A qualitative inquiry into cash waqf model as a source of financing for micro enterprises

Abstract Purpose: This paper aims to explore the opinions and recommendations of various experts on the integrated cash waqf micro enterprise investment (ICWME-I) model, particularly in terms of its suitability, applicability and prospects in the market. Design/methodology/approach: The research involves primary data which are collected from semistructured interviews conducted with experts from various backgrounds. Thematic analysis was used to examine the data. Findings: The experts support the suitability of the ICWME-I model in providing financial services to micro enterprises. They highlight the importance of establishing, managing and operating ICWME-I model under the aegis of the State Islamic Religious Council in Malaysia or the corporate sector. They further emphasize that the characteristics of micro enterprises, the element of sustainable funding, the importance of proper management and administration, legal matters and public awareness are key factors that influence the sustainability of the ICWME-I model. Originality/value: This paper adds to the literature on waqf and micro enterprises especially from the Malaysian context. The paper validates the ICWME-I model in terms of its suitability, applicability and prospects in the market by interviewing experts from various backgrounds. © 2018, Mohamed Asmy Bin Mohd Thas Thaker.


Introduction
The role and importance of micro enterprises have been acknowledged in both developed and developing economies. Hailey (1991) classified the roles of micro enterprises in terms of economic benefits (e.g. income generation, wealth creation and mobilization of local resources), social contribution (e.g. poverty reduction, balanced development and provision of a seed bed for new initiatives) and political influence (e.g. wealth redistribution, creating opportunity and community empowerment). Furthermore, the contributions of micro enterprises cover a wide range of sectors such as services, manufacturing, construction, agriculture, quarrying and mining. The number of total establishments varies from one country to another. However, micro enterprises represent more than 70 per cent of total small and medium enterprises (SMEs) in most world economies, and these enterprises contribute around 60 per cent of total employment (OECD, 2013).
Despite their importance and contribution, a considerable number of empirical studies have investigated the problem micro enterprises have in accessing external finance (Stephanou and Rodriguez, 2008;Ganbold, 2008;Punyasvatsut, 2011;Ung and Hay, 2011;Machmud and Huda, 2011). The Malaysian case is no exception, and many empirical studies have highlighted this funding problem (Hashim, 1999;Saleh and Ndubisi, 2006;Aris, 2006;Abdullah and Manan, 2010;SME Annual Report, 2011SME Masterplan, 2012/2020Duasa et al., 2014;Thaker et al., 2014;Thaker, 2015, 2016;Thaker 2015). These studies empirically found the following to be prominent factors that hinder micro enterprises from accessing external finance: inadequate collateral; insufficient legal status; high transaction costs; insufficient information and documentation; lack of financial track record; nature and quality of business; rigidity of the financing procedure; and lack of awareness on financial facilities.
Furthermore, traditional financial institutions do not serve micro enterprises because the latter are perceived as entailing high risk of default and relatively low profitability.
To meet micro enterprises' need for financial accessibility, alternative approaches have been offered by using conventional microfinance institutions (Husain et al., 2005;Ngehnevu and Nembo, 2010;Nawai and Shariff, 2011;Suryana and Komaladewi, 2012;Akorsu and Agyapong, 2012;Mondal, 2012) and Islamic microfinance institutions (Muhammad, 2012). However, the use of conventional microfinance institutions do not solve the problems, particularly because of the high interest rate (Anyanwu, 2004;Weiss and Montgomery, 2004;Parveen, 2009). Islamic microfinance institutions face their own issues in that their existing practices tend to converge with conventional practices (Muhammad, 2012). For example, the financing modes used by Islamic microfinance institutions are mostly debtbased, which are similar to the interest-based conventional modes (Muhammad, 2012). The operations of Islamic microfinance institutions in some Muslim countries tend to be costly because of the dominance of mur aba Á hah (cost plus mark-up) practices and administrative charges that are tantamount to rib a (interest) (Hassan, 2010;Muhammad, 2012). Moreover, most of the suggested models focus on SMEs in general rather than sub-components of SMEs, particularly micro enterprises. There is a lack of well-developed and tested models specifically for micro enterprises.
In response to the above, an alternative model that can improve the access of micro enterprises to financial services has been proposed by using waqf (Islamic endowment). This study describes the integrated cash waqf micro enterprise investment (ICWME-I) model that has been proposed in the literature. Realizing that this model has so far remained at best a conceptual framework, this study attempts to fill in this gap by exploring the opinions and recommendations of various experts regarding the ICWME-I model. It carries out empirical research to determine the range of factors that will impact its suitability, applicability and prospects in the market that might aid the development of micro enterprises. Semi-structured interviews were conducted for this purpose with a range of experts from various backgrounds and the data were analyzed using thematic analysis. This paper is organized as follows: the following section provides a brief review of the literature on the use of waqf as a financing mode. It then describes the modus operandi of the ICWME-I model and the research methodology utilized in conducting this research. The next section then presents the research findings and analyzes the results. The last section concludes the paper and provides some recommendations.

