Waqf in Islamic Economics and Finance

Waqf is emerging globally as a distinctive institution, serving as a vital

bridge between societal and economic needs, and resource allocation. Waqfs
functioning in some parts of the world, of a variety of assets such as cash,
stocks, securities, intellectual property rights, and other financial instruments
by individual, institutional, and corporate wāqifs, are paving the way for
financial and social inclusion. This book explains how the system of awqāf
leads to welfare in society by facilitating financial and social intermediation.
It describes waqf in accessible terms, focusing on how it helps people,
communities, and nations, and how it can help make societies equitable,
peaceful, efficient, and more prosperous. It comprises eight key themes,
including a brief overview of the historical role of waqf in various periods
in Muslim societies in socioeconomic sectors; the evolutionary aspects of
waqf as an institution; the role of waqf in promoting entrepreneurship; the
role of awqāf system in an economy by facilitating financial and social inter-
mediation; potential options for using waqf as financial intermediation; an
overview of the management and regulation of waqf entities; the organiza-
tional and legal framework for the institution of waqf; and key findings and
recommendations for realizing the capacity of waqf in the pursuit of socio-
economic welfare. Specifically, the book takes Pakistan as a case study.
This research-​ oriented book is tailored to readers interested in
understanding the fundamental concepts of Islamic finance and social wel-
fare, without requiring a background in the discipline. It caters to academics,
researchers, policymakers, and those keen on exploring the transformative
potential of waqf to achieve societal welfare and shared economic growth.

Muhammad Ayub is Professor of Islamic Economics and Finance, Riphah

Center of Islamic Business, Riphah International University, Islamabad,
Pakistan.

Khurram Khan is Professor of Management and Finance at the Faculty of

Management Sciences, Riphah International University, Islamabad, Pakistan.

Muhammad Ismail is Assistant Professor of Finance and Islamic Finance,

Iqra National University, Peshawar, Pakistan.
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Waqf in Islamic Economics and Finance

An Instrument for Socioeconomic Welfare
Muhammad Ayub, Khurram Khan and Muhammad Ismail

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Waqf in Islamic Economics and
Finance
An Instrument for Socioeconomic
Welfare

Muhammad Ayub, Khurram Khan, and

Muhammad Ismail
First published 2025
by Routledge
4 Park Square, Milton Park, Abingdon, Oxon OX14 4RN
and by Routledge
605 Third Avenue, New York, NY 10158
Routledge is an imprint of the Taylor & Francis Group, an informa business
© 2025 Muhammad Ayub, Khurram Khan, and Muhammad Ismail
The right of Muhammad Ayub, Khurram Khan, and Muhammad Ismail to be identified
as authors of this work has been asserted in accordance with sections 77 and 78 of the
Copyright, Designs and Patents Act 1988.
All rights reserved. No part of this book may be reprinted or reproduced or utilised
in any form or by any electronic, mechanical, or other means, now known or
hereafter invented, including photocopying and recording, or in any information
storage or retrieval system, without permission in writing from the publishers.
Trademark notice: Product or corporate names may be trademarks or registered trademarks,
and are used only for identification and explanation without intent to infringe.
British Library Cataloguing-​in-​Publication Data
A catalogue record for this book is available from the British Library
ISBN: 978-​1-​032-​76205-​0 (hbk)
ISBN: 978-​1-​032-​76206-​7 (pbk)
ISBN: 978-​1-​003-​47754-​9 (ebk)
DOI: 10.4324/​9781003477549
Typeset in Sabon
by Newgen Publishing UK
Contents

Foreword by Omar Mustafa Ansari ix

Preface xiii
Acknowledgments xviii
List of Figures xxi
List of Tables xxii
List of Boxes xxiii
Acronyms xxiv

Introduction and Historical Perspective of Waqf

1  1
1.1 Introduction 1
1.2 Objectives of the Book 2
1.3 Problem Statement 3
1.3.1 Macro Issues Facing Pakistan’s Economy as a Case 4
1.3.2 Potentials in Pakistan’s Economy 4
1.3.3 Uniqueness of Waqf as a Welfare Institution 6
1.4 Significance of the Research for the Book 8
1.5 Spending as an Inspiring Part of Belief in the Islamic Paradigm 10
1.5.1 Maqāṣid al Sharī’ah and Their Relevance with Awqāf 12
1.6 The Concept of Waqf and Its Historical Role 12
1.6.1 Waqf in Historical Perspective 15
1.7 Waqf Laws in British India and Countries Like Pakistan 19
1.8 Scheme of the Book 20
1.9 Summary and Conclusion 22

Evolution of Waqf as an Institution for Socioeconomic Growth

2  24
2.1 Introduction 24
2.2 The “Theory of Institutions” and Assessment of Waqf as an
Institution 25
2.2.1 The Institutional Characteristics of Waqf 27
2.2.2 Waqf and Trust 30
vi Contents

2.3 Evolution of Waqf in Terms of Activities Covered and Impact 31

2.3.1 Nationalization of Awqāf 34
2.3.2 Continued Functioning of Awqāf 35
2.4 Taking Waqf to Micro Level 36
2.5 Categories of Waqf Based on the Purpose or the Beneficiaries 37
2.6 Sustainability of Waqfs 38
2.7 The Expected Impact of Waqf and Charitable Foundations 40
2.8 Waqf and the UN’s SDGs 2030 41
2.9 Waqf Institution in Pakistan 42
2.10 Summary and Conclusion 43

Promoting Entrepreneurship through the System of Awqāf

3  46
3.1 Introduction 46
3.2 Entrepreneurship in Historical and Wider Perspective 48
3.2.1 Determinants or Success Factors for Entrepreneurship 48
3.3 Role of Entrepreneurship in Socioeconomic Development 50
3.4 Entrepreneurship and Waqf Linkage 52
3.4.1 Waqf for Entrepreneurship in Historical Perspective 53
3.5 Possible Modes of Entrepreneurial Finance from the Waqf
Funds 57
3.5.1 The Financing Contracts and Rates Charged by Waqfs
from the Entrepreneurs 60
3.6 Summary and Conclusion 63

Waqf for Accelerating Socioeconomic Development

4  67
4.1 Introduction 67
4.2 The Concept and Facets of Socioeconomic Development 68
4.2.1 Waqf Foundations versus Companies: Role in
Development 71
4.2.2 Awqāf-​Related Business Associations and Economic
Development 73
4.3 Islamic Perspective of Market Economy and Waqf 73
4.3.1 Consumer and Firm Behavior and the Role of Waqf 74
4.3.2 Potential for Charity Making and Donations for Common
Welfare 76
4.3.3 Cash Awqāf for Common Welfare 78
4.4 Waqf for Socioeconomic Development in Islamic Cooperative
Perspective 78
4.4.1 Economic Role of Awqāf 79
4.4.2 Waqf and Community Development 80
4.4.3 Waqf, Maqāsid al Sharī’ah, and the SDGs 84
4.5 Need for Waqf-​Based Socioeconomic System in Economies Like
That of Pakistan 86
4.6 Summary and Conclusion 88
 Contents vii

