A Model of Portfolio Investment Management of The Islamic Endowment Funds Using System Dynamics Methodology.
A Model of Portfolio Investment Management of
The Islamic Endowment Funds
Using System Dynamics Methodology
Dian Masyita (dianmasyita@fe.unpad.ac.id)
The Faculty of Economics, Padjadjaran University, Bandung, Indonesia
Abstract
This research tries to find out the potency of endowment funds as an innovation financial instrument,
especially cash waqf, to alleviate the poverty in Indonesia. This research also tries to offer a design of the
endowment funds management system in a system dynamics model. Using the system dynamics
methodology, we try to know the structure of the endowment funds management system and simulate the
behaviour of endowment funds.
Cash Waqf, a special charitable endowment fund, is expected to become one of the alternative
instruments for the poverty alleviation programs in Indonesia. These programs require huge amount of fund
that cannot be provided thoroughly by the government. Therefore, initiation of new sources of fund for such
a program is inevitable. In the Islamic sosio-economic concept, there is a source of social fund that is
economically and politically free of charge, namely cash waqf (wakaf tunai). In this concept, Nadzir (cash
waqf fund manager) collects the fund from Waqif (cash waqf payer) and invest the money in the real sector
(mainly Small & Medium-sized Ventures) and in any syariah-based investment opportunities.
Nadzir will then allocate all profits and returns gained from the investments to any poverty alleviation
programs to enhance the quality of poor people’s life, such as free education and health service, cheap basic
food, etc. Nadzir is obliged to maintain the amount of fund in such a way that it does not go below the initial
amount. Therefore, Nadzir not only should be highly capable, but also needs a financial institution, which has
been proven to be experienced, highly capable and effective in helping SMEs development efforts, since such
a microfinancing program is considered as the most vital portfolio in the poverty alleviation program.
Therefore, it’s necessary to design an instrument which is able to control the endowment funds management
especially cash waqf.
Keywords: the endowment funds, cash waqf, portfolio investment, poverty alleviation, system dynamics
1.
Preface
In the end 2005, the Indonesian poverty
rate has been still discouraging. The poverty
indices are still higher than those of the previous
years. The economic crisis beginning in 1997,
does not end until now. In addition, the Tsunami
Disasters destroyed two provinces in Indonesia i.e
Nanggroe Aceh Darussalam and North Sumatra in
the end of the year 2004. Based on the Statistics
Central Bureau (BPS)’s data, there are about 40
million Indonesian people who are under the
poverty line.
Indonesia has come into debt trap made
by the Indonesian government and the private
sectors. Large amount of debt has weakened
Indonesian economy for the past seven years.
Meanwhile, the government has been confronted
with the deficit budget almost every year since
1997, which means that the government may find
it difficult to cover its routine expenditures 1 .
1
Baswir, Revrisond, Indonesian Foreign Debt, satunet
column, 2000.
Those regular balance sheet items require so large
amount of fund that government cannot provide
adequate fund for other strategic needs, such as
good education, appropriate health, poverty, and
SME’s development. Mismanagement of debts is
the largest of all factors that make Indonesia go
into crisis. Consequently, all of citizens and their
offsprings have to carry the heavy burden of that
debt.
2.
Problem Identification
One of potential solutions to the
necessity of sufficient fund for public needs is a
special endowment fund, cash waqf, from
people’s donation. People donate their money as
cash waqf by purchasing cash waqf certificate.
The gathered fund will be then invested in various
investment portfolio and the profit of which can
be spent for the above mentioned public
necessities. The gained profit will also be used for
funding poverty alleviation programs, while the
principal of funds will be reinvested in various
highly profitable investment opportunities.
Waqif donates his/her money as waqf
fund to Mauquf’alaih (a person who is entitled to
get benefit from waqf fund) through Nadzir (a
person/an institution being in charge for
managing waqf fund and distributing returns of
waqf investment). Only gains of the invested
waqf fund will be delivered to Mauquf’alaih 2 .
The principal of funds keep being invested in
potential investment opportunities. In relation to
its role as waqf fund investment manager, Nadzir
on behalf of Waqf Institution may allocate some
waqf funds to financial portfolio and finance
SMEs’ businesses on the basis of profit-loss
sharing system.
The larger the investment returns, the
more fund can be allocated to poverty alleviation
program. In some countries, waqf fund
management has reduced poverty effectively and
enhanced people’s welfare, by providing
additional fund for education & health
development programs, cheap houses & public
facilities development programs, and so forth.
3. Objectives of Research
This research is expected to be able to find
out the potency of an Islamic innovation financial
instrument, especially cash waqf, to alleviate the
poverty in Indonesia. This research also tries to
offer a design of the endowment fund
management system in a system dynamics model.
Using the system dynamics methodology, we try
to know the structure of cash waqf system and
simulate the behaviour of it.
On the next part of this paper, we will
discuss definition, law, and history of a special
endowments fund, cash waqf, to recognize the
concept and its potential benefit.
4.
Problem Definition : Cash Waqf
Previously, waqf of building and land
are the most popular forms of waqf. Nowadays,
cash waqf has become increasingly well-known,
particularly because of its flexibility, which
allows distribution of the waqf’s potential benefit
to be benefited by the poor anywhere 3 .
Cash waqf was firstly introduced in
Ottoman era in Egypt. Professor Mannan then
sosialized cash waqf in Bangladesh through
Social Investment Bank Limited (SIBL). SIBL
issues Cash Waqf Certificate to collect funds
2
Utomo, Setiawan Budi, Fiqh on Waqf and Cash Waqf,
Presentation in Monthly Discussion for Cash Waqf
Implementation in Indonesia, MUI Commission of
Economy. 2001
3
Mannan, M.A.Abdul, Cash Waqf Certificate- an Innovation
in Islamic Financial Instrument: Global Opportunities for
Developing Social Capital Market in the 21stCentury
Voluntary Sector Banking”, Presentation at the Third Harvard
University Forum on Islamic Finance, October 1, 1999
from the rich and distributes gains of the managed
funds to the poor 4 .
Like those of Bangladesh, most of
Indonesian people are poor. Characteristic of
communities in both countries are also similar.
Therefore, effectiveness of cash waqf certificate
program to help reduce poverty in Bangladesh
gives hope that analogous program can be
successfully
implemented
in
Indonesia.
Therefore, Fatwa Commission, Board of
Indonesian Moslem Scholars (MUI), responded
the necessity of cash waqf program in Indonesia
by issuing a fatwa (dated on 11 May 2002) about
cash waqf .
5.
Research Metodology
This research used system dynamics
methodology to capture dynamic phenomenon of
a system, in which variables change
System
simultaneously as time moves 5 .
Dynamics is a method of dealing with questions
about the dynamic tendencies of complex
systems, that is, the behavioral patterns they
generate over time 6 .
