General Description of System

necessary to design an instrument which is able to control the cash waqf management. Based on the survey’s result, using exclusively designed computer program then simulated with system dynamics methodology, some scenarios of cash waqf implemention to formulate some policy concepts applicable in Indonesia. The computer program was designed to help the policy makers 1 estimate cash waqf potential in alleviating poverty in Indonesia, 2 supervise performance of nadzir or waqf fund management institution, and 3 identify appropriate policies conducive to poverty alleviation programs. Since there was no similar study preceding the research, some assumptions were applied. The ability of three national TV corporations RCTI, SCTV, and Indosiar to collect donation amounting 2 billions Rupiah in two nights in 2000 and the other charity programs to collect donation in 2001-2005 were used as an assumption basis of amount of fund could be gathered by cash waqf management institution 9 . This research also used data supplied by Biro Pusat Statistik Republik of Indonesia National Beaurau for Statistics, BKKBN Republic of Indonesia National Coordinating Agency for Family Planning and Islamic Financial Institution. 5.1 Limitation of Research This research put more emphasived on financial management especially raising and investing of cash waqf funds. The duties of Nazir, as a cash waqf fund manager, are to increase the cash waqf funds and invest those funds in profitable portfolios. As we know, the poverty alleviation problems are complicated. However, they need multidiscipline knowledge to formulate and figure out the solutions. With this research we want to try to make an early design of poverty alleviation in the financial viewpoint using system dynamics modeling.

6. General Description of System

Conceptualization The system conceptualization involves establishing model boundary, identifying causal relationships and policy framework 10 . 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 1. 9 PIRAC Public Interest Research and Advocacy Center, “Rate of giving of Indonesian Community”.. Based on survey from Agustus 2000 to Agustus 2001. 10 Sushil 1993, System Dynamics “A Practical Approach for Managerial Problems”,Wiley Eastern Limited. 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 1. A Macro-view of Model 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 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_Microfinancing 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 2 The Islamic financial portfolios sectors, 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 urn_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 3 Figure 2. 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 + 4 3 The global fund management sectors, Global Fund Management Sector Total_Return Principal_4 Investment_periode CW_normal Convert_to_Gold_standard Global_Fund_Mgt Ratio rate_of_cash_inflow Collecting_period Cash_Inflow Profit_of_Glb_Fund_Mgt growth_rate Current_price_of_gold Min_Req_Return Return_of_Global_Fund Return_of_Global_Fund Return_of_Microfinancin Cash_Waqf 4 The microfinance sectors. Microfinance Portofolio Sectors Mikrofinance microcredit Profit_of_Microfinance Indonesian_population Stop_Microfinance Microfinace_Period Return_of_Microfinancing Pra_welfare_people Microfinance_Policy Policy_ratios The survey concluded that most people did not trust any existing government institutions to manage cash waqf fund and control cash waqf investment activities, especially because cash waqf management will involve large amount of endowment funds. Most of them also recommend that if a special purpose institution is established to manage cash waqf fund, it has to be highly capable of detecting any potential dishonesty and assessing performance of cash waqf fund manager, i.e. nadzir. Therefore, it’s necessary to design an instrument which is able to control the cash waqf management. This model tries to design a control tools which is able to detect the human error in decision making either mismanagement or dishonesty quickly see figure 3e 3d. 5 The direct investment in large and medium scale enterprises, 6 The distribution sectors of the profits of cash waqf investment see figure 4b. Investment profits link to the poor through the poverty programs. The Interrelationship among variables can be seen in Figure 2.

7. The Cash Waqf Management Control