Waqf-​Based Financial Intermediation, Fintech, and

5 
Crowdfunding for Realizing the Potential of Islamic Social Finance 90
5.1 Introduction 90
5.2 Financial Intermediation for Social Inclusion 91
5.2.1 Cash Waqf Enhancing the Potential of Waqf as a Financial
Intermediary 91
5.2.2 Sustainability of Cash Waqf 93
5.2.3 Institutions for Financial Intermediation 94
5.2.4 Waqf and Recent Finance-​Related Moves for Welfare 96
5.3 Cash Waqf and Modern Banking 96
5.3.1 The Source and Uses of Funds in Waqf-​Based Banking 97
5.3.2 Ottoman Cash Waqf-​Based Microfinance 101
5.3.3 Al Khair Ṣukūk 103
5.3.4 The Idea of a Separate Waqf-​Based Capital Market 104
5.4 Waqf-​Based Development and Public Sector Financing 105
5.4.1 Easing the Issue of the Budgetary Deficit through Waqf 105
5.4.2 Waqf-​Based Islamic Fund Management 106
5.5 Waqf and Fintech 107
5.5.1 Fintech Sector in Pakistan 109
5.6 Summary and Conclusion 110

Management and Governance of Awqāf as Social Finance

6 
Institutions 113
6.1 Introduction 113
6.2 Framework of Waqf Management and Governance 114
6.2.1 Governance of Awqāf vis-​à-​vis the Corporate
Governance 116
6.2.2 Concept of Holistic Accountability in Awqāf 118
6.2.3 Accountability of Nāzir (Mutawalli or Manager) 119
6.2.4 Need for Standardized Waqf Management Rules 122
6.3 Management of Awqāf in Some Jurisdictions 124
6.3.1 Management of Cash Waqfs in Ottoman Caliphate 125
6.3.2 Waqf Management in Muslim India 126
6.3.3 Management of Waqf in Malaysia and Indonesia 127
6.3.4 Management of Awqāf in Kuwait 128
6.4 General Regulatory Framework of Waqf Management 129
6.4.1 Waqf Board and Its Duties –​Strategies of Waqf Board 130
6.5 Core Principle of Waqf 132
6.5.1 Principles for Optimal Waqf Management as per the
IWG-​2018 132
6.6 Summary and Conclusion 135
viii Contents

Waqf-​Based Legal and Organizational Frameworks

7  138
7.1 Introduction 138
7.2 Forms of Waqfs and Their Establishment 139
7.2.1 Rules Regarding Waqf Management 141
7.2.2 Waqf (under Islamic Law) and a Trust (under Common
Law) 141
7.3 Existing Waqf Laws and Status in Pakistan 144
7.3.1 State Control over Awqāf in Pakistan 146
7.3.2 Islamabad Capital Territory Waqf Properties Act, 2020 148
7.3.3 Rules Relating to Charities and Awqāf 149
7.4 Waqf Law and Rule in Selected Islamic Countries 151
7.4.1 Legal Framework of Waqf Entities in Malaysia 152
7.4.2 Waqf Law and Regulation in Indonesia 155
7.5 Proposed Framework for Waqf Law for Pakistan (as a Case Study) 158
7.5.1 Providing Constitutional Provision for Revival of Awqāf 159
7.5.2 Legal and Organizational Framework for Waqf 160
7.5.3 Organizational Framework 160
7.6 Summary and Conclusion 162

Summary Recommendations for Realizing the Potential of Waqf

8 
for Shared Growth and Sustainable Socioeconomic Development 165
8.1 Introduction 165
8.2 Promoting Charity at the Micro Level and Making Charity Giving
Hassle-​Free 168
8.2.1 Using Fintech for Waqf-​Based Donations and Financing the
Micro Businesses 169
8.3 Promoting Waqfs –​A Vital Requirement for Economies Like
That of Pakistan 170
8.3.1 Categories of Waqfs 171
8.3.2 Sources and Use of Waqf Funds 171
8.4 Waqf for Various Socioeconomic and Cultural Functions 172
8.4.1 Waqf for Education and Human Capacity Building 173
8.5 Awqāf as Financial Intermediaries –​Promoting
Entrepreneurship 174
8.5.1 Developing a Cash Waqf Financing Model 175
8.6 Waqf as an Institution of Public Policy 176
8.7 Management and Regulation of Waqfs 177
8.7.1 Integrating Zakāh and Waqf for Rural and Urban Support
Programs 178
8.8 Recommendations and Concluding Remarks 179
8.8.1 Contribution of This Research 182

Bibliography 184
Index 206
Foreword

Waqf is considered one of the most important components of Islamic social

finance architecture with its increasing scope, fulfilling the basic needs of
society, and acting as sustainable investment entity for socioeconomic devel-
opment. It is a unique institution within the Islamic economy for intergroup
resource sharing that caters to both short-​and long-​term needs of those who
need support in consumption, production, businesses, or job opportunities in
Micro, Small, and Medium Enterprise (MSME) sectors as well as large-​scale
industries.
Waqf is increasingly being seen as a socioeconomic financial inter-
mediary tool for the welfare of society. It played a crucial role in the
Ottoman era, Mughal India, and the Malay region. It served as an institu-
tion for the equitable distribution of wealth in society to support produc-
tion, businesses, education, capacity building, and rehabilitation from any
calamities.
Waqf is emerging globally as a distinctive institution, serving as a vital
bridge between societal and economic needs. It can be an effective tool for
Islamic financial institutions to realize the objectives of Islamic ethical and
social finance. Islamic social finance, including waqf, fintech, and digital
economy, could be termed as the Key Economic Growth Activities (KEGA)
for those countries that are facing the challenges of increasing debt burden,
fiscal and balance of payment deficits, and the widening gap between the
poor and the rich, including the OIC member countries.
The concept of cash waqf resolved many problems enabling the institution
to play a multifaceted role in the socioeconomic growth of economies and
societies. It turned the waqf into a kind of socioeconomic financial inter-
mediary through which smaller amounts of charities were channeled into
many subsystems of socioeconomic welfare in education, healthcare, hospi-
tality, and other sectors.
Linking the globally emerging concept of corporate social responsibility
(CSR) to waqf institutions could also be instrumental in the endeavor for
the welfare of the public. The funds allocated by the corporate bodies,
x Foreword

