CONCEPT PAPER

Reinvigorating the Institution of Waqf

Date of Issue: April 03, 2025

Last date of submission of comments: May 04, 2025

SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN

Islamic Finance Department
NIC Building, Jinnah Avenue, Blue Area, Islamabad.
Tele No. +92-51-9195188, Email: [email protected]
 CONCEPT PAPER - REINVIGORATING THE INSTITUTION OF WAQF

1. Preamble
The Waqf (Islamic endowment) is a centuries-old institution rooted in Islamic tradition, aimed at
fostering social welfare and economic development, and played a pivotal role in sustaining public
welfare and economic justice in the modern world. The term Waqf, derived from the Arabic root
“aqaf” (to stop, contain, or preserve), refers to an endowment made by a Muslim for charitable
or religious purposes. Waqf traditionally involves dedicating assets, such as property or funds,
for charitable purposes, where the principal remains intact, and only its yield or profits are used
for welfare activities.

Waqf and trust are both institutions for managing and preserving assets for specific purposes,
but they differ in their origins, objectives, and governing principles. Apart from separate legal
standing, the following are critical conceptual differences between Waqf and Trusts:

Aspect Waqf Trust

Purpose Religious, charitable, or public benefit Can be for charitable, private, or
purposes, e.g., mosques, schools, commercial purposes.
healthcare, and social welfare.
Ownership Ownership is permanently Ownership is held by the trustee for
transferred to Allah, and assets the benefit of beneficiaries.
become irrevocable.
Irrevocability Waqf is irrevocable once established, Trusts can be revocable or
and assets cannot be sold, inherited, irrevocable, depending on the
or donated. settlor's intent.
Perpetuity Designed to be perpetual, with the Can be perpetual or time-limited,
income used for designated purposes. depending on the trust deed.
Beneficiaries Often benefits society at large, Can benefit specific individuals,
especially the needy. groups, or public purposes.
Legal Based on Shariah, with modern laws. Operates within the legal framework
Framework of the jurisdiction.

In essence, while both serve to protect and manage assets for designated purposes, Waqf is
deeply rooted in Islamic tradition and spirituality, whereas trusts are flexible tools for various
legal and financial needs.

2. Contributions of Waqf in Muslim history

The Waqf played a significant role in Muslim history by fostering social, economic, and cultural
development. It was a charitable institution where individuals donated property or wealth for
public or religious benefit. Here are key contributions with specific historical examples:

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 (a) Education: Waqf was pivotal in funding educational institutions. Notable examples include
the Al-Qarawiyyin University in Morocco (founded in 859 CE) and the Nizamiyya Madrasas
in the 11th century, supported by Waqf to provide free education, scholarships, and
maintenance of scholars.
(b) Healthcare: Waqf funded hospitals and medical services, such as the Bimaristan of
Damascus (built in 706 CE by Caliph Al-Walid I) and the Mansuri Hospital in Cairo
(established in 1284 CE by Sultan Qalawun), offered free treatment to all, regardless of
background.
(c) Infrastructure and Public Services: Waqf supported the construction and maintenance of
mosques, wells, and markets. For example, the Süleymaniye Mosque Complex in Istanbul
(16th century) included schools, a hospital, and a soup kitchen, all sustained through waqf.
(d) Social Welfare: Waqf provided for the poor, widows, and orphans through food
distribution, housing, and stipends. Soup kitchens like the Imaret of Haseki Hurrem Sultan
in Jerusalem fed thousands daily during the Ottoman era.
(e) Economic Development: By investing in agricultural lands, shops, and caravanserais, Waqf
stimulated economic activity. For instance, the waqf of Imam Razi in Central Asia managed
farmlands and markets to sustain his madrasa.

Through these contributions, waqf shaped the social fabric of Islamic societies, ensuring the
sustainability of essential services and fostering community well-being.

3. Global practices of modern adaptation of the Waqf

Modern adaptation of the Waqf model requires innovative approaches to maximize its socio-
economic impact while adhering to Shariah principles and rules. Islamic social finance has
emerged as a viable mechanism to address socio-economic challenges in line with the principles
of Shariah.

The modern adaptation of Waqf in Islamic social finance reflects its revival as a key tool for
poverty alleviation, sustainable development, and financial inclusion. Globally, Waqf has been
integrated with contemporary economic systems to address modern challenges. Below are some
examples and adaptations:

(a) Sustainable Development Goals (SDGs): Waqf is aligned with the United Nations’ SDGs,
addressing poverty, education, clean water, and economic growth. The Islamic
Development Bank (IsDB) promotes Waqf as a tool to finance SDG-focused projects, such
as building schools and providing clean water in African countries.