System dynamics is a powerful tool in
the creation of feedback theories. Since its
beginnings, the founders of the field have
developed a series of guidelines for the model
building process (Randers 1980; Richardson and
Pugh 1981; Roberts et al. 1983; Wolstenholme
1990; Sterman 2000) and a series of tests to build
confidence in the models created (Forrester and
Senge 1980; Sterman 2000) 7 .
In 2000, I carried out a survey on
possible implementation of cash waqf in Jakarta
and West Java, Indonesia. The survey concluded
that most people did not trust any existing
government institution to manage cash waqf fund
and control its investment activities, especially
because cash waqf management will involve large
amount of endowment funds 8 . 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
4 Mannan, M.A.Abdul, Cash Waqf, Enrichment of Family
Heritage Generation to Generation, Social Investment Bank
Publication Series no. 1, 1st edition, 1998
5
Tasrif, Muhammad, System Thinking & Dynamics
Modeling,ITB 1996
6
Meadows, Donella H., “The Unavoidable A Priori”, MIT
Press 1980.
7
Sterman, John. Business Dynamics: system thinking &
modeling for a complex world, Mc Graw-Hill, 2000.
8
Masyita, Dian, Preliminary Implementation Model Design
of Cash Waqf Certificate as Alternative Instrument for
Poverty Alleviation in Indonesia using System Dynamics
Methodologi, Thesis, ITB, 2002
2
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.
(-) loop 4
THE RICH -
- THE POOR
-
+
CASH WAQF
FUNDS
AVAILABLE FUNDS
FOR THE POVERTY
PROGRAMS
(-) loop 1
+
(+) loop 2
+
INVESTMENT
+ INVESTMENT+ (+) loop 3 PROFITS
+
PORTFOLIOS
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
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
Return_of_Microfinancing
Ratio
Global_Fund_Mgt
rate_of_cash_inflow
Profit_of_Glb_Fund_Mgt
Convert_to_Gold_standard
Total_Return
Return_of_Global_Fund
Global_Fund_Inv
Principal_11
Principal_1
Microfinace_Period
Principal_13
Min_Rtrn_MK
Principal_12
Principal_2
Principal_14
Mikrofinance
Cash_Waqf_Mgt
Invest_to_Islamic_Fin
Invest_to_microfinance
Total_Return
Total_Return
Ratio
Stop_Microfinance
Average_Return_of_Islamic_Finance
Principal_31
Invest_to_Direct_Investment
Microfinance_Policy
Principal_3
Return_of_Global_Fund
Principal_33
Average_Return_Direct_Inv
Principal_32
Average_Return_of_Islamic_Finance
2) The Islamic financial portfolios sectors,
Islamic Financial Portfolio Sector
Return_Islamic_Finance
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.
Invest_to_Islamic_Fin
Min_Req_Return
Investment_periode
Islamic_Mutual_Funds
Return_Islamic_Mutual_Fund
Profit_of_Islamic_Bonds
Invest_to_Mutual_Funds
Principal_12
Return_of_Islamic_Bonds
Return_of_Islamic_Bonds
Return_Islamic_Mutual_Fund
Islamic_Bonds
Invest_to_Islamic_Bond
Return_of_Islamic_Bonds
Profit_of_Islamic_Mutual_Funds
Return_of_Islamic_Stocks
Principal_13
Return_Islamic_Finance
urn_Islamic_Finance
Min_Req_Return
Invest_to_Islamic_Fin
Return_of_Deposit
Investment_periode
Invest_to_Islamic_Fin
Islamic_Capital_Market
Invest_to_Mudharabah_Deposits
Average_Return_of_Islamic_Finance
Profit_of_Islamic_Deposits
Principal_14
Invest_to_JII
Return_of_Islamic_Stocks
Mudarabah_Deposits
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.
Profit_of_Islamic_Cap_Mrkt
Return_Islamic_Finance
Return_of_Deposit
Profit_of_Islamic_Bonds
Principal_11
Investment_periode
Min_Req_Return
Profit_of_Islamic_Mutual_Funds
Profit_of_Islamic_Deposits
Profit_of_Islamic_Finance
3
Figure 2. The Interrelationship Among Variables in the General System
Foreign
Waqif
the poor
Quality of
Life
- Living Cost
Healthy Cost
Education Cost
The Family
Rehabilitation Cost
Natural Disaster
Victims Costs
-
Indonesian
++ Population
the rich
cash waqf growth
Average Period to
+
Collect Funds
+
The poverty
Microfinance
allevation
+
Portfolio
programs
+
+
To meet the
poor needs
The funds for the
poverty alleviation
programs
+-
Infrastructure
Recovery Cost
+
Multiplier Effects of
Microfinance towards
Family's Welfare
+
+
+
microfinance
Management Fees
for the Nazir
+
+
+
+
+
+
Profits of Islamic
Financial Investment
-+
+
+
NAV's Mutual
Funds
+
+Risk of Islamic
Financial Investment
+ To make a new
waqf assets
Direct
Investment
Portfolios
+
+
+
Invest to company
To maintain the
existing waqf assets
Waqf land +
productivity
+
Dividen or Capital
Gains
+
+
Real Estate
+
+
Agriculture
Waqf Land
Rental
To maintain new
assets
Commercial
Projects
+
+
+
+
The Profits of cash
waqf investment+
+
capital gains
Global Fund
Mgt
+
+
Investment
Funds
+
Unemployment
rate
Microfinance Policy
+
Scheme
Technical Assistances
for the poor
Bad debts of
microfinance
- The risk of
+
+
Islamic Mutual
Funds
+
Mudharabah
Deposits
Dividens
rate of return
+
+
+
The Profits of
Microfinance
Islamic Capital
Market
Islamic Bond
death rate
+
Islamic Banking
+
+
+
Cash Waqf Funds are
collected by Nazir
Islamic Financial
Portfolio
+
birth rate
-
cash inflow of
+ cash waqf
+
+ +
+
+
+
+
+
Business
Risk
+
+
Social
Projects
+
Free-charge Health
Services
Free Education
+
+
The Profits of Direct Investment + +
4
3) The global fund management sectors,
Global Fund Management Sector
growth_rate
Cash_Waqf
6) The distribution sectors of the profits of cash
waqf investment (see figure 4b). (Investment
profits link to the poor through the poverty
programs).
Min_Req_Return
Cash_Inflow
Return_of_Global_Fund
Investment_periode
CW_normal
Principal_4
Current_price_of_gold
Collecting_period
Return_of_Microfinancin
Ratio
Global_Fund_Mgt
The Interrelationship among variables can be seen
in Figure 2.
7. The Cash Waqf Management Control
The survey concluded that most people
did not trust any existing government institutions
to manage cash waqf fund and control cash waqf
4) The microfinance sectors.
investment activities, especially because cash
Microfinance Portofolio Sectors
waqf management will involve large amount of
Microfinace_Period
endowment funds. Most of them also recommend
Policy_ratios
Return_of_Microfinancing
that if a special purpose institution is established
Profit_of_Microfinance
Microfinance_Policy
to manage cash waqf fund, it has to be highly
Mikrofinance
microcredit
capable of detecting any potential dishonesty and
Pra_welfare_people
Indonesian_population
Stop_Microfinance
assessing performance of cash waqf fund
5) The direct investment in large and
manager, i.e. nadzir. Therefore, it’s necessary to
design an instrument which is able to control the
medium scale enterprises,
cash waqf management. This model tries to
Direct Investment to Real Sectors
design a control tools which is able to detect the
human error in decision making either
mismanagement or dishonesty quickly (see figure
3e & 3d).