particularly by the banking and finance companies, may relate CSR funds to
the waqf-​based community development programs.
The potential of waqf in the 21st century has been recognized globally as
a social-​sector institution that can be used to realize socioeconomic object-
ives. Islamic banks and finance institutions (IBFIs) can play their role in this
perspective. It will also promote shared prosperity by promoting financial
and social inclusion, concepts that are not only central to the teachings of
the divine law but also part of CSR and Sustainable Development Goals
(SDGs).
It may be worth mentioning that Accounting and Auditing Organization
for Islamic Financial Institutions (AAOIFI) has issued the revised Sharī´ah
Standard No. 60 on waqf, Financial Reporting by waqf institutions (FAS 37),
and waqf governance standard (GS 13). FAS 37 elucidates different types of
waqfs, along with the addition of concepts such as the “Statement of Service
Performance” and the “Ghallah Statement” (for charity box). The standard
also requires reporting on the impact that a waqf has created, utilization of
ghallah, statement of changes in waqf equity, and disclosures in the statement
of ghallah, among others. Further, the robust governance of waqf cannot be
overemphasized which is important for the sustainability and integrity of
waqf system, and to achieve its objectives.
The International Working Group on Waqf which represented experts from
the Islamic Development Bank Institute (formerly IRTI), Bank Indonesia, and
many waqfs operating in various parts of the world suggested in 2018 the
29 Waqf Core Principles (WCPs) for optimal waqf management. Applying
AAOIFI’s standards and the WCPs would maximize the benefits to human
societies inclusively and enhance public confidence in the waqf system. The
authors have referred to all these sources for the contemporary application
of waqf.
Waqfs are also functioning presently in some parts of the world in the
form of cash, stocks, securities, intellectual property, and other financial
instruments by individuals and institutions (corporate wāqifs). Over the
last few decades, it played a contributory role in enhancing sustainability
in terms of environmental hazards and bridging infrastructural deficits. The
awqāf system must therefore be promoted to create waqfs for socioeconomic
purposes, by individuals, banks, NBFCs, and other entities in public or pri-
vate sectors.
The book delves deeper into the historical origins of waqf, explaining its
role in various cultures in Islamic history. Based on the historical role, the
book provides insights into the contemporary application of the waqf system
and offers a clear, and practical approach with a global perspective. This
approach makes it a valuable resource for the readers.
The book comprises eight chapters on key aspects of waqf and its role
in socioeconomic welfare in modern societies. The themes discussed and
 Foreword xi

analyzed in the book include (i) an overview of the historical role of waqf
and its evolution as an institution, (ii) waqf for promoting entrepreneurship
by facilitating financial and social intermediation, (iii) management and regu-
lation of waqf entities, and (iv) the organizational and legal frameworks for
the institution of waqf.
The book also includes different practices of waqf operations from histor-
ical perspectives and deliberations with waqf experts from Türkiye, Malaysia,
Indonesia, and Pakistan. It thus reflects the global wisdom of contemporary
jurists, researchers, and Islamic finance professionals. Further, the role of
fintech and digitalization has also been discussed which can play an enabling
role in mobilizing and spending waqf funds.
As mentioned by the former Governor of Bank Negara Malaysia, H.E.
Ms. Shamsiah Mohd Yunus in her address at the GIFF 2018, the Islamic
finance industry must embody and exemplify the value of ihsān, continu-
ously striving for the attainment of excellence. It implies attaining effi-
ciency with equity while implementing the “Adl and Ihsān” equation as
discussed in detail in the AAOIFI’s Code of Ethics for the Islamic Finance
Professionals. It requires “value-​based growth” that is balanced, progres-
sive, sustainable, and inclusive. The potential of waqf has to be realized in
this context.
Banking and nonbanking finance players need to create value-​ based
products to achieve efficiency with equity. In this way, they will help their
respective governments and societies achieve goals set out under the United
Nations (UN) SDGs.
Social inclusion, as discussed in the book, would require financing to
underserved segments of society and entrepreneurs. Islamic banks and
investors should realize that returns on investments should not be measured
solely by financial yardstick but also by the social impact they create. Besides,
as part of the CSR, IBFIs are encouraged to use social institutions like zakāt
and waqf increasingly.
The book is a valuable contribution of the Riphah Center of Islamic
Business (RCIB) toward providing analytical research material and helping
strengthen curricula on the Islamic socioeconomic system of faculties of
universities and business schools. It is recommended that the philosophy,
approach, and principles of Islamic finance which are distinct from that
of conventional finance be made compulsory subjects for bachelors-​level
students of social sciences and business faculties in universities and business
schools.
The book will be useful for researchers, policymakers, and other
stakeholders keen on exploring the transformative potential of waqf as a
means to achieve societal welfare and shared economic growth. It is also cru-
cial in providing theoretical, operational, managerial, regulatory, and legal
guidance for developing the waqf system anywhere in the world, particularly
xii Foreword

in the OIC member countries. It is a welcome addition to the literature on

waqf and its role in the past, the present, and the future. Authored by an
accomplished scholar Dr. Muhammad Ayub and the co-​authors, I sincerely
hope that this book will be insightful.
Omar Mustafa Ansari
Secretary-​General
Accounting and Auditing Organization for Islamic Financial Institutions
(AAOIFI)
Fellow Member of the Institute of Chartered Accountants of
Pakistan (ICAP)
Preface

Commercial capitalism and mercantilism emerging from Europe and

spreading to the whole world in the 19th and 20th centuries led to the accu-
mulation of capital and wealth in certain groups and persons. Islamic finance
was institutionalized in the second half of the 20th century in many OIC
member states to resolve the problem of increasingly inequitable income
distribution due to exploitation tools of ribā and gharar and the resultant
financialization. It also evolved in other countries and was adopted by mega-​
conventional financial institutions as a business proposition. Practically, of
course, it has failed, at least so far, in realizing the objective of equity and
justice mainly because it pursued the paradigm of conventional finance and
ignored the objectives and tools of Islamic social finance.
Banking and nonbanking finance players need to introduce value-​based
products to achieve efficiency with equity and reach sustainability goals.
In this way, they will be helping the respective governments to achieve the
conditions and to avoid the carbon tax that could be levied in the future
in the case of noncompliance. The achievement so far is unsatisfactory as
the latest UN Global Sustainable Development Report, 2023, gives a stark
warning –​at the halfway point to 2030, the world is not on track to achieve
the SDGs.
Waqf being the most effective institution in the beyond-​market segment of
the Islamic economy can be an effective tool for Islamic financial institutions
in realizing the objectives of Islamic economics and social finance. It is a
unique institution for intergroup resource sharing to take care of both short-​
and long-​term needs of those in the society who might need support for their
instant consumption requirements, or production and business process/​job
opportunities. Particularly the cash waqf played its role, as a ribā-​free system,
particularly in Ottoman Europe to meet the basic needs of the society. It ful-
filled the financial needs of priority sectors of economy like that of farmers,
craftsmen, entrepreneurs, producers, and merchants through Islamic contracts
and practices. It, thus, worked as a financial intermediary in socioeconomic
sectors as a tool for the general welfare. It could be the most effective tool
for poverty alleviation and sustainability for the present-​day economies with
xiv Preface

