Waqf & Zakat
Solidarity-based financing for sustainable
development
06/06/2014
IDB Vision 1440 H
“A Vision for Human Dignity"
IDB has been innovative and
successful in utilising the
institutions of Zakat, Awqaf and
Sadaqat to alleviate poverty, but
their potential has not been fully
tapped
The Bank should help develop
these institutions further as key
instruments for not only poverty
alleviation and reducing income
gaps, but also to fight disease,
promote health and spur
development
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Waqf-Basic Concept
«إذا مات ابن آدم انقطع عمله إال من
أو، أو علم ينتفع به، صدقة جارية:ثالث
رواه مسلم،»ولد صالح يدعو له
“Whence a child of Adam
dies, his/her deeds come to
an end, except for three
things:
• a running charity
• or knowledge which gives
benefit
• or a righteous child who
prays for him/her
(narated by Muslim)
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What is Waqf?
Waqf is a Voluntary donation: a
running charity
Waqf literally means tying up of usufruct
an asset (Real estate, cash,
etc…) for some specific sharia
compliant objective in such a
way that :
• the Asl (أصلPrinciple) remains
intact
• and only its Re’a ريع
(usufruct) is spent on the
named objectives Principle
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Waqf Typology
Real estate based Cash/commodity based
Rental of Waqf Investment of the waqf
Usufruct
properties and principle and
disbursement of the disbursement of
proceeds. proceeds
Waqf assets producing Direct lending of the
Principle
goods and service Waqf principle (to the
(Farms, fountains needy- student – seeds
bridges, public utilities to farmers- cash to )
etc…)
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Awqaf from the Atlantic to the Pacific
First Waqf established in the
early days of Islam included:
Mosques - Farms- Wells, etc.,
From the Atlantic to the Pacific,
many different kinds of waqf
were created:
• Public utilities, education and
research, health care, etc.
• Property, cash, grains for
seeds, etc.
This great Variety sets Awqaf
apart from other forms of
endowment (Roman endowed
chairs, etc..)
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Great variety of innovative Causes
Interest free
Social
loans
Debt relief
Hospitals,
Health/Environmental
Guesthouses Veterinary
for passing hospitals
strangers
Shelter for Universities,
Educational
Replace Stray animals. student hostels
Broken Utensils , libraries
(housemaids) “Medical
caravans” or Orphans/poor Roads,
Infrastructure
Distribution of mobile clinics students Bridges,
Dessert, Fish vacation home Railway
… Special Need
Feeding the Hijaz Railroad
Bread basket Chanting to
entertain mule of Sheikh Public Utilities
Bailing out sleepless Al-Azhar
prisoners Etc…
patients
Marriage loans, Guesthouses
Lending (Khan-caravan
Jewelry sarays)
Shelter for
Angry
housewives
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Great variety of innovative Causes
Dar Deqqa: Shelter for angry/abused
housewives in the city of Marrakesh, Morocco-
offers counseling and mediation between
husband and wife…
Replacements of broken utensils (to avoid
punishment)
A special Waqf was setup to provide Shaikh Al-
Azhar with a vehicle (mule), fuel and
maintenance (Feed and care)
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Waqf as a Solution to the Economic Crisis?
One of the most urgent economic
problems facing the U.S. is the
deplorable state of the country's
roads, bridges, railway…
The wealthy should consider a
new target for their philanthropy:
public works.….
There is a Precedent: Ottoman -
era Turkey lacked a budget for
the provision of basic services.
To fill the void, more than 35,000
private foundations, known
as vakif in Turkish, funded public-
works projects and municipal
services, from water systems and
schools to hospitals, bridges and
roads.
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Current Estimates of Waqf Assets worldwide
• In some Muslim countries awqaf reached
1/3rd or more of cultivable land.
• Due to different reasons, awqaf have
degenerated —both as a concept and in real
terms
• It is Difficult to estimate for current size of
Awqaf Assets
• Current Estimates range from USD 100
billion to 1 trillion.