The collected cash waqf fund from the
waqif will be distributed to the various portfolios
and then the usage will be controlled periodically.
The early warning system will be prepaired by the
system in order to the amount of cash waqf fund
will not go below the initial amount. It is the
difference of the cash waqf from the other sources
of funds. Gold standard can be used as the
currency standard because of its stability. (see
figure 3a-d).
rate_of_cash_inflow
Profit_of_Glb_Fund_Mgt
Convert_to_Gold_standard
Total_Return
Return_of_Global_Fund
Return_Real_Estate
Profit_of_Waqf_Land
Principal_331a
Principal_331b
Profit_of_agriculture
Age_of_Waqf_Prodctvty
Return_of_Waqf_Land
Profit_of_Real_Estate
Principal_331
minimum_ROI
Age_of_Waqf_Prodctvty
To_Increase_Waqf_Land_Productivity
Real_Estate
Agriculture
Principal_331b
Invest_to_Real_Estate
Invest_to_Agriculture
Principal_331a
Invest_to_Waqf_Land
minimum_ROI
Average_Rtrn_Waqf_Land
Return_of_Agricltr
Profit_of_agriculture
Return_Real_Estate
Return_of_Agricltr
To_Increase_Waqf_Productivity
Principal_33
Invest_to_Waqf_Assets
Total_Rtrn_Waqf_Prodctvty
Principal_331
Principal_332
Total_Rtrn_Waqf_Prodctvty
Invest_to_Direct_Investment
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
2e9
Profit_of_Waqf_Productivity
2
1
To_Increase_Waqf_Building_Productifity
2
1,5e9
Age_of_Waqf_Prodctvty
Profit_of_Waqf_Land
rupiah
Principal_332
minimum_ROI
2
1
2
1
500.000.000
0
Commercial_Projects_investment_Periode
Social_Projects_Policy
1
20
Principal_322
60
80
100
Figure3a. The Simulation Result (Short-Term)
Principal_322
Average_Rtrn_New_Waqf_Assets
Total_Rtrn_New_Waqf_Assets
Invest_to_build_Comrcl_Projects
minimum_ROI
Principal_321
Commercial_Projects
Rtrn_Commercial_Projects
Gold Standard (kg)
1
Principal_32
Invest_to_new_waqf
Total_Return_Direct_Inv
Profit_of_Commercial_Projects
Cummulative_Cash_Waqf_Fund
Principal_321
Invest_to_Social_Projects
Build_New_Waqf_Assets
Invest_to_Direct_Investment
Control_Function
day
Total_Rtrn_New_Waqf_Assets
Average_Rtrn_New_Waqf_Assets
1
40
Social_Projects
Rtrn_Commercial_Projects
2
2
Adjust_to_Social_Projects
Return_Social_Projects
1
1e9
20
2
1
15
1
2
10
1
1
5
2
2
2
Total_cash_waqf_in_gold
Convert_to_gold
1
Commercial_Projects_investment_Periode
0
Rtrn_Commercial_Projects
Invest_to_Direct_Investment
minimum_ROI
Principal_31
Total_Return_Direct_Inv
Time_to_Direct_inv
Company_rate_of_return
Company
Invest_to_Company
Company_Profits_
Company_rate_of_return
Profit_of_Waqf_Land_Rental
The_number_of_Waqif
2
20
40
60
80
100
day
Figure 3b. The Simulation result (short term)
Age_of_Waqf_Prodctvty
Rental_Price
Fraction_of_year
Waqf_Land_Availability
Waqf_Land_Growth
Profit_of_Waqf_Land_Rental
Decrease_of_Waqf_Land
Waqf_Land_Devaluation
Profit_of_Direct_Investment
Profit_of_Waqf_Productivity
Profit_of_Commercial_Projects
Company_Profits_
Time_to_invest_in_Direct_Investment
5
simulation result could demonstrate the deviation.
(see figure 3e-f)
rupiah
1e15
5e14
1
2
The Potency of Cash Waqf for
The Poverty Alleviation
Cummulative_Cash_Waqf_Fund
Profit_of_Cash_Waqf_Investment
Multiplier_Effects
Control_Function
Profits_of_CW_Investment_
Average_Period_to_become_prawelfareDaily_needs
the_poor
0
12
5.000
12
10.000
15.000
day
death_rate3
Birth_rate3
alleviation_1
gold standard (kg)
Figure 3c The Simulation Result (long term)
10.000.000
the_poor
The_poor_decrease
aleviation
Pra_welfare_people
The_poor_reducing
death_rate2
birth_rate2
lifetime_expectancy
Microcredit_for_a_poo
Population_growth
1
5.000.000
2
0
12
5.000
1
Pra_welfare_reducing the_welfare_increase
Convert_to_gold
Indonesian_populationwelfare
Total_cash_waqf_in_gold
Multiplier_effect
Average_period_to_become_welfare
Average_of_Microfinacing
2
the_rich
15.000
birth_rate
day
Figure 4b Causal Diagram of The Potency of Cash
Waqf Simulation using Powersim
Figure 3d The Simulation Result (long term)
Profits of Cash Waqf Investment Distribution
2
5e9
1
Average_of_Microfinacing
Invest_to_microfinance
death_rate
gold standard (kg)
50
4e9
1
Total_cash_waq
1 d
Convert_to_gol
2
1
1
2 2
rupiah
3e9
2
20
0
1
2
1
30
10
Profit_of_Microfinance
2
Profit_of_Glb_Fund_Mgt
Living_cost
40
1
2e9
2
1
2
Profit_of_Direct_InvestmentNatural_Disaster_Cost
0
2
Total_available_fund_for_poor
Profit_of_Cash_Waqf_Investment
Infstructure_Cost
Family_Rehbiittion_Cost
1 1
Education_cost
Pra_welfare_people
the_poor
da
Inflation
Enter_to_pra_welfare
Needs_ratio_1
Figure 3e. The Simulation Result (short term)
if any of mismanagements or dishonesty occur
Living_cost
Needs__ratio_2
Cost_1
poor
Healthy_cost
Needs_ratio_3
Cost_2
6e13
Profit_of_Cash_Waqf_Investmen
allocation_ratio_1
available_fund_for_living
Living_needs
available_rate_1
allocation_ratio_2
needs_rate_1
needs_rate_2
available_fund_for_healthy
Healthy_needs
available_rate_2
allocation_ratio_3
needs_rate_3
available_fund_for_education
Education_needs
available_rate_3
allocation_ratio_4
600.000
1
2
300.000
2
1
0
12
12 12
2.000
10.000
day
Total_cash_waqf_in_gold
rupiah
gold standard (kg)
Daily_needs
Cummulative_Cash
1
20 40 60 80 100
da
Healthy_cost
Control_Function
ment
1e9
2
20 40 60 80100
Profit_of_Islamic_Finance
2
4e13
1
2e13
0
Control_Function
Education_cost
Cummulative_Cash_Waqf_
2 Fund
Convert_to_gold
Cost_3
Needs_ratio_4
2
available_fund_for_rehbltation
Rehabilitation_needs
Family_Rehbiittion_Cost
2 1
12 12 1
2.000 6.000 10.000
Cost_4 Needs__ratio_5
Enter_to_pra_welfare
day
Natural_Disaster_Cost
Figure 3f. The Simulation Result (long term) if
any of mismanagements or dishonesty occur
available_fund_for_disaster
Disaster_needs
available_rate_5
needs_rate_5
Cost_5
Infstructure_Cost
The Potency of Cash Waqf for the
Poverty Alleviation Programs
It can be concluded from the system that
the larger the amount of cash waqf collected, the
larger the amount of fund can be invested in
highly cost-effective profit sharing-based
portfolios, and the larger the amount of return can
be distributed to poor people. The more fund
allocated to finance microbusiness, the sooner
poverty in Indonesia can be alleviated. (see Figure
4a).
