Juridical Study on the Optimization of Cash Waqf Management

by Islamic Bank in Indonesia*

Teguh Tresna Puja Asmara ** , Lastuti Abubakar ***

DOI: https://doi.org/10.22304/pjih.v6n3.a1

Submitted: September 15, 2019 | Accepted: December 02, 2019

Abstract
Cash waqf is an innovative instrument of waqf aiming to create social welfare. It is
expected that cash waqf enables extensive public participation to support social
welfare. However, in reality, cash waqf management in Indonesia has not yet
resulted optimal benefit. Based on the Law Number 41 of 2004 on Waqf, three
institutions carry out cash waqf management. They are the Indonesian Waqf Board as
the collector and the developer, Nazhir as the manager, and the Islamic Financial
Institution as the collector. The three institutions make the cash waqf management
and development ineffective and not optimal. Based on the data from the Indonesian
Waqf Board, of the total potential cash waqf IDR180 Trillion, only IDR400 billion was
realized. This study is a normative juridical legal study employing descriptive method. The
results reveal that the role of the Islamic Financial Institution, Islamic bank, as collector can
actually be expanded. Thus, it covers the management and distribution roles like a Waqf
Bank in Bangladesh, the Social Islami Bank Ltd. (formerly known as Social Investment Bank
Ltd). Islamic bank has capability and professionalism of management and distribution of
funds generated from the cash waqf.

Keywords: Cash Waqf, Islamic Bank, Optimization

Studi Yuridis tentang Optimalisasi Manajemen Wakaf Uang

oleh Bank Syariah di Indonesia

Abstrak
Wakaf uang merupakan salah satu instrumen inovatif dari wakaf dalam menciptakan
kesejahteraan sosial di masyarakat. Dengan wakaf uang, partisipasi masyarakat umum
akan terbuka lebih lebar dalam menunjang pemerataan kesejahteraan sosial. Akan tetapi,
dalam kenyataannya pengelolaan wakaf uang di Indonesia masih belum dirasakan
manfaatnya secara optimal. Berdasarkan Undang-Undang Nomor 41 Tahun 2004 tentang
Wakaf, pengelolaan wakaf uang dilakukan oleh tiga lembaga yakni Badan Wakaf Indonesia
(BWI) sebagai penghimpun dan pengembang, Nazhir sebagai pengelola, dan Lembaga

PADJADJARAN Journal of Law Volume 6 Number 3 Year 2019 [ISSN 2460-1543] [e-ISSN 2442-9325]
*
This article is adapted from the author paper presented at Islamic Law Fair 2016, Diponegoro University.
**
Student of Master Program at the Faculty of Law, Padjadjaran University, Jalan Banda No. 42, Bandung, S.H.
(Padjadjaran University), Email: [email protected].
***
Lecturer of the Faculty of Law, Padjadjaran University, Jalan Dipati Ukur No. 35, Bandung, S.H. (Padjadjaran
University), M.H. (Padjadjaran University), Dr. (Padjadjaran University), Email: [email protected].

427
428 PJIH Volume 6 Number 3 Year 2019 [ISSN 2460-1543] [e-ISSN 2442-9325]

Keuangan Syariah (LKS) sebagai penghimpun. Pengelolaan Wakaf Uang oleh tiga lembaga
tersebut menjadikan pengelolaan dan pengembangan Wakaf Uang tidak efektif dan
optimal. Hal ini terbukti dari data BWI, bahwa di tahun 2017 dengan total potensi Wakaf
Uang keseluruhan yang mencapai Rp180 Trilyun, hanya terealisasikan sebesar Rp400
Milyar. Penelitian ini bersifat deskriptif analitis dengan menggunakan pendekatan yuridis
normatif. Hasil penelitian menunjukan bahwa fungsi LKS dalam hal ini perbankan syariah
sebagai penghimpun wakaf uang, sesungguhnya dapat diperluas sehingga mencakup fungsi
pengelolaan dan penyaluran seperti Bank Wakaf yang ada di Bangladesh yakni Social Islami
Bank Limited (sebelumnya dikenal sebagai Social Investment Bank Ltd). Perbankan syariah
memiliki kompetensi dan profesionalisme dalam pengelolaan dan penyaluran dana yang
berasal dari wakaf uang tersebut.

Kata kunci: Optimalisasi, Perbankan Syariah, Wakaf Uang

A. Introduction
The Preamble of the 1945 Constitution of Indonesia states that one of the national
objectives of the people of Indonesia is public welfare. This objective is based on
economic democracy by relying on a fair market mechanism.1 To achieve the ideal,
the State needs to play an active role in carrying out national economic
development by making efforts to renew the economic legal system to be suitable
with the values that live within society
In the fields of law and justice, Indonesia is the largest Muslim country in the
world that cannot be separated from Islamic law. In the context of national
economic development, Islamic Law is urgently needed to be the foundation of
economic activities within society adhering to Islamic values such as cooperation,
tolerance, and justice. The existence of Islamic economic law in the national
economic legal system was strengthened by the enactment of the Islamic Law
system in banking activities with the presence of Islamic bank. Therefore, Indonesia
has dual legal system governing the same material.2
The enactment of the Law Number 41 of 2004 on Waqf is a form of Islamic Law
in the field of economy to achieve the welfare objective. The utilization of waqf is
not only for the purposes of ceremonial worship but also carries out social
functions for equal distribution of public welfare. The principles of waqf
management are to maintain the eternity of the substance of property and to
maximize the results. They are effective means of realizing public welfare.
The existence of waqf has the potential to continue to be developed in
Indonesia. Realizing the potential, the Indonesian Government establishes efforts
to regulate waqf. Initially, the Law on Waqf and Government Regulation Number
42 of 2006 on the Implementation of the Law Number 41 of 2004 on Waqf was

