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

• DOI: https://doi.org/10.1108/978-1-78973-545-120191010
• Pages: 53-68
• Published date: 26 August 2019
• Date: 26 August 2019
• Author: Sharifah 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

Abstract

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

doi:10.1108/978-1-78973-545-120191010

54 Sharifah Zubaidah Syed Abdul Kader and Nor Asiah Mohamad

Introduction

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.