6. General Description of System Conceptualization
The system conceptualization involves establishing model boundary,
identifying causal relationships and policy framework
2
. In this research the model boundary includes all relevant factors that are considered important in the
problem context. The model comprises six interrelated components in the cash waqf management as shown as Figure 3.
THE POOR THE RICH
CASH WAQF FUNDS
INVESTMENT PORTFOLIOS
+ INVESTMENT
PROFITS AVAILABLE FUNDS
FOR THE POVERTY PROGRAMS
+
+ -
+
+ - loop 1
+ loop 2 +
+ loop 3 - loop 4
- -
Figure 3. A Macro-view of Model
As depicted in the above causal loop, the model links among the rich, cash waqf fund, investment portfolios, investment profits, available funds for the poverty
programs and the poor.
A general system of cash waqf model, derived from a macro-view of model above, consists of six sectors i.e:
1. The cash waqf fund raising sectors the rich links to the collected-cash waqf funds,
2 The Islamic financial portfolios sectors, 3 The global fund management sectors,
4 The direct investment in large and medium scale enterprises, 5 The microfinance sectors.
number 2,3,4,5 are investment portfolios which link to investment profits 6 The distribution sectors of the profits of cash waqf investment. Investment
profits link to the poor through the poverty programs. The Interrelationship among variables can be seen in Figure 4.
2
Sushil 1993, System Dynamics “A Practical Approach for Managerial Problems”,Wiley Eastern Limited.
11
Figure 4. The Interrelationship Among Variables in the General System
Islamic Financial Portfolio
Microfinance Portfolio
The Profits of Microfinance
The risk of microfinance
Microfinance Policy Scheme
Bad debts of microfinance
Unemployment rate
Technical Assistances for the poor
+ -
- -
-
+ -
+ -
- Indonesian
Population birth rate
+ the rich
the poor death rate
cash waqf growth cash inflow of
cash waqf Cash Waqf Funds are
collected by Nazir Average Period to
Collect Funds Investment
Funds -
- +
+ +
+ +
Direct Investment
Portfolios +
+
The Profits of cash waqf investment
Management Fees for the Nazir
The funds for the poverty alleviation
programs -
+ +
+ +
+ -
+ Islamic Capital
Market Islamic Banking
Islamic Mutual Funds
Dividens capital gains
Mudharabah Deposits
NAVs Mutual Funds
+ +
+ +
+ +
+ Islamic Bond
+
rate of return +
Profits of Islamic Financial Investment
+ +
+ +
+ Risk of Islamic
Financial Investment -
+ +
+
+ Invest to company
To maintain the existing waqf assets
To make a new waqf assets
+ +
+
Dividen or Capital Gains
+ Waqf land
productivity To maintain new
assets
Agriculture Real Estate
+ +
+ +
Business Risk Social
Projects Commercial
Projects
Free Education Free-charge Health
Services Waqf Land
Rental +
+ +
+ +
The Profits of Direct Investment
+ +
+ +
+ +
+ +
+ -
+
+ The poverty
allevation programs
-
+ +
Global Fund Mgt
+ Foreign
Waqif
+
+ +
+
Multiplier Effects of Microfinance towards
Familys Welfare -
+ +
+ To meet the
poor needs Living Cost
Healthy Cost Education Cost
The Family Rehabilitation Cost
Natural Disaster Victims Costs
Infrastructure Recovery Cost
Quality of Life
+
12
The interrelationship among the six sectors is described as following: 1
The cash waqf fund raising sectors
The responsibilities of this sector are collecting the cash waqf fund from the waqif and then distributing them to the investment portfolios. The profits of the
investment will be distributed to the poor through the poverty alleviation programs. At which the profits will be distributed depend on the waqif requests
such as the education, infrastructure, family rehabilitation, public health sanitation.