1 Syaugi Mubarak, “Demokrasi Ekonomi dalam Hukum Ekonomi Syari’ah”, Risalah Hukum Fakultas Hukum
Unmul, Vol. 6, No. 2, 2010, p. 89.
2 Lastuti Abubakar and Tri Handayani, “Perkembangan Transaksi Perbankan dan Implikasinya terhadap
Pembaruan Hukum Perdata Indonesia”, Justitia Jurnal Hukum, Vol. 1, No. 2, 2017, p. 251.
 Juridical Study on the Optimization of Cash Waqf Management by Islamic Bank
in Indonesia 429

enacted. Subsequently, it has been amended by the Government Regulation

Number 25 of 2018 on the Amendments of Government Regulation Number 42 of
2006 on the Implementation of the Law Number 41 of 2004 on Waqf.
Currently, people’s understanding of waqf is still very restricted on physical
goods, such as Land or Building. Consequently, the benefit on economic welfare is
limited. In fact, even though waqf is a Maliyah3 instrument, it can also be classified
as a humanitarian effort.4 Therefore, Waqf must be maximized to realize public
welfare.
Cash waqf is an innovative instrument of waqf to realize public welfare. It
enables public participation to support the equitable distribution of public welfare.
The Law on waqf based on Ijtihad can be understood as the development of the
provision. Despite the fact that cash is not mentioned directly in the valid texts, the
Holly Quran and Hadith, as a form of waqf, Islamic scholars have no dissenting
opinion regarding the practice of cash waqf. The difference is only in the sense of
the essence that must be eternal or not about assets that may be represented.5
Thus, the law of cash waqf is included in the concept in which appropriate with the
thoughts of Malikiyah and Hanafiyah scholars wherein the treasure of waqf
category can also include the items that may not always be perpetual. In this case,
the analogy against the law of mubah (be allowed) turn out to be appropriate for
relevance to the position of the cash waqf based on the principle that all the
problems are basically mubah as long as there is no argument that prohibits it.
Cash waqf also has the potential to advance the national economy. According
to Nasution, the potential is estimated to reach three trillion in a year.6 However,
the management of the cash waqf is still not reach the peak. According to data
from the Indonesian Waqf Board (BWI – Badan Waqaf Indonesia), in 2017, of the
potential IDR180 trillion, only IDR400 billion was realized.7 This is undeniably very
far from the calculation. As a modification of Waqf, the cash waqf management
cannot be treated equally with the general waqf management. Because of the
differences with waqf management in general, problems or obstacles often arise in
the management institutions and developers of cash waqf. Under the Law on
Waqf, there are three parties acting as cash waqf managers and developers. They
are the BWI, Nazhir, and the Islamic Financial Institutions. The division of
management and development of cash waqf into these three different institutions

3 Maliyah Instruments or Maliyah Worship, is the deed of worship carried out by means of property or
manifested in the form of giving assets or related to assets, such as Waqf, Zakat, Infaq, and Shadaqa.
4 Ali Amin Isfandiar, “Tinjauan Fiqh Muamalat dan Hukum Nasional tentang Wakaf di Indonesia”, La Riba, Vol.
2, No. 1, 2008, p. 52.
5 Imam Suhadi, Wakaf Untuk Kesejahteraan Umat, Yogyakarta: PT. Dana Bhakti Prima Yasa, 2002, p. 80.
6 Ibid.
7 Umi Nur Fadhilah, “Potensi Wakaf Tunai Capai Rp 180 Triliun”, Republika,
https://www.republika.co.id/berita/dunia-islam/wakaf/18/10/16/pgovmd384-potensi-wakaf-tunai-capai-rp-
180-triliun, accessed on 02 November 2018.
430 PJIH Volume 6 Number 3 Year 2019 [ISSN 2460-1543] [e-ISSN 2442-9325]

has led to the failure of cash waqf in Indonesia. Another problem is the
competency of cash waqf management that cannot accommodate all interests.
As a step to realize social welfare, optimization of cash waqf needs to be done
in a structured, systematic, and massive manner. Institutional waqf is important to
realize the optimization of cash waqf in Indonesia. Therefore, an exclusive
management institution should include collection and distribution. Therefore,
obstacles and constraints of the role of cash waqf can be addressed effectively and
efficiently. The potential of Islamic Financial Institutions as the collector of cash
waqf, as regulated in the Law on Waqf, can actually be expanded so that it also
covers the management and distribution functions because the Islamic Financial
Institutions have competence in collection and management of professional social
funds. Based on the background, this study aims to analyze the revision of
regulations to facilitate the Islamic bank to become Nazhir as an effort to optimize
cash waqf in Indonesia.
This study used normative juridical approach method that prioritizes library
research to be secondary data material in the form of positive law in this case
governing the cash waqf and Islamic bank.8 The normative juridical approach
method used in this study includes research on the legal principles, legal
systematics, and legal synchronization.9 This research is descriptive method of
analysis which describes the facts of the data obtained based on reality in this case
the implementation of cash waqf in Indonesia. These facts are then analyzed by the
applicable law and conclusions are drawn. The research phases are carried out in
two stages, the first is Library Research, this study aims to examine and trace
secondary data in the form of primary, secondary and tertiary material. The second
is Field Research, this research is conducted to obtain primary data in the field as a
result of secondary data collection and interviews with practitioners, academics
and other professionals who have competence with research material in legal
writing.