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(b) Healthcare and Education Initiatives: Waqf has been revitalized to fund hospitals, clinics,
and schools in both developing and developed countries.
 Turkey: The Turkey Diyanet Foundation manages Waqf assets to support schools,
universities, and scholarships globally.
 Saudi Arabia: The King Abdullah Waqf Project finances medical research and healthcare
facilities.
(c) Waqf-based Crowdfunding Platforms: Digital platforms enable individuals worldwide to
contribute to waqf projects. Examples include:
 GlobalSadaqah (Malaysia): A Waqf-driven crowdfunding platform that funds projects
like healthcare, education, and disaster relief.
 Awqaf SA (South Africa): Uses technology to pool small donations into larger Waqf
endowments, financing social and economic programs.
(d) Digital Asset Management: Blockchain and fintech solutions are being used to ensure
transparency and efficient management of waqf properties.
 Indonesia: The National Zakat Agency (BAZNAS) is exploring blockchain-based Waqf
systems to track funds and optimize their use.
 Dubai: Introduced the Global Waqf Digital Platform to attract international donors and
manage waqf projects.
(e) Cash Waqf: Instead of fixed property, cash waqf allows individuals to endow money, which
is invested, and returns are used for social purposes. For example:
 Bangladesh: The Social Investment Bank Limited (SIBL) developed a Cash Waqf
Certificate where individuals contribute cash Waqf for ongoing charitable projects.
 Malaysia: The Waqf An-Nur Corporation utilizes cash Waqf to build hospitals and
provide subsidized medical care.
(f) Integration with Islamic Microfinance: Modern Waqf companies combine endowments
with microfinance to support small businesses and entrepreneurs in underprivileged
communities. For example:
 Malaysia: The Selangor Waqf Corporation collaborates with Islamic banks to offer
microfinance backed by Waqf assets for economic empowerment.
 Indonesia: Dompet Dhuafa, a prominent organization, uses Waqf to provide interest-
free loans and seed capital to small-scale entrepreneurs.
(g) Corporate Waqf: Large corporations have started incorporating Waqf as part of their
corporate social responsibility (CSR) programs. For instance, Johor Corporation (Malaysia)
pioneered the concept of Corporate Waqf, where company profits are allocated to Waqf
funds for social development.

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Through these adaptations, Waqf is becoming a global instrument for social finance, harnessing
traditional Islamic principles to address modern socio-economic issues effectively.

4. Concept of Waqf in Pakistan

The concept of waqf in Pakistan has evolved significantly since the country’s independence in
1947, adapting to social, legal, and economic changes. Pakistan inherited the Waqf framework
from British India, where waqf was governed by Islamic traditions but regulated under colonial
laws such as the Waqf Validating Act of 1913. Early Waqf institutions were mostly private,
focused on mosques, shrines, and madrasas, with minimal state involvement. The West Pakistan
Waqf Properties Ordinance (1959) centralized the management of waqf properties under state-
appointed administrators, particularly those related to religious shrines and mosques, to prevent
misuse and ensure proper administration. With the 18th Amendment (2010), Waqf became a
provincial subject. Each province now manages Waqf properties through Waqf boards (e.g.,
Punjab Waqf Board). The present legal framework for Waqf in Pakistan includes the following:

(a) The Islamabad Capital Territory Waqf Properties Act, 2020

(b) The Punjab Waqf Properties Ordinance, 1979
(c) The Sind Waqf Properties Ordinance, 1979
(d) The Khyber Pakhtunkhwa Waqf Properties Ordinance, 1979
(e) The Balochistan Waqf Properties Ordinance, 1979
(f) The Mussalman Waqf Validating Act, 1913

It appears from the perusal of the above laws that they focus on physical properties used for
religious, pious or charitable purposes; properties allotted in lieu or exchange of waqf property
left in India; property acquired from proceeds of waqf property; income from boxes placed at
shrines or offerings; properties dedicated to mosques, Takaia, Khankah, Dargah or shrines, etc.
The Mussalman Waqf Validating Act, 1913, covers properties of family Waqf only. Therefore,
these laws appear to fall short of providing an enabling framework for Waqf companies or Waqf
in corporate structures.

