Proposing an Effective Waqf Model for Ensuring Poverty Reduction among Refugees in Malaysia

Abstract

Background COVID-19 has heavily impacted the financial and economic well-being of the world’s population. Various national relief programs and initiatives have been carried out to address society’s financial difficulties, especially the issue of poverty among the vulnerable, like refugees and immigrants. Consequently, being one of the main elements in Islamic social finance, waqf has been emphasised and proven throughout Islamic history as one of the practical tools for poverty reduction. However, recent waqf initiatives towards poverty reduction focused more on aiding the micro and small entrepreneurs, whilst limited waqf initiatives were available to help low-income households, refugees, and immigrants during this critical time in Malaysia. Methods This study introduces a novel waqf model, specifically designed to contribute to poverty reduction in society. It is tailored for low-income households, refugees, and immigrants, aiming to sustain their financial independence. By combining the elements of waqf and crowdfunding, this model proposes an innovative agriculture-based microfinance programme. It utilizes undeveloped waqf lands and equity-based crowdfunding to reach its objective of poverty reduction. This study has adopted a secondary research approach using the existing scholarly literature. Results This paper also discusses the potential of the proposed model to deliver more than its primary objective, as the framework illustrates that waqf institutions will have a continuous inflow of funds that will allow them to initiate other waqf-based projects, job creation through the microfinance programmes, and financial return for the investor of equity-based crowdfunding projects. Conclusion This study not only underscores the sustainability of the proposed model, but also its alignment with the increasing awareness of value-based and social impact objectives. It further explores the potential of waqf to be integrated with other financing instruments during the pandemic to help the vulnerable, specifically refugees and immigrants. This research thus contributes to the true purpose of Islamic social finance, highlighting the significance of its findings.