B. Cash Waqf as Waqf Innovation

Etymologically, waqf is derived from the word waqafa-yaqifu-waqfan, which means
to stop or to hold (al-habs).10 Terminologically, Islamic scholars have provided the
definition of Waqf. A scholar of Shafi’i School, Imam Nawawi, mentions that Waqf
is to hold back the assets that can be taken advantage of, while the object remains
and the benefits are used for good and draws closer to Allah. According to a scholar
of the Hanafi School, Imam Syarkhasi, waqf is to hold back property from the reach

8 Soerjono Soekanto and Sri Mamudji, Penelitian Hukum Normatif: Suatu Tinjauan Singkat, Jakarta: PT. Raja
Grafindo Persada, 2003, p. 13.
9 Soerjono Soekanto, Pengantar Penelitian Hukum, Jakarta: Penerbit Universitas Indonesia 2008, p. 51.
10
Said Agil Husin al-Munawwar, Hukum Islam dan Pluralitas Sosial, Jakarta: Penamadani, 2004, p. 122.
 Juridical Study on the Optimization of Cash Waqf Management by Islamic Bank
in Indonesia 431

of other people. Ibn Arafah of the Maliki School defines Waqf as provision of
something, at the time limit of its existence, at the same time as an estimate.11
According to the Indonesian Compilation of Islamic Law (KHI –Kompilasi Hukum
Islam), Waqf is a legal act of a person or group of people or legal entity that
separates part of property and institutionalizes it eternally for the interests of
worship or other public purposes in line with Islamic teaching. Furthermore, the
Law Number 41 of 2004 on Waqf states that waqf is a legal act of a wakif to
separate and/or to submit a portion of property to be used evermore or for a
certain period in accordance with interests for the purposes of worship and/or
public welfare based on sharia. Article 16 Paragraph (3) regulates Waqf property
not only limited to immovable objects; it also covers movable objects such as
money, precious metals, securities, vehicles, intellectual property rights, rights of
lease, rights of movable objects, and further movable objects based on Islamic laws
and applicable laws and regulations.
Initially, waqf assets that have been deemed in a narrow manner include only
immovable property such as land and buildings. However, the coverage is
developed to include movable property such as cash. In accordance with the fatwa
of the Indonesian Ulema Council (MUI –Majelis Ulama Indonesia) on May 11, 2002,
the Waqf (al-Nuqud Waqf/Cash Waqf) is a waqf by a person, a group of people, an
institution, or a legal entity in the form of cash. This is one of the productive Waqf.
Didin Hafidhuddin, in Anshori,12 explains that productive Waqf is a gift in the form
of something that can be cultivated or rolled out for the good and benefit of
people.
The cash waqf is similar to other Islamic financial instruments, namely zakat,
infaq, and shadaqa (ZIS). Still, there are some differences between them. Unlike
the cash waqf, ZIS can be distributed directly to the beneficiary. On the contrary,
cash waqf should be invested so that people always have available funds that
increase along with the increase in the number of wakif who do charity. The
investment profits from the principal can be reused to fund the needs of people.
Therefore, the cash waqf instrument can be a public fundraising instrument.
Essentially, Waqf is charity from benefits and profits obtained from the assets
of Waqf with the provision of holding object not to be traded, granted, and
inherited to remain lasting (dawam al-intifa). The reward continues to flow to the
wakif. The eternal principle of benefits is the main principle of waqf.13
The Law of cash waqf can be understood as the development of thought from
the original provision. The cash waqf is not mentioned in the Holy Quran and the
Hadith. However, there is no difference of opinion among scholars in the practice
of waqf. The dissenting opinion (khilafiah) only covers whether the asset must be

11 Elsi Kartika Sari, Pengantar Hukum Zakat dan Wakaf, Jakarta: Grasindo, 2007, p. 55.
12 Abdul Ghofur Anshori, Hukum dan Praktik Perwakafan di Indonesia, Yogyakarta: Pilar Media, 2006, p. 90.
13 Rashedul Hasana and Siti Alawiah Siraj, “Complexities of Waqf Development in Bangladesh”, Journal of
Emerging Economies and Islamic Research, Vol. 4, No. 3, 2016, p. 19.
432 PJIH Volume 6 Number 3 Year 2019 [ISSN 2460-1543] [e-ISSN 2442-9325]

eternal or not.14 Therefore, the law of cash waqf is included in the understanding of
the Schools of Malikite and Hanafite that allow the asset of Waqf also to include
items that may not always be eternal. In this case, the analogy to the law of mubah
(be allowed) turn out to be appropriate to the position of cash waqf based on the
principle that all things are basically mubah as long as there is no prohibition.

C. Cash Waqf as a Representation of Economic Democracy

The Economic Democracy System is an economic system that refers to the
mandate of the national constitution. According to Article 33 of the 1945
Constitution, the Economic Democracy System is based on society’s, not individual,
prosperity. It is structured as a joint effort based on the principle of kinship.
National economic development must be sustainable based on economic
democracy.15 The Economic Democracy System involves all strengths of people’s
economy. Therefore, it needs to be held not only as an alternative but as the main
of the economic system of a nation. According to Baswir,16 the economic
democracy can be defined as a national economic system that is structured as a
joint venture based on the principle of kinship, where the production is carried out
by all, for all, under the leadership or surveillance of society members to increase
the ability of the society to control the economy. To be precise, it is an economic
governance aiming to achieve people’s welfare and economic democracy progress–
an overall economic activity carried out by modest people.17
Essentially, the principle is in line with the practice of waqf of Islamic economy.
The main purposes of both systems are welfare and economic justice for
everyone.18 The assets of waqf, as an Islamic social institution, essentially carry a
function of economic resource. This means that the use of waqf assets is not only
limited to the needs of conventional activities, such as education, mosques,
hospitals, orphanages, and others. The assets of Waqf, in a broader sense, can be
used for economic activities, such as agriculture, livestock, industry, mining, real
estate, offices, hotels, restaurants, and others.
Cash waqf is one of the potential economic resources that are closely related to
the welfare of the people (ummah). The other resources, to be mentioned, consist
of zakat, infaq, and shadaqa. It is spiritual institution that is closely related to socio-
economic conditions. In general, waqf has significantly the developments of human
resources and socio-economic resources.

