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 an 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 operationalizing their subsidiary Warees, which developed the majority of the waqf land in Singapore with an asset value of more than SGD700 million 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-19 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.

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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 Ph.D. 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. I am very passionate about the areas of zakat, waqf and Fara’id which 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 how Global Sadaqah does crowdfunding, I see these areas as crowdfunding too 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 faced by the community. Thus, these are all 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 thus, one of the big areas for MUIS to focus on is zakat. However, the cultural mindset of our society was that the payment of zakat should be done in person but things have evolved during the COVID-19 situation and that is no longer the case so 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 important which is why the zakat authorities have to invest in all of this technology because it will improve the efficiency of their distribution. Thus, it will cost less, consume 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) so we can transfer money to them monthly and they do not have to come to HQ to get their money. Additionally, with regard to 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 have created vouchers for the beneficiaries which are mailed to them and redeemable at shopping centres. Hence, through the use of technology, it has become 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 but, I do think that most of the time there are manpower constraints so we need to have volunteers.

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 from the capital is disbursed so it is supposed to be in perpetuity. Waqf has been a tool for some time in the 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 Aljunied and so on — were the ones who created the waqf here and the income generated from that waqf or its capital is disbursed globally. For instance, the poor and needy in Saudi can access it and it was used for a mosque in Indonesia and Yemen. 

Furthermore, as Singapore is considered a haven for investments, the beneficiaries have benefitted as well. An example that illustrates this point is if the rental of an area/place in Singapore (that is waqf) is converted into rupiah for the beneficiaries in Indonesia, those beneficiaries would receive very good returns. In my opinion, the foresight of the earlier wakifs (donors) brought these benefits. Therefore, waqf is useful in creating social impact locally and globally. On the other hand, the social impact of zakat is more localized 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 emphasizes helping the poor and needy. This is because if we look at the Hadiths (prophetic sayings) and the way that waqf was initially distributed by Saidina Umar r.a, the money was given to those who were poor, needy and stranded. I guess this was one of the ways of effectively helping people back then.

In our modern times, some things have changed so to effectively help out society, we pondered on the things/skills that people currently need. An example of a solution that resulted from our pondering was when PERGAS decided to use zakat money to empower religious teachers by teaching them technological skills so that they can do their da’wah (conveying the message of Islam to non-Muslims). Back then, these skills were unnecessary but now they are needed.  

While there is a culture of embracing technology, cultural mindsets can also act as a barrier and prevent this embracement. 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 engaging those who are apprehensive and expose them to things. In addition, I think that doing research and presenting it to them along with our reasonings will help to convince them and thus, break/lower the barrier. Also, we also should not blame them for being apprehensive because they are not as familiar with technology since they do not come from the that industry. Whenever something is unknown, fears are always present and we need to understand that. They may have concerns on whether these new methods are safe and secure. 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 religious teachers are having a lot of seminars, conferences and discussions about these areas. Having said that, I believe that sometimes the more technologically-inclined/savvy and the entrepreneurs among us can try to push the boundaries too far and too fast. This could be dangerous because maybe at that point in time, that is not the best course of action and it might result in others taking a more confrontational/defensive stance. 

Additionally, sometimes we may not see the harm of what we want to implement and immediately think that those who are wary are backward or ignorant. However, they sometimes see things that we do not which is why they behave differently. When we are young, we tend to question things but as we get older and become wiser, we recognize that there are certain areas where we should not be so aggressive and it is better to take the middle path. We start to see the hikmah (wisdom) of certain religious injunctions which is very important because 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 speeding up this whole process. 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) so 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 much smaller group of people whereas before if there were less than 40 people gathered, the prayer would not happen. Hence, things have changed a lot and in particular, the shifting of ijtihad of the religious scholars is unprecedented. 

Since the current situation is forcing us to go through these technological and cultural changes, people have this mindset that we have to do things faster or that we do not have certain things in place so we need to catch up. Some people belonging to the older generation are not used to technology so PERGAS has received calls from them asking 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 to 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. This year, I’m sure that many 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 there can be serious consequences if they don’t know how to use technology as this leaves them with no way of carrying out their duties. Although these are some of the issues that the current situation has forced us to face, there is a saying that states “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 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 performed as a whole. Global Sadaqah is an example of how zakat and waqf can be carried out differently and in a more transparent manner which people like because they can see their beneficiaries. Conversely, in the past things were done in a very closed manner and the beneficiaries were not able to reach out to others for help easily but now they have an avenue for their voices to be heard due to technological advancements. Therefore, I see the areas of zakat and waqf as ‘blue oceans’ because there is still much to be explored and so much more can be done. In the future, I think we will see more transparency and efficiency in the areas of zakat and waqf because administration costs, for example, can be reduced. This will make it easier for small zakat collectors to be sustainable and overall, open up doors.

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? 

The PERLU fund, an endowment set up by Pergas and its affiliate Pergas Investment Holdings (PIH) is meant for the legacy of the ulama (scholars). I think that organizations need to be sustainable in their activities therefore, 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 similar models that 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 and so on 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 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 activity 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. Thus, 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, you have to be doing good no matter what 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 require 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 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.