In the cash waqf raising sectors, there are several causal relationship among the rich, who have the potency as a waqif, the gathered cash waqf fund,
the invested funds to various portfolios, and the gained profits from investment which will be distributed to the poor. see figure 5a and 5b.
population Birth rate
Cash Waqf Growth
Microfinance Portfolio
+
The rich The poor
Death Rate
Cash Inflow of Cash Waqf
Collected Cash Waqf Funds
Average Period to Collect Funds
Investment Funds
- -
+ +
+ +
+ + +
-
The Poverty Alleviation Programs
- +
Global Fund Mgt +
Foreign Waqif
+
Islamic Financial
Portfolio Direct Investment
Portfolio +
+
The Profits of Cash Waqf Investment
+ +
+ +
es Management Fe
+ +
+ +
+ +
The funds for the poverty alleviation
programs -
+
Figure 5a. Causal loop of The Cash Waqf Fund Raising
13
Cash Waqf Funds Raising Sector
Principal_32 Total_Return
growth_rate Cash_Waqf
Min_Req_Return Cash_Inflow
Return_of_Global_Fund Investment_periode
CW_normal Principal_4
Current_price_of_gold Collecting_period
Principal_3 Principal_1
Principal_11 Principal_12
Principal_14 Principal_13
Principal_33 Principal_31
Ratio Global_Fund_Inv
Invest_to_Islamic_Fin Convert_to_Gold_standard
Cash_Waqf_Mgt Mikrofinance
Global_Fund_Mgt
Return_of_Global_Fund Total_Return
Invest_to_Direct_Investment Invest_to_microfinance
Ratio Return_of_Microfinancin
rate_of_cash_inflow Profit_of_Glb_Fund_Mgt
Return_of_Global_Fund Microfinace_Period
Min_Rtrn_MK Principal_2
Total_Return Stop_Microfinance
Average_Return_of_Islamic_Finance Microfinance_Policy
Average_Return_Direct_Inv Average_Return_of_Islamic_Finance
Figure 5b. Flow Diagram of The Cash Waqf Fund Raising
14
2 The Islamic financial portfolios sectors
The responsibilities of this sector are investing the cash waqf efficiency and effectively. The gathered cash waqf will be then invested by Nazir, a fund
manager, in Islamic financial portfolios. The structure of Islamic banking and finance is firmly rooted in the Qur’an and the teachings of Muhammad which is
called a Islamic Law
3
. Islamic Law has derived from revealed text a web of interrelated norms prohibiting interest-taking and undue speculative practices.
Generally, these portfolios are divided into four kinds i.e a. Islamic mutual funds, b. Islamic Capital Market Indices, c. Islamic Banking Products
Mudharaba Deposits, d Islamic Bond. All of them are issued by Indonesian financial institutions.
The gained profits will be distributed to meet the poor’s basic needs and increase the quality of the poor’s life. Meanwhile, the principal keep being
invested in potential investment opportunities. see Figure 6a and 6b.
The rich The poor
Cash Waqf growth Cash Waqf
Inflows Collected Cash
Waqf Fund average period to
collect the funds Investment funds
Islamic Financial Portfolio
- +
+ +
+ +
The profits of cash waqf investments
Management Fees The funds for the
poverty alleviation programs
- +
+
+ -
Islamic Capital Market
Islamic Banking Islamic Mutual
Funds
Dividen Capital gain
Mudharabah Deposits
NAV of Mutual Funds
+ +
+
+ +
+ +
Islamic Bonds
+
rate of return +
The Profits of Islamic Financial Investments
+ +
+ + +
Risk of Islamic Finance Investment
- +
+ +
+ The poverty
alleviation programs -
+ +
-
Figure 6a. Causal loop of The Islamic Financial Portfolios
3
Frank E.Vogel and Samuel L.Hayes III 1998, Islamic Law and Finance “religion, risk and return.” Published by Kluwer Law International.