14 Imam Suhadi, op.cit., p. 80.

15 Teguh Tresna Puja Asmara, Isis Ikhwansyah, and Anita Afriana, “Ease of Doing Business: Gagasan Pembaruan
Hukum Penyelesaian Sengketa Investasi di Indonesia”, University of Bengkulu Law Journal (UBELAJ), Vol. 4,
No. 2, 2019, p. 126.
16 Revrisond Baswir, Ekonomi Kerakyatan sebagai Sistem Indonesia, Yogyakarta: Pustaka Pelajar, 1995, p. 111.
17 Ibid.
18 Sofyan Rizal, “Titik Temu dan Sinergi Ekonomi Islam dan Ekonomi Kerakyatan”, Al-Iqtishad, Vol. 3, No. 1,
2011.
 Juridical Study on the Optimization of Cash Waqf Management by Islamic Bank
in Indonesia 433

D. The Function and Role of Islamic Bank in Economic Development

Well-structured financial management patterns strongly influenced economic
development of a country. Financial management, especially banking, is an effort
to realize national development. In general, banks manage public fund in a
structured and institutionalized state. A bank is an institution that aims to satisfy
the needs of people for credit, both with money (funds) received from other
people, and by circulating money in the form of common money and check.19
Banking system continues to develop and currently presenting a form called
Islamic bank, which uses the principles of Islamic values based on the National Legal
System. According to Article 1 point 7 of the Law Number 21 of 2008 on Islamic
Banking, Islamic bank carries out their business activities based on Islamic
Principles; and, according to their type, it consists of Islamic Commercial Banks and
Public Islamic Financing Banks. The Islamic Principles referred to above are part of
Islamic teachings related to economy based on the values of justice, expediency,
balance, and universality (rahmatan lil ‘alamin).
Both conventional and Islamic banks in general have almost similar purpose.
Based on Article 4 of the Law Number 7 of 1992 on Banking, which has been
amended by the Law Number 10 of 1998, the objective of Indonesian Banking is to
support the implementation of national development to increase equity, economic
growth, and national stability towards increasing people’s welfare. To improve the
distribution of public welfare, Islamic bank is based on economic democracy, the
principle of prudence, while maintaining justice and togetherness. In other words,
in addition to be an agent of development maintaining monetary stability, Islamic
bank also strives to maintain the economy, which is bound by aqeeda, sharia, and
moral values as well as to create a balance between individual and universal
objectives.20
The functions of bank in general determine its activities. They include collecting
and distributing public funds. Besides the mandatory functions, Islamic bank have a
social function in receiving funds from Zakat, Infaq, Shadaqa, Waqf, etc.
Furthermore, Article 4 Paragraph (3) explains that Islamic banks can collect social
funds originating from the cash waqf and distribute them to the Nazhir in
accordance with Wakif's will.
The Government must consider an important solution to recover Indonesia’s
economy by the implementation of Islamic economy. One of the efforts is the
management of Islamic bank. The Islamic economy principles, compared to
conventional banking systems, contain excellent concepts to deal with monetary
fluctuation. The global economic experts such as Rodney Shakespeare, Volker
Nienhaus, and others recognized the Islamic Economy to be effective and resistant
in times of crisis.21 Based on the principle of profit sharing offered, Islamic bank

19 Syamsuddin Mahmud, Dasar-Dasar Ilmu Ekonomi dan Koperasi, Banda Aceh: PT. Intermasa, 1986, p. 194.
20 Mardani, Hukum Ekonomi Syariah di Indonesia, Bandung: Refika Aditama, 2011, p. 12.
21
Ibid.
434 PJIH Volume 6 Number 3 Year 2019 [ISSN 2460-1543] [e-ISSN 2442-9325]

forms a healthy and fair investment climate because all parties can share both
benefits and risks so that banks and its customers gain a balanced position. In the
future, it could encourage national economic equality because both capital owner
and capital managers enjoy profits.

E. Social Islami Bank Limited (formerly known as Social Investment Bank Ltd) as
the Model of Waqf Bank
Social Islami Bank Limited (SIBL), formerly known as Social Investment Bank Ltd., is
a model of bank that covers three service sectors: formal, informal, and voluntary
aiming to alleviate poverty and empower families through social investment based
on participatory economics.22 The SIBL’s banking and financial activities use a
humanitarian approach and operationalization based on interest-free transactions
through financing and participation.23 The SIBL offers socio-economic programs in
the form of a spirit of sharing and participation, social responsibility, and mutual
needs. This concept avoids individualistic behavior to produce loyalty as the
concept of essential economic democracy. The SIBL also offers modern banking
services with the deposit concept. In the concept, depositors participate in various
financing model activities and some investments projects such as profit-sharing
projects, trade leasing projects, lease purchase agreements etc. These projects do
not only reflect economic activity but also as social and moral activities.
The SIBL was pioneered by Bangladesh’s leading Islamic economist, Prof. Dr. M.
A. Mannan, who introduced the Cash Waqf Certificate as a new voluntary product
in the history of the voluntary banking sector. This Cash Waqf Certificate is used as
a financial instrument in the banking sector to manage social funds, including Waqf
funds. The SIBL’s operation receives cash waqf as donation based on Islamic
teaching. Their role is to manage the waqf in the name of Wakif. The Wakif has the
freedom to choose the objective or the target of the waqf in line with the list
provided by SIBL or other objectives permitted by Islamic teachings. Against the
quantity of the waqf, it must remain intact and only the profits are spent on the
wakif’s objectives. The profits that are not spent is automatically added to the
Waqf so that the profits always increase. Afterward, the cash waqf deposit is given
a receipt or, after the amount of the waqf reaches the specified amount, the
certificate is issued.24
The establishment of SIBL through its Cash Waqf Certificate provides latest
paradigm for waqf that opportunities for representation are not only for rich
people but also for all people in general. The role of cash waqf is very important to
sustain national development efforts by increasing society participation. The SIBL