Prominent examples of Waqf companies in Pakistan include Hamdard Waqf Laboratories,

established by Hakim Saeed in 1948. Initially, it was an herbal medicine company; it was
converted into a waqf in 1953, and now all profits are used for public welfare. This Waqf
supported the creation of Hamdard University and healthcare systems through free Tibb clinics
across the country. Sindh Madrasa-tul-Islam was originally a Waqf established to provide
education; it became a university. Minhaj-ul-Quran Waqf is a modern Waqf supporting
education, interfaith harmony, and religious research. It runs schools, colleges, and Minhaj
University.

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These Auqaf demonstrate how traditional Islamic endowments have been modernized in
Pakistan to address contemporary needs, from healthcare and education to cultural preservation
and poverty alleviation. In Pakistan, the management and administration of Waqf properties are
primarily governed by various legislative frameworks at both federal and provincial levels. These
laws aim to ensure the proper supervision, administration, and utilization of Waqf assets for
religious, pious, or charitable purposes.

 Family Waqf: The Muslim Family Laws Ordinance, 1961, includes provisions on family
waqf (e.g., waqf-alal-aulad) to regulate endowments for family members. Family Waqf
are also governed under “the Mussalman Wakf Validating Act, 1913”.
 Provincial Management of Waqf: Auqaf Departments in Punjab, Sindh, Khyber
Pakhtunkhwa, and Balochistan manage shrines, mosques, educational institutions, and
other waqf assets. Provincial Waqf property laws, e.g., Punjab Waqf Properties
Ordinance, 1979, and Islamabad Capital Territory Waqf Properties Act, 2020, were
updated in 2020 due to AML-related issues. However, the framework provided in these
laws is primarily for the management of Waqf properties (shrines, others). Under these
laws, a BPS-19 officer from district administration acts as “chief administrator”.

In Pakistan, a significant number of Waqf assets exist, ranging from land and buildings to financial
endowments. However, these assets are often underutilized due to inefficient management, lack
of proper governance, and inadequate legal frameworks.

5. Waqf for Islamic social finance

The Waqf model, a traditional Islamic endowment system, offers huge potential for socio-
economic development in Pakistan. Waqf is a vital tool in Islamic social finance, characterized by
its unique features and potential to address social and economic challenges in line with Shariah
principles. Islamic social finance represents a faith-based mechanism aimed at addressing socio-
economic inequalities through redistributive and mutual cooperation models.

Waqf combines Shariah compliance, social impact, and financial sustainability, making it an
effective tool for addressing modern socio-economic challenges. By integrating traditional
principles with innovative financial models, Waqf can play a crucial role in Islamic social finance.
Further, with the development of Islamic commercial finance in the form of Islamic financial
institutions, Islamic financial products and services, and Islamic markets, there is now a need to
integrate this concept into the overall Islamic finance ecosystem so as to ensure that with the
development of the Islamic financial system, the benefits are reached by the masses.

The initiatives for social impact financing can also integrate with the concept of Waqf. Social
impact financing generally refers to innovative financial strategies and investment models aimed

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at addressing societal challenges while generating measurable positive social outcomes and, in
some cases, financial returns. The Waqf holds significant potential for driving social impact
financing in Pakistan. By leveraging its assets and aligning with modern financial practices, Waqf
can address pressing societal challenges such as poverty, education, healthcare, and
infrastructure development.

6. Proposals for reinvigorating the Waqf

In view of the foregoing, to unlock the potential of Waqf and provide for a proper framework for
Islamic social finance, this concept paper proposes a three-pronged approach, i.e., (a) to
introduce an enabling legal and regulatory framework; (b) to support the establishment of Waqf
as regulated persons; and (c) to develop Islamic instruments and financial services products. The
details of each of the above dimensions are provided in the below sections:

(a) Proposal to introduce an enabling legal and regulatory framework for Waqf
The present legal framework is scattered and unsuitable for Waqf in corporate structures due
to limitations in its scope and operational structure. Therefore, the proposal advocates for
the introduction of the concept of “Waqf companies” under Section 42 of the Companies Act,
2017 of Pakistan. Currently, the management and utilization of Waqf assets face significant
challenges, including governance inefficiencies, mismanagement, and lack of transparency.
This proposal recommends establishing Waqf companies under Section 42, which will address
these issues, promote accountability, and enhance the impact of Waqf assets.

