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Medan — Waqf is no longer limited to land donations or religious facilities. A 2026 study by Irma Suryani Lubis and Muslim Marpaung from Politeknik Negeri Medan shows that modern waqf has evolved into a strategic financing instrument capable of supporting large-scale and sustainable socio-economic development. Published in the East Asian Journal of Multidisciplinary Research, the study highlights how cash waqf, Islamic financial institutions, cash waqf–linked sukuk, and social entrepreneurship can work together to significantly increase the long-term impact of Islamic social finance.
The findings matter at a time when governments and communities face rising inequality, fiscal constraints, and growing demand for alternative development financing. According to the authors, integrating waqf with modern financial mechanisms allows it to function as a productive, transparent, and scalable development tool rather than a purely charitable instrument.
Why Modern Waqf Matters Today
Waqf has historically played a central role in funding education, healthcare, and poverty alleviation across Muslim societies. However, Lubis and Marpaung note that many waqf institutions today still struggle with underutilized assets, weak governance, and limited innovation. These challenges have prevented waqf from reaching its full socio-economic potential.
The study positions cash waqf as a critical solution. Unlike traditional land-based waqf, cash waqf allows contributions from a broad segment of society, including small donors. Funds are invested in Sharia-compliant instruments, and only the returns are distributed for social purposes. This structure ensures sustainability while preserving the original endowment.
“Cash waqf transforms waqf from a static asset into a dynamic source of social financing,” the authors explain.
The Role of Islamic Financial Institutions
One of the study’s strongest findings is the importance of Islamic financial institutions, particularly Islamic banks, in managing cash waqf. Banks provide professional fund management, regulatory compliance, transparency, and risk control. Acting as financial intermediaries, they channel idle waqf funds into productive investments aligned with Islamic principles.
The literature reviewed in the study consistently shows that Islamic bank involvement improves accountability and public trust in waqf institutions. This integration also aligns waqf management with broader goals of financial inclusion and economic stability.
By embedding waqf within the formal financial system, the study argues, waqf can move beyond fragmented charitable initiatives and become part of a coordinated development framework.
Cash Waqf Linked Sukuk Expands Impact
A major innovation highlighted in the research is Cash Waqf Linked Sukuk (CWLS). This instrument connects charitable waqf funds with government-backed Islamic bonds, allowing waqf to finance large-scale infrastructure and social projects.
CWLS enables waqf funds to support projects such as hospitals, schools, and social housing while maintaining financial security. The study finds that this model significantly increases efficiency, transparency, and scalability compared to traditional waqf practices.
Lubis and Marpaung describe CWLS as a breakthrough that allows waqf to operate at a macroeconomic level, contributing directly to national development priorities.
Social Entrepreneurship Turns Waqf into Productive Capital
Beyond financial instruments, the study emphasizes the role of social entrepreneurship in strengthening waqf sustainability. Instead of distributing waqf funds solely for consumption, waqf-based enterprises reinvest capital into income-generating activities that benefit communities over the long term.
These enterprises support microbusinesses, create employment, and increase household income. As a result, beneficiaries become economically active participants rather than long-term aid recipients.
The authors note that this approach reduces dependency and creates a self-sustaining cycle of social and economic empowerment.
Governance as a Decisive Factor
While the potential of modern waqf is substantial, the study stresses that governance quality determines success. Weak governance leads to mismanagement, idle assets, and declining public confidence. Strong governance frameworks, including performance measurement systems and digital reporting, are essential for ensuring accountability.
The study references the growing use of waqf performance indexes and standardized audits as effective tools for improving transparency. According to the authors, professional governance not only protects waqf assets but also attracts greater participation from donors and investors.
“Governance is the foundation of sustainable waqf development,” Lubis and Marpaung write, emphasizing that institutional reform is as important as financial innovation.
Contribution to Sustainable Development Goals
The study also highlights waqf’s expanding role in supporting the Sustainable Development Goals (SDGs). Modern waqf instruments are increasingly used to finance education, healthcare, renewable energy, and climate-resilient infrastructure. This positions waqf as a complementary funding source to public budgets and private investment.
By combining philanthropy with investment, waqf can generate long-term social value while supporting environmental and economic sustainability.
Implications for Policy and Practice
The findings carry important implications for policymakers, regulators, and waqf authorities. Governments are encouraged to integrate waqf into national development and financial inclusion strategies. Supportive regulations for cash waqf, waqf investment funds, and CWLS are seen as essential to unlocking waqf’s full potential.
Islamic financial institutions are also urged to expand their role as professional waqf managers, providing custodial services, investment expertise, and transparent reporting systems. Meanwhile, waqf authorities are advised to prioritize digitalization, governance reform, and public education to increase participation and trust.
For society at large, the study reinforces the idea that waqf is not only an act of religious charity but also a strategic social investment capable of delivering lasting benefits across generations.
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