Waqf and financing
There are several studies that have discussed the usage of cash waqf for enterprise financing (Elgari, 2004;Cizakca, 2004;Dusuki 2008;Hassan, 2010). To provide a source of financing for the poor who are restricted from accessing external finance, Elgari (2004) proposed an idea to incorporate waqf into the concept of qar Á d Á hasan (interest-free loan). In this context, he recommended establishing a non-profit financial intermediary in the form of a qar Á d-Á hasan bank. The capital injection of the bank would come from the monetary (cash) waqf donated by Muslims while the bank would provide qar Á d Á hasan as a form of financing for the poor.
Cizakca (2004) also suggested a model where the use of cash waqf can be extended to entrepreneur financing through the concept of mu Á d arabah (partnership). He further proposed that cash waqf be used as a microfinance tool for the poor and entrepreneurs. Meanwhile, Lahsasna (2010) proposed that cash waqf be used to enhance the financial access of SMEs in Malaysia. It is expected to improve domestic economic growth and play a vital role in socioeconomic development. The investment of cash waqf would be made with debt and equity financing contracts such as mur aba Á hah, ij arah, isti Á sn aʿ, bayʿ bithaman ajil, mu Á d arabah and mush arakah for SMEs in Malaysia. Tohirin (2010) found that cash waqf can become a solution to Indonesian SMEs' lack of access to formal banking institutions. Through proper use and investment of cash waqf assets, SMEs would be able to expand their business venture through partnership with cash waqf institutions (CWIs).
The various cash waqf models that have been proposed by various authors have shown the possibility of integrating cash waqf and micro enterprises to effectively address the issue of financing for micro entrepreneurs. Although the proposed models by various studies have similarities with the present study, there is a difference. This study focuses on the ICWME-I model, which is a participatory form of contract between waqf institutions and micro enterprises. This model incorporates a mush arakah mutan aqi Á sah (diminishing partnership) financing arrangement between waqf institutions and micro enterprises. This study adds value to the proposed ICWME-I model by empirically exploring its suitability, applicability and prospects in the market.

The integrated cash waqf micro enterprise investment model
The studies by Thaker et al. ( , 2014;  and Duasa and Thaker (2015a, 2015b, 2016 have suggested an ICWME-I model for improving the financial accessibility of micro enterprises in Malaysia. The ICWME-I model basically provides financial facility through the use of a cash waqf fund. It also involves a participatory contract between Islamic voluntary organizations particularly waqf institutions and micro enterprises. The model is illustrated in Figure 1. The modus operandi of the ICWME-I model is as follows: Arrow[1] indicates the flow of funds from donors (both public and corporate sectors) that contribute cash waqf to the CWI with the intention of creating a perpetual waqf.

