Waqf is defined as a form of endowment specifically intended for charitable causes, usually given in the form of assets such as land or buildings. But for the cash-linked sukuk, which was officially introduced on the sidelines of the Annual Meetings of the International Monetary Fund and World Bank Group in Nusa Dua, Bali on Sunday, people are encouraged to provide cash as waqf.

The cash-waqf is given to bodies that are appointed to manage waqf such as the Indonesian Waqf Board (BWI), which invests the cash in specific sukuk issued to finance the government’s projects, BI’s sharia finance director Anwar Bashori explained.

“It is an alternative financing [instrument] for waqf, so that the funds will be more productive,” Anwar said, adding that the newly-introduced instrument would also contribute to the deepening of Indonesia’s financial market.

The waqf benefactor could choose to make their cash-waqf temporary or permanent. It means the benefactor can have their cash returned at least after five years, or donate the whole fund to the BWI.

BWI chairman Muhammad Nuh said separately that the newly introduced cash-waqf sukuk had attracted Rp 21 billion of waqf funds. Nuh added that the cash-waqf sukuk was expected to be issued in mid-December, which will coincide with the Indonesia Sharia Economic Festival.

In her remarks at the launch of the cash-waqf, Finance Minister Sri Mulyani said the combination of the waqf and sukuk was an innovation in providing low-cost but high impact financing instruments for the government’s economic program.

“The cash-waqf sukuk scheme allows philanthropic organizations to invest waqf money in a safe and risk-free investment instrument through private placement,” said Sri Mulyani.

National Development Planning Minister Bambang Brodjonegoro said the cash-waqf sukuk would enable people to provide waqf for the greater good despite not possessing any assets. “It could be a solution if there are people who want to provide waqf but do not have land or assets to be endowed, as they can use cash,” said Bambang.

He also said the potential to utilize sukuk as an alternative source of finance for the government was immense, quoting a Standard and Poor’s data that revealed global sukuk issuance has grown 45.3 percent in 2017, with total sukuk issuance reaching US$97.9 billion over the same period.

Sri Mulyani also quoted data that estimated the gap between sukuk demand and supply at $178 billion this year and was expected to rise to $271 billion in 2021, saying that the figure represented huge potential for the government to tap into.

Indonesia became the world’s first sovereign green sukuk issuer in March when it raised $1.25 billion through the issuance of a five-year sukuk to finance environmentally friendly projects.

Aside from introducing a new sukuk instrument, BI, along with the Islamic Research and Training Institute of the Islamic Development Bank and BWI also launched the Waqf Core Principles as an international standard for waqf in the financial sector.

The principles, which consist of 29 items, were largely centered on five issues, namely legal foundation, supervision, good governance, risk management as well as sharia governance, said BI governor Perry Warjiyo.

Perry added that the principles of Islamic finance, which emphasize ethics, justice, fair treatment and equity, was also in line with the goals outlined in the sustainable development goals (SDGs).

Sri Mulyani echoed Perry’s opinion, while adding that Islamic finance products such as sukuk provide a source for raising the type of funding needed to achieve the SDGs as well as the government’s national development agenda.

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