Economic impact of Waqf-funded water infrastructure in West Java : an inter-regional input-output analysis

Abstract

This research examines the economic implications and institutional viability of waqf-based investment in water infrastructure in West Java, Indonesia. This research examines how Islamic charitable mechanisms, such as waqf, might supplement governmental funding to alleviate infrastructure deficiencies, motivated by ongoing discrepancies in access to clean water, particularly in rural and peri-urban areas. The study used a mixed-method approach, using Inter-Regional Input-Output (IRIO) analysis to examine macroeconomic effects with qualitative interviews with key stakeholders to assess implementation circumstances. The IRIO simulation indicates that a Rp50 billion waqf investment in the water supply, waste management, and recycling sector (Sector 30) produces substantial economic spillovers. It enhances the regional production of West Java by Rp 76.6 billion and the national output by Rp 83.9 billion. Additionally, it impacts 1,427 employments, with 1,279 located in West Java alone. The findings indicate significant backward links with sectors like agriculture, building, and food processing, establishing water infrastructure as a crucial facilitator of comprehensive growth. Qualitative results confirm robust stakeholder confidence for the national expansion of the waqf model, dependent on evident local success and collaborative efforts among several stakeholders. Despite obstacles posed by governmental support and Nazir capabilities, the model's versatility and ethical finance foundation provide a robust supplement to traditional infrastructure funding. Overall, the research underscores waqf's dual value: as a faith-based financing tool rooted in social justice, and as a pragmatic mechanism for advancing inclusive and sustainable development.