Reimagining Islamic Social Finance: Institutional Architecture of Waqf Banks in Indonesia

Abstract

The development of Islamic social finance has attracted increasing attention as an alternative mechanism to address socioeconomic challenges through sustainable and inclusive financial instruments. Waqf, as a fundamental Islamic social finance instrument, has significant potential to promote economic empowerment and social welfare; however, its transformation into productive and sustainable financial institutions remains limited, particularly in Indonesia. This study aims to analyse the institutional architecture of Waqf Banks in Indonesia by identifying essential structural, governance, operational, and regulatory dimensions that support their establishment and sustainability. This research employs a qualitative Systematic Literature Review (SLR) approach by reviewing 73 articles indexed in the Indonesian national journal database (SINTA). Through a systematic screening and eligibility process, six articles were selected as the most relevant studies for thematic analysis. The findings reveal that effective Waqf Bank development requires an integrated institutional framework involving governance mechanisms, ownership structures, sustainable capital mobilisation, Shariah-compliant transaction models, risk management, and regulatory harmonisation. The review further identifies a fundamental tension between waqf’s social mission and financial sustainability requirements, highlighting the need for a hybrid institutional model. This study contributes to Islamic social finance literature by conceptualising Waqf Banks as a bridge between charitable endowment systems and modern Islamic financial ecosystems. The findings provide insights for policymakers, waqf authorities, and Islamic financial institutions in developing sustainable Waqf Bank models in Indonesia.