22 M. A. Mannan, “Cash-waqf Certificate: Global Opportunities for Developing the Social Capital Market in 21st
-Century Voluntary-sector Banking,” Third Harvard University Forum on Islamic Finance, Harvard University,
2011, p. 6.
23 Jafril Khalil, “Social Investment Bank Limited (SIBL) di Bangladesh”, Al-Awqaf, Vol. II, No. 02, 2009, p. 56.
24
Ibid, p. 56.
 Juridical Study on the Optimization of Cash Waqf Management by Islamic Bank
in Indonesia 435

also makes the role of banks as facilitators to optimize the development and
management of cash waqf to realize its goal.
The SIBL basically has a model that is very adaptable and can be applied in both
Muslim and non-Muslim states that wish to eradicate poverty by avoiding interest
that have strangled people’s lives. In Bangladesh, the SIBL provides new
experiences within the framework of poverty alleviation through society
participation and their role as the initiator of the establishment of waqf banks in
various countries, including Indonesia.

F. The Implementation of Cash Waqf in Advancing the Economic Democracy

The Economic Democracy System is an economic system that refers to the
mandate of the national constitution. Article 33 of the 1945 Constitution states
that the Economic Democracy system is based on the prosperity of society, not
individual. This is structured as a joint effort based on the principle of kinship.
As the economic democracy system that involves all strengths of people’s
economy, it needs to be the main of the economic system of a nation, not only as
an alternative. According to Baswir25, the economic democracy is a national
economic system that is structured as a joint venture based on the principle of
kinship, where production is carried out by all, for all, under the leadership or
surveillance of members of society to increase the ability of the society to control
the economy. In other words, the management of economic democracy is the
implementation of an economy that affects the welfare of people. The progress of
the economic democracy lies on overall economic activities that are carried out by
people.26
Essentially, the system is in line with the practice of Waqf. Both place welfare
and justice of economy for everyone as the main objective.27 The assets of waqf
can be used as an economic resource. This means that the use of the waqf asset is
not only limited to the needs of conventional activities, such as education,
mosques, hospitals, orphanages, etc. The assets can also be used for economic
activities, such as agriculture, livestock, industry, mining, real estate, offices, hotels,
restaurants, etc. Cash waqf is a potential economic resources that is closely related
to the welfare of the people, in addition to zakat, infaq, and shadaqa.
Prior to formal legal arrangement, on May 11, 2002, the MUI released a fatwa
that the law of cash waqf was jawaz (allowed). Based on the fatwa, the Nazhir
Waqf institutions were established to accommodate collection and management of
cash waqf. They consisted of Tabung Wakaf Indonesia (TWI), Pos Keadilan Peduli
Umat (PKPU), and Baitul Mal Muamalat (BMM).28 The existence of the waqf, after

25 Revrisond Baswir, Ekonomi Kerakyatan sebagai Sistem Indonesia, Yogyakarta: Pustaka Pelajar, 1995, p. 111.
26 Ibid.
27 Sofyan Rizal, “Titik Temu dan Sinergi Ekonomi Islam dan Ekonomi Kerakyatan”, Al-Iqtishad, Vol. 3, No. 1,
2011, p. 10.
28
Muhyar Fanani, “Pengelolaan Wakaf Tunai”, Jurnal Walisongo, Vol. 19, No. 1, 2011, p. 180.
436 PJIH Volume 6 Number 3 Year 2019 [ISSN 2460-1543] [e-ISSN 2442-9325]

the establishment of the waqf Law, was then realized by three institutions. The first
is BWI as an independent government agency to develop the waqf system in
Indonesia, the appointment of Islamic Financial Institutions as an institution to
collect the cash waqf and nazhir as the waqf manager. However, this management
mechanism was not able to optimize the potential of cash waqf in Indonesia. The
management of waqf funds under many parties resulted in less effective
management of cash waqf up to now. Based on the data from the BWI, of the total
potential cash waqf IDR180 Trillion, only IDR400 billion was realized.29 According to
Nasution, the potential for cash waqf in Indonesia ranges from around IDR3 trillion.

Table F.1 : Potential of Cash Waqf30

Potential of Potential of
Income The Amount of Time Rate/
Cash Waqf/ Cash Waqf/
Level/Month Muslim Month
Month Year
IDR240
IDR500.000 4 Million IDR5000 IDR20 Billion
Billion
IDR1 million
IDR360
– IDR2 3 Million IDR10.000 IDR30 Billion
Billion
million
IDR2 million IDR1,2
2 Million IDR50.000 IDR100 Billion
– 5 million Trillion
IDR5 million IDR1,2
1 Million IDR100.000 IDR100 Billion
– 10 million Trillion
TOTAL IDR3 Trillion

Based on the Table F.1 and by looking at the goals and contributions that can be
provided by the Waqf institution, the existence of Cash Waqf in Indonesia,
especially in realizing social welfare, is very crucial. Masyita31 reveals that if the
waqf fund collection increases, for example, around IDR50 million in a day,
assuming that the collected funds are constant, the development of cash waqf has
an economic strategy value in overcoming poverty for 11,000 days (30 years) and
21,000 days (57 years) to improve the quality of Indonesian population. Different
simulation models can be built up on various assumptions for mobilization of Cash
Waqf Fund. For example, Cash Waqf of one US dollar per Muslim in one month can
generate US$1.6-billion, US$260 million in Indonesia, US$160 million in