Muslim populations that are facing the challenges of increasing debt burden,
trade and budgetary deficits, and an increasingly widening gap between the
poor and the rich.
While the institution of waqf is being revived in some parts of the world
to play its historic role in socioeconomic development, little work has been
done in Islamic countries like Pakistan, to revive/​promote waqfs for real-
izing the social and economic objectives. Among the challenges being faced in
developing the awqāf system, one serious challenge is the lack of awareness
and proper knowledge about the scope and potential of waqf in social and
economic fields not only among the public but also among the academia and
researchers. The policymakers, state functionaries, and common people think
of waqf as limited to masjid, madrasah, and mazārāt (shrines). Although the
regulators, some financial market players, and researchers have been talking
about financial inclusion, no one has thought of an effective model of finan-
cial inclusion leading to social inclusion with the crucial role of waqf.
Keeping in view the need for research, the authors submitted a research
proposal to the Higher Education Commission (HEC), Pakistan for a
detailed study about the potential role of waqf for socioeconomic welfare
and shared growth in Pakistan, which was approved. The research on the
project culminated in a comprehensive report covering all conceptual, oper-
ational, organizational, and legal aspects for evolving the system of awqāf to
play its multifaceted role in the welfare of any Muslim society, and particu-
larly the people of Pakistan. This book is based on that report while general-
izing the findings and recommendations for promoting the system of awqāf
in Islamic countries today.
Waqf as an institution of social welfare preceded the modern institution
of “trust”. The West learned about waqf as charitable endowments during
the Crusades. The 20th-​century “welfare states” popularized this trend of
waqf-​like institutions in their quest to mitigate the impact of the capital-
istic economy that increasingly widened the gap between the poor and the
rich. Accordingly, many charitable trusts are running universities and other
educational institutions. Hence, while the West adopted “trust” in their per-
spective, nonprofit organizations (NPOs), trusts, charities, and other philan-
thropies emerged also in the Islamic world, while ignoring the sanctity and
role of the waqf system.
Since the beginning of the 21st century, of course, the potential of waqf
has been increasingly recognized as an institution that can be used to realize
social and economic objectives. Many types of waqfs are being created of
fixed and liquid assets such as cash, stocks, securities, intellectual property
rights, and other financial instruments by individual, institutional, and cor-
porate wāqifs. Initiatives taken over the last decade have made waqf studies
more relevant for resolving socioeconomic problems like poverty, hunger,
lack of education, and health and civic facilities in Muslim societies. At the
policymaking level, waqf is becoming a contributory tool for bridging infra-
structural deficits in developing economies.
 Preface xv

The conceptual, operational, managerial, regulatory, and legal frameworks

for awqāf have been suggested in the book based on the interpretative and
qualitative research methods. The report for the HEC was prepared by docu-
ment analysis and the information gathered through interviews, focus group
discussions, and observations of the experts. Primary data was gathered from
around 60 experts belonging to charity or NPOs, welfare organizations,
companies’ personnel involved in CSR activities, officials of awqāf, and the
researchers on the potential and role of waqf. The perceptions, perspectives,
and understandings of the research participants have been analyzed to derive
various frameworks required for the revival of awqāf in present-​day Islamic
societies. For the purpose of brevity, however, the details about the method-
ology of this research have not been included in the book.
Based on the discussions and content analysis, a format for waqf law has
been suggested enabling/​requiring different institutions to establish awqāf to
which the well-​to-​do at the micro level may also contribute to social causes.
The funds allocated by the corporate bodies, particularly, by the banking and
finance companies, oil and gas companies, etc. may relate CSR funds to the
waqf-​based community development programs.
This book comprises eight chapters that discuss all conceptual as well as
operational and supervisory aspects of the institution of waqf for playing an
effective role in the socioeconomic development of Islamic societies. Chapter 1
gives a brief overview of the historical role of waqf in various periods in
Muslim societies. It also discusses the importance of infāq or spending for the
benefit of others. It also analyzes the available material on waqf to suggest
frameworks for the operation of waqf institutions.
Chapter 2 discusses the evolutionary stages of waqf as an institution for
the longer-​term benefit of the poor and the needy. Immovable properties such
as land, fields, farms, or buildings such as mosques, schools, hospitals, or
basic infrastructures such as bridges, roads, water supply, etc. were the form
of waqf in early Islamic history. But later, other movable, financial, and intan-
gible assets were included to facilitate cash and liquid assets endowments.
The concept of cash waqf led to a micro-​level formalized philanthropy system
enabling awqāf to play a multifaceted role in the socioeconomic growth of
economies and societies. It turned the waqf into a kind of social finance inter-
mediary through which smaller amounts of charities were channeled into
many subsystems of socioeconomic activities in education, healthcare, hospi-
tality, and other infrastructural sectors.
The role of waqf in promoting entrepreneurship is discussed in Chapter 3.
Entrepreneurship for micro-​production units and businesses is the growth
engine in any market economy and the best tool for broad-​based and shared
growth by integrating the interests of all stakeholders in any society. The
chapter explains how entrepreneurship can be promoted in Islamic coun-
tries and the Muslim community by adopting a nonaccumulative paradigm
for a formal but discretional system of wealth sharing and thus realizing the
objective of financial and social inclusion.
xvi Preface

