Waqf & Islamic Finance: A candid talk with Dr Shamsiah

Today we are joined by Dr Shamsiah Abdul Karim who has been involved in groundbreaking projects and efforts in Islamic finance and especially Waqf over the past 30 years.

Currently, she is the CEO of PERGAS Investment Holdings, an affiliate of PERGAS, the Religious Teachers and Ulama Association Singapore. In addition, Cambridge IFA named her as one of the top 20 most influential women in Islamic Finance. In the past, she was a SVP at Bank Muamalat, CEO of Albukhary Foundation and Deputy Director of Asset Development at MUIS, the Islamic Religious Authority Singapore. While at MUIS, she was instrumental in setting up and operationalising their subsidiary Warees, which developed the majority of Waqf land in Singapore with an asset value of more than SGD700m today.

The discussion will touch on the potential and challenges of Waqf, what she is currently working on, embracing technology and closing the gap with the older generation, how COVID has affected our society as well as her advice to young people today.

This post is a part of “EthisX: The World Tomorrow”- a series of candid interviews with industry thought-leaders to foresee a post-COVID-19 world.

You can watch the full interview here:

Let’s get going:

Thank you for joining us today. Before we jump into things, could you introduce yourself and your background briefly? 

Thank you for having me. I graduated from International Islamic University Malaysia (IIUM/UIA) with a basic degree in Bachelor of Business Administration and then I did my PhD at Durham University where I specialized in waqf and Islamic finance. I spent the majority of my career with Majlis Ugama Islam Singapura (MUIS), the Islamic Religious Council of Singapore where I specialized primarily in the finance area. I was involved in areas like zakat (the determined share of wealth to be distributed to the categories entitled to receive it), Islamic investment, waqf (voluntary charitable endowment), baytul-mal and Fara’id. Then, I went to Malaysia to head the foundation and I also had a short stint in the banking sector where I looked at the Shariah division in the areas of zakat and waqf. So I am very passionate about the areas of zakat, waqf and Fara’id and these are the areas that I have been involved in for almost 30 years. 


You mentioned the areas of zakat, waqf and Fara’id are your passions — could you share a bit more about how this passion came about and why you are so passionate about these areas?

Through the collection of public contributions, a lot of things can be achieved. Just like Global Sadaqah does crowdfunding, I see this as also crowdfunding because the whole community gets involved and contributes towards elevating others especially on zakat. Many areas in social finance through the act of waqf and zakat, can alleviate/solve a lot of the social problems in the community. Thus, these are all the tools that help us to finance the community and their impact can be tremendous. The best thing for me is the fact that when you see these impactful changes, you get even more excited and want to do more to help. 

See also: Islamic CrowdFunding

Can you share a few specific examples of good implementation of zakat or waqf?

In the 1990s, zakat collection in Singapore was very manual. Now, Singapore is aiming to be a cashless society and so since that is the aim, one of the big areas for MUIS to focus on is zakat. However, the cultural mindset of our society was such that the payment of zakat should be done in person but things have evolved during this COVID situation and that is no longer the case — zakat can now be collected in many ways and forms. Now that we’ve created this foundation, it has become easier for people to do their obligations even without being physically there. 

Similarly, on the disbursement side, I think it is also very important to embrace technology. Databases are very important, that is why the zakat authorities have to invest in all of this technology because doing so can improve the efficiency in their distribution. It will cost less, use less manpower and the funds can be distributed more easily. In Singapore, we opened accounts for all the fakir and miskin (the poor and needy). This way, we can transfer money to them every month so they do not have to come to HQ to get their money. Also for the fidyah money (a charitable form of compensation if one is unable to fast during Ramadan and cannot make up for the lost days), we created vouchers for the beneficiaries, send it to them by mail and they can redeem these vouchers at shopping centres. So through the use of technology, it becomes easier for the poor and needy to receive help. However, I do not disregard the fact that it is very important to have physical visits and so on. In this area, I do think that a lot of the time there are manpower constraints and we need to have volunteered to see the impact of that in order to be able to help more effectively.

Could you briefly explain what waqf is for those who may not be familiar with the term? 

