social Science Research Unit, Institute of Education, University of London.
Singer, Amy.” Giving Practices in Islamic Societies,” in Social Research vol. 80, No. 2, Giving: Caring for the Needs of Strangers (summer 2013): 341-358, 355
Social Finance for Social Economy Working Paper No. 67 Nathanael Ojong
Tahiri Jouti A. (2019) An integrated approach for building sustainable Islamic social fnance ecosystems // ISRA International Journal of Islamic Finance. -. - №2 (11). 246–266.p
Wilson, R. (2007) Making Development Assistance Sustainable Through Islamic Microfinance. IIUM Journal of Economics and Management.
[Online] 15 (2), 197–217.
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INTERNATIONAL ISLAMIC ECONOMIC SYSTEM CONFERENCE (I-iECONS 2021)
Optimization Cash Waqf Linked Sukuk (CWLS) to Support the Development of Social Investment and Productive Waqf
Nadia Annisa Putri
Faculty of Economics, State University of Jakarta, DKI Jakarta 11840, Indonesia Tel: +6287777094596 E-mail: [email protected]
Abstract
Waqf is a very important element of Islamic philanthropy because waqf is not only a dimension of worship but waqf has a very close relationship from the legal, social, and especially economic sectors. The economic sector is very important because, from waqf assets, assets with high economic value can be produced, the results of which can be utilized for the welfare of the people and have the potential to have an impact on social life, equitable development, and economic growth. One form of waqf that is currently being developed globally is cash waqf. However, at present, cash waqf has not been managed productively.
According to the Indonesian Waqf Agency (BWI), the potential for cash waqf in Indonesia reaches IDR 180 trillion every year.
But in fact, the realization of cash waqf is only Rp. 819.38 billion annually. This means that cash waqf has enormous potential to be developed but its management cannot be said to be optimal. The existence of this problem, the Indonesian government through the Indonesian Waqf Board (BWI) is trying to improve the development of cash waqf by issuing sharia financial instruments known as Cash Waqf Linked Sukuk (CWLS) but there is no specific integrity that is still connected digitally with mobile banking. This study analyzes the problem of Indonesian cash waqf against Cash Waqf Linked Sukuk. The method used in this research is the collection and analysis of quantitative data. With this research, Cash Waqf Linked Sukuk are expected to be well integrated and increase the potential of cash waqf for the development of social investment, strengthen the sharia sector, finance productive waqf assets, and support the implementation of social programs.
Keywords: Cash Waqf, Cash Waqf Linked Sukuk, Economy Indonesia.
1. Introduction
Waqf is a very important element in Islamic philanthropy because waqf does not only have dimensions of worship, but waqf also has a very close relationship from the legal, social, and economic sectors. The economic sector is very important because waqf assets can be produced with high economic value and the results can be used for the welfare of society, equitable development, and economic growth. The existence of waqf has proven to have helped many social activities in various parts of the world, especially Indonesia. Several of educational institutions, Islamic boarding schools, hospitals, and mosques in Indonesia are largely supported by their existence and survival by waqf. The Indonesian Ministry of Finance also emphasized that the waqf system could contribute significantly to reducing government spending. Reduced government spending can reduce the budget deficit and government loans (Ministry of Finance of the Republic of Indonesia, 2019).
One form of waqf that is being developed globally is cash waqf. Waqf is a carried out by a person, group of people, Cashinstitutions, or legal entities in the form of cash in securities (Virdita Ratriani, 2021). Cash waqf, in addition to getting rewards, can also strengthen the Islamic banking sector, increase sharia capital, drive the sharia economy, finance productive waqf assets, and support the implementation of social programs.
Several countries have developed cash waqf well, namely Saudi Arabia, Egypt, Jordan, Turkey, Bangladesh, and Malaysia (Fauza, 2015). In Egypt, Jordan, Turkey, and Bangladesh, waqf funds are used for the benefit of the state. Egypt has used waqf funds to cover the national budget deficit and build various public facilities so that the country can ease state spending. In Bangladesh the role of waqf as a substitute for the role of tax by issuing Cash Waqf Certificates (SWU) which can be purchased by the public for funding social projects (Mu'allim & Kunci, nd). These countries have been very advanced in the development of waqf and even have a special institution to manage waqf at the level of the ministry. Thus, waqf management makes a significant contribution to sustaining the country's economy.
