Creating Security to Finance Waqf Property Development in Malaysia: Issues and Solutions

Publication Date26 Aug 2019
AuthorSharifah Zubaidah Syed Abdul Kader,Nor Asiah Mohamad
Chapter 4
Creating Security to Finance Waqf
Property Development in Malaysia:
Issues and Solutions
Sharifah Zubaidah Syed Abdul Kader and Nor Asiah Mohamad
Legal and Sharīʿah issues abound in creating security to nance waqf
property development in Malaysia, for it involves integrating the Sharīʿah
concept of waqf with requirements of Malaysian land law as well as the
requirements of modern nance under civil law. Banks and nancial
insti tutions will not generally nance property development without any
form of security for the loan. The best type of security transaction under
Malaysian land law is to create a charge on the land under the National
Land Code 1965, rendering the land liable as a security which upon default
of the chargor, would entitle the chargee to seek statutory remedies including
sale of the land. Such may not be feasible for waqf properties due to the
inalienable nature of such properties. Due to the remedy of sale of the land
upon default, the same issues would arise in regard to other types of securities
like a lien and a loan agreement cum assignment. There is therefore a need to
diversify the available options in creating security over waqf property. What
are the existing Sharīʿah restrictions on waqf property? Do these restrictions
affect the creation of security over waqf lands under conventional Malaysian
land law? What are the legal and Sharīʿah issues relating to creating a charge
over waqf lands? What are some feasible options? Initial ndings are that
creating a charge on a lease of waqf land as well as resorting to a hybrid
form of a traditional security transaction in Malaysia, called ‘Jualjanji’, may
hold some answers. Through doctrinal legal research and content analysis,
this chapter explores these issues and recommends feasible solutions.
Keywords: Waqf; nancing; security transaction; charge on lease; jualjanji;
property development
Emerging Issues in Islamic Finance Law and Practice in Malaysia, 53–68
Copyright © 2019 by Emerald Publishing Limited
All rights of reproduction in any form reserved
54 Sharifah Zubaidah Syed Abdul Kader and Nor Asiah Mohamad
Waqf is a type of endowment recognised under Islamic law and is as old as Islam
itself. It is immediately created when a person who owns property dedicates such
property to God and the ownership of such property is then divested from the
waqf founder (waqif) and thereafter vests in God. Such property is then ‘locked’ or
‘frozen’ in that it cannot be sold, neither transferred during the founder’s lifetime,
nor transmitted upon his death. Only the benets from use of the property are
conveyed to the waqf beneciaries. Waqf is therefore described contemporarily
as ‘the holding of certain property and preserving it for the conned benet of
certain philanthropy and prohibiting any use or disposition of it outside that
specic objective’ (Kahf, 2000, 2015).
Over the years, Muslims all over the world, wherever they are settled, have
created awqaf (plural of waqf), primarily for pious purposes such as the building
of mosques, cemeteries and religious schools. Some have endowed their properties
for the general wellbeing of the ummah and the fullment of the wishes of the
waqif in this regard is entrusted to the waqf trustee.
A waqf trustee (mutawalli) is empowered (by the waqf deed or through
other appointment) to see that the prots arising from the use, development or
investment of the waqf property (mawquf) is used to full the intention of the
founder (waqif) in terms of giving benet to the beneciaries intended by the
founder. An important way to full the intention of the founder and give due
benets to the waqf beneciaries (mawquf ‘alaih) is for the waqf trustee to plan
and develop such waqf properties – not to leave it idle, without economic worth.
Proper development of waqf properties requires facilitation from both, the
public sector and the private sector. It is crucial for the government to create
an enabling legal and administrative environment while the private sector must
be ready to embrace all aspects of waqf development, including the nancing
of such projects. One of the main challenges for waqf property development in
Malaysia is the issue of securing end-nancing of properties that are built on
waqf lands (Abu Bakar, M. N. R. Vice-President UDA Waqf Sdn. Bhd. 7 March
2017). Often times, banks and nancial institutions are reluctant to provide such
nancing for the reason that the waqf property itself cannot be charged to the
lender as security for the loan.
This chapter explores the issue of creating security to nance the purchase of
leases over waqf immoveable properties (land and premises) in Malaysia. The
issue is that waqf property (mawquf) is subjected to Sharīʿah principles relating
to waqf, the most relevant of which is that waqf property is inalienable and
cannot be transferred.
Under Malaysian land law, there are four types of security transactions
relating to land, namely:
(1) A registered charge under the National Land Code 1965 (NLC);
(2) A statutory lien under the NLC;
(3) A Deed of Assignment by way of contract; and
(4) A jualjanji agreement under Malay custom.

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