• Awqaf Are experiencing major revival
nowadays
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Waqf in IDB
ISFD
WWF IDB Waqf
IDB
Waqf
APIF Activities in
IRTI
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The IDB Waqf
(Special Account Resources Waqf Fund)
IDB’s Waqf Supports the
following causes:
• Special Assistance
– Health & Education for
Muslim communities in non-
MCs
– Relief operations in the
event of natural disasters
– Scholarship programs
• Technical cooperation
programs and technical
assistance to MCs
• The Islamic Research and
Training Institute
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Awqaf Properties Investment Fund
• APIF aims to provide • PICTURES FROM
financial resources to APIF
develop Awqaf properties
to maximize their
revenues to contribute to
the social and economic
development
• Finance new projects /
expansion / renovation of
Awqaf projects:
Housing / Commercial
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The World Waqf Foundation
• WWF aims to promote Waqf
through effective partnership R&D,
between Philanthropists, NGOs Disbursement Advisory
and the Public Sector, to
contribute to development
projects and programs Good
Governance
• WWF’s aims to add value and
fill the gaps in the Waqf Value Investment
Resource
Mobilization
Chain
The Waqf Value Chain
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The Islamic Solidarity Fund for Development
• ISFD aims to • PICTURES FROM
– reduce poverty ISFD
– build the productive
capacities of member
countries,
– reduce illiteracy
– eradicate diseases and
epidemics, particularly
Malaria, Tuberculosis
(TB) and HIV/AIDS
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Zakah Basic Concepts
• Zakah is the third pillar
of Islam
• Zakah is “a due right on
specific items of
assets/properties, in
specific percentages
with consideration of
the passage of a year
(hawl) and the
satisfaction of nisab”
• A religious obligation
on all adult men/women
who fulfill the conditions
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8 categories
Poor Needy
sympathizers
zakah collection Freeing the
with islamic
Employees captives
causes
In the cause of Wayfarers
Allah (General
Indebted (Children of the
Community
services) street)
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Zakah and Poverty
Zakah is an instrument of poverty alleviation
Early history indicates zakah was effective in
solving the problems of poverty
Zakah could not be distributed
Rationale of using zakah
Unique faith-based institution
Still unutilized for poverty alleviation
Has potentials to mobilize additional untapped
resources for poverty alleviation
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Zakah During Contemporary Times
• Impact of zakah on poverty would depend on the size of
zakah collections and the kind of disbursements
• Contemporary zakah institutions appear to be weak and
ineffective in collection and distribution.
• Zakah collection less than potential
– Potential estimates—3% of GDP
– Actual estimates—0.15% of GDP
• If we take OIC Member countries only 6 trillion GDP
– Actual Estimate: USD 10 billion p.a.
– Potential Estimate: USD 200 billion p.a.
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Impact of Zakah on Poverty
• Disbursement of Funds
– Zakah used for consumption– smaller and
temporary impact
– Zakah used for investment (human, physical,
and financial capital)–stronger and permanent
impact
– Integrate zakat with microfinance
– Zakat for social safety nets
The potential of zakah collection and
utilization for effective poverty alleviation
remain untapped
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New Projects: Awqaf Capital (ACAP)
World Waqf Fdn.
Community
Health
Education
بيوت الخبرة املتخصصة في
Food مجال الوقف
Trade Dev.
Sufficiency
Specialized funds to support
.. … various social causes
Invest. Returns
ACAP
23 (A Cash-Waqf Investment Firm - Under Registration in Bahrain)
New Projects: Waqf for Development
(W4D)
• W4D approach aims at injecting
Waqf Principle -not the returns-
into the “bottom of the pyramid” Mega
(i.e. investing Waqf assets into Projects
socially responsible projects/ L&SMEs/
Doing business with the poor) Formal
Sector
• An asset class in which social
impact, economic Empowerment Low Income/
are sought beyond solely the Bottom of the Pyramid
monetary returns
(W4D)
• Through careful due diligence,
and intelligent PPPP (Public
/Private /Philanthropic Investing Waqf Principle at
/Partnership) risks can be the bottom of the pyramid
mitigated and objectives achieved Patient Capital
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The Way Forward
• How can we work
together?
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