The waqif and public can control or
monitor the cash flow of cash waqf investment. If
mismanagement and dishonesty occurred, the
available_rate_4
allocation_ratio_5
needs_rate_4
Cost_6
8.
available_fund_for_infrastrctr
Infrastructure_needs
available_rate_6
needs_rate_6
Needs_ratio_6
allocation_rate_6
Enter_to_pra_welfare
Inflation
Profit_of_Cash_Waqf_Investment
Figure 4b Causal Diagram of Simulation using
Powersim
9.
The Simulation Result
Since there has been no similar study
preceding the research, some assumption were
applied. The ability of five national TV
corporations (RCTI, SCTV, Indosiar, MetroTV
and Lativi) to collect donation amounting 3
billions Rp in two night in 2003 was used as an
6
assumption basis of amount of fund could be
gathered by cash waqf management institution.
It was then assumed that the cash waqf
institution could obtain 20 millions Rupiah a day
in form of cash waqf from various components of
Indonesian people. The study also assumed that
the gathered fund would grow 25% annually and
it would be invested in Islamic financial products
with profit sharing- based various rate of return.
Using the above assumption and data
supplied by Biro Pusat Statistik (National
Beaurau for Statistics), BKKBN (National
Coordinating Agency for Family Planning) and
syariah financial institution in Indonesia, the
computer-based data process resulted. Such an
amount of fund is expected to be available for the
poverty alleviation efforts in Indonesia, especially
through microfinance distribution program. If this
plan can be implemented smoothly and if those
assisted micro enterprises can get well run
maximum of 8 years after being financed, it will
take approximately 12500 days (35 years) to
eliminate poverty and 22400 days (63 years) to
increase quality of live for Indonesian population.
(see figure 5a-b) Poor people, in this study, are
those with very low quality of life. In other words,
poor people are not only those who cannot feed
once a day, but also those who cannot afford
proper health and education services.
4
200,000,000
4
4
4
3
3
3
3
1
100,000,000
2
3
50,000,000
1
1
2
1
4
2
0
5,000
1
10,000
the_rich
the_poor
Pra_welfare_people
Indonesian_population
3
2
15,000
2
20,000
2
25,000
30,000
day
Figure 5a. The Simulation Result (based on Rp 20 million a day)
population
500.000.000
400.000.000
300.000.000
200.000.000
2
100.000.000
0
1
78
78
78
78
578
6
34
150,000,000
34
3
34
1
2
4
3
100,000,000
4
5
50,000,000
56
56
5
6
56
6
12
4
12
0
5,000
12
10,000 15,000
12
20,000
123
25,000 30,000
7
8
the_poor
the_poor
Pra_welfare_people
Pra_welfare_people
the_rich
the_rich
Indonesian_populatio
Indonesian_populatio
Time
Figure 6a. Simulation Result (based on Rp 50 million in a day
compare with Rp 20 million in a day)
10. Conclusions
This work is an attempt to provide Board
of Indonesian Waqf and policy makers in
Indonesia with a “microworld” in which they can
experiment with their policy options, prior to
adoption. This helps them test their mental
models regarding the solutions they see for the
problems associated with portfolio of Islamic
endowment funds investment management. The
model could be used a basis for other cycle model
of donation funds. We would expect that
expanding our model to include all players in the
endowment funds and donation funds such as
Zakat, infaq, shadaqah etc. and linking it with a
macroeconomic model, would probably reinforce
the cyclical behaviour.
List of References
Baswir, Revrisond (2000), Indonesian Foreign Debt,
satunet column.
2.
Mannan, M.A.Abdul, (1998) Cash Waqf, Enrichment of
Family Heritage Generation to Generation, Social
Investment Bank Publication Series no. 1, 1st edition.
3.
Mannan, M.A.Abdul, (October 1, 1999), Cash Waqf
Certificate- an Innovation in Islamic Financial
Instrument: Global Opportunities for Developing
Social Capital Market in the 21stCentury Voluntary
Sector Banking”, Presentation at the Third Harvard
University Forum on Islamic Finance.
4.
Mannan, M.A.Abdul, (1999) Lesson of Experience of
Social Investment Bank in Family Empowerment
Micro-credit for Poverty Allevation: A Paradigm shift
in Micro-financ”, Social Investment Bank Publication
Series no. 10.
5.
Masyita, Dian, (2001), Preliminary Implementation
Model Design of Cash Waqf Certificate as Alternative
Instrument for Poverty Alleviation in Indonesia using
System Dynamics Methodologi, Thesis, ITB.
6.
PIRAC (Public Interest Research and Advocacy Center),
“Rate of giving of Indonesian Community”. Based on
survey from Agustus 2000 to Agustus 2001.
7.
Sterman, John. (2000), Business Dynamics: system
thinking & modeling for a complex world, Mc GrawHill
8.
Sushil, (1993), System Dynamics- A Practical Approach
for Managerial Problems, Wiley Eastern Limited,
India.
9.
Tasrif, Muhammad, (1996), System Thinking &
Dynamics Modeling.
10. Utomo, Setiawan Budi, (2000) Fiqh on Waqf and Cash
Waqf, Presentation in Monthly Discussion for Cash
Waqf Implementation in Indonesia, MUI Commission
of Economy
1.