29 Umi Nur Fadhillah, loc.cit.

30 Mustafa Edwin Nasution, Wakaf Tunai dan Sektor Volunteer, Jakarta: PSTTI-UI, 2006, pp. 43-44.
31 Dian Masyita, (et.al), “A Dynamic Model for Cash Waqf Management as One of The Alternative Instruments
for the Poverty Alleviation in Indonesia”, The 23rd International Conference of The System Dynamics Society,
Boston, 17–21 July 2005, p. 28.
 Juridical Study on the Optimization of Cash Waqf Management by Islamic Bank
in Indonesia 437

Bangladesh, US$176 million in Pakistan, US$80 million in Turkey, and US$30 million
in Malaysia, etc.32
Cash waqf needs to be managed by competent and professional institution so
that the purpose to improve social welfare can be realized. The presence of TWI,
PKPU, BMM, and other Nazhir organizations or institutions actually reflects the
form of independent institution in the management of the Indonesian Cash Waqf
System. However, the institutions currently still have obstacles in the managerial
operational of the Cash Waqf System. Nazhir as an asset manager currently has not
been carried out professionally. For instance, one of the tasks is to carry out the
obligation to secure principal assets but the institutions have not involved in Islamic
deposit insurance.33 In addition, the BWI has too many functions and authorities,
including regulation, supervision, socialization, management, collection, and
distribution. The BWI functions as the main nazhir manager become inefficient and
lack of effectiveness in socializing and collecting cash waqf. In fact, the two
important functions can be the key point to success.
There is also an overlap of authority, especially between the regulatory
function and the management function. As the manager, BWI has the role to
manage and develop waqf assets. Unfortunately, BWI has also regulatory authority
both for itself, as the manager, and for the Nazhir. This is inappropriate because
the function of regulation and management should not be in one body. Thus, the
overlapped authority causes the management of Cash Waqf ineffective.
According to Article 28 of the Law on Waqf34, fundraising can be done through
Islamic Financial Institutions. However, the optimization of cash waqf as a means of
social welfare is hampered. In the Indonesian waqf system, the LKS-PWU only
serves as the “recipient” of the cash waqf based on the mandate of the Law. The
Management function is still limited to the Religious Social Institutions. Therefore,
the LKS-PWU does not take an active attitude and tends to be passive in capturing
Wakif because the determination of the forms of Waqf management and its
designation is not their authority. This then affected the level of productivity of the
waqf because the LKS-PWU is unable to explain concretely and clearly the
allocation of collected Waqf.35
The roles of waqf institutions, in the form of regulators, collector, managers,
and distributors, that are shared between the BWI and the Ministry of Religion, the
Ministry of Religion and the Coordinating Ministry for Economic Affairs, BWI with

32 M. A. Mannan, “Linking Islamic Commercial and Social Finance with Special Reference to Cash-Waqf as New
Strategy of Interest-Free-Micro-Credit for Family Empowerment of The Poor Towards Establishing World
Social Bank: A Case Study Approach”, Journal of Islamic Monetary Economics and Finance, Vol. 3, Special
Issue, 2018, p. 9.
33 Muhyar Fanani, op.cit., p. 192.
34 See Article 28 of the Law Number 41 of 2004 on Waqf.
35 Ahmad Furqon, “Analisis Praktik Perwakafan Uang pada Lembaga Keuangan Syariah”, Jurnal Walisongo, Vol.
19, No. 1, 2011, p. 159.
438 PJIH Volume 6 Number 3 Year 2019 [ISSN 2460-1543] [e-ISSN 2442-9325]

LKS-PWU, have not been aligned. They are still running partially.36 Therefore, the
management of Waqf must be carried out under one institution to accelerate and
make simple the system. An integrated institution performing waqf system can be
effective and optimal. In addition, it should be noted that the management of cash
waqf is different with conventional waqf.

G. Legal Studies on the Position of Cash Waqf in Indonesian Waqf System

Since waqf is an instrument originating from Islamic Law, the discussion must
always involve Islamic Law. The word waqf comes from Arabic, which means to
stop or stand up. According to the Law, waqf is to hold back assets without
spending or damaging the object that is used for good purposes. In general, waqf is
a gift that is carried out by holding the original ownership (tahbisul ashli) so that
the benefits can be received generally. Tahbisul Ashli holds goods that are not
inherited, leased, and mortgaged to others. The goods may be used based on the
will of the wakif without compensation.
In Indonesia, waqf has been known since before the independence. Moreover,
Indonesians have known it since the early days of Islam in Indonesia. In the
independence era, Waqf has received more attention so that it accommodated in
the Law on Waqf. Previously, it was regulated in Book III of the Compilation of
Islamic Law on Waqf.
Provisions regarding property or goods that can be represented are explained
in the Law. Specifically, Article 16 Paragraph (1) reads that property can be in the
form of either immovable or movable properties or goods. Cash Waqf is a type of
Waqf that is regulated in the Law specifically. The inclusion and arrangement of
cash waqf in the Law is based on the fatwa MUI on May 11, 2002 on cash waqf as
follows.
1. Cash waqf (al-nuqud waqf) is a waqf by a person, group of people, institution,
or legal entity in the form of cash.
2. Securities can be included in cash waqf.
3. The principle of cash waqf is jawaz (allowed).
4. Cash waqf can only be distributed and used for things that are allowed by
Islamic principle.
5. The principal value of waqf must be guaranteed for sustainability. The goods or
property cannot be sold, granted, and/or inherited.

The MUI has released a fatwa on the status of cash waqf and it is adopted into the
Government Regulation Number 42 of 2006 on the Implementation of the Waqf
Law. In the Regulation, cash waqf is given a narrow meaning covering only cash in
the form of Rupiah. If the money is not Rupiah, or in foreign currency, the money
must be converted first.

