Cash Waqf: Sustainable Housing in Indonesia
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Indonesia is facing a national crisis with an estimated housing shortage of 11.4 million homes. Also up to 70% of those employed work informally, resulting in millions of people being excluded from traditional finance.
President Joko Widodo launched the ‘One Million Homes’ initiative in 2015 to address this issue, however the Covid-19 lockdown has reduced banks’ appetite to provide mortgages for this segment.There is an urgent need for liquidity in the affordable housing sector and cash Waqf can bridge this gap while creating yield to be used for even greater impact.
Waqf is an endowment made by a Muslim for a religious, educational, or charitable cause. It is an essential tool towards achieving socio-economic development, and if properly implemented, it can play a major role towards reducing unemployment and poverty eradication, eventually contributing towards the socio-economic progress of Muslim communities.
What’s the first thing that comes to mind when you hear about Waqf? Something to do with establishing some form of an institution on a designated piece of land. Many of us generally think that Waqf is something only the rich can afford because it involves property.
Awqaf in the form of infrastructure are indeed the most common and famous type. However, cash itself can serve as a Waqf. Cash Waqf can be defined as the confinement of an amount of money by a founder(s) and the dedication of its usufruct in perpetuity to the welfare of the society. Think of it as sadqah jariyah (continuous charity) that will keep benefitting us for years to come and even after we pass away.
This is a brilliant opportunity for everyone to get involved in becoming a part of establishing a Waqf with a small amount of money. Amounts like RM100 can go a long way in changing someones life and be multiplied into greater rewards.
This campaign aims to establish a cash waqf fund. A certain immovable percentage of cash can be allocated so that it can then be channelled to form a cash waqf fund. Funds from this cash waqf will then be used for beneficial projects, one of which is to purchase and provide sustainable housing for low income groups in Indonesia.
Investing in low-cost housing for low income groups brings social, economic, and psychological benefits to homeowners. This is a clear service to mankind in uplifting those striving for a better future while also generating a healthy yield that can preserve the Waqf capital. The Waqf will provide an additional social impact by directing the yield earned to develop community infrastructure including mosques, educational facilities, and solar power.
How does it work? As an indirect cash Waqf, there is a planned medium term out/exit, where residential assets from the initial investment can be sold to or refinanced by mortgage providers including Islamic banks, multi-finance institutions and cooperatives.
Waqf capital is invested in an SPVs to purchase affordable housing units in direct Sale Contracts (Murabaha). Shariah-compliant mortgage providers assist to screen and identify buyers who have the income capacity and stability to be able to obtain home financing from them in the future. Homeowners will then purchase the house in pre agreed, affordable installments from the Waqf SPV at a pre agreed higher price. This will provide yields for the Waqf while enabling low income families to benefit from home ownership.
Our funding of Affordable Housing in Indonesia directly and indirectly address 7 of the 17 United Nations Sustainable Development Goals (UN SDGs).
PT. Ethis Membangun Indonesia (EMI) is a developer company that focuses on building social housing in Indonesia. Ethis Indonesia has a wide reach in the property sector having partnered with large developer associations to tap on a huge base of small to large developers, and formed relationships with stakeholders ranging from Islamic banks, large community groups and government bodies.