(i) Rationale:
The practice of Waqf in Pakistan is deeply rooted in Islamic traditions, contributing to a wide
array of charitable causes. However, due to insufficient regulation and oversight, many
Waqf assets remain underutilized, and there is a lack of clarity in their governance. Further,
the present legal frameworks neither provide for corporate-styled regulated Waqf nor are
considered suitable due to AML-related concerns and other governance issues.

However, section 42 of the Companies Act, 2017, already provides a legal framework for
establishing "not-for-profit" companies, which are allowed to operate in a transparent and
accountable manner. Few of such registered companies are already operating as licensed
NBFCs to provide micro-finance services.

There also exists a similar practice in Malaysian jurisdiction where the Companies Act 2016
of Malaysia provides the legal foundation for Waqf companies, particularly through the
structure of Companies Limited by Guarantee (CLG). Many Waqf-based organizations in
Malaysia are registered as CLGs, ensuring that assets and profits are reinvested into the
Waqf’s charitable objectives.

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Therefore, this concept paper proposes to introduce the concept of Waqf companies,
combining the advantages of a formal corporate structure with the philanthropic goals of
Waqf.

(ii) Objective:
The primary objectives of introducing Waqf companies under Section 42 of the Companies
Act, 2017, are:
 To enable Waqf to operate with a clear legal structure, thus enabling it to connect
better with the formal financial sectors for mobilizing financial resources and
managing the Waqf assets.
 To ensure transparency, accountability, and proper management of Waqf assets,
enhancing the confidence of stakeholders and attracting more donations and
investments.
 To establish a framework that enhances the long-term sustainability and impact of
Waqf initiatives in Pakistan.
 To provide regulatory oversight for Waqf companies, ensuring that affairs are
conducted in a proper manner and funds are utilized effectively for the identified
charitable purposes.

(iii) Proposed Structure of Waqf Companies:

Under the Section 42 framework, Waqf companies would be established as not-for-profit
entities, managed by a board of trustees or directors with a mandate to ensure that assets
are used strictly for charitable purposes. To provide enabling provisions, the Associations
with Charitable and Not for Profit Objects Regulations, 2018, may be suitably amended to
cover the following key features of Waqf companies:
 Legal Entity: The Waqf Company would be a distinct legal entity, providing a clear
structure for ownership, governance, and accountability. The regulations may provide
recognition and registration of Waqf companies.
 Governance: A board of trustees or directors, selected based on merit and experience
in managing Waqf assets, would oversee the operations of the Waqf Company. The
composition of the board should be diverse, with expertise in finance, law, social
work, and relevant sectors.
 Transparency and Reporting: Waqf companies would be required to submit annual
reports, financial statements, and audits to the relevant government bodies. These
reports would be made publicly available to ensure transparency.

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  Capitalization: Waqf assets could be capitalized through donations, investments, and
endowments. The Waqf Company would operate in a manner that generates
sustainable income from the capital while preserving the core assets.
 Regulatory Oversight: The SECP would have the authority to regulate and monitor
Waqf companies, ensuring compliance with the Companies Act, 2017, and the
principles of Waqf.

(iv) Expected outcome:

It is expected that the Waqf companies may provide enhanced accountability,
sustainability, professional management, and increased public trust. Their corporate
structure ensures transparent and accountable management of assets, generating income
through investments and endowments. The formalization of Waqf companies attracts
funds and investors, while clear governance structures and reporting requirements
enhance public trust in Waqf companies.

We are cognizant of the fact that some traditional Waqf institutions may resist adopting a
corporate structure, but this can be addressed given the voluntary nature of Waqf
companies and through awareness campaigns and demonstrating accountability.
Additionally, the successful introduction of the concept of Waqf Companies requires
expertise in Islamic law and corporate governance, which can be addressed by recruiting
skilled professionals and providing ongoing training.

In conclusion, we believe that introducing Waqf companies under Section 42 of the

Companies Act, 2017, represents an innovative approach to modernizing the management
of Waqf assets in Pakistan. By formalizing the governance and management of Waqf
companies, this proposal has the potential to increase the impact, sustainability, and
transparency of charitable initiatives across the country. The establishment of Waqf
companies will contribute to the broader goals of social welfare, poverty alleviation, and
the overall well-being of society. This proposal calls for the necessary legal amendments,
regulatory frameworks, and stakeholder collaboration to bring this vision to fruition.

