Cash Waqf and its Negative Impact on the Economy

Anthony Budiawan Managing Director of Political Economy and Policy Studies (PEPS)

IO – Recently, the people have been confused again with the maneuvers of government policies in managing state finances related to the launch of the National Money Waqf Movement. I don’t refer to the definition of waqf in general and money waqf in particular. I try to discuss money waqf in macroeconomics, public policy, and fiscal or state finances. As for the definition of cash waqf, which has sparked controversy, whether it is legal or not, let it be left up to the opinions of the experts in their respective fields. 

First, regarding fiscal and State Finances. In Law No. 17 of 2003 concerning State Finances, it is explained that the collection of state revenue must first be determined by law (Article 8 letter e). The law also explains that state revenue only consists of three types, namely, tax revenue, non-tax revenue, and grants (article 11 paragraph (3)). Meanwhile, grants may only be made, first, between the central government and regional governments after obtaining approval from the House of Representatives (DPR), as explained in Article 22 paragraph (2) and paragraph (3). Second, between the central government and foreign governments/ institutions with the approval of the DPR, in accordance with Article 23 paragraph (1). And third, between the government and state/ regional companies after first being stipulated in the APBN/APBD, according to Article 24 paragraph (1) and paragraph (2). 

I wonder whether the money waqf referred to in the National Money Waqf Movement is one of the three state revenues mentioned above: tax revenue, non-tax revenue, or grants? Also, is the type of cash waqf levy in question already stipulated by law as referred to in Article 8 letter e in Law No.17/2003 on State Finances? 

I estimate that cash waqf does not include tax and non-tax collection. The reason is that tax and non-tax levies are mandatory, not voluntary. Meanwhile, if I’m not mistaken, cash waqf is not mandatory, but only has an appeal. 

If so, is the cash waqf a grant? It seems that cash waqf is not a grant either. Since the state cannot accept grants from the people. 

If cash waqf is not a part of state revenue, then the government at large, including the central government, local governments, ministries, and institutions, cannot collect cash waqf. Is not it so? 

In one national media, it was reported that the Ministry of Religion had collected cash waqf of up to IDR 4.13 billion as of January 21, 2021. 

To that end, we appeal to the Minister of Religion to be careful in levying cash waqf on behalf of the ministry because it could violate laws on State Finance. 

Oh sorry, maybe the government does not plan to input cash waqf as part of state revenue. If so, what is the use of cash waqf for the state? What is the use of the National Money Waqf Movement? Please enlighten me. 

Oh yes, the government has said that cash waqf is useful for financing infrastructure projects. Does this mean in the form of Islamic loans? If our allegations are correct, hasn’t the Ministry of Finance always issued State Sharia Securities (SBSN), also known as State Sukuk, to finance various State Expenditure needs? Then, what is the difference between SBSN and this cash waqf financing? 

If the money waqf in question is true in the form of sharia loans, in our opinion, first, this money waqf has no positive impact on economic growth. This is because the source of financing, whether from State Sukuk or Cash Waqf, is irrelevant for economic growth. What’s relevant is the shopping value. Meanwhile, the expenditure value, deficit, and total state debt have been budgeted, and the amount does not depend on financing. 

Second, we assume that the cash waqf funds that are being targeted already exist in the banking system in the form of savings, or third party funds. That is, not from the money kept under the pillow. If this is true, the transfer of books from savings to cash waqf accounts will not affect economic growth, because the money in savings will be reduced by the amount that is transferred to the cash waqf account. This means that in macro there is no additional money: only moving from the left pocket to the right pocket. 

Third, the appeal for cash waqf can harm economic growth because money in the banking sector is sucked into cash waqf accounts, resulting in a crowding-out effect which results in reduced liquidity for the private sector, causing interest rates to rise and credit to fall. 

Finally, according to rumors, the value of waqf money for Indonesia could reach IDR 2,000 trillion. Hopefully, the government hasn’t heard these rumors. Oh sorry, apparently this information was from the government. In that case, please reconfirm this value as it seems almost impossible. The reason is that the value of all public money in the banking sector, as third party funds, is only IDR 6,665 trillion. Meanwhile, the money supply in a broad sense (M2), including cash, was only IDR 6,800 trillion. Therefore, it is hard to believe that the value of cash waqf could reach IDR 2,000 trillion. Hopefully, the government will not be tempted by issues that are not true. 

We pray that Indonesia’s economy can recover as soon as possible, with a growth of 5 percent, according to the target in the 2021 State Budget.