Chapter 4 is the crux of the whole study that elaborates on how the awqāf
system may lead to welfare in society by facilitating financial and social inter-
mediation. It compares the capitalistic paradigm with the Islamic perspec-
tive of market economy where the institution of waqf would be functioning
for sharing the wealth by the affluent with those who might not get needed
resources due to any incapacity or market functioning. It deliberates on
various facets of socioeconomic development, the role of consumer behavior
in shaping the social sector in the economy, and the potential and role of
donations and charity making for instant and long-​term requirements for the
community’s welfare. It discusses the role of waqf in poverty alleviation, edu-
cation, and health sectors, and the realization of maqāsid al sharī’ah in the
context of UNDP’s SDGs 2030.
Chapter 5 discusses the opportunities for intermediation including cash
waqf, waqf-​takaful, waqf sukuk/​al khair sukuk, al khair bank accounts, qarḍ
hassan, waqf for financing infrastructure projects and public finance, and use
of fintech for waqf-​related collections and financing. By involving the com-
munity at micro levels, financial institutions can provide affordable finance
and address the banes of inequity and injustice being meted out currently. It
also suggests the ways of sustainability of philanthropic activities through
various social venture management schemes.
Chapter 6 provides a detailed background and scheme for the manage­
ment of waqf entities, and their supervision and regulation. Good governance
is a success factor for waqfs where the waqf board, mutawalli, administrator,
and the board of trustees share many of the responsibilities. The chapter also
suggests the regulatory framework of waqf organizations.
The organizational and legal frameworks for the institution of waqf have
been discussed in Chapter 7. The interviews and deliberations with waqf
experts from Pakistan, Türkiye, Malaysia, and Indonesia have enabled the
authors to suggest related frameworks. The laws, provisions of law, court
monitoring, and conflict resolution in the operations of waqf institutions
have been elaborated.
Chapter 8 is on findings and recommendations on realizing the potential of
waqf for welfare. It suggests a framework to provide education, health, and
other civic amenities for the public in general and the poor, small farmers,
small traders, and home-​ based businesses, in particular. It also includes
establishing vocational training centers for capacity building of human
resources in the lower income groups in society. It is to enhance entrepre-
neurship and provide opportunities for self-​employment. In this way, it will
contribute toward the upward social mobility of the beneficiaries.
The inability of the state institutions to provide necessary civic, health,
and education facilities to the public is causing serious harm to the balance
of society that could be devastating in the long run to all groups including
the rich. The book highlights that the development of awqāf on the emerging
trends for broad-​based social and economic development would lessen the
burden on the government which is facing huge budgetary and trade deficits.
 Preface xvii

Greed, extravagance, and pride in one’s richness in societies with a capitalistic

mindset need to be replaced with the welfare of all human beings through
cooperation, benevolence, and sacrifice for others. All these features con-
stitute the cornerstone of Islam’s socioeconomic system and social finance.
Therefore, waqf-​related laws and rules must not only make philanthropy
easy but also involve all members of society by way of wealth sharing for
financial and social inclusion.
The primary readers of this book could be the researchers, graduate
and postgraduate students in Islamic economics and finance, Islamic social
finance, public finance, development economics, fintech, and crowdfunding.
Similarly, the book also provides valuable material for development
agencies, NGOs, and financial institutions and offers detailed guidelines for
policymakers for poverty alleviation. For policymakers, it offers a more com-
prehensive and practical approach, encompassing historical, contemporary,
legal, operational, managerial, and socioeconomic dimensions.
Finally, this research-​oriented book is tailored for readers interested in
knowing about waqf as the prime institution of Islamic finance for social wel-
fare, without requiring a background in the discipline. It caters to academics,
researchers, policymakers, and general readers keen on exploring the trans-
formative potential of waqf to achieve societal welfare and shared economic
growth.
Muhammad Ayub
Professor, Islamic Economics and Finance
Riphah Centre of Islamic Business (RCIB)
Riphah International University
Islamabad
Acknowledgments

All Praise to ALLAH, the most merciful and most gracious, “The Master of
the Day of Judgment”. His infinite munificence enabled us to accomplish this
task despite our limitations.
Credit for this book goes primarily to the Higher Education Commission
(HEC), Pakistan, which accepted our research proposal and approved the
grant for the research on the potential role of waqf for socioeconomic devel-
opment in Pakistan. At our level, it would not have been possible to involve
many specialists in waqf from different parts of the world, particularly
Türkiye, Malaysia, Indonesia, and many areas in Pakistan. The research pro-
ject enabled us to explore the historical and innovative role of waqf from
the related organizational and legal frameworks of waqf operating in other
countries, published reports of many waqfs, and material published in aca-
demic journals and books. I take this opportunity, on our behalf and on
behalf of the Chancellor, Vice Chancellor, and the Management of Riphah
International University, to pay gratitude to the HEC for granting the research
project to Riphah under its flagship research initiative –​National Research
Program for Universities (NRPU).
Credit for the successful completion of this study also goes to our aca-
demic and sectoral collaborators. While renowned academic institutions
including the Centre of Excellence in Islamic Finance (CEIF) Institute of
Business Administration (IBA) and Malaysia-​based International Sharī’ah
Research Academy for Islamic Finance (ISRA) provided us with wide-​
ranging academic support, the Securities and Exchange Commission of
Pakistan (SECP) helped us in getting extremely useful information about
the legal and organizational framework of waqf system to be evolved.
I pay rich gratitude to Datuk Prof. Dr. Mohamad Akram Laldin, Executive
Director of ISRA, Malaysia, for facilitating us in getting research material
on waqf from Malaysia and Indonesia. Dr. Irum Saba, Associate Professor
at IBA (SBS and CEIF) Karachi facilitated in conducting the focus group
meeting (FGM) at IBA with many waqf specialists and researchers from
Karachi.
 Acknowledgments xix

Mr. Bilal Rasul, Executive Director/​Secretary to the SECP/​Policy Board,

and Mr. Tariq Naseem, Head of the Islamic Finance Department of the SECP
deserve our special gratitude for providing insights regarding the possible
legal and organizational framework of waqf in Pakistan. Mr. Tariq Naseem
also added much value by participating in the final FGM held in Islamabad
to discuss the draft of the research report. It would not have been possible to
complete the study without their support. We record our deep appreciation
to SECP officials.
For the completion of this qualitative research project, many senior
researchers, economists, heads of trusts/​NPOs, social welfare practitioners,
philanthropy specialists, banking and finance regulators, and Sharīʿah
scholars provided us with extremely useful information about the histor-
ical and potential role of waqf. It helped us to get insights on conceptual,
legal, organizational, and operational aspects helpful in suggesting a model
for promoting awqāf to play an effective role in socioeconomic develop-
ment in Pakistan or other Muslim societies. Many specialists from Malaysia,
Indonesia, and Pakistan added value by participating in the FGMs. We are
deeply obliged to all of them.
From a historical perspective, Türkiye is a country having a long his-
tory of successfully operating welfare awqāf. We visited Istanbul, Ankara,
and Konya to study the legal and operational frameworks, and fund man-
agement of awqāf while ensuring sustainability and good governance.
Research participants from Türkiye included Dr. Necmettin Kızılkaya,
Dr. Necdet Sensoy, Dr. Kadir Yaman, General Secretary of MAVERA,
Dr. Mehmet Koca, Mutavelli, “Karzi Hasen Vakfi”, Dr. Yusuf Bilgin
of IHH Humanitarian Relief Foundation, Dr. Ozan Marasli of Zam
University Istanbul, Dr. Cem Korkut of Turkish Academy of Sciences, and
Waqf “Ankara Centre for Thought and Research”, Dr. Kamola Bayram,
Dr. Huseyn, and Mr. Sinan of Karatay Universitesi, Konya; and director of
Regional Foundation Directorate of awqāf at Konya. We feel humbled and
deeply obliged to all of them for their warm hospitality and the diverse infor-
mation they shared about waqf and its historic role. We are also grateful
to Mr. Hassan Muhammad Khan, Chancellor of Riphah International
University, Islamabad, for taking a personal interest in the research project
and funding our visit to Türkiye.
Within Riphah International University, we record our appreciation to
Prof. Dr. Khurram Shahzad, Dean, FMS, Riphah; Dr. Rahila Yasmeen, Dean/​
Director, ORIC and RARE; Mr. Muhammad Irfan, Manager, ORIC; and
officials of the Finance Department for their support in smooth execution of
the project. We are also indebted to Dr. Zeshan Ghafoor, Mr. Irfan Mazari
of the Graduate Research Office of FMS, and other colleagues at FMS and
RCIB who extended us support when needed for any task relating to the
project.
xx Acknowledgments