(b) Proposals for the establishment of regulated Waqf companies

This proposal seeks the promulgation of a licensing framework for Waqf companies with the
regulatory domain of the SECP. A Waqf company engaged in Islamic financial services may be
allowed to operate as a regulated person in the following areas:

(i) Islamic microfinance licensed as a non-banking microfinance company (NBMFC)

It is proposed to allow Waqf companies to be licensed by the SECP as non-banking
microfinance companies (NBMFCs). Waqf, as a charitable concept, involves the allocation

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of assets for public welfare. By licensing Waqf companies as NBMFCs, these institutions can
expand their financial inclusion efforts, provide microfinancing for low-income
communities, and enhance their impact. This initiative aims to empower Waqf companies
with the legal and financial tools necessary to support poverty alleviation,
entrepreneurship, and social welfare while adhering to Islamic principles.

The licensed NBMFCs have proven to be a successful model for supporting underserved
populations with small loans, promoting economic self-sufficiency, and reducing poverty.
The SECP, under its regulatory framework for Non-Banking Microfinance Companies
(NBMFCs), licenses institutions that provide microfinance services, including Qard-e-
Hassan, financing, savings, and protection, if coupled with micro-takaful, to low-income
individuals or communities.

This proposal seeks to leverage the existing regulatory infrastructure for NBMFCs to allow
Waqf companies to operate under the same framework. By licensing Waqf companies as
NBMFCs, these entities will be able to extend their charitable objectives to include financial
services that foster entrepreneurship and economic empowerment in line with their Waqf-
based social missions.

Suitable amendments are to be made to the NBFC Regulations to enable licensing of Waqf
Companies and enable them to offer microfinance services to underserved and
economically disadvantaged populations in Pakistan. Waqf companies are aligned with
Islamic finance principles; therefore, they will be instrumental in promoting responsible
financing and entrepreneurship. Key features of the proposed regulatory enablement
include the following:
 Simplified licensing process with minimal operational requirements, such as capital
adequacy, governance standards, and risk management protocols.
 The requirements to ensure that Waqf companies are regulated, audited, and
compliant with the SECP’s framework for NBMFCs and Shariah governance.
 The focus of Waqf NBMFCs should be on providing small-scale financing, savings
products, and other financial services aimed at improving the economic conditions of
low-income communities, particularly in rural areas.
 Financial products can be tailored to meet the needs of the target populations, including
interest-free loans (Qard Hasan) and other Shariah-compliant offerings that align with
Islamic finance principles.

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 Waqf companies, as NBMFCs, are expected to generate revenue through the provision
of financial services, which can be reinvested to support the broader philanthropic goals
of the Waqf.
 The earnings from microfinance operations will be used to support the identified
objectives, including educational, health, and social welfare initiatives, thus ensuring
the dual impact of financial inclusion and social development.
 Licensed Waqf companies may be required to submit periodic reports to SECP, including
financial statements, impact assessments, SIP ratings, and compliance audits. This will
ensure ongoing oversight and accountability.

Licensing Waqf companies as NBFCs offers several benefits. It will enhance financial
inclusion by providing access to credit, savings, and financial literacy to underserved
populations. It aligns with Islamic finance principles, ensuring interest-free or ethical
financing models. Waqf companies can generate sustainable income for charitable projects,
reducing dependence on donations. Microfinance services help alleviate poverty and
promote economic empowerment, enabling low-income individuals and small businesses
to access capital for entrepreneurial activities. Additionally, licensing ensures regulatory
oversight and transparency, enhancing transparency and accountability in operations.

Licensing Waqf companies as NBMFCs by SECP may create a unique opportunity to

modernize and expand the impact of Waqf institutions in Pakistan. By combining the social
mission of Waqf with the financial services sector, this initiative can create a powerful tool
for socio-economic development in Pakistan.

(ii) Waqf asset management as an asset management company (AMC)

It is proposed that through regulatory amendments, Waqf companies be licensed and
allowed to operate as asset management companies (AMCs) with a limited and specialized
scope. This is to allow Waqf companies to professionally manage their assets, ensuring
sustainability and growth of resources dedicated to charitable causes. By leveraging the
expertise of AMCs and adopting best practices in investment and asset management, Waqf
companies can maximize the utilization of their assets, contribute to economic
development, and expand their social welfare initiatives.