1
150,000,000
population
4
200,000,000
1
2
The_poor_decrease
the_welfare_increase
12 12 12 12
5.000
15.000
25.000
day
Figure 5b. The Simulation Result (based on Rp 20 million a day)
Based on the study result above and
various scenarios proposed, if the gathered fund
through cash waqf certificate increase i.e. Rp 50
million in a day , it will take approximately 11000
days (30 years) to eliminate poverty and 21000
days (57 years) to increase quality of live for
Indonesian population. (see figure 6a)
7
The Islamic Endowment Funds
Using System Dynamics Methodology
Dian Masyita (dianmasyita@fe.unpad.ac.id)
The Faculty of Economics, Padjadjaran University, Bandung, Indonesia
Abstract
This research tries to find out the potency of endowment funds as an innovation financial instrument,
especially cash waqf, to alleviate the poverty in Indonesia. This research also tries to offer a design of the
endowment funds management system in a system dynamics model. Using the system dynamics
methodology, we try to know the structure of the endowment funds management system and simulate the
behaviour of endowment funds.
Cash Waqf, a special charitable endowment fund, is expected to become one of the alternative
instruments for the poverty alleviation programs in Indonesia. These programs require huge amount of fund
that cannot be provided thoroughly by the government. Therefore, initiation of new sources of fund for such
a program is inevitable. In the Islamic sosio-economic concept, there is a source of social fund that is
economically and politically free of charge, namely cash waqf (wakaf tunai). In this concept, Nadzir (cash
waqf fund manager) collects the fund from Waqif (cash waqf payer) and invest the money in the real sector
(mainly Small & Medium-sized Ventures) and in any syariah-based investment opportunities.
Nadzir will then allocate all profits and returns gained from the investments to any poverty alleviation
programs to enhance the quality of poor people’s life, such as free education and health service, cheap basic
food, etc. Nadzir is obliged to maintain the amount of fund in such a way that it does not go below the initial
amount. Therefore, Nadzir not only should be highly capable, but also needs a financial institution, which has
been proven to be experienced, highly capable and effective in helping SMEs development efforts, since such
a microfinancing program is considered as the most vital portfolio in the poverty alleviation program.
Therefore, it’s necessary to design an instrument which is able to control the endowment funds management
especially cash waqf.
Keywords: the endowment funds, cash waqf, portfolio investment, poverty alleviation, system dynamics
1.
Preface
In the end 2005, the Indonesian poverty
rate has been still discouraging. The poverty
indices are still higher than those of the previous
years. The economic crisis beginning in 1997,
does not end until now. In addition, the Tsunami
Disasters destroyed two provinces in Indonesia i.e
Nanggroe Aceh Darussalam and North Sumatra in
the end of the year 2004. Based on the Statistics
Central Bureau (BPS)’s data, there are about 40
million Indonesian people who are under the
poverty line.
Indonesia has come into debt trap made
by the Indonesian government and the private
sectors. Large amount of debt has weakened
Indonesian economy for the past seven years.
Meanwhile, the government has been confronted
with the deficit budget almost every year since
1997, which means that the government may find
it difficult to cover its routine expenditures 1 .
1
Baswir, Revrisond, Indonesian Foreign Debt, satunet
column, 2000.
Those regular balance sheet items require so large
amount of fund that government cannot provide
adequate fund for other strategic needs, such as
good education, appropriate health, poverty, and
SME’s development. Mismanagement of debts is
the largest of all factors that make Indonesia go
into crisis. Consequently, all of citizens and their
offsprings have to carry the heavy burden of that
debt.
2.
Problem Identification
One of potential solutions to the
necessity of sufficient fund for public needs is a
special endowment fund, cash waqf, from
people’s donation. People donate their money as
cash waqf by purchasing cash waqf certificate.
The gathered fund will be then invested in various
investment portfolio and the profit of which can
be spent for the above mentioned public
necessities. The gained profit will also be used for
funding poverty alleviation programs, while the
principal of funds will be reinvested in various
highly profitable investment opportunities.
Waqif donates his/her money as waqf
fund to Mauquf’alaih (a person who is entitled to
get benefit from waqf fund) through Nadzir (a
person/an institution being in charge for
managing waqf fund and distributing returns of
waqf investment). Only gains of the invested
waqf fund will be delivered to Mauquf’alaih 2 .
The principal of funds keep being invested in
potential investment opportunities. In relation to
its role as waqf fund investment manager, Nadzir
on behalf of Waqf Institution may allocate some
waqf funds to financial portfolio and finance
SMEs’ businesses on the basis of profit-loss
sharing system.
The larger the investment returns, the
more fund can be allocated to poverty alleviation
program. In some countries, waqf fund
management has reduced poverty effectively and
enhanced people’s welfare, by providing
additional fund for education & health
development programs, cheap houses & public
facilities development programs, and so forth.
3. Objectives of Research
This research is expected to be able to find
out the potency of an Islamic innovation financial
instrument, especially cash waqf, to alleviate the
poverty in Indonesia. This research also tries to
offer a design of the endowment fund
management system in a system dynamics model.
Using the system dynamics methodology, we try
to know the structure of cash waqf system and
simulate the behaviour of it.
On the next part of this paper, we will
discuss definition, law, and history of a special
endowments fund, cash waqf, to recognize the
concept and its potential benefit.
4.
Problem Definition : Cash Waqf
Previously, waqf of building and land
are the most popular forms of waqf. Nowadays,
cash waqf has become increasingly well-known,
particularly because of its flexibility, which
allows distribution of the waqf’s potential benefit
to be benefited by the poor anywhere 3 .
Cash waqf was firstly introduced in
Ottoman era in Egypt. Professor Mannan then
sosialized cash waqf in Bangladesh through
Social Investment Bank Limited (SIBL). SIBL
issues Cash Waqf Certificate to collect funds
2
Utomo, Setiawan Budi, Fiqh on Waqf and Cash Waqf,
Presentation in Monthly Discussion for Cash Waqf
Implementation in Indonesia, MUI Commission of
Economy. 2001
3
Mannan, M.A.Abdul, Cash Waqf Certificate- an Innovation
in Islamic Financial Instrument: Global Opportunities for
Developing Social Capital Market in the 21stCentury
Voluntary Sector Banking”, Presentation at the Third Harvard
University Forum on Islamic Finance, October 1, 1999
from the rich and distributes gains of the managed
funds to the poor 4 .
Like those of Bangladesh, most of
Indonesian people are poor. Characteristic of
communities in both countries are also similar.
Therefore, effectiveness of cash waqf certificate
program to help reduce poverty in Bangladesh
gives hope that analogous program can be
successfully
implemented
in
Indonesia.
Therefore, Fatwa Commission, Board of
Indonesian Moslem Scholars (MUI), responded
the necessity of cash waqf program in Indonesia
by issuing a fatwa (dated on 11 May 2002) about
cash waqf .
5.
Research Metodology
This research used system dynamics
methodology to capture dynamic phenomenon of
a system, in which variables change
System
simultaneously as time moves 5 .
Dynamics is a method of dealing with questions
about the dynamic tendencies of complex
systems, that is, the behavioral patterns they
generate over time 6 .
System dynamics is a powerful tool in
the creation of feedback theories. Since its
beginnings, the founders of the field have
developed a series of guidelines for the model
building process (Randers 1980; Richardson and
Pugh 1981; Roberts et al. 1983; Wolstenholme
1990; Sterman 2000) and a series of tests to build
confidence in the models created (Forrester and
Senge 1980; Sterman 2000) 7 .