Finally, we are obliged to the reviewers of the manuscript for publication

in the form of a book. We also record our deep appreciation to Prof. Dr. Ishaq
Bhatti, Series Editor for Routledge, Ms. Cristina, Editorial Assistant, and
others for their facilitation and support in the publication of the book.
Muhammad Ayub
Riphah Centre of Islamic Business (RCIB)
Riphah International University
Islamabad
Figures

Waqf –​Islamic Microfinance and Project Financing Model

2.1 
for Poverty Alleviation 29
Waqf –​Immovable Properties and Cash –​Categories and
2.2 
Functions 39
3.1 
Success Factors for Entrepreneurship 49
Waqf-​Entrepreneurship Linkage Model
3.2  59
Possible Use of Cash Waqf’s Profits
3.3  61
4.1 
Broader-​Level Composition of an Islamic Economy 70
4.2 
Socioeconomic Development in Islamic Perspective 71
4.3 
Socializing Charity Giving in an Islamic Society 77
Cash Waqf Fund Donation Form
5.1  98
Cash Waqf Deposit Account by SME Development
5.2 
Corporation (SMEDC) 100
Operations of Cash Waqf by Banks and Financial Institutions
5.3  102
Five Factors of Waqf Management
6.1  114
The Management and Governance Framework of Waqf
6.2 
Institutions 115
General Regulatory Framework for Waqf Management and
6.3 
Supervision 129
The Factors of Waqf Management
7.1  142
Awqāf Structure to Be Covered in the Legal Framework
7.2  158
Suggested Organizational Framework for Waqf System in
7.3 
Pakistan 161
Structure of Waqf Ṣukūk Operation
8.1  177
Tables

6.1 
Key Characteristics of Accountability Mechanisms 120
Major Areas of Waqf Core Principles
6.2  133
Law, Court Monitoring, and Oversight of Waqf in Selected
7.1 
Countries 156
8.1 
Theoretical Framework of Charity Giving in Islamic
Perspective 169
Boxes

The Basic Principles of Infāq fi sabil Allah

4.1  75
Major Conditions for Waqf Formation
6.1  122
Basic Information Contained in an 18th-​Century Waqf Register 123
6.2 
Acronyms

Acronym Definition

ABA Al Khair Bank Accounts

AGM Annual General Meeting (of Companies)
AH After Hijrah
AMCs Asset Management Companies
APIF (of Awqāf Properties Investment Fund
IsDB, Jeddah)
BISP Benazir Income Support Program (Pakistan)
CCI Council of Common Interest (Pakistan)
CEIF-​IBA Centre for Excellence in Islamic Finance at Institute of
Business Administration Karachi
CII Council of Islamic Ideology
CIV Collective Investment Vehicle
CSR Corporate Social Responsibility
CWCs Cash Waqf Certificates
DC Discipline Committee
EAD Economic Affairs Division (Pakistan)
EFP Entrepreneurial Factors of Production
ESG Environment, Social values and Governance
FC Finance Committee [of the Waqf Board]
FGM Focus Group Meeting
FPCCI Federation of Pakistan’s Chambers of Commerce and
Industry
FSC Federal Sharī’ah Court
GDP Gross Domestic Product
HFP Hired Factors of Production
HLIs Higher Learning Institutions
IBFIs Islamic Banks and Financial Institutions
ICIS Islamic Collective Investment Schemes
IFS Infāq fi Sabeel Allah
 Acronyms xxv

Acronym Definition

IFSB Islamic Financial Services Board (KL, Malaysia)

IIFA International Islamic Fiqh Academy
IIFC International Islamic Fiqh Academy [of the OIC, at
Jeddah]
IPR Intellectual Property Rights
ISRA International Sharī’ah Research Academy for Islamic
Finance (KL, Malaysia)
IWB Indonesian Waqf Board
IWD Indonesian Waqf Deposits
IWG International Working Group
IWSD International Waqf for Sustainable Development
KEGA Key Economic Growth Activities
KiTS Karachi Internet Trading System
LOFW Legal and Organizational Framework for Waqf
MAINS Islamic Religious Council of Negeri Sembilan
MFF Microfinance Foundation
MMEs Micro and Medium Enterprises
NBFIs Nonbanking Financial Institutions
NPO Nonprofit Organizations
NRSP National Rural Support Program
OECD The Organisation for Economic Co-​operation and
Development
OGDC Oil and Gas Development Corporation, Pakistan
PAF Pakistan Audit Foundation
PBA Pakistan Banks Association
PCI Per Capita Income
PCP Pakistan Centre for Philanthropy
PIPO Pakistan Institute of Public Opinion
PPAF Pakistan Poverty Alleviation Fund
PPC Pakistan Peace Collective
PWB Provincial Waqf Boards
PWTF Pakistan Waqf Takaful Foundation
RAA Radiyallahu Anhum (Salutation to the Companions of
Prophet, PBUH)
REITs Real Estate Investment Trusts
SAP Social Action Program
SBP State Bank of Pakistan (the Central Bank)
SDGs Sustainable Development Goals
SECP Securities and Exchange Commission Pakistan
SESRIC Statistical, Economic, and Social Research and Training
Centre for Islamic Countries
SIBL Social Investment Bank Limited
newgenprepdf

xxvi Acronyms

Acronym Definition

SMEDC Small and Medium Enterprises Development

Corporation
SMEs Small and Medium Enterprises
SPDC Social Policy and Development Centre
SRI Socially Responsible Investment
SRP Social Responsibility Protocol
TOR Terms of Reference
TREC Trading Right Entitlement Certificate
UNDP United Nations Development Program
UNICEF United Nations International Children’s Emergency Fund
VBI Value-​Based Intermediation
VC Venture Capital (entities)
WBP Waqf Board Pakistan
WCO (Iran) Waqf and Charity Organisation
WCP Waqf Core Principles
WDF Waqf Development Foundation
1 Introduction and Historical
Perspective of Waqf