Inquiry into cash waqf model
The public contributes cash waqf by donating cash or purchasing waqf certificates offered by the CWI. The corporate sector can contribute cash waqf as part of their corporate social responsibility initiatives. The CWI becomes a mutawallī (manager) of the fund and is responsible for making the necessary investment decisions of the fund. The CWI can be treated as a separate entity or represent a non-profit organization under the purview of the Malaysian State Islamic Religious Council (SIRC) or the corporate sector. Arrows [2a] and [2b] show that the CWI would offer financial services by entering into mush arakah mutan aqi Á sah (diminishing partnership) arrangements with micro entrepreneurs. Both the CWI and micro enterprises would jointly engage in business activities or purchase property/commercial enterprises. The share of ownership of the financier/CWI and the micro enterprises is in turn divided into parts, with the understanding that the micro enterprises would gradually purchase their share in the property via periodic payments and CWI would gain a part of profit from the arrangement. By the end of the contract, the micro enterprises would have gradually become the sole owner of the property/ commercial enterprise. This arrangement is suitable for business financing [3a] and project financing [3b]. Business financing would include the financing of machinery, land, electric installation, equipment and other fixed assets. Project financing would involve the financing for construction of shop lots and business premises. Under this model, the CWI requires no collateral and there is no imposition of any interest in the transaction. However, the CWI is required to conduct thorough screening on the potential micro enterprises related to their business.
Among the lacunae of the ICWME-I model is that it is still a conceptual framework and reliance thereon fails to further its understanding and appreciate its suitability, applicability and prospects in the market. The present study thus seeks to fill in this gap.  Duasa and Thaker (2015a, 2015b, 2016 Research methodology The present study used the qualitative (interview) approach to achieve its objective. Interviews were conducted with experts from various fields across different related institutions such as Sharīʿah scholars, practitioners and academicians. The purpose was to develop greater understanding of the ICWME-I model and appraise its suitability, applicability and prospects in the market.
The steps in qualitative analysis include: preliminary exploration of the data by reading through the transcripts and writing memos; coding the data by segmenting and labeling the text; using codes to develop themes by aggregating similar codes together; connecting and interrelating themes; and constructing a narrative (Creswell, 2003).
The selection of experts was based on purposive sampling. Purposive sampling is one of the most common sampling strategies whereby the group of participants is pre-selected based on a particular research question. Purposive sample sizes are often determined on the basis of theoretical saturation (the point in data collection when new data no longer brings additional insight to the research questions). This study focuses on expert sampling, which is a subset of purposive sampling. The experts were from the different institutions shown in Table I. The selection criteria for experts were based on their qualification, area of specialization and working experience.
In terms of the number of participants chosen for the study, it follows the suggestion provided by Morse (1994), who recommends six participants for qualitative studies. Furthermore, the selection of number of respondents also typically relies on the concept of "saturation" or the point at which no new information or themes are observed in the data from the respondents. That number of respondents (six) has also been used by other researchers such as Muhammad (2012) and Ahmed (2013). According to their view, researchers work with a small sample size to study their subject matter in-depth, and it is sufficient to achieve the objectives of the study.
Data collected during the interviews were transcribed into field notes and analyzed by using thematic analysis. According to Braun and Clarke (2006), thematic analysis is "a Inquiry into cash waqf model method for identifying, analyzing and reporting patterns (theme) within data". Thematic analysis was used in this study because of the following advantages: ability to summarize key features of large data; highlighting the similarities and differences of data; and usefulness in making analysis suited to policy development (Braun and Clarke, 2006).
The process of thematic analysis involved selecting, simplifying and coding the data collected into common themes (Miles and Huberman, 1994).

Research findings
The present study identified eight major themes from the data analysis, as presented in Table II.

Importance of micro enterprises
The participants in the interviews were asked their views on the importance of micro enterprises for the development of the national economy. In general, the participants (n = 6) strongly agreed on the economic and social significance of micro enterprises. Below are some of their responses: According to the interviewees, micro enterprises contribute in the reduction of poverty, generate employment, create wealth and improve the standard of living. The importance of micro enterprises as highlighted by the interviewees is consistent with past studies such as Hailey (1991); Harvie (2004) and Nasrullah (2012).

Financial challenges
The participants conveyed their views on the issue of financial accessibility for micro enterprises. They all (n = 6) mentioned that micro enterprises face financial problems particularly in terms of accessing external finance. The following views were collected: Inquiry into cash waqf model The above findings reveal that all the participants agreed that micro enterprises face the problem of accessing finance. The interviewees cited the following factors leading to this problem: no collateral, high interest rate, no documentation and characteristics of micro enterprises. This finding is supported by earlier studies by Hashim (1999); Saleh and Ndubisi (2006), Aris (2006) and Economic Census: Profile of SMEs (2011).

