Do borrowers behave differently under a Waqf institution?

Ebi Junaidi, Wachid Asad Muslimin, Muhamad Rizky Rizaldy

Research output: Contribution to journalArticlepeer-review

2 Citations (Scopus)


Waqf was considered the main vehicle for investing in commercial and public ventures in early Muslim civilization. This paper discusses how the use of awqaf funds for lending can be a better alternative for financing in the Muslim world. We propose to model the concept of integrating the private equity and venture capital concept with waqf. An experimental study using a principal-agent contract, which mimics a possible contract in waqf, is employed to see the effect of the use of such social funds in investment and the social value embedded in such contracts. A standard loan contract with social preference is adopted to discern how much the structured contract superior compares with its legalistic Islamic standard contract employed in an Islamic bank. Using mudaraba in the experiment, the result provides evidence that knowing the nature of social endowment funds of an Islamic waqf institution motivates the borrower to comply with signed contracts and influences his giving behavior. This is expected to empower emerging Muslim economies and act as one of the solutions offered for development.

Original languageEnglish
Pages (from-to)309-325
Number of pages17
JournalInternational Journal of Economics and Management
Issue number2 Special Issue
Publication statusPublished - 2017


  • Moral economy
  • Private equity
  • Venture capital
  • Waqf


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