1.1 Introduction
Human beings are the most sublime masterpieces of the universe created by
Allah Tā’la. The whole universe is obedient to His commands and protocols
(Qur’an, 13:2; 41:11) that constitute the “Natural Law” to be observed by
all His creatures. Man,1 as vicegerent to Allah, is authorized to employ all
resources of the universe while remaining within the laws of nature (rules
prescribed by the Creator of the universe). As all human beings, their future
generations, and other creatures on the planet have an equal right to benefit
from the resources endowed by nature, man has been required to remain
within the discipline suggested as the divine guidelines.
Man is designed to live in a society and, therefore, the rules applicable to
it for the peaceful coexistence of all human beings pertain to virtue and ben-
evolence, cooperation for broad-​based risk-​reward sharing, social and ethical
values, and ownership and exchange related laws and protocols. While com-
mercial and exchange laws are applicable to the production and distribution
of wealth –​goods and services, business, and transfer of ownership as per
market forces of demand and supply; the rules pertaining to benevolence,
sacrifice for others, and cooperation are tools for maintaining the natural
balance and peaceful survival of the human societies.
Based on the capitalistic mindset, the human being is being increasingly
divided into two extremes of poor and the rich. According to the Oxfam
International Report 2019, “The world’s billionaires, 2,208 in number,
are growing $2.5 billion richer every day, while the poorest half of the
global population is seeing its net worth dwindle”. The report that calls
for attention to the growing gap between rich and poor indicates that the
combined fortunes of the world’s 26 richest individuals reached $1.4 trillion
in 2018 –​the same amount as the total wealth of the 3.8 billion poorest
people.2
The institution of “waqf” is the tool belonging to the latter category
that fulfills an in-​built instinct in human beings engrained by nature for

DOI: 10.4324/9781003477549-1
2 Introduction and Historical Perspective of Waqf

broad-​based welfare and happiness of human societies. It helps human beings

in peaceful coexistence by assisting those in society who might remain behind
in terms of fulfilling any of their basic and genuine needs. Such acts are part
of nature’s overall Social Responsibility Protocol, a part of which has been
recently adopted by the UNDP under the term “CSR”.
The divine protocol requires that all human beings must do the
following: (i) honor the rights and ownership of others by avoiding immoral
and prohibited acts or contracts to exploit fellow human beings, and (ii)
help one another in resolving the issues faced at an individual, communal
and the global levels. The latter type of accomplishment is bifurcated into
three categories: (i) compulsory, (ii) relatively necessary in a social context
and not transgressing the equally legitimate needs of other species, and (iii)
recommended or desirable (mustahab) in terms of helping or spending for
others. The institution of waqf is the subject of this book, which explores
the potential of the second part of the divine protocol suggested by nature
regarding social and shared welfare and sustainable development of OIC
member countries’ economies and societies.

1.2 Objectives of the Book

Waqf, as suggested and made by the Prophet of Islam (PBUH) himself, is a
tool for the community’s welfare by the well-​off in any society. It is a his-
torical, religious, and cultural system of endowments for the welfare of any
specified group or society. Notwithstanding the principles of Islamic law of
contracts covering mainly the “exchange part”, the main theme of the Islamic
socioeconomic system revolves around socioeconomic justice and care for
the poor and the indigent. The institution of waqf, in this context, is a crucial
part of that system and had been the main provider of education, healthcare,
and water resources in Islamic societies.
In many OIC member countries like Pakistan, Indonesia, Malaysia,
Saudi Arabia, Kuwait, the UAE, Oman, Qatar, and others huge amounts of
charity are given to the needy and the social sectors, but that charity must be
formalized in a proper manner to make it effective for welfare of the society.
Waqf is a crucial part of the “beyond market sector” of the Islamic economy,
and a civil societal institution that could play a crucial role in formalizing
charity giving for broader-​level benefits of poverty alleviation, and social and
financial inclusion. It is one of the traditional Islamic institutions based on
philanthropy, the others being zakāh and infāq (spending as gratitude to
Allah while seeking His blessings) in general.
The primary objective of this book is to suggest a waqf-​based practical
and sustainable model involving the rich and philanthropists, the State
institutions, and banking and nonbanking financial institutions particularly
in Islamic countries. It is to provide education, health, and other civic amen-
ities to the public in general and the poor, and the indigent, in particular. In
 Introduction and Historical Perspective of Waqf 3

Islamic history, waqf-​based institutions have been rendering all such social
and economic services.
Under the above main objective, the scope of the research is as follows:

• To explore the role of waqf as an instrument for a sustainable system of

social welfare in Pakistan as a case study.
• To indicate the areas crucial in the revitalization of the institution of waqf
for the welfare of society and the economy by involving banking and
nonbanking financial institutions (NBFIs) in the fintech age. In this context,
the role of State institutions like the M/​O Finance, central banks, Securities
Commissions, and banking and nonbanking companies, particularly
Islamic banks and financial institutions (IBFIs) have also been explored by
way of focal group meetings and structured and semistructured interviews
with the stakeholders.
• To explore the importance of disciplined virtuous giving for others, the
current scenario of awqāf and charity in society, and the potential role
of waqf in the reduction of poverty. It also discusses how waqf can con-
tribute to social welfare programs that cannot be undertaken by the State
institutions due to lack of funds, or by the private sector because of com-
mercial nonviability. Some specific suggestions have also been given for
the development of waqf for shared and general welfare-​based growth.
• To explore and suggest a waqf-​based welfare-​based framework to provide
education, health, and other civic amenities for the public in general and
the poor, small farmers, small traders, home-​based businesses, and SMEs,
in particular.
• To suggest measures for promoting entrepreneurship at the micro level
based on waqf. The awqāf model will also include establishing vocational
training centers for capacity building of human resources in the lower
income groups in society. It is to enhance entrepreneurship and provide
opportunities for self-​employment. In this way, it will contribute toward
the upward social mobility of the beneficiaries.
• To suggest a framework of specific waqf law to be promulgated by the
Government of Pakistan, as a case study, enabling/​ requiring different
institutions to establish awqāf to which the well-​to-​do will be contributing
to making the system sustainable.

1.3 Problem Statement

Many Islamic countries have been experiencing a high incidence of pov-
erty. In Pakistan, as a case study, poverty estimates by an SPDC research
report for the year 2016 show that close to 38% population of Pakistan was
living below the poverty line during the year 2015–​16. The percentage of
rural poor is higher (41%) as compared to urban poverty incidence which
is estimated at 32%. Similarly, the depth and severity of rural poverty are
4 Introduction and Historical Perspective of Waqf

relatively higher as compared to urban areas. The unemployment rate is 6%

while about 60% population of Pakistan is considered literate (Labor Force
Survey, 2012–​13). The same is the case of many other countries in almost all
parts of the world.