36
Ibid, p. 64.
 Juridical Study on the Optimization of Cash Waqf Management by Islamic Bank
in Indonesia 439

The regulation also arranges requirements of wakif as follows:

1. Wakif presents at the LKS-PWU to declare the cash waqf;
2. Wakif explains ownership and origin of money;
3. Wakif deposit cash to the LKS-PWU; and
4. Wakif fills out form containing the statement of intention, which functions as
the Waqf Pledge Deed.

Regarding the right to manage waqf, the Law of Waqf mentions that the party
entitled to manage the waqf is nazhir. Article 9 divides nazhir into three types:
individual, organization, and legal entities. To develop waqf in Indonesia, the Law
regulates that an independent institution is formed as the main institution that
manages waqf. It is the Indonesian Waqf Board (BWI –Badan Wakaf Indonesia).
The BWI is based in the capital state of the Republic of Indonesia and can form
representatives in provinces and/or districts/cities according to their needs. As the
main institution, BWI has several functions to develop waqf. Article 49 Paragraph
(1) reads that it is to:
(1) nurture nazhir in managing and developing waqf properties;
(2) manage and develop national and international waqf assets;
(3) give approval and/or permission for changes in designation and status of waqf
property;
(4) dismiss and replace nazhir;
(5) give approval for the exchange of Waqf property;
(6) provide advice and consideration to the Government in the formulation of
policies in the field of waqf.

Article 28 to Article 31 specifically regulates the management of general and cash

waqf. Cash waqf must be deposited in Sharia Financial Institution Receiving Cash
Waqf (LKS-PWU –Lembaga Keuangan Syariah Penerima Wakaf Uang). The Minister
of Religious Affairs of the Republic of Indonesia determines the institution. The
Islamic Financial Institution is Indonesian legal entity formed in accordance with
the applicable laws and regulations that are engaged in Islamic finance–for
instance, an Islamic bank. The possibility of moving cash waqf into Islamic Financial
Institution is intended to enable wakif to gather the cash easier.
The Minister determines the LKS based on advice and consideration from the
BWI. Previously, the selected LKS-PWU have several tasks. First, the LKS-PWU
announce their existence publicly through various means of communication.
Subsequently, the LKS-PWU can receive written statement from wakif containing
statement of intention. After the waqf is received, the money is placed in a deposit
account (wadi’ah) in the name of nazhir. The LKS-PWU is also obliged to provide a
blank Certificate of Cash Waqf (SWU –Sertifikat Wakaf Uang) to be issued and
submitted to wakif as a proof of Waqf submission. The copy is submitted to nazhir
who is appointed by wakif. According to Indonesian Waqf Board Regulation
440 PJIH Volume 6 Number 3 Year 2019 [ISSN 2460-1543] [e-ISSN 2442-9325]

Number 01 of 2009, the certificate can be given to wakif who has donate the
money of at least Rp1.000.000 (one million Rupiah) by including a description of
the origin of the money and the complete identity of the wakif. To be concluded,
LKS-PWU must register cash waqf to the Minister on behalf of nazhir.
Essentially, the status and the arrangement of cash waqf is clear and has a
strong legal basis for further development. Unfortunately, in the practice, cash
waqf management still faces various obstacles ranging from technical
management, community paradigms, and internal problems of cash waqf
management-institution.

H. Juridical Research on the Optimization of Cash Waqf Management by Islamic

Bank in Indonesia
In terms of regulation and legal aspects of cash waqf, Indonesia is very detail. The
management of cash waqf under the Law on Waqf determines that three parties
involve in managing cash waqf. First, it is the BWI to manage and develop. Second,
Islamic Financial Institutions acts to collect and distribute fund. Third, Nazhir is the
cash waqf fund manager.
In fact, the management of waqf through a single institution has not been
effective and efficient. Therefore, the potential of cash waqf has not been
optimized yet. Many people cannot feel the benefits of cash waqf, which has the
potential to reach 3 trillion per year.
Islamic bank that acts as the nazhir, or waqf bank, can be a solution to
overcome the problems related to cash waqf. Bank system enables the utilization
of bank function in terms of professional fund management, public trust, and the
reach of bank that has many branches to socialize cash waqf.
According to Mannan, Waqf Bank is a bank that holds waqf in the form of cash
waqf. In this case, it could turn as a supplement to fund various social projects.37
The waqf bank shall have full authority as nazhir that performs tasks to receive, to
manage, and to distribute waqf funds. It is possible based on Article 9 of the Law
on Waqf, which states that Nazhir can also be an organization or a legal entity.
The bank that can be a waqf bank in Indonesia is an existing Islamic bank that
receives expansion of authority not only to become a fund collector but also to
manage and distribute cash waqf. Based on the Law Number 21 of 2008 on Islamic
bank, Islamic bank is a bank that carry out their business activities based on Islamic
Principles. According to the type, there are Islamic Commercial Banks and Islamic
Society Financing Banks. Both are to support the implementation of national
development to improve justice, togetherness, and equal distribution of people’s
welfare. The definition and purpose of Islamic bank is in line with the definition of
waqf bank, which also aims to improve the welfare of society.