In 2000, I carried out a survey on
possible implementation of cash waqf in Jakarta
and West Java, Indonesia. The survey concluded
that most people did not trust any existing
government institution to manage cash waqf fund
and control its investment activities, especially
because cash waqf management will involve large
amount of endowment funds 8 . 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
4 Mannan, M.A.Abdul, Cash Waqf, Enrichment of Family
Heritage Generation to Generation, Social Investment Bank
Publication Series no. 1, 1st edition, 1998
5
Tasrif, Muhammad, System Thinking & Dynamics
Modeling,ITB 1996
6
Meadows, Donella H., “The Unavoidable A Priori”, MIT
Press 1980.
7
Sterman, John. Business Dynamics: system thinking &
modeling for a complex world, Mc Graw-Hill, 2000.
8
Masyita, Dian, Preliminary Implementation Model Design
of Cash Waqf Certificate as Alternative Instrument for
Poverty Alleviation in Indonesia using System Dynamics
Methodologi, Thesis, ITB, 2002
2
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.
(-) loop 4
THE RICH -
- THE POOR
-
+
CASH WAQF
FUNDS
AVAILABLE FUNDS
FOR THE POVERTY
PROGRAMS
(-) loop 1
+
(+) loop 2
+
INVESTMENT
+ INVESTMENT+ (+) loop 3 PROFITS
+
PORTFOLIOS
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
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
Return_of_Microfinancing
Ratio
Global_Fund_Mgt
rate_of_cash_inflow
Profit_of_Glb_Fund_Mgt
Convert_to_Gold_standard
Total_Return
Return_of_Global_Fund
Global_Fund_Inv
Principal_11
Principal_1
Microfinace_Period
Principal_13
Min_Rtrn_MK
Principal_12
Principal_2
Principal_14
Mikrofinance
Cash_Waqf_Mgt
Invest_to_Islamic_Fin
Invest_to_microfinance
Total_Return
Total_Return
Ratio
Stop_Microfinance
Average_Return_of_Islamic_Finance
Principal_31
Invest_to_Direct_Investment
Microfinance_Policy
Principal_3
Return_of_Global_Fund
Principal_33
Average_Return_Direct_Inv
Principal_32
Average_Return_of_Islamic_Finance
2) The Islamic financial portfolios sectors,
Islamic Financial Portfolio Sector
Return_Islamic_Finance
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.
Invest_to_Islamic_Fin
Min_Req_Return
Investment_periode
Islamic_Mutual_Funds
Return_Islamic_Mutual_Fund
Profit_of_Islamic_Bonds
Invest_to_Mutual_Funds
Principal_12
Return_of_Islamic_Bonds
Return_of_Islamic_Bonds
Return_Islamic_Mutual_Fund
Islamic_Bonds
Invest_to_Islamic_Bond
Return_of_Islamic_Bonds
Profit_of_Islamic_Mutual_Funds
Return_of_Islamic_Stocks
Principal_13
Return_Islamic_Finance
urn_Islamic_Finance
Min_Req_Return
Invest_to_Islamic_Fin
Return_of_Deposit
Investment_periode
Invest_to_Islamic_Fin
Islamic_Capital_Market
Invest_to_Mudharabah_Deposits
Average_Return_of_Islamic_Finance
Profit_of_Islamic_Deposits
Principal_14
Invest_to_JII
Return_of_Islamic_Stocks
Mudarabah_Deposits
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.
Profit_of_Islamic_Cap_Mrkt
Return_Islamic_Finance
Return_of_Deposit
Profit_of_Islamic_Bonds
Principal_11
Investment_periode
Min_Req_Return
Profit_of_Islamic_Mutual_Funds
Profit_of_Islamic_Deposits
Profit_of_Islamic_Finance
3
Figure 2. The Interrelationship Among Variables in the General System
Foreign
Waqif
the poor
Quality of
Life
- Living Cost
Healthy Cost
Education Cost
The Family
Rehabilitation Cost
Natural Disaster
Victims Costs
-
Indonesian
++ Population
the rich
cash waqf growth
Average Period to
+
Collect Funds
+
The poverty
Microfinance
allevation
+
Portfolio
programs
+
+
To meet the
poor needs
The funds for the
poverty alleviation
programs
+-
Infrastructure
Recovery Cost
+
Multiplier Effects of
Microfinance towards
Family's Welfare
+
+
+
microfinance
Management Fees
for the Nazir
+
+
+
+
+
+
Profits of Islamic
Financial Investment
-+
+
+
NAV's Mutual
Funds
+
+Risk of Islamic
Financial Investment
+ To make a new
waqf assets
Direct
Investment
Portfolios
+
+
+
Invest to company
To maintain the
existing waqf assets
Waqf land +
productivity
+
Dividen or Capital
Gains
+
+
Real Estate
+
+
Agriculture
Waqf Land
Rental
To maintain new
assets
Commercial
Projects
+
+
+
+
The Profits of cash
waqf investment+
+
capital gains
Global Fund
Mgt
+
+
Investment
Funds
+
Unemployment
rate
Microfinance Policy
+
Scheme
Technical Assistances
for the poor
Bad debts of
microfinance
- The risk of
+
+
Islamic Mutual
Funds
+
Mudharabah
Deposits
Dividens
rate of return
+
+
+
The Profits of
Microfinance
Islamic Capital
Market
Islamic Bond
death rate
+
Islamic Banking
+
+
+
Cash Waqf Funds are
collected by Nazir
Islamic Financial
Portfolio
+
birth rate
-
cash inflow of
+ cash waqf
+
+ +
+
+
+
+
+
Business
Risk
+
+
Social
Projects
+
Free-charge Health
Services
Free Education
+
+
The Profits of Direct Investment + +
4
3) The global fund management sectors,
Global Fund Management Sector
growth_rate
Cash_Waqf
6) The distribution sectors of the profits of cash
waqf investment (see figure 4b). (Investment
profits link to the poor through the poverty
programs).
Min_Req_Return
Cash_Inflow
Return_of_Global_Fund
Investment_periode
CW_normal
Principal_4
Current_price_of_gold
Collecting_period
Return_of_Microfinancin
Ratio
Global_Fund_Mgt
The Interrelationship among variables can be seen
in Figure 2.
7. The Cash Waqf Management Control
The survey concluded that most people
did not trust any existing government institutions
to manage cash waqf fund and control cash waqf
4) The microfinance sectors.
investment activities, especially because cash
Microfinance Portofolio Sectors
waqf management will involve large amount of
Microfinace_Period
endowment funds. Most of them also recommend
Policy_ratios
Return_of_Microfinancing
that if a special purpose institution is established
Profit_of_Microfinance
Microfinance_Policy
to manage cash waqf fund, it has to be highly
Mikrofinance
microcredit
capable of detecting any potential dishonesty and
Pra_welfare_people
Indonesian_population
Stop_Microfinance
assessing performance of cash waqf fund
5) The direct investment in large and
manager, i.e. nadzir. Therefore, it’s necessary to
design an instrument which is able to control the
medium scale enterprises,
cash waqf management. This model tries to
Direct Investment to Real Sectors
design a control tools which is able to detect the
human error in decision making either
mismanagement or dishonesty quickly (see figure
3e & 3d).