Importance of ICWME-I model
The participants in the interviews were asked to provide their opinions on the importance of the ICWME-I model. The participants (n = 6) agreed that this model is important and relevant to the needs of micro enterprises as a source of financing. The following views were collected: Based on the above findings, the participants opined that the proposed model in this study is new, unique and important. According to the experts' views, there is a need for an alternative model that can replace existing financing models. The model, as opined by the respondents, would channel resources appropriately according to the needs of micro enterprises.

Suitability of ICWME-I model
The views of participants in the interviews were sought on the suitability of the ICWME-I model in assisting micro enterprises to obtain financial services. This theme emerged by answering two main questions, as mentioned earlier in Table II: Q1. How can cash waqf fund be used to resolve the problem of access to finance by micro enterprises?
Q2. What is your view on the mush arakah mutan aqi Á sah partnership (MMP) arrangement involved in this model?
All the participants (n = 6) affirmed the suitability of the ICWME-I model in assisting micro enterprises. Below are excerpts of their views: The cash waqf fund could provide financing facility to micro enterprises particularly without any restrictions such as interest rates and collateral [. Cash waqf fund has the capacity to help micro enterprises in terms of financing [. . .] when we provide financial facilities using the cash waqf fund, micro enterprises can use it for their business operations. They can expand their business without any restrictions such as interest rates, collateral requirement, strict documentation requirement [. . .] I can see the potential of MMP to help micro enterprises using the cash waqf fund. It is good to use MMP with micro enterprises. It is because MMP involves joint venture between CWI and micro enterprises [. . .] at the end, micro enterprises eventually become the owner of the asset. (E4) Cash waqf fund can be used to help micro enterprises by providing financial facilities. CWI can provide this fund as a source of financing for micro enterprises to start up and expand their businesses. Through cash waqf, I see surely there will be no interest-based mechanism in the model [. The participants agreed on the suitability of the ICWME-I model to help micro enterprises in terms of providing financial services using cash waqf. The agreement to use cash waqf particularly for financing is consistent with earlier scholars' views such as Ahmed (2002), Elgari (2004), Cizakca (2004), Dusuki (2008) and Hassan (2010). In addition, the idea of using MMP as a financial arrangement was preferred by most of the interviewees. This is perhaps because of the uniqueness of MMP, as it involves a joint venture between two parties and the structure of MMP consists of two separate contracts (Meera and Razak, 2005). First, there is a mush arakah where the client and the financier become partners, and second, there is an ij arah, which involves the leasing of the property where the equity of the financier follows a diminishing balance method. At the end of the contract, MMP allows the customer to own the property, whereas CWI as the waqf institution gets back its principal amount plus profit. The interviewees argued in favor of MMP being applied for all types of financing, including micro enterprises, although in practice it is more used for house financing. This follows the view of Usmani (2002), who stated that the concept of MMP is not confined to home ownership only. It can also be applied to other forms of acquiring assets and projects.