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Meanwhile, in Indonesia, the management of cash waqf is only regulated by one directorate under the auspices of the Ministry of Religion, namely the Indonesian Waqf Board or Badan Wakaf Indonesia (BWI) as the regulator in managing waqf funds. In addition, BWI collaborates with Nazhir as the manager of waqf funds, and the Islamic Financial Institution Recipient of Cash Waqf or Lembaga Keuangan Syariah Penerima Wakaf Uang (LKSPWU) as the party receiving and collecting waqf funds. Indonesia in the management and development of waqf funds cannot be said to be good. Strengthened based on data reported from the official website (bwi.go.id, 2021), the potential for Indonesian cash waqf reaches IDR 180 trillion every year. However, cash waqf only reaches Rp. 819.38 billion every year. Thus, it can be said that the management and development of cash waqf in Indonesia are still not optimal.
This is due to the low literacy of cash waqf so that people do not know cash waqf well. The National Committee for Sharia Economics and Finance also said the same thing that the development of cash waqf in Indonesia was not optimal. One of the reasons was the low literacy regarding cash waqf (Merdeka.com, 2021). In addition, an important thing that causes the management of cash waqf in Indonesia to be not yet optimal is the cash waqf system that has not been well integrated. In Indonesia in assisting the management of cash waqf, BWI in 2020 issued a sharia financial instrument called Cash Waqf Linked Sukuk (CWLS). The instrument is a cash waqf to increase social investment and the development of productive waqf in Indonesia (Utami, 2020). Productive waqf is waqf management from the people whose results can be used for sustainable useful activities (bwi.go.id, 2018).
Thus, Cash Waqf Linked Sukuk (CWLS) is here to optimize the Indonesian economy through the potential of waqf funds at a productive, safe, and competitive rate guaranteed by the state.
But in fact, the integration of CWLS implementation cannot be said to be optimal because CWLS does not yet have specific management. The implementation of CWLS is still carried out face-to-face and is still incorporated in the Islamic banking mobile banking feature, there is no digitalization specifically that handles CWLS. Therefore, this study aims to analyze the effect of optimizing CWLS Islamic financial instruments in the management and development of cash waqf to support the development of social investment and increase productive waqf in Indonesia.Here introduce the paper, and put a nomenclature if necessary, in a box with the same font size as the rest of the paper.
2. Literature Review 2.1 Social Investment Structure
Investment is often defined as the activity of setting aside funds for investment facilities to obtain economic value at a later date. According to (Fitria, 2019) Investment is the placement of several funds with the hope of gaining profits in the future. Currently, the types of investment are increasingly developing, one type of investment that is starting to be of interest to investors, there is social investment. Based on research conducted by (Santoso et al., 2018). Social investment is a type of investment that is not like a financial investment which only relies on profits from time to time but the social investment is an effort to improve people's welfare so that the results of social investment are beneficial for people. Lots. Then, in social investment, every resource used needs to be accounted for.
2.2 Cash Waqf
The Indonesian Ulema Council or Majelis Ulama Indonesia (MUI) defines Cash Waqf as waqf that is carried out by a person, group of people, institution, or legal entity in the form of cash. Cash waqf may only be used and distributed for which are permitted or syar'I, the principal value of the waqf may not be sold, granted or inherited.
The definition of cash waqf is also interpreted the same by (Dwi Pusparini, 2016), namely that cash waqf is a kind of waqf which is different from building waqf but waqf is in the form of cash.
2.3 Cash Waqf Linked Sukuk
Cash Waqf Linked Sukuk (CWLS) is a sharia financial instrument in the form of Islamic debt securities, or Sukuk based on cash waqf. Waqf funds collected from this instrument can be invested in a safe and risk-free investment instrument, namely the sovereign Sukuk. So that it can help finance fiscal in social projects, especially in the fields of education, health, and development. The scheme or flow of the CWLS, namely the community as wakif who wants to invest in cash waqf ordering CWLS with a minimum price of 1 million Rupiah at the Sharia Financial Institution for Cash Waqf Receiving or Lembaga Keungan Syariah Penerima Wakaf Uang (LKSPWU).
Then, BWI as the manager of the waqf funds invested the waqf funds in the State Sukuk. Furthermore, BWI will channel the return from the State Sukuk yield through its nazir partner as the cash waqf manager. The distribution is to finance social activities and to finance the construction of social facilities and infrastructure projects that will become waqf assets. At the maturity date of the Sukuk Negara, the cash repayment is returned by BWI to the waqifs 100% (Faiza, 2019).
439 3. Methodology and Data
3.1 Method
The type of research that the author uses is quantitative, namely research that aims to develop theories or hypotheses related to natural or social phenomena.
3.2 Population
The population in this study is the Indonesian people with the most affordable population is the Indonesian people on the island of Java.
