Universitas Gadjah Mada
Faculty of Economics and Business

Waqf has tremendous potential to improve the economic well-being of the Ummah. However, managing waqf assets for social welfare has not yet been optimized in Indonesia.

This issue was highlighted during the WAKAFPRENEUR workshop "Goes to Campus" organized by the Center for Islamic Economics and Business Studies (PKEBS) FEB UGM in collaboration with the Indonesian Waqf Education Foundation on Friday, November 22, 2024. Dr. Muhammad, M.Ag, CIRBC, an expert in Islamic finance and banking, explained that Islamic social finance is vital to the Islamic economy. It is based on two principles: religious obligations (zakat, waqf, infaq, and sadaqah) and religious prohibitions (riba and gambling).

"Obligations such as zakat, waqf, and sadaqah are the highest forms of gratitude aimed at building the welfare of the ummah, while prohibitions such as riba and gambling hinder economic flows," he said.

Muhammad also addressed the disruption the banking industry faces due to technological advancements. Islamic banking continues to adapt to the disruptions caused by technological developments and evolving societal needs. A significant opportunity lies in the development of Islamic social finance, particularly cash waqf. As a unique social finance instrument, cash waqf has the potential to be an innovative solution for mobilizing third-party funds (TPF) efficiently and sustainably.

He added that cash waqf could become an essential alternative for Islamic banks to remain competitive in the face of banking disruption. In addition to enhancing the collection of low-cost funds, cash waqf offers added value through positive social impacts, thereby strengthening the role of Islamic banks as drivers of Ummah's economy.

Cash waqf also addresses a common misconception among communities that waqf is limited to physical assets such as land for mosques, schools, or cemeteries. With professional management by nazirs (waqf managers) and Islamic financial institutions authorized to manage cash waqf (LKS-PWU), cash waqf can be invested in productive economic activities. The returns from such investments can be used for various social and financial purposes, such as community empowerment, education, and health services.

"With cash waqf, anyone can participate in ongoing charitable activities without owning large assets. This is a strategic step towards reducing social inequality," Muhammad concluded.

Reporter: Shofi Hawa Anjani
Editor: Kurnia Ekaptiningrum

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