37 F. Prihatini, (et.al.), Hukum Islam Zakat dan Wakaf, Jakarta: Collaboration between the Papas Sinar Mentari
Publisher and the University of Indonesia’s Faculty of Law Publishing Board, 2005, p. 151.
 Juridical Study on the Optimization of Cash Waqf Management by Islamic Bank
in Indonesia 441

Islamic bank currently has a social function to collect cash waqf. However, the
social function has not been able to optimize cash waqf in Indonesia because
trustworthy and professional institution must collect it. The role of Islamic bank to
manage cash waqf has at least several advantages to optimize waqf as follows:
1. Islamic bank’s network is wider compared to other Islamic Financial
Institutions. This is an important factor to optimize socialization of waqf
collection and distribution.
2. Bank has an ability to be a fund manager. A bank is a public fund management
institution. It has the ability to manage funds and is expected to be able to act
as an alternative institution capable of managing cash waqf funds to be
accounted to the public, especially wakif.
3. The facilities of several Islamic banks are relatively complete. For instance, the
availability of widely spread cash machine networks, SMS Banking, Internet
Banking, Phone Banking, and auto debit facilities from customer accounts can
make it easier for people to make cash waqf deposits. Currently Islamic banks
have more than 10,000 cash machine facilities.
4. Professional human resources in Islamic Banks guarantee that waqf funds are
received and managed optimally, reliably, honestly, and transparently. They
are expected to maximize the benefits of managing cash waqf.
5. Cash waqf funds, either in the form of nazhir deposit funds (wadi’ah) or nazhir
managed funds (mudharabah) are part of the third-party funds of Islamic
banks guaranteed by the Indonesia Deposit Insurance Corporation (IDI, or in
Indonesia: LPS – Lembaga Penjaminan Simpanan). Thus, cash waqf funds in
Islamic banks are more secure and guaranteed.
6. The distribution map and information network of Islamic banks is full of
extensive experience so that the management of cash waqf is expected to not
only optimize fund management, but also can streamline the distribution.
7. Positive image of Islamic banks is expected to create a positive image on the
cash waqf movement. The alternative role of Islamic banks in cash waqf
includes as Nazhir recipients, distributors, and waqf fund managers.

The change in the status of Islamic bank, which was previously only tasked with
accommodating funds to become managers and distributors, is a common feature
of the waqf bank model in Bangladesh. In addition, the situation in Bangladesh has
some similarities with Indonesia. They are, among others, the majority of Muslim
population and still shrouded in poverty. Islamic banks will later have full authority
to become nazhir, starting from the recipients, managers, and distributors of cash
waqf. This is none other than that in the implementation of collection,
management, and distribution related to cash waqf to be carried out progressively
because it is in a single door of an institution that is focused and based on a
banking system that already has customers with principles of professionalism and
trust.
442 PJIH Volume 6 Number 3 Year 2019 [ISSN 2460-1543] [e-ISSN 2442-9325]

The fractions of the Cash Waqf Certificate (SWU) issued by Islamic banks can
later be reached by all people, since the fractions ranging from IDR10.000,
IDR25.000, IDR50.000, and IDR100.000. Fund management is also accompanied by
cooperation with Islamic Guarantee Institutions to ensure no reduction in the
principal value of cash waqf.
The Islamic bank can later carry out the management and development of cash
waqf by distributing the funds collected in the form of soft loans as well as
financing various types of investments, both in the form of mudharabah,
musyarakah, etc. It must be realized that the waqf will be distributed to the public.
For this reason, the management must be carried out professionally and
accountably in a regulatory basis.

Financial Indonesian Islamic

Service Waqf Board Supervisory
Authority Board
(OJK)

Waqf Fund
Outcome Al- Mauquf’alaih
Wakif Islamic (People who are
Banking entitled to receive)

SWU

Compensation
Funds
Manageme
nt
Islamic
Guarantee
Institution

Loss Profit

Image H.1: Management and Distribution of Cash Waqf in Islamic Banks in

Indonesia
 Juridical Study on the Optimization of Cash Waqf Management by Islamic Bank
in Indonesia 443

Funding is carried out through the streamlining information networks and

distribution maps. In terms of the distribution target, Islamic banks distribute it
according to wakif and if wakif does not have any requirements, Islamic bank can
determine unilaterally by prioritizing business capital, empowering education,
health, and other economic empowerments. Islamic banks, in carrying out their
activities, are monitored through integrated supervision between the Financial
Services Authority (OJK), the Islamic Supervisory Board, and BWI. In terms of the
mechanism of accountability to the public, the Islamic banks can rely on the
accountability of the banking system and if necessary can take a way to report
regularly to wakif and can request the services of independent public accountants
to audit the Islamic bank.
The successful implementation of SWU in Bangladesh can be used as an
example for Indonesia to carry out the management of this cash waqf. Islamic bank
can support the development of cash waqf in Indonesia by collecting funds from
the society, which consists of donating cash waqf directly and cash waqf deposits
while still keeping the basic funds from the society to be managed over. The
proceeds from the management of waqf funds are used to overcome problems
related to education, health, economy, and social services. Hence, this is expected
to realize social welfare in Indonesia.

I. Conclusion
Islamic banks currently are able to collect social funds that come from cash waqf.
However, the social function of Islamic bank is limited only to raising funds. It has
not been able to optimize the cash waqf in Indonesia. In addition to be collected by
trusted and professional institutions, cash waqf must also be managed and
distributed by a trusted and professional institution, one of which can be done by
Islamic bank.
Assigning authority to Islamic bank as a nazhir can be a greatest solution to
overcome the problem of cash waqf that has not been managed optimally
nowadays. By becoming nazhir, Islamic bank can raise the funds and have the
authority to manage and distribute the cash waqf. Furthermore, this system
enables the advantages of bank to be maximized, in terms of professional ability in
fund management, public trust, and networking. The success of the waqf bank in
Bangladesh, the SIBL, can be used as a comparison and be adopted into a system of
Islamic bank in Indonesia.
In order to realize the idea of converting the authority of Islamic Banking to
become the nazhir, it is necessary to have a legal reform that regulates the
authority of Islamic bank in managing cash waqf, both in Law Number 21 of 2008
on Islamic Banking and in Law Number 41 of 2004 on Waqf.
444 PJIH Volume 6 Number 3 Year 2019 [ISSN 2460-1543] [e-ISSN 2442-9325]

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