Constructing Sukuk-linked Awqaf (endowment) model

Rifki Ismal

International Journal of Islamic and Middle Eastern Finance and Management, 2024, vol. 17, issue 5, 871-882

Abstract: Purpose - Islamic endowment (awqaf), particularly awqaf land, is one of the potential Islamic social assets to serve the public interest, particularly to provide public infrastructures such as business centers, public hospitals and airports. However, unfortunately, most of them are still unproductive lands, especially in the form of idle lands. One problem to use such unproductive awqaf lands is the lack of awqaf land model as the platform to use such awqaf lands. This paper aims to construct and propose a model called Sukuk-linked Awqaf (SLA) to use awqaf lands as an underlying for Sukuk issuance. Design/methodology/approach - This paper constructs mechanisms and formulas of SLA by involving Sukuk issuer, awqaf management (Nadzhir), Sukuk investors and tenants of the infrastructure. In particular, the SLA model is proposed based on the unique characteristics of both awqaf asset and Ijarah (leasing) Sukuk, considers the intention of state-owned enterprise (SOE) to construct buildings to be rented to the tenant and to be owned by the awqaf manager and formulates equations and uses net present value theory to determine Nadzhir and Sukuk investors’ investment decisions. Findings - Engaging awqaf land with SLA model can ease its benefit for the society. The model addresses the strategic roles of Nadzhir, SOE, investors and contractor in using awqaf land. Research limitations/implications - The SLA model could ease related parties to use the awqaf land for the sake of public benefits. Originality/value - To the best of the author’s knowledge, this is the first assessment on the potential implementation of Islamic hedging with a commodity as an alternative hedging in Indonesia.

Keywords: Awqaf; Sukuk; Nadzhir; SLA (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eme:imefmp:imefm-04-2024-0198

DOI: 10.1108/IMEFM-04-2024-0198

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