Waqf is a philanthropic system that involves dedicating assets for charitable purposes.
These assets include financial assets like shares, Sukuk, mutual funds and other financial
instruments. However, the traditional Waqf have not been able to manage financial assets
optimally, resulting in underutilization and inefficiencies.

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AMCs in Pakistan are regulated entities under SECP that manage pooled funds and
investments on behalf of their clients. Allowing Waqf companies to operate as AMCs would
enable them to professionally manage their assets, making use of modern investment
strategies to generate returns that can be reinvested into charitable initiatives. This
approach would increase the financial sustainability of Waqf companies, enabling them to
scale their impact and reach.

The objective here is to create an enabling environment where Waqf companies can
improve their asset management, ensuring efficient and sustainable resource use,
generating higher returns on Waqf assets, aligning with modern investment practices, and
ensuring regulatory compliance and transparency under SECP's regulatory framework.

The proposed regulatory amendments are required to enable Waqf companies to apply to
SECP for licensing as specialized AMCs, providing them with the legal framework to manage
pooled assets, funds, and investments. Waqf AMCs are to be governed by a board of
directors with expertise in finance, investment, governance, and Islamic law, overseeing
asset management strategies. They may appoint professional asset managers to handle
day-to-day investment operations, utilizing diversified portfolios including shares, Sukuk,
mutual funds and other approved financial instruments. Waqf AMCs will prioritize
investments aligned with their social mission, such as funding education, healthcare, and
poverty alleviation projects. They may also be required to submit periodic financial reports
and annual audits to SECP to ensure transparency, accountability, and compliance with
regulatory standards.

The benefits of Waqf AMCs include sustainability and growth of Waqf assets, enhanced
governance and transparency, increased funding for charitable purposes, Islamic finance
compliance, and broader financial inclusion.

(iii) Waqf companies as manager of takaful pools

This proposal recommends enabling Waqf companies to manage Takaful funds, i.e., pools
of policyholder funds for licensed Takaful operators in Pakistan. As an integral part of
Islamic finance, Takaful relies on Waqf structures to establish and manage risk-sharing pools
based on mutual assistance and cooperation. Empowering Waqf companies to act as
specialized fund managers for Takaful operators will strengthen the operational efficiency,
governance, and transparency of Takaful funds. This initiative will enhance public
confidence in Takaful while promoting compliance with Shariah principles and enabling
Waqf companies to contribute to Pakistan’s Islamic finance sector.

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 In Pakistan, Takaful operators are licensed and regulated by the SECP under the Takaful
Rules, 2012. A key component of Takaful operations is the Waqf fund, which acts as the
pool of contributions used to cover participant claims and expenses.

Currently, Takaful operators are responsible for managing Waqf funds, but this dual role of
managing both operations and funds can create inefficiencies and potential conflicts of
interest. Delegating the management of Waqf funds to specialized Waqf companies will
enhance transparency, improve fund governance, and allow Takaful operators to focus on
their core functions of underwriting and risk assessment.

This proposal aligns with the broader objectives of promoting Islamic finance and
strengthening the operational framework for Takaful in Pakistan. The proposal aims to
improve operational efficiency and transparency for Takaful operators. This will enhance
compliance with Shariah principles and promote the growth of Takaful in Pakistan. Waqf
companies will apply for a specialized license from SECP, acting as independent fund
managers. They will oversee the investment and disbursement of Waqf funds, adhering to
Shariah principles and SECP regulations. A Shariah supervisory board or a Shariah advisor,
will be mandatory for Waqf companies managing Takaful funds. Waqf companies will
develop and implement Shariah-compliant investment strategies, focusing on permissible
instruments like Sukuk, Islamic equities, and real estate. They will earn a pre-agreed
management fee from Takaful operators, aligning with Shariah principles. Regular reports
and audits will ensure compliance with regulatory and Sharia requirements.

We believe that by leveraging the expertise of Waqf companies, this initiative will
strengthen the Takaful industry, build public confidence, and ensure compliance with Sharia
principles.

(c) Proposal to allow Waqf companies to act as a manager of corporate CSR funds
This proposal recommends enabling Waqf companies to manage Corporate Social
Responsibility (CSR) funds of other companies. By leveraging the governance structures and
philanthropic focus of Waqf companies, listed and large companies can channel their CSR
resources into impactful and sustainable social welfare projects. This arrangement will
combine the strategic use of CSR funds with the Waqf model's inherent transparency,
accountability, and focus on public welfare, ensuring better alignment with societal
development goals. CSR has become an important component for many companies, as it
encourages businesses to contribute to social development in areas such as education,
healthcare, poverty alleviation, and environmental sustainability. However, many such
companies face challenges in identifying, implementing, and monitoring CSR initiatives
effectively.