The collected cash waqf fund from the
waqif will be distributed to the various portfolios
and then the usage will be controlled periodically.
The early warning system will be prepaired by the
system in order to the amount of cash waqf fund
will not go below the initial amount. It is the
difference of the cash waqf from the other sources
of funds. Gold standard can be used as the
currency standard because of its stability. (see
figure 3a-d).
rate_of_cash_inflow
Profit_of_Glb_Fund_Mgt
Convert_to_Gold_standard
Total_Return
Return_of_Global_Fund
Return_Real_Estate
Profit_of_Waqf_Land
Principal_331a
Principal_331b
Profit_of_agriculture
Age_of_Waqf_Prodctvty
Return_of_Waqf_Land
Profit_of_Real_Estate
Principal_331
minimum_ROI
Age_of_Waqf_Prodctvty
To_Increase_Waqf_Land_Productivity
Real_Estate
Agriculture
Principal_331b
Invest_to_Real_Estate
Invest_to_Agriculture
Principal_331a
Invest_to_Waqf_Land
minimum_ROI
Average_Rtrn_Waqf_Land
Return_of_Agricltr
Profit_of_agriculture
Return_Real_Estate
Return_of_Agricltr
To_Increase_Waqf_Productivity
Principal_33
Invest_to_Waqf_Assets
Total_Rtrn_Waqf_Prodctvty
Principal_331
Principal_332
Total_Rtrn_Waqf_Prodctvty
Invest_to_Direct_Investment
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
2e9
Profit_of_Waqf_Productivity
2
1
To_Increase_Waqf_Building_Productifity
2
1,5e9
Age_of_Waqf_Prodctvty
Profit_of_Waqf_Land
rupiah
Principal_332
minimum_ROI
2
1
2
1
500.000.000
0
Commercial_Projects_investment_Periode
Social_Projects_Policy
1
20
Principal_322
60
80
100
Figure3a. The Simulation Result (Short-Term)
Principal_322
Average_Rtrn_New_Waqf_Assets
Total_Rtrn_New_Waqf_Assets
Invest_to_build_Comrcl_Projects
minimum_ROI
Principal_321
Commercial_Projects
Rtrn_Commercial_Projects
Gold Standard (kg)
1
Principal_32
Invest_to_new_waqf
Total_Return_Direct_Inv
Profit_of_Commercial_Projects
Cummulative_Cash_Waqf_Fund
Principal_321
Invest_to_Social_Projects
Build_New_Waqf_Assets
Invest_to_Direct_Investment
Control_Function
day
Total_Rtrn_New_Waqf_Assets
Average_Rtrn_New_Waqf_Assets
1
40
Social_Projects
Rtrn_Commercial_Projects
2
2
Adjust_to_Social_Projects
Return_Social_Projects
1
1e9
20
2
1
15
1
2
10
1
1
5
2
2
2
Total_cash_waqf_in_gold
Convert_to_gold
1
Commercial_Projects_investment_Periode
0
Rtrn_Commercial_Projects
Invest_to_Direct_Investment
minimum_ROI
Principal_31
Total_Return_Direct_Inv
Time_to_Direct_inv
Company_rate_of_return
Company
Invest_to_Company
Company_Profits_
Company_rate_of_return
Profit_of_Waqf_Land_Rental
The_number_of_Waqif
2
20
40
60
80
100
day
Figure 3b. The Simulation result (short term)
Age_of_Waqf_Prodctvty
Rental_Price
Fraction_of_year
Waqf_Land_Availability
Waqf_Land_Growth
Profit_of_Waqf_Land_Rental
Decrease_of_Waqf_Land
Waqf_Land_Devaluation
Profit_of_Direct_Investment
Profit_of_Waqf_Productivity
Profit_of_Commercial_Projects
Company_Profits_
Time_to_invest_in_Direct_Investment
5
simulation result could demonstrate the deviation.
(see figure 3e-f)
rupiah
1e15
5e14
1
2
The Potency of Cash Waqf for
The Poverty Alleviation
Cummulative_Cash_Waqf_Fund
Profit_of_Cash_Waqf_Investment
Multiplier_Effects
Control_Function
Profits_of_CW_Investment_
Average_Period_to_become_prawelfareDaily_needs
the_poor
0
12
5.000
12
10.000
15.000
day
death_rate3
Birth_rate3
alleviation_1
gold standard (kg)
Figure 3c The Simulation Result (long term)
10.000.000
the_poor
The_poor_decrease
aleviation
Pra_welfare_people
The_poor_reducing
death_rate2
birth_rate2
lifetime_expectancy
Microcredit_for_a_poo
Population_growth
1
5.000.000
2
0
12
5.000
1
Pra_welfare_reducing the_welfare_increase
Convert_to_gold
Indonesian_populationwelfare
Total_cash_waqf_in_gold
Multiplier_effect
Average_period_to_become_welfare
Average_of_Microfinacing
2
the_rich
15.000
birth_rate
day
Figure 4b Causal Diagram of The Potency of Cash
Waqf Simulation using Powersim
Figure 3d The Simulation Result (long term)
Profits of Cash Waqf Investment Distribution
2
5e9
1
Average_of_Microfinacing
Invest_to_microfinance
death_rate
gold standard (kg)
50
4e9
1
Total_cash_waq
1 d
Convert_to_gol
2
1
1
2 2
rupiah
3e9
2
20
0
1
2
1
30
10
Profit_of_Microfinance
2
Profit_of_Glb_Fund_Mgt
Living_cost
40
1
2e9
2
1
2
Profit_of_Direct_InvestmentNatural_Disaster_Cost
0
2
Total_available_fund_for_poor
Profit_of_Cash_Waqf_Investment
Infstructure_Cost
Family_Rehbiittion_Cost
1 1
Education_cost
Pra_welfare_people
the_poor
da
Inflation
Enter_to_pra_welfare
Needs_ratio_1
Figure 3e. The Simulation Result (short term)
if any of mismanagements or dishonesty occur
Living_cost
Needs__ratio_2
Cost_1
poor
Healthy_cost
Needs_ratio_3
Cost_2
6e13
Profit_of_Cash_Waqf_Investmen
allocation_ratio_1
available_fund_for_living
Living_needs
available_rate_1
allocation_ratio_2
needs_rate_1
needs_rate_2
available_fund_for_healthy
Healthy_needs
available_rate_2
allocation_ratio_3
needs_rate_3
available_fund_for_education
Education_needs
available_rate_3
allocation_ratio_4
600.000
1
2
300.000
2
1
0
12
12 12
2.000
10.000
day
Total_cash_waqf_in_gold
rupiah
gold standard (kg)
Daily_needs
Cummulative_Cash
1
20 40 60 80 100
da
Healthy_cost
Control_Function
ment
1e9
2
20 40 60 80100
Profit_of_Islamic_Finance
2
4e13
1
2e13
0
Control_Function
Education_cost
Cummulative_Cash_Waqf_
2 Fund
Convert_to_gold
Cost_3
Needs_ratio_4
2
available_fund_for_rehbltation
Rehabilitation_needs
Family_Rehbiittion_Cost
2 1
12 12 1
2.000 6.000 10.000
Cost_4 Needs__ratio_5
Enter_to_pra_welfare
day
Natural_Disaster_Cost
Figure 3f. The Simulation Result (long term) if
any of mismanagements or dishonesty occur
available_fund_for_disaster
Disaster_needs
available_rate_5
needs_rate_5
Cost_5
Infstructure_Cost
The Potency of Cash Waqf for the
Poverty Alleviation Programs
It can be concluded from the system that
the larger the amount of cash waqf collected, the
larger the amount of fund can be invested in
highly cost-effective profit sharing-based
portfolios, and the larger the amount of return can
be distributed to poor people. The more fund
allocated to finance microbusiness, the sooner
poverty in Indonesia can be alleviated. (see Figure
4a).