Institutional platform: SIRC, SIRC's entity and corporate entity
Participants were asked on the appropriate institutional platform to establish the ICWME-I model. Among the options given to the interviewees were operation of the ICWME-I model under the SIRC, as a separate entity of the SIRC, or as a private entity under the corporate sector. The majority of the participants mentioned that the ICWME-I should be operated as a separate entity of the SIRC (n = 6) or under the corporate sector (n = 4). Below are excerpts of the respondents' views: I suggest to establish it as a separate entity under the SIRC. For example, PWS was established by SIRC as a separate entity and we at PWS have our own organizational structure and management. It is similar to an entity under the corporate sector having its own organizational structure and management. But, it is still under the control of SIRC, which monitors its progress. (E2) I would suggest a separate entity to manage it. An entity does not matter whether it is under the SIRC or corporate sector. As a separate entity, its management will be organized well and more efficient. For operating this model, it is not a matter whether it is through SIRC or under the corporate sector. But we expect those who want to operate it must be efficient in terms of management. For me it is still possible to be through SIRC, if SIRC has the capability to do it. It must have all experts in investment area and so on [. . .] You could do like PWS where PWS was created as a separate entity under SIRC. (E5) We can use concepts like PWS or JCorp. Like PWS, CWI can become an entity under the SIRC which will manage it. This is because if the entity is under SIRC, it will have its own organizational structure and expertise [. . .] it is also similar to JCorp. CWI can become an entity under a corporate sector. (E6) Based on the findings, the respondents preferred to have a separate entity such as Perbadanan Wakaf Selangor (PWS) and Waqf An Nur Corporation Berhad to manage the ICWME-I model. PWS and Waqf An Nur Corporation Berhad are subsidiaries of SIRC and JCorp Berhad, respectively. Thus, the ICWME-I model can be operated as a separate entity under the SIRC or the corporate sector. A separate entity can act as the coordinating and implementing agency that represents the parent organization or company. This setup is preferred over a government agency as the institutional platform. According to Hassan (2010), government agencies are inefficient in managing waqf-related matters, which leads to a decrease of public participation in development initiatives.
Sustainability of the ICWME-I model As the ICWME-I model was deemed to be implementable, the participants were further asked to share their views on its sustainability. Several aspects of sustainability were raised by the interviewees. Among them were: the characteristics of micro enterprises; the aspect of funding; and the issue of management and administration.
The majority of participants (n = 5) mentioned that the issue of funding is important for the sustainability of the ICWME-I model, followed by characteristics of micro enterprises (n = 4) and management and administration (n = 1). Based on the interviews, the following views were collected: There is a need for the CWI to choose capable micro enterprises. Micro enterprises that are selected in this model should at least have the intention to change their position from micro status to small and medium enterprises over time [. . .] CWI has to monitor micro enterprises to prevent them from misusing the funds given [. . .] to ensure the continuation of waqf funds. This is very important because if there are not enough funds available then the model will not function. (E1) Funding is an important aspect. It must be sufficient to ensure the sustainability of the model [. . .] Micro enterprises that are selected should be suitable and capable. (E2) The projects that micro enterprises are involved in must be appropriate and necessary for the long term. We need to see the potential of their business to expand [. Based on the findings, the participants highlighted that funding is a main element for the sustainability of the ICWME-I model. If CWI wants to maintain the sustainability of its services and programs, it is necessary to ensure the continuation of its source of funding. Thus, donors' contributions, either in cash or through purchase of waqf certificates, are a sign of commitment to this model. On the other hand, the characteristics of micro enterprises are also important in ensuring the ICWME-I model's sustainability. Micro enterprises that are going to participate in business activities must be capable and able to sustain their operations and revenue generation.
Challenges of the ICWME-I model The participants were asked to share their views on the potential challenges that will arise in materializing the ICWME-I model. The participants (n = 6) anticipated that the ICWME-I model will face legal and public awareness challenges. Below are excerpts of the respondents' views: In terms of the challenges, funding should be made available at most of the times. CWI should be active in seeking funding [. The legal challenge is the main challenge. But if you establish and operate your model like PWS, then there will be no legal problem. It is because you know that in Malaysia, SIRC plays a role in all matters relating to Islam. So, if you want to operate separately, then you will face a legal challenge [. . .] The next challenge is about micro enterprises [. . .] CWI must identify potential micro enterprises through screening and monitoring. Another challenge would be awareness among the people. (E5) In terms of the challenges, awareness is very important to ensure that the model is successful. Nowadays there is lack of awareness among the public on waqf itself. Another challenge pertains to funding. CWI needs to find a source of funding to run its operations. Another issue relates to the law [. . .] whether the law allows you to carry out your model. Even in Malaysia, we know that we have Majlis to engage with matters related to Islam. (E6) Based on the feedback received from experts, legal issues and public awareness are iterated as the main blockages in materializing the ICWME-I model. For instance, in Malaysia, all Islamic matters including waqf are governed and enacted by the SIRC of each Malaysian state. Each SIRC would issue its respective fatwa (legal opinion) regarding the way the cash waqf fund can be spent or invested. Thus, to avoid hassles, it is preferable for the ICWME-I model to be operated as a separate entity of the SIRC or the corporate sector. However, SIRC would monitor and evaluate CWI's performance.
With respect to the awareness level among the public, the interviewees highlighted that the low level of public awareness about cash waqf could affect the ICWME-I model. Most programs organized by SIRC are mainly focused on religious activities and the traditional charitable avenues of orphanage and relief to the poor (Osman et al., 2012). Thus, lack of promotion of cash waqf by SIRC is seen to be a cause of the low level of public awareness. Furthermore, the Malaysian public's understanding of waqf is quite narrow. They associate it only with the construction of mosques and waqf lands for cemeteries, despite waqf's wider function and role.