15
Islamic Financial Portfolio Sector
Investment_periode Return_Islamic_Finance
Invest_to_Islamic_Fin
Principal_14 Invest_to_Islamic_Fin
Principal_12 Islamic_Mutual_Funds
Invest_to_Mutual_Funds Min_Req_Return
Return_Islamic_Mutual_Fund Profit_of_Islamic_Bonds
Return_of_Islamic_Bonds
Invest_to_Islamic_Bond Islamic_Bonds
Principal_13 rn_Islamic_Finance
Min_Req_Return
Invest_to_JII Islamic_Capital_Market
Profit_of_Islamic_Cap_Mrkt Invest_to_Mudharabah_Deposits
Principal_11 Return_Islamic_Finance
Profit_of_Islamic_Mutual_Funds Investment_periode
Invest_to_Islamic_Fin
Return_of_Deposit
Profit_of_Islamic_Deposits Profit_of_Islamic_Bonds
Mudarabah_Deposits
Profit_of_Islamic_Finance Investment_periode
Average_Return_of_Islamic_Finance Profit_of_Islamic_Deposits
Return_of_Islamic_Stocks Return_Islamic_Finance
Return_of_Islamic_Bonds Profit_of_Islamic_Mutual_Funds
Return_of_Islamic_Bonds Return_Islamic_Mutual_Fund
Return_of_Deposit
Return_of_Islamic_Stocks
Min_Req_Return
Figure 6b. Flow Diagram of of The Islamic Financial Portfolios
3 The global fund management sectors
The responsibilities of this sector are to invest the cash waqf fund in the global financial portfolios as known a global funds management such as Amanah Fund,
Lariba Fund, Islamic Indices, etc. A fund manager should choose the portfolios not only high return but also safety. The better Nazir choose the investment
portfolios, the higher profits will be gained and the more funds will be acquaired by the poor.
16
The principal then will be reinvested in various highly profitably investment opportunities. see Figure 7a and 7b
The rich The poor
The growth of cash waqf fund
Cash inflow of Cash Waqf
Collected Cash Waqf Funds
Average period to collect cash waqf
Investment Funds -
+ +
+ +
The Profits of cash waqf investment
Management Fee The funds for the
poverty alleviation programs
- +
+
+ -
The poverty alleviation programs
-
+ +
Global Fund Mgt +
Foreign Citizens +
+
Figure 7a. Causal loop of the global fund management portfolios
Global Fund Management Sector
Total_Return Principal_4
Investment_periode CW_normal
Convert_to_Gold_standard growth_rate
Cash_Waqf Min_Req_Return
Cash_Inflow Return_of_Global_Fund
Current_price_of_gold Collecting_period
Global_Fund_Mgt Ratio
rate_of_cash_inflow Profit_of_Glb_Fund_Mgt
Return_of_Global_Fund Return_of_Microfinanc
Figure 7b. Flow Diagram of The global fund management portfolios
17
4 The direct investment in large and medium scale enterprises
A cash waqf fund manager, Nazir, allocates the gathered funds to the big companies in the forms of stocks which the gained profit are dividends or capital
gains. The nature of this sector is the long term. The other forms of direct investment are building the new waqf buildings and maintaining the existings
waqf assets either for social projects or the commercial projects. See Figure 8a and 8b.