The waqif and public can control or
monitor the cash flow of cash waqf investment. If
mismanagement and dishonesty occurred, the
available_rate_4
allocation_ratio_5
needs_rate_4
Cost_6
8.
available_fund_for_infrastrctr
Infrastructure_needs
available_rate_6
needs_rate_6
Needs_ratio_6
allocation_rate_6
Enter_to_pra_welfare
Inflation
Profit_of_Cash_Waqf_Investment
Figure 4b Causal Diagram of Simulation using
Powersim
9.
The Simulation Result
Since there has been no similar study
preceding the research, some assumption were
applied. The ability of five national TV
corporations (RCTI, SCTV, Indosiar, MetroTV
and Lativi) to collect donation amounting 3
billions Rp in two night in 2003 was used as an
6
assumption basis of amount of fund could be
gathered by cash waqf management institution.
It was then assumed that the cash waqf
institution could obtain 20 millions Rupiah a day
in form of cash waqf from various components of
Indonesian people. The study also assumed that
the gathered fund would grow 25% annually and
it would be invested in Islamic financial products
with profit sharing- based various rate of return.
Using the above assumption and data
supplied by Biro Pusat Statistik (National
Beaurau for Statistics), BKKBN (National
Coordinating Agency for Family Planning) and
syariah financial institution in Indonesia, the
computer-based data process resulted. Such an
amount of fund is expected to be available for the
poverty alleviation efforts in Indonesia, especially
through microfinance distribution program. If this
plan can be implemented smoothly and if those
assisted micro enterprises can get well run
maximum of 8 years after being financed, it will
take approximately 12500 days (35 years) to
eliminate poverty and 22400 days (63 years) to
increase quality of live for Indonesian population.
(see figure 5a-b) Poor people, in this study, are
those with very low quality of life. In other words,
poor people are not only those who cannot feed
once a day, but also those who cannot afford
proper health and education services.
4
200,000,000
4
4
4
3
3
3
3
1
100,000,000
2
3
50,000,000
1
1
2
1
4
2
0
5,000
1
10,000
the_rich
the_poor
Pra_welfare_people
Indonesian_population
3
2
15,000
2
20,000
2
25,000
30,000
day
Figure 5a. The Simulation Result (based on Rp 20 million a day)
population
500.000.000
400.000.000
300.000.000
200.000.000
2
100.000.000
0
1
78
78
78
78
578
6
34
150,000,000
34
3
34
1
2
4
3
100,000,000
4
5
50,000,000
56
56
5
6
56
6
12
4
12
0
5,000
12
10,000 15,000
12
20,000
123
25,000 30,000
7
8
the_poor
the_poor
Pra_welfare_people
Pra_welfare_people
the_rich
the_rich
Indonesian_populatio
Indonesian_populatio
Time
Figure 6a. Simulation Result (based on Rp 50 million in a day
compare with Rp 20 million in a day)
10. Conclusions
This work is an attempt to provide Board
of Indonesian Waqf and policy makers in
Indonesia with a “microworld” in which they can
experiment with their policy options, prior to
adoption. This helps them test their mental
models regarding the solutions they see for the
problems associated with portfolio of Islamic
endowment funds investment management. The
model could be used a basis for other cycle model
of donation funds. We would expect that
expanding our model to include all players in the
endowment funds and donation funds such as
Zakat, infaq, shadaqah etc. and linking it with a
macroeconomic model, would probably reinforce
the cyclical behaviour.
List of References
Baswir, Revrisond (2000), Indonesian Foreign Debt,
satunet column.
2.
Mannan, M.A.Abdul, (1998) Cash Waqf, Enrichment of
Family Heritage Generation to Generation, Social
Investment Bank Publication Series no. 1, 1st edition.
3.
Mannan, M.A.Abdul, (October 1, 1999), Cash Waqf
Certificate- an Innovation in Islamic Financial
Instrument: Global Opportunities for Developing
Social Capital Market in the 21stCentury Voluntary
Sector Banking”, Presentation at the Third Harvard
University Forum on Islamic Finance.
4.
Mannan, M.A.Abdul, (1999) Lesson of Experience of
Social Investment Bank in Family Empowerment
Micro-credit for Poverty Allevation: A Paradigm shift
in Micro-financ”, Social Investment Bank Publication
Series no. 10.
5.
Masyita, Dian, (2001), Preliminary Implementation
Model Design of Cash Waqf Certificate as Alternative
Instrument for Poverty Alleviation in Indonesia using
System Dynamics Methodologi, Thesis, ITB.
6.
PIRAC (Public Interest Research and Advocacy Center),
“Rate of giving of Indonesian Community”. Based on
survey from Agustus 2000 to Agustus 2001.
7.
Sterman, John. (2000), Business Dynamics: system
thinking & modeling for a complex world, Mc GrawHill
8.
Sushil, (1993), System Dynamics- A Practical Approach
for Managerial Problems, Wiley Eastern Limited,
India.
9.
Tasrif, Muhammad, (1996), System Thinking &
Dynamics Modeling.
10. Utomo, Setiawan Budi, (2000) Fiqh on Waqf and Cash
Waqf, Presentation in Monthly Discussion for Cash
Waqf Implementation in Indonesia, MUI Commission
of Economy
1.
1
150,000,000
population
4
200,000,000
1
2
The_poor_decrease
the_welfare_increase
12 12 12 12
5.000
15.000
25.000
day
Figure 5b. The Simulation Result (based on Rp 20 million a day)
Based on the study result above and
various scenarios proposed, if the gathered fund
through cash waqf certificate increase i.e. Rp 50
million in a day , it will take approximately 11000
days (30 years) to eliminate poverty and 21000
days (57 years) to increase quality of live for
Indonesian population. (see figure 6a)
7