Awareness cultivation
The participants shared their opinions on how to cultivate the attitude of "giving" and "helping others" among the public and corporate sectors. The majority of respondents (n = 5) believed that extensive promotion is needed to cultivate the attitude of "giving" and "helping others", followed by providing education about waqf including cash waqf (n = 4), practicing accountability and transparency (n = 3), campaigning (n = 2) and providing incentives (n = 1). Below are excerpts of the respondents' views: If you want to create public awareness on cash waqf, we need to give some education and information for the public to understand the concept of cash waqf and its benefits. Promotions are also very important. Promotion may be made through TV, radio, mosques, public, corporate and others. So far, I find there is lack of promotion. (E1) Awareness of the public should be enhanced in order to make them understand about cash waqf [. . .] can do it through promotion and campaign. (E2) Our people must be given education about the importance of cash waqf [. . .] promotion to related parties is also important. This will expose them to information about it. (E3)

Inquiry into cash waqf model
If we want to create awareness among the public, campaigning about waqf and cash waqf is very important. I feel that various incentives should be given such as tax exemption, coupon and so on. It is to attract the public to donate cash waqf. There is also the importance of education. Through education, the public can get exposure on cash waqf. (E4) If you want to create public awareness, you must practice accountability and transparency. It is very important for the people, particularly the donors. The benefits derived from the waqf funds will convince them of the usefulness of the model. Promotion is also important to attract donors. (E5) If you want to make the people aware of cash waqf contribution, we need to make large-scale promotion. It is to ensure that the information is received by the public. In addition, CWI must be transparent and accountable on anything that they are doing with the waqf fund. We have to show to the public what we are doing with the funds collected [. . .] Another aspect is education. We should give early education on the importance of cash waqf on socio-economic development. (E6) Based on the findings, most of the interviewees are in consensus that promotion is needed to cultivate the culture of "giving" and "helping others" among the public and corporate sectors. With extensive promotion, the public and corporate sectors will be able to get more information about cash waqf and its roles. This will help to close the "information gap" between the service providerin this case, CWIand the donors. Promotion can be made through various sources such as the media, internet, magazines, newspapers and mosques. Meanwhile, the interviewees also highlighted the importance of education to make the public and corporate sectors aware of cash waqf and cultivate the culture of "giving" and "helping others". Education on waqf including cash waqf can take place at the secondary school level or the tertiary level. Through different programs, people will be better exposed to the concept of waqf and its role in socio-economic development.
The interviewees also emphasized the importance of practicing accountability and transparency by waqf institutions. The presence of a credible, transparent and accountable institution will enhance people's confidence in the role of waqf institutions, and people will then continue to support these institutions by contributing funds.

Conclusion and recommendation
The main objective of this study is to gather experts' opinions and recommendations on the suitability, applicability and prospects of the ICWME-I model. This study has presented the analysis of the in-depth interviews conducted with six experts from various institutions. The findings from the interviewees support the suitability of the ICWME-I model in providing financial services.
The findings also highlighted the importance of operating the ICWME-I model as a separate entity of either the SIRC or the corporate sector. Meanwhile, in terms of the model's sustainability, the main drivers, as highlighted by the interviewees, are the characteristics of micro enterprises, including their management and the funding aspect. Furthermore, legal challenges and public awareness are considered as the potential challenges that might arise in materializing the ICWME-I model.
From the viewpoint of the experts, the model is considered to be very useful in providing micro enterprises with financial facilities. It provides an alternative to traditional financial institutions in that regard. This model can help the government to reduce expenses on micro enterprises' development; therefore, the government should consider it carefully. Besides, the ICWME-I model can be proposed for adoption by other Muslim countries.