Waqf is an Islamic endowment where the capital is kept intact and only the income or the usufruct from the capital is disbursed. So it is supposed to be in perpetuity. Waqf has been a tool for some time in Islamic civilizations/Islamic world. For example, the University of Al Azhar has an endowment (waqf) and uses it to fund a lot of their activities. In Singapore, the Yemenis — the Alsagoff, the Aljuneid and so on — were the ones who created the waqf here and the income generated from that waqf or its capital is being disbursed globally. So the benefits of waqf can be seen globally — the poor and needy in Saudi can access it, it was used for a mosque in Indonesia and Yemen, etc. 

Also as Singapore is considered to be a safe haven for investments, this has benefited the beneficiaries because, for example, a rental in a particular area in Singapore can fetch SGD$10,000 and that money if converted into Indonesian rupiah would give very good returns for the beneficiaries in Indonesia. In my opinion, the foresight of the earlier wakifs (donors) has brought about these benefits. So waqf has been useful in creating social impact both locally and globally. On the other hand, the distribution of zakat is still very local in nature since the fatwa (Islamic legal ruling) for it is done locally. 

Is zakat meant to be given back to those who are close to you whereas waqf is more ‘open’?

Yes, waqf is more ‘open’ but zakat still places an emphasis on the poor and needy. This is because if we look at the Hadith (prophetic sayings) and the way that waqf was initially distributed by Saidina Umar whereby money was given to those who were poor, needy and stranded. 

In order to be able to help our society more effectively, the question that we asked ourselves is: what are the things that people need the most in our modern times? This is why Pergas, which is an association of the religious teachers in Singapore, decided to use zakat money to empower the religious teachers to have technological skills so that they can do their da’wah (conveying the message of Islam to non-Muslims). Back then, these skills were not needed but now people need to have this particular skill. 

I agree with you on how there is a culture of embracing technology but at the same time, cultural mindsets can act as a barrier when embracing technology. How do you go about breaking this barrier? What advice would you give to those who are facing a similar challenge in other countries?

We need to keep on engaging with them and exposing them to things. I think that we should also do research because if we do that and present them with it along with our reasonings, I don’t think there will be a problem and this will help to break/lower the barrier. We also should not blame the religious people for being apprehensive because they are not as familiar with technology since they do not come from the technology industry. When something is unknown, there is always a fear present and we need to understand that. They may have concerns on whether these new methods are safe and secure or whether the money will just disappear. To help alleviate concerns and foster better understanding, I believe that having discussions, involving others in them and having conducive environments for such discussions are necessary. Alhamdulilah, I think more professionals and even the religious group have a lot of seminars, conferences and discussions on these areas. Having said all that, the more technologically-inclined/savvy and the entrepreneurs among us can sometimes try to push the boundaries too far and too quickly. This can sometimes be dangerous because maybe at that point in time, that is not the best course of action and might cause others to take a more confrontational/defensive stance. 

Also, sometimes we may not see the harm of what we want to do/implement and immediately think that the religious group is backwards or ignorant. However, they sometimes see things that we do not which is why they behave differently. When people are younger, they might question why things are the way that they are or why certain things are not allowed but as people get older, they become wiser and recognize that there are certain areas in which we should not be so aggressive in and that it is better to be on the middle path. We start to see the hikmah (wisdom) of certain religious injunctions which is also very important. Sometimes the younger generation or those who are more technologically-savvy, simply push ahead with a certain agenda but this can be detrimental.

With the current COVID situation, it seems that there is a catalyst which is speeding up the whole process so do you think we will see a closing of the gap between the more traditional, conservative group of people who are still typically leading Islamic social finance and the new way of doing things?

I think that with this COVID situation, it feels like everyone has been forced to adapt. This is the only way that you can perform your ibadah (acts of worship), even the religious scholars and their way of thinking have changed. For example in Malaysia, the fatwa on solat jumaat (Friday prayers) now allows the prayers to happen with a smaller group of people whereas before if you don’t have 40 people then you can’t have solat jumaat. So things have changed a lot and in particular, the shifting of ijtihad of the religious scholars is unprecedented. 

