Legitimacy of Waqf management technology and social-business integration in Muhammadiyah organization

Abstract

Waqf plays a strategic role in supporting social welfare, education, and economic empowerment in Indonesia. According to the Indonesian Waqf Board (BWI), in 2022, the potential for cash waqf in Indonesia will reach IDR 2,000 trillion annually. However, the actual waqf collection remains significantly below this potential, with total receipts of approximately IDR 400 billion annually. Muhammadiyah, one of Indonesia’s largest Islamic organisations, has significantly contributed to waqf management since its establishment in 1912. As of 2022, Muhammadiyah manages approximately 21,000 hectares of waqf land and various fixed assets. Despite this extensive involvement, the optimisation of waqf management continues to face multiple challenges. Digital transformation is increasingly recognised as a potential solution to enhance waqf management's efficiency, transparency, and sustainability. The technology adoption within Muhammadiyah’s waqf management system remains limited, necessitating further study to assess its effectiveness and compliance with shariah principles. The study addressed three objectives: to assess the adequacy of Muhammadiyah’s waqf framework, identify key factors shaping the digital waqf model, and analyse performance factors to enhance the sustainability and effectiveness of waqf management. Employing a mixed-methods approach, this research began with an analysis of Muhammadiyah’s waqf framework, policies, and operational mechanisms, followed by the development of a digital waqf management model and an assessment of factors influencing technology adoption and the performance of digital waqf systems. The study incorporated qualitative analysis through in-depth interviews, focus group discussions (FGDs), and document reviews with waqf administrators and technology experts. Furthermore, quantitative validation was conducted through a survey of 81 respondents, which required PLS-SEM analysis. This study is grounded in multiple theoretical perspectives. Non-Profit Organisation Theory, Stakeholder Theory, and Sharia Governance explain the governance dimension; Technology Acceptance Model (TAM), Technology Adoption Theory, and Diffusion of Innovation frame the technological adoption process; Legitimacy Theory clarifies societal acceptance; and Social Business Integration Theory supports the integration of waqf with sustainable socio-business practices. The findings indicate that Muhammadiyah possesses substantial readiness for adopting technology in waqf management, with a decentralised management system that remains under centralised administration and oversight. However, digital transformation implementation encounters significant system challenges. To address these issues, this study assessed the Digital Social Business Waqf Muhammadiyah (DSB-WM) model, which integrates technology with social business mechanisms and financial sustainability. The model incorporates investment in Cash Waqf Linked Sukuk (CWLS) and Cash Waqf Linked Deposits (CWLD), crowdfunding platforms, and the productive waqf management of Muhammadiyah’s social enterprises (Amal Usaha Muhammadiyah). This model's effectiveness is supported by three key elements: waqf literacy, training and capacity building, and strategic collaboration with academics and Islamic finance practitioners. The quantitative analysis confirms that Perceived Behavioural Control (PBC), Subjective Norms (SN), Perceived Usefulness (PU), and Technological Legitimacy (TL) significantly influence technology adoption in digital waqf management. To enhance the sustainability of digital waqf management, Muhammadiyah must strengthen institutional coordination, increase investment in digital infrastructure, and implement a structured and continuous digital literacy program. These strategic initiatives are expected to facilitate the broader adoption of technology-driven waqf management systems, thereby improving efficiency, transparency, and long-term social and economic impact in the digital era. The study contributes theoretically by extending Legitimacy and Social Business Integration theories into Islamic social finance, and practically by proposing the Digital Social Business Waqf Muhammadiyah (DSB-WM) model as an innovative framework for strengthening digital readiness, shariah legitimacy, and socio-business integration.