Identification of Risks Exposed to The Development of Zakat and Wakaf Housing in Malaysia

Risk management is a constant effort that must be carried out throughout the life of a project. For construction and property development projects, the administration of each risk management stage is important due to the nature of the work involved. Specifically, in deliberating the collaboration between zakat and wakaf resources in the provision of low-cost housing or its equivalent for the asnaf and poor, it is crucial to identify the risks involved and the best way to manage them. Otherwise, the authorities' support, for instance, housing-related assistance, for instance, building new and repairing houses, could not be wisely utilized and maintained should any catastrophes occur. In the event of a calamity, the recipients will lose their houses. Especially for the asnaf and needy, given that they are already poor, their standard of living will deteriorate. The identification of risks exposed to housing development has been addressed in current literature, but little research has specifically identified the vulnerabilities associated with zakat and wakaf housing development. This study is conducted in an attempt to identify risks exposed to the development of zakat and wakaf housing in Malaysia via content analysis of relevant documents and a series of interviews with related stakeholders. The study's findings indicate that there are 94 risks identified, where most of the risks are inherent risks associated with the development of the property. The finding also suggests that Shariah-compliant risks, such as the requirements of mua'malat, and principles of zakat and wakaf, are included among the identified risks associated with the development of zakat and wakaf housing. The outcome of the study is significant in providing information to relevant authorities and related organizations in identifying risks accordingly and becoming the basis for the development of a comprehensive risk management framework for zakat and wakaf housing development in Malaysia.

Development; Housing; Risk Identification; Wakaf; Zakat

    The presence of risk is unavoidable, especially in construction and property development transactions. The development of zakat and wakaf housing, like any other type of housing development, is exposed to many risks. There are a number of risks that, if not adequately managed, can lead to loss and damages, including inadequate comprehensive planning, a lack of knowledge and skills, construction disputes, and poor communication between stakeholders. 
    Thorough risk identification is one of the most important elements in ensuring good risk management. Before risks can be analyzed and an effective response identified, the first step in. risk management is to identify them. According to Mills (2001), if a risk is not detected, it cannot be controlled, transmitted, or managed in any other way. The risk item can be distinguished from others by identifying each source of risk and its components. The early risk and uncertainty identification rationale also suggest that project management should focus more on methods for limiting and allocating possible disadvantages, such as contract strategy selection. It also indicates the area that requires the most design, improvement, or clarification.
    From the perspective of Islamic economics and technology, the practice of management of risk is not merely acknowledged but is highly emphasized and encouraged through the identification of risks (Fauzi & Laldin, 2019). The practice of proper identification of risks is based on the concept of Islamic legal maxim (al-ghurmu bil ghunmi, which means gain, profit, or advantage comes with risk-taking or loss) (Dusuki & Mokhtar, 2010).
    The current economic climate, particularly considering the recent COVID-19 pandemic, has negatively impacted many people's well-being, with some losing their homes due to financial inability and others losing their jobs (Berawi, 2020). The Malaysian government has provided aid and services to low-income communities, including increased financial and physical support. In terms of housing-related assistance, the Malaysian government, through its agencies and authorities, provides a great deal of assistance, such as continuing to construct low-cost housing, building new and renovating existing houses with public funds, and employing zakat and wakaf resources. While the understanding and identification of hazards associated with ordinary housing development has been established, risks associated with the development of zakat and wakaf housing have yet to be identified and made public.
    This study endeavours to identify risks exposed to zakat and wakaf housing development, specifically in Malaysia. The study combines content analysis of relevant literature and documents and a series of interviews with related stakeholders from various fields such as mua'malat, risk management, construction, and housing development. The paper is structured into a few sections. Section 1 is the introduction, followed by Section 2 through Section 4 – a review of the zakat and wakaf housing projects in Malaysia, and the concept of risk management and identification, particularly in the development of zakat and wakaf housing. Section 5 of the paper reports on the methodology used in conducting the study. Data analysis and results of the study are reported in Section 6, followed by a conclusion in Section 7.

    The research concluded that there is a dearth of literature on the risks associated with the development of zakat and wakaf housing in Malaysia.  Ninety-four risks were identified as being associated with the development of zakat and wakaf housing in Malaysia, and Shariah principles, particularly the business transactions and dealings (mua'malat) and their requirements are included as one of the risks identified. Additionally, most of the risks identified are inherent risks involved in typical housing developments in Malaysia. The research findings are significant because they enable authorities and related organizations to appropriately identify risks and serve as a basis for developing a comprehensive risk management framework for zakat and wakaf housing development in Malaysia.

    This research is funded by the EmPOWER Grant, EGIS, Heriot-Watt University Malaysia (Principal Investigator: Sr Dr. Puteri Nur Farah Naadia; Project ref. no.: EGIS/EmRGS/2021/03). The commercial solver used in this work was fully supported by LINDO Systems Inc., whose support is gratefully acknowledged.

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