IDENTIFYING THE OPTIMAL CASH WAQF LINKED SUKUK: INDONESIAN EXPERIENCE

The National Waqf Body (BWI) and Ministry of Finance (MoF) have implemented a model called Cash Waqf Linked Sukuk (CWLS) and issued the Government of Indonesia Sukuk (Islamic securities) namely Sukuk Waqf Indonesia (SWI) in 2020. The intention behind applying CWLS model is to accelerate waqf as one of the Islamic social funds and particularly, to optimize the collection of cash waqf with Islamic securities to serve the public and at the same time to diversify the sovereign securities (Sukuk) in the Islamic financial market. Indeed, it is very crucial to assess the feasibility of the CWLS model as a new sovereign Sukuk instrument in the market despite its sharia compliant aspect. Especially, it needs to undergo a robust academic assessment such as formulation of the model, optimal level of each party such as the government, waqif, waqf management agencies (Nadzhir), etc . This is the objective and main motivation of the research. The paper will answer the following research questions: (i) What is the quantitative formula of SWI model especially SWI issuers and holders? What is the formula of the optimal impacts of SWI model, taking into account two types of waqif? Finally, what is the optimal formula for project financing, given the total cash waqf investment? Then, the paper technically constructs and develops the quantitative formulas of SWI instrument namely BWI, Ministry of Finance (MoF), waqf management agencies (Nadzhir), partners of Nadzhir and waqf investors (waqif). SWI formulation is derived based on SWI’s terms and conditions, cash flow, intentions of waqf investors and tenor of SWI. Later, the optimal impacts of SWI are measured by formulating the present and future values of waqf investment to assess the Net Present Value (NPV) and limit theories to find variables determining the optimal SWI impacts on the public via project financing taking into account two types of waqif namely temporary waqif and permanent waqif. Finally, the paper contributes to the academic assessment of CWLS model (SWI instrument) particularly, it identifies variables determining the optimal implementation of CWLS model which might benefit the waqf stakeholders.