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Waqf companies, which are structured to manage charitable assets and funds, are well-suited
to serve as stewards of CSR resources. These entities are designed to support long-term
welfare projects while ensuring compliance with Shariah principles and maintaining financial
and operational transparency. Allowing Waqf companies to manage CSR funds would create
a symbiotic relationship where listed and large companies benefit from the expertise and
infrastructure of Waqf companies, while the latter gain access to consistent funding streams
for social impact projects.

This concept can be introduced by amending the Corporate Social Responsibility Voluntary
Guidelines 2013 and creating a framework for Waqf companies to manage CSR funds. The
aim here is to create a structured mechanism for companies to utilize their CSR funds,
ensuring efficiency and accountability. The framework may include establishing dedicated
CSR management committees and providing transparency and accountability through
independent audits and annual reports. Waqf companies will focus on social development
projects, environmental sustainability, and Islamic finance solutions, such as Qard Hasan and
interest-free microfinance.

The benefits of allowing Waqf companies to manage CSR funds include enhanced efficiency
and expertise, increased transparency and accountability, alignment with corporate values,
promotion of Shariah-compliant practices, and scalability and sustainability. Waqf companies
will provide a trusted platform for corporations seeking Islamic finance-aligned CSR solutions,
allowing them to create sustainable projects with long-term impact, such as endowments for
education or healthcare facilities. By partnering with Waqf companies, listed and large
companies can align their CSR initiatives with their mission, vision, and societal goals.

(d) Proposal to allow Waqf companies to operate as social impact financial institutions
The federal government or any provincial government may establish social impact financial
institutions (SIFIs) in the form of a Waqf company. Operating under the government's
oversight, an SIFI can leverage the Waqf model to mobilize, manage, and deploy funds for
sustainable development goals (SDGs). By combining Islamic philanthropy with modern
financial tools, Waqf-based SIFIs can provide innovative and Shariah-compliant solutions, in
line with Article 38(f) of the constitution, for education, healthcare, poverty alleviation, and
environmental sustainability.

In modern contexts, integrating Waqf principles into structured financial institutions can help
Pakistan address resource mobilization challenges for social impact initiatives. These
institutions are dedicated to channelling funds toward socially beneficial projects while
ensuring financial sustainability. Waqf companies, as SIFIs, can serve as effective vehicles for

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public and private sector collaboration in achieving socio-economic objectives, especially in
underprivileged communities. The establishment of Waqf-based SIFIs aligns with the
Government of Pakistan's vision for economic inclusion, poverty alleviation, and sustainable
development.

The proposal aims to enable mobilization of philanthropic resources, promote social impact
investments, ensure Shariah-compliant financing in line with the objectives of the
constitutions, foster public-private collaboration, and promote financial inclusion. Waqf
companies will be regulated by the SECP, paving the way to allow them through relevant
regulations for offering financial solutions such as Islamic microfinance, issuing social impact
Sukuk, creating education and healthcare endowments, and even establishing Waqf venture
capital. A board of trustees can oversee each SIFI, with annual financial reports and impact
assessments mandatory. External audits can verify compliance with Shariah principles and
operational effectiveness. Partnerships and collaborations may include the government
allocating matching funds or grants to support Waqf SIFI initiatives in priority sectors,
encouraging corporations to contribute CSR funds or partner with SIFIs for joint projects, and
attracting funding from global development agencies and Islamic finance organizations.
Benefits of Waqf companies as SIFIs include sustainable resource mobilization, increased
trust and participation, scalable impact, enhanced governance, and achievement of SDGs
through focused investments in education, healthcare, and environmental sustainability.

