Understanding the Difference Between Cash Waqf and Waqf through Cash

Though the terms might sound similar, cash waqf and waqf through cash are two forms of endowment that are different in practice.

cash waqf
Illustration. Waqf Wells are the result of waqf through cash where people allot some of their wealth for the construction of wells that can benefit many people. (ACTNews)

ACTNews, JAKARTA – There has been quite a lot of discussions about cash waqf as it carries a wide potential for the alleviation of social problems. However, people often confuse cash waqf with waqf through cash. What are the differences between these two forms of waqf?

Mukhlis Rahmanto from Muhammadiyah’s Islamic Economics Division revealed that cash waqf (waqf al-nuqud) is a legal act of an endower to set aside or donate some of his money for a certain or unlimited period of time to be managed productively so that the proceeds of which can be used for worship purposes and/or the welfare of the community in accordance with the sharia.

For instance, if someone endows IDR 100 million, the money must be used productively and the proceeds are taken for the benefit of others. Although the money is used up, the value doesn’t change because of its position as a waqf object and property.

"The nature of the benefits of cash waqf is not direct because it must be invested in Islamic bonds or Sukuk before the proceeds can be used to finance muezzins, imams, etc," said Mukhlis.

On the other hand, in waqf through cash (waqf abra al-nuqud), the money donated or set aside by the endower is used directly to purchase movable or immovable waqf assets for worship purposes and/or the welfare of the community in accordance with the sharia.

Muhammadiyah, for example, made an appeal for school construction that is worth IDR 10 billion. To support this project, Muhammadiyah opens an opportunity for everyone to endow their waqf. They can donate either IDR 100,000, IDR 2,000,000, or IDR 500,000,000. This is called waqf through cash because the waqf object is the school, not money.

 “In cash waqf, money becomes the object of waqf. However, in waqf through cash, we give some money to be used to purchase the waqf assets. This means that, in this case, money is merely an intermediary for the waqf assets,” said the lecturer in Islamic Economics at Universitas Muhammadiyah Yogyakarta.

From a legal perspective, DR Oni Sahroni, Member of National Sharia Board (DSN) - Indonesian Ulema Council (MUI) is of the opinion that both cash waqf and waqf through cash are permissible. In fact, the scholars such as those of the Maliki school, Muhammad bin Abdullah Al-Ansari, and Ibn Taimiyah.

This conclusion becomes the basis for The Organization of Islamic Cooperation (OIC)’s Fiqh Institute's decision Number 140 as well as the AAOIFI International Sharia Standards in Bahrain regarding waqf. These laws are in line with the waqf law in Indonesia which allows cash waqf where endowers can endow movable objects in the form of money (Law Number 41 of 2004 concerning Waqf Article 28).[]