Now, there is this mindset where we have to do things more quickly or we do not have certain things in place so we need to catch up since the current situation forces us to go through these technological and cultural changes. Some people belonging to the older generation are not used to technology so we have received calls in Pergas where they ask if we can go to their house to collect their zakat since they are unable to go out. We have opened a physical counter to cater for the older generation but I do think that moving forward, they might be left out if they do not know how to embrace technology which is a scary thought because it might affect their ibadah. I’m sure that this year, a lot of those who did not embrace technology missed out on the payment of their zakat especially zakat fitrah (Zakat paid before the end of Ramadan) so it can be quite serious as they don’t know how to use technology and so are left with no outlet to carry out their duties. Although these are some of the issues that the current situation has forced us to face, as the saying goes “change is difficult in the beginning, messy in the middle but it is beautiful at the end”. I think that there should be efforts to bridge the gap that the older generation is facing since this COVID situation is forcing everyone to use technology. 

Could you elaborate more on what the beautiful final outcome you mentioned would or should look like? How can zakat and waqf bring a better future for the Muslim world and humanity at large?

I think there will be more transparency in how waqf and zakat are done as a whole. Global Sadaqah is an example of how zakat and waqf can be done differently and in a more transparent manner which people like because they can see their beneficiaries and where the money is going. Conversely, in the past things were done in a very ‘closed’ manner and also the beneficiaries were not able to reach out to others for help easily but now there is an avenue for them to have their voices heard due to technological advancements. So I see the areas of zakat and waqf as ‘blue oceans’ because there is a lot that has not been explored yet and so much more can be done. In the future, in the areas of zakat and waqf, I think we will not only see more transparency but also efficiency because, for example, administration costs can be reduced. This will make it easier for small zakat collectors to be sustainable, for example, and open up doors in general. 

There is so much suffering and pain in this current situation and we might face a prolonged depression as well as high unemployment rates so what can waqf potentially do to help? 

So the PERLU fund which is an endowment set up by Pergas and its affiliate Pergas Investment Holdings (PIH) is for the legacy of the ulama (scholars). I think that it is very important for organizations to have sustainability in their activities so to do this, they need to create an endowment. This allows them to continuously carry out their mission or vision since they’ve already created plans for their capital and the returns from their investments.  

Can you please give more details on how PERLU works and what are other similar models which can be implemented following PERLU? 

PERLU follows a cash waqf concept and it is an endowment so when people donate, we do not disburse the donations immediately. It is different from general sadaqah and zakat because with zakat, for example, you have to distribute the funds within the year so it is a different kind of funding mechanism. In this particular funding mechanism, the fund was formed so that the donations can grow and be used to sustain an organization’s yearly activities. Many non-Muslim organizations especially universities like Yale, Harvard, etc have created endowments and these can be worth billions of dollars. If we look at religious organizations in Singapore or Malaysia, they do not create endowments and so every year they struggle to raise funds since they do not have a steady income stream. 

Creating this endowment also expands the Islamic investment sector since the capital has to be invested. Thus, you are creating economic activity especially Islamic economic activities through the creation of such an endowment because you would have to invest. 

Could you share with us some thoughts about what is happening today and the future? Where do you see the opportunities are for young people in Islamic finance or Islamic social finance? 

I think that Islamic finance has many areas within it including actual trade and investments. If we look at the situation now, there is an increase in debt and I do not think that many of the sophisticated instruments like derivatives are sustainable. So there are a lot of opportunities for young people if they look into these areas especially on how Islamic finance can help to create the real economy which I feel we should be focusing on because it creates goods, services and jobs. Of course, I think that if you do social finance, whatever it is you have to be doing good and I believe that doing good helps with the balance in society. I think that we can learn a few lessons from this COVID situation namely that people should reflect and realize that there are a lot of people out there who are in need of help. I hope this teaches us to go through life with these strong realizations and reflections. My advice to the younger generation would be to embrace technology and develop multiple skills because you can no longer afford to be specialized in only one single thing/area. 

Takeaway #1: The gap between the older generation and technology needs to be bridged otherwise, they will be left behind and it might even affect their ibadah (acts of worship). 

Takeaway #2: The younger generation should embrace technology and develop multiple skills because people can no longer afford to be specialized in only one single thing/area.

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We operate ethical investment platforms approved by regulators in Indonesia, Malaysia, and Dubai, and also run a charity platform Global Sadaqah serving ordinary people, high-net-worth individuals, corporates and government entities. Best known for crowdfunding impact investments for Indonesian social housing development projects we adhere to the United Nations Global Compact ethical standards and are based on Islamic finance.