(e) Proposals to develop Islamic instruments and financial services products for Waqf
companies
Waqf companies can introduce products that promote trust, create sustainable social
development projects, provide diversified revenue streams, and address Pakistan's socio-
economic challenges. These products uphold Islamic values and principles, ensuring financial
stability and playing a pivotal role in Pakistan's socio-economic development. Waqf
companies can offer a range of Shariah-compliant financial and social products, focusing on
Islamic principles and maximizing their impact on social welfare. Below is a list of such
products categorized by their objectives:

(i) Fundraising and capital generation products:

 Waqf Certificates: A waqf company can issue Waqf certificates, which is a form of
investment where individuals or institutions contribute to a specific Waqf fund. Funds can
be used for pre-defined charitable or social development purposes. Contributors are
rewarded spiritually without financial returns, as per Waqf principles. These certificates
may or may not be transferable or redeemable.
 Sukuk al-Waqf (Waqf Sukuk): A Waqf company may issue, listed or privately placed, Waqf
Sukuk to raise funds for projects such as building schools, hospitals, or housing. The Sukuk

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 certificate may carry zero or lower returns, and income generated by the assets acquired
by Waqf Company can support the Waqf purpose.
 Islamic Crowdfunding for social finance: A Waqf company may mobilize funds through
Islamic crowdfunding to collect sadaqah (voluntary charity), zakat (mandatory charity),
and other donations. The collected funds are managed transparently to ensure alignment
with Islamic principles and values.

(ii) Investment products for sustainable growth:

 Ijarah (Lease Financing): Waqf properties or assets can be leased to generate income,
which is reinvested into charitable projects. This structure ensures sustainable financial
growth while preserving the Waqf asset.
 Istisna (Construction Financing): Waqf company may use funds to construct
infrastructure such as schools or housing, with a focus on public benefit. Income from
these projects can be reinvested for additional social impact.
 Murabaha (Cost-Plus Financing): This structure can be used by Waqf companies to
finance goods and commodity purchases by the customers. This can also be used for
financing community development projects or income-generating ventures.
 Musharakah (Partnership Investments): Waqf companies can become partners with
other entities to invest in profitable, ethical ventures. This can be achieved by the
acquisition of shares of such companies and investing in Musharakah Sukuk. Profits
received can be reinvested into Waqf’s social programs.
 Modaraba (Investment Management): Waqf companies act as fund managers, investing
pooled funds in Shariah-compliant ventures. Returns generated may support Waqf's
charitable objectives.

(iii) Social and development-orientated products:

 Qard Hasan (Benevolent Loans): Waqf companies may provide interest-free loans to
individuals or small businesses to support entrepreneurship, education, or emergencies.
The customer’s repayment can create a revolving fund for further extension of such loans.
 Takaful (Islamic Insurance): Waqf companies can establish Takaful funds to provide
Shariah-compliant insurance for low-income individuals.

(iv) Innovative products for modern needs:

 Renewable energy Waqf projects: Waqf companies may have separate funds for
investments in solar or wind energy projects to support underserved communities
sustainably.
 Waqf Venture Capital: Waqf companies may make investments in start-ups addressing
social challenges, such as fintech for financial inclusion or edtech for education.

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 (v) Corporate-specific products:
 CSR Fund Management: Waqf companies may manage CSR funds from listed and large
companies to align them with impactful social projects.
 Waqf-based sukuk for companies: Waqf companies may offer Shariah-compliant
investment vehicles to companies, allowing them to fund social projects through Waqf
companies.

7. Challenges and considerations

The key challenge in introducing the proposed concept would be the jurisdiction and legal
considerations. While the jurisdiction for traditional waqf clearly lies with the provincial
authorities, the jurisdiction for waqf companies formed under the Companies Act, 2017, may or
may not transgress the said authority. In order to address this challenge, the following options
can be considered:
(a) The existing provincial laws be suitably amended to introduce the concept of corporate
Waqf and a dedicated framework be provided for administration, governance,
operations, taxation, supervision, and reporting by such corporate Waqf; or
(b) An enabling provision be introduced in the Companies Act, 2017, for the registration of
Waqf as a company subject to administration, governance, operations, supervision,
taxation, and reporting by such Waqf companies, as per the provisions applicable to
companies; or
(c) An amendment be introduced to the Association With Charitable and Not for Profit
Objects Regulations, 2018, to enable registration of Waqf companies under section 42 of
the Companies Act, 2017, subject to conditions applicable for such registered companies;
or
(d) A combination of the above options.

8. Ways forward
These proposals are a compilation of initial ideas for reinvigorating the institution of Waqf in
Pakistan. The objective of this concept paper is to seek stakeholders’ comments and feedback to
further refine the concepts before initiating the envisaged regulatory interventions. In order to
take the matter forward, this concept paper has been made public to seek stakeholders’ feedback
and comments. Roundtable consultation sessions can be held with the stakeholders who choose
to provide comments and feedback on this concept paper.

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