The rich The poor
Cash Waqf growth Cash Waqf Inflow
Collected Cash Waqf Fund
Average Period to Collect Funds
Investment Funds -
+ +
+ +
Direct Investment Portfolio
The Profits of Cash Waqf Investment
Management fees The funds for poverty
alleviation programs -
+ +
+ -
Invest to company
To maintain the existings waqf assets
To make the new waqf assets
+ +
+
dividen or capital gains
+ Waqf Land
Productifity To maintain waqf
buldings
Agriculture Real Estate
+ +
+ +
Business Risks Social
Projects Commercial
Projects Free Education
Free-Charge Healthy Services
Waqf Land rental
+ +
+
+ +
The Profits of Direct Investment
+ +
+ + + +
+ +
+ -
+
+ The poverty alleviation
programs -
+ +
Foreign Waqif +
+
Figure 8a. Causal loop of the direct investment to real sectors
18
Direct Investment to Real Sectors
Return_Real_Estate Principal_331a
Age_of_Waqf_Prodctvty Principal_331b
Profit_of_Waqf_Land
Figure 8b. Flow Diagram of the direct investment to real sectors
Invest_to_Agriculture
Invest_to_Waqf_Assets Principal_33
Principal_331b Principal_331
Invest_to_Real_Estate
To_Increase_Waqf_Productivity Average_Rtrn_Waqf_Land
Return_Real_Estate Return_of_Agricltr
Profit_of_agriculture Invest_to_Waqf_Land
Agriculture Real_Estate
minimum_ROI Age_of_Waqf_Prodctvty
Profit_of_agriculture Return_of_Waqf_Land
Profit_of_Real_Estate minimum_ROI
To_Increase_Waqf_Land_Productivity Principal_331a
Return_of_Agricltr
Invest_to_Direct_Investment Total_Rtrn_Waqf_Prodctvty
Principal_331 Principal_332
Total_Rtrn_Waqf_Prodctvty Average_Return_of_Waqf_Prodctvty
Average_Rtrn_Waqf_Land Invest_to_Waqf_Building
Company_rate_of_return Total_Return_Direct_Inv
Profit_of_Waqf_Building Return_of_Waqf_Building
Average_Rtrn_New_Waqf_Assets Average_Return_Direct_Inv
Profit_of_Waqf_Productivity To_Increase_Waqf_Building_Productifity
Profit_of_Waqf_Land Age_of_Waqf_Prodctvty
Principal_332 minimum_ROI
Principal_322
Invest_to_Company Build_New_Waqf_Assets
Invest_to_new_waqf Invest_to_build_Comrcl_Projects
Principal_32 Total_Return_Direct_Inv
Total_Rtrn_New_Waqf_Assets
Company Total_Return_Direct_Inv
Waqf_Land_Growth Decrease_of_Waqf_Land
Age_of_Waqf_Prodctvty Average_Rtrn_New_Waqf_Assets
Invest_to_Direct_Investment
Commercial_Projects Commercial_Projects_investment_Periode
Average_Rtrn_New_Waqf_Assets Principal_321
Total_Rtrn_New_Waqf_Assets Principal_322
Invest_to_Social_Projects
Profit_of_Commercial_Projects Rtrn_Commercial_Projects
minimum_ROI
Rtrn_Commercial_Projects Commercial_Projects_investment_Periode
Principal_321
Company_rate_of_return minimum_ROI
Company_Profits_ Company_rate_of_return
Time_to_Direct_inv Invest_to_Direct_Investment
Principal_31
Waqf_Land_Devaluation The_number_of_Waqif
Fraction_of_year Profit_of_Waqf_Land_Rental
Rental_Price
Profit_of_Direct_Investment Profit_of_Waqf_Land_Rental
Profit_of_Commercial_Projects Company_Profits_
Profit_of_Waqf_Productivity Time_to_invest_in_Direct_Investment
Waqf_Land_Availability Social_Projects
Rtrn_Commercial_Projects Return_Social_Projects
Adjust_to_Social_Projects Social_Projects_Policy
19
5 The Microfinance Sectors
The microfinancing programs, which used the loss-profit sharing, are one of the most important sectors for poverty alleviation. Most of funds collected through cash
waqf certificate issues will be allocated as loan for microenterprises. This microcredit program should particularly be aimed at helping poor people initiate their business and
enhance their quality of life, accordingly. Nevertheless, merely supplying them with capital is not sufficient, since most of them do not have adequate knowledge and skill to
choose and to run a business that is suitable to their condition. Consequently, relevant business technical assistance is needed to help them survive.
Family’s business activities have significantly influenced economy of a community, particularly in developing countries. Big manufacturing companies indeed
dominate mass production processes, both for goods and services, but most of enterprises are initiated by family. In addition, family’s consumption behaviour also affects
production and marketing activities, as well as other business activities.
