Determinants of waqf institutions’ efficiency in Malaysia / Azrizal Husin

Waqf is a unique form of philanthropy in Islam with the objectives of providing spiritual
rewards the donor (or waqif) continuously in this World and Hereafter, as well as to
enhance the ummah’s (society) standard of living according to Islamic principles. It is
estimated that the global Waqf assets are valued at US$1 trillion, while in Malaysia, it
has the potential to be as high as US$ 325.4 billion. Waqf institutions are trusted bodies
that manage Waqf in many Muslim countries. In Malaysia, Waqf is managed by the
State Islamic Religious Councils (SIRCs) which are responsible to ensure that the Waqf
assets and its objectives are managed efficiently by producing a maximum level of
outputs given a certain level of inputs or minimize inputs given a certain level of
outputs. In this study, the efficiency of Waqf institutions in Malaysia during the 2010 to
2016 period was analyzed through a two-stage analysis. In the first stage, the DEA
Windows Analysis method was deployed to gauge the efficiency levels of the Waqf
institutions, while in the second stage, the Pooled Ordinary Least Square (OLS)
Regression Model was deployed to examine the Waqf-specific characteristics,
macroeconomic conditions, and regulatory determinants on the efficiency of the Waqf
institutions in Malaysia. The findings of the first stage analysis recommended that the
efficiency of the Waqf institutions in Malaysia was underperforming and unfit to carry
out its main functions efficiently. Furthermore, it was also discovered that the Scale
Efficiency (SE) was more dominant over the Pure Technical Efficiency (PTE) in
determining the technical efficiency of the Waqf institutions in Malaysia, which
technically suggested that the inefficiency of Waqf institutions in Malaysia might be
mainly caused by managerial inefficiency. In the second stage, it was discovered that
the efficiency was influenced significantly by the Number of Employees (NOE), Size
of Waqf Lands Under Management (SWLUM), Number of Branches available (NOB),
Existence of Waqf Operational Websites (WEB), Number of Social Media adopted
(SM), Economic Growth (GDP), Corporatization (CORP), and Board Size (BS).
Overall, the findings of this study highlighted the importance of ensuring efficiency of
Waqf institutions in Malaysia. Furthermore, relevant authorities, especially the SIRCs,
the Department of Zakat, Waqaf, and Haji (JAWHAR), and the government ought to
deploy efficiency enhancement measures of Waqf institutions as well as strengthening
the collaborations between authorities and stakeholders in ensuring the noble objectives
of Waqf institutions in Malaysia are successfully accomplished.