Financial institution Indonesia (BI) announced its Wide Info plan lately to trouble waqf (Islamic endowment) based totally bonds as a social welfare mechanism to aid struggling business property.
The Indonesian Muslim Intellectual Association (ICMI) will launch the first actual waqf challenge Financial institution this June. Can waqf become the next satisfactory aspect in Islamic finance?
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Islamic economics and finance projects initiated inside the early 20th century aimed for the “elimination of poverty and reduction of inequalities in the distribution of profits and wealth” (Siddiqi, 2006).
This mission became then actualized inside the form of Islamic banking and finance. Certainly, Islamic finance and banking have played a position in reaching the above vision of the founding fathers, being alternative establishments and devices selected by the previously untapped market.
Why must we count on waqf to end up the new trend in Islamic banking?
The primary motive is that within the records of Islam, waqf has performed a tremendous position in reaching the welfare of human beings. It’s far important, to the quantity that Hodgson ( 1974 ) postulated, that the successes and the screw-ups of the economic system within the Muslim international trusted the performance of waqf.
Waqf changed into the principal vehicle for financing each business and public venture, a position that has been changed with the aid of banks and other monetary institutions (Hodgson, 1974; Kuran, 2001).
Secondly, waqf finances can be applied for fairness-primarily based financing, and economic structure considered perfect for Islamic values, however, undervalued in the present-day Islamic banking and finance structure. A waqf Financial institution will permit us to actualize the “ideal” mode of financing, specifically maharajah and mus yarak ah.
Shinsuke Nagaoka of Kyoto University, Japan, attributed the early emergence of Islamic finance because of the “Murabahah syndrome” due to its dominant use inside the modern Islamic banking practices. This settlement is structured in a way wherein an Islamic Financial institution price range the borrower by buying the capital items needed and promoting it at a marked-up fee.
Even though nevertheless categorized as new horizon 1.0 with the aid of the Japanese academic for Islamic Economics and finance actions, greater profound complaint changed into that many Islamic merchandises have been derived from conventional economic practices. They are “sharia-compliant” but fail to uphold Islamic values above the legalistic form.
To deal with this, Mehmed Asutay ( 2011 ) and Amartya Sen ( 1999 ) cautioned the “creation of ethical Islamic finance and investment institutions within the form of Islamic social banking as a part of civil society, and the introduction of social banks be considered as the next level of monetary development.” For this reason, a waqf Bank ought to take this role because of the emergence of a brand new ethical Islamic finance and investment organization.
Thirdly, the character of long-term waqf finances for funding will make a good source of funding for project capital and personal equity, a section of finance wherein Islamic finance has been little or no investment. Task capital and private equity were broadly claimed because of the purpose for the terrific upsurge in monetary growth inside the evolution globally.
Jeng and Wells ( 2000 ) argue that project capital becomes crucial to creating dominant games in the excessive-tech industry, including Apple, Microsoft, Google, Facebook, Oracle, Compaq, and Solar Microsystems. We can agree “from Microsoft’s Home windows to FedEx’s in a single day delivery, technology evolved by VC-backed firms have changed the sector.” (Gornall and Strebulaev, 2015)