Government’s programs for family business empowerment has to do with informal sector development efforts, as most of family businesses are operated in non
formal format and business system. Family businesses, which absorb the largest number of employee, are also found mostly in small and medium scale. In most developing
economies, these small and medium enterprises SMEs have limited access to formal financing practices, as well as to adequate government’s technical assistance. see figure
9a and 9b
Microfinancing Portfolio
The profit of microfinance
Risk of Microfinance
Microfinance Policy Scheme
Bad debt of microfinance
Unemployment rate
Technical Assistances
+ -
+ -
-
+ -
+ -
- Investment funds
+
The profits of cash waqf investment
Management Fees The funds for poverty
alleviation programs -
+
+ +
Multiplier Effects of Microfinance towards
familys welfare The poverty
alleviation programs +
The poor -
+ +
- The rich
- +
Collected Cash Waqf Fund
+
- +
+
Figure 9a. Causal loop of The Microfinancing Sectors
20
Microfinance Portofolio Sectors
Mikrofinance microcredit
Profit_of_Microfinance Indonesian_population
Stop_Microfinance Microfinace_Period
Return_of_Microfinancing
Pra_welfare_people Microfinance_Policy
Policy_ratios
Figure 9b. Flow Diagram of The Microfinancing Sectors
6 The profits of cash waqf investment distribution sectors
The gained profits from the various portfolios will be distributed to the poor through the poverty alleviation programs such as basic needs, health services,
sanitations, education, natural disasters victims, etc. The principal of cash waqf will be reinvented to various portfolio opportunities. see figure 10a and 10b.
The rich The poor
Cash Waqf Growth
Cash Waqf Inflow Collected Cash
Waqf Funds Average period to
collect the cash waqf
Investment funds -
+ +
+
+
The Profit of cash waqf investment
Management fee The funds for the
poverty alleviation programs
- +
+
+ -
The Poverty Alleviation Programs
-
+ +
Foreign Waqif +
+ To meet the poor
needs +
Living Cost Healthy Cost
Education cost The family
rehabilitation cost Natural Disaster
Victims Cost Infrastucture
Recovery cost Quality of Life
+ +
+ +
+ +
-
+
Figure 10a. Causal Loop of the cash waqf profits distribution sectors
21
Profits of Cash Waqf Investment Distribution
Enter_to_pra_welfare Profit_of_Microfinance
Living_needs Healthy_needs
Education_needs Rehabilitation_needs
Infrastructure_needs Disaster_needs
Education_cost Family_Rehbiittion_Cost
Natural_Disaster_Cost
Infstructure_Cost Cost_1
Cost_2
Cost_4
Cost_5 Cost_6
Needs_ratio_4 Needs__ratio_5
Needs_ratio_6 needs_rate_1
needs_rate_2
needs_rate_3 needs_rate_4
needs_rate_5 needs_rate_6
allocation_ratio_2 allocation_ratio_3
allocation_ratio_4
allocation_ratio_5
allocation_rate_6 available_fund_for_living
available_fund_for_healthy
available_fund_for_education available_fund_for_rehbltation
available_fund_for_disaster available_fund_for_infrastrctr
available_rate_1 available_rate_2
available_rate_3 available_rate_4
available_rate_5 available_rate_6
poor Living_cost
Healthy_cost Needs_ratio_1
Needs__ratio_2 Needs_ratio_3
Enter_to_pra_welfare Profit_of_Cash_Waqf_Investment
Cost_3 ent
Profit_of_Cash_Waqf_Investment
Profit_of_Cash_Waqf_Investment Inflation
Inflation Enter_to_pra_welfare
Healthy_cost
Infstructure_Cost Living_cost
Natural_Disaster_Cost Daily_needs
Education_cost Family_Rehbiittion_Cost
Total_available_fund_for_poor Profit_of_Glb_Fund_Mgt
Profit_of_Islamic_Finance Profit_of_Direct_Investment
Pra_welfare_people the_poor
allocation_ratio_1
Figure 10b. Flow Diagram of the cash waqf profits distribution sectors
22
7. The Cash Waqf Management Control