3.3 Sample
In this study, the authors took a sample of 140 Indonesians in the Jakarta, Bogor, Depok, and Bekasi (Jabodetabek) areas with an error rate of 5% so that there were as many as 100 Indonesians in the Greater Jakarta area.
3.4 Data collection
The data in this study were obtained from distributing questionnaires so that they were easily accessible to the public. Then the data were collected through questionnaires using a scaling technique consisting of 5 scales which were then tested through SPSS. Then, this study uses a description using regression analysis seen from the determinant coefficient table.
4. Discussion
4.1 The Influence of CWLS on Investment Development
Table 1. T-Test for CWLS on Investment Development Coefficientsa
Model Unstandardized Coefficients Standardized Coefficients
t Sig.
B Std. Error Beta
1 (Constant) 2.787 .521 5.350 .000
CWLS .659 .070 .625 9.416 .000
a. Dependent Variable: Investment Development
Hypothesis testing of CWLS on Investment Development is declared "accepted" or means that there is an influence between CWLS on Investment Development. This is because the significance value of the t-test on this variable is 0.000 and fulfils the requirements for the acceptance of the hypothesis, namely the significant value must be less than 0.05, so it can be concluded that H0 is rejected, and Ha is accepted.
Table 2. Coefficients of Determinations for CWLS on Investment Development Model Summary
Model R R Square Adjusted R Square Std. Error of the Estimate
dimension0 1 .625a .391 .387 1.191
a. Predictors: (Constant), CWLS
The result of the calculation of the coefficient of determination can be seen that the value of R square (R²) is 0.391. Thus, the influence of CWLS on Investment Development is 39.1% while the remaining 60.9% is influenced by other variables. This supports the t-test and illustrates the effect of CWLS on Investment Development.
440 4.2 The Effect of CWLS on Productive Waqf
Table 3. T-Test for CWLS on Productive Waqf Coefficientsa
Model
Unstandardized Coefficients Standardized Coefficients
t Sig.
B Std. Error Beta
1 (Constant) 3.405 .539 6.312 .000
CWLS .651 .072 .607 8.980 .000
a. Dependent Variable: Productive Waqf
Testing the CWLS hypothesis on Productive Waqf is declared "accepted" or means that there is an influence between CWLS on Productive Waqf. This is because the significance value of the t-test on this variable is 0.000 and fulfills the requirements for the acceptance of the hypothesis, namely the significant value must be less than 0.05, so it can be concluded that H0 is rejected, and Ha is accepted.
Table 4. Coefficient of Determination for the Effect of CWLS on Productive Waqf Model Summary
Model
R R Square
Adjusted
R Square Std. Error of the Estimate
1 .607a .369 .364 1.233
a. Predictors: (Constant), CWLS
The result of the calculation of the coefficient of determination can be seen that the value of R square (R²) is 0.369. Thus, the influence of CWLS on Productive Waqf is 36.9% while the remaining 63.1% is influenced by other variables. This supports the t-test and illustrates the effect of CWLS on Investment Development.
Indonesia is a country with the largest Muslim population in the world, based on data from the Ministry of Religion quoted from the website (Kompas.com, 2021) which as many as 227 million people have the potential to develop Islamic financial instruments Cash Waqf Linked Sukuk (CWLS) so that the optimization of these instruments can be optimized. Materialized. Accompanied by an increase in public knowledge regarding CWLS and the need for a special digitalization of CWLS so that the potential of cash waqf owned by Indonesia is in line with its realization. Based on the research data that has been done, CWLS has great potential in the development of social investment and the management of productive waqf.
With the productive management of cash waqf, Indonesia can use the cash waqf to help cover the APBN deficit and assist in building various public facilities so that cash waqf can be a solution in reducing state spending. In addition, good management of cash waqf can also help fund social projects. Thus, the Cash Waqf Linked Sukuk (CWLS) can contribute to sustaining the Indonesian economy.
5. Conclusion
This research was conducted to measure the factors that can increase productive waqf and investment development in Indonesia. The variables tested are Cash Waqf Linked Sukuk (CWLS) (X), Investment Development (Y1), and Productive Waqf (Y2). From the hypothesis test conducted by the researcher, the results are as follows:
CWLS has a positive and significant impact on investment development. Thus, it can be concluded that CWLS is one of the factors that can influence investment development using a regression method.
CWLS has a positive and significant effect on Productive Waqf. So, it can be concluded that CWLS is one of the factors that can influence Productive Waqf.
From these results, the authors conclude that CWLS is indispensable for the Indonesian people to develop existing investments and increase the potential of productive waqf.
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