1.3.1 Macro Issues Facing Pakistan’s Economy as a Case

The major issues facing Pakistan’s economy are huge budget and trade
deficits, low levels of savings, investments, and capital formation, and lack of
economic and social infrastructure particularly with respect to high cost but
still insufficient energy. This, coupled with a lack of consistent and long-​term
taxation, monetary and exchange rate policies, increasingly uneven income
distribution, and neglecting capacity building, has led to capital flight abroad,
high incidence of indirect taxation, and resultant lack of export competitive-
ness and import substitution. Thus, Pakistan has become a “Consumption
economy”. Its consumption in 2021–​22 was almost 100pc of the GDP. Since
GDP is a sum of consumption, investment, and net exports, the impact of the
investment-​to-​GDP ratio of 15.1pc is fully offset by the negative gap between
exports and imports in national income accounts (Riazuddin, 2022).
The public sector in Pakistan has heavy debt servicing obligations
rendering it almost impossible to spare resources for the welfare of the
common man. Pakistan’s total debt and liabilities at the end of June 2021
stood at Rs. 47. 8 trillion (100.3% of GDP). Total public debt from external
resources amounted to $95.2 billion which also included debt taken from
IMF ($7.4 billion). Public foreign debt including that of PSEs amounted to
$102.2 billion (SBP, 2021).3
The high rates of borrowing and the speed of increasing debt-​servicing
obligations are issues of even more serious concern. Domestic public debt
taken from the banks increased to Rs. 15.4 trillion on March 30, 2022, from
Rs. 8.9 trillion in December 2019 (SBP). A more serious issue is the high
cost of public sector borrowing from the money market, while SBP has been
prohibited by an amendment in its autonomy act (2021) to lend directly to the
government. In July 2023, the per annum T -​Bills rate rose to around 22%.
A major part of the remaining banks’ financing goes to the corporate
sector, thus crowding out the SMEs, micro businesses, agriculture and agri-​
based value-​adding industries, and the potential entrepreneurs in emerging
areas of renewable energy, software industry, and high-​tech services. As a
result of all these problems, the most serious issue of concern regarding all
economies like that of Pakistan is the widening gap between the rich and the
poor making it increasingly difficult for the latter who are having a hard time
making both ends meet.

1.3.2 Potentials in Pakistan’s Economy

But still, Pakistan’s economy has considerable economic potential in terms
of socioeconomic growth based on its geographic position, rich natural
 Introduction and Historical Perspective of Waqf 5

resources, a culture of mutual help and benevolence, and the globally

accepted talent of its hardworking and enthusiastic population. In addition
to the fact that it serves as a transit route for global trade for almost half
of the world’s population, fertile tracts of land, the huge irrigation system,
the mountains, and the towns and cities of Pakistan offer great potential to
be realized.
Helping others at times of distress is an instinct ingrained in human
beings as we witness philanthropy, humane behavior, and welfare activ-
ities in all societies of the world. But for Muslim societies, spending for the
cause of Allah and His creatures (infāq-​fi-​Sabeelillah –​ a distinct institution
of Islamic beyond market economy) is a part and parcel of the belief to be
pious (muttaqi) and virtuous (mohsin). From the social and cultural per-
spective, therefore, Pakistan’s society with a 97% Muslim population is well
equipped with social norms of sacrifice for others, spending for others for
sharing Allah’s bounties, and cooperative risk mitigation at community and
national levels.
In Islamic perspectives, broadly, there are five types of social initiatives or
activities: (i) compulsory spending for others (zakāh and ‘ushr), (ii) volun-
tary spending for others (sadaqāt), (iii) spending as a social obligation, (iv)
cooperative risk and reward sharing for mutual survival, and (v) awqāf. The
above means and institutions tend to ensure that equity –​equal opportun-
ities to all, also including those who might remain behind due to sickness/​
any inability, or malfunctioning of the market, and social harmony –​are
integral parts of prosperity. Faith, accountability, belief in every human’s
ultimate encounter with Allah, and cooperation leading to shared prosperity
of human societies are the cardinal pillars of an economy that cherishes the
above initiatives.
While Pakistan is the only country in the modern world where a well-​
defined system of zakāh and ‘ushr was established in 1980, although grossly
mismanaged, but still works and could become a means of social welfare
to the extent of entitled beneficiaries, if revived with proper care and man-
agement. Spending for the welfare and benefit of others, over and above
zakāh and ‘ushr, is also ingrained in Muslim societies. A huge amount of
funds is spent individually and collectively for humane causes. The affluent
have a tendency to contribute to the welfare of the poor. According to
a study conducted by Pakistan Peace Collective (PPC), Pakistanis give an
estimated Rs. 650 billion in charity every year to mosques, seminaries, poor
and homeless people, needy relatives, victims of terrorism, and hospitals
(Zibago, 2015).
One such institution that has a rich historical perspective for an impactful
role in the welfare of society is “waqf”. Starting from the earlier period of
Islam, waqf played a crucial role in Islamic civilization that had an impact
on Western civilizations as well where many “endowments” played a vis-
ible role in social sectors of education and health. Waqf is a crucial part of
the “beyond market sector” of the Islamic economy that served as the main
provider of education, healthcare, and water resources in Islamic history,
6 Introduction and Historical Perspective of Waqf

particularly in the Ottoman period. Recently, the earliest waqf legacy in the
world was deciphered in two villages in Palestine with complete and oldest
inscriptions for the description of waqf rules4 (Schuster, 2021).
In principle, a waqf is perpetual, irrevocable, and unconditional. Of
course, many jurists allowed a temporary waqf as well. Accordingly, the pre-
sent unanimous view is that time-​bound waqfs of liquid assets like cash,
deposits, ṣukūk, or profits on any investment could be the subject of waqf,
as we have discussed in different chapters quoting mainly from the AAOIFI’s
Sharī’ah Standard on waqf (No. 60), and the International Working Group
on Waqf Core Principles (IWG-​2018) that represented experts from IRTI of
IsDB Jeddah, Bank Indonesia, and many waqfs operating in various parts of
the world.

1.3.3 Uniqueness of Waqf as a Welfare Institution

The continuity of reward of a virtuous act is of utmost importance as per the

Islamic belief system. This sublime objective can best be achieved by creating
perpetual endowments for social and national causes and for the benefit of
human beings. Waqf that fits in the best in this paradigm is driven by a firm
belief in Allah and the day hereafter, social justice, and personal satisfaction
of its creator (donor) and is purposely meant to provide key essential services
like health and education to improve the welfare of the people in the society
at little cost to the government. The prophet (PBUH) suggested waqf for the
donation of Orchards and used it to finance the State economy and weaponry
in times of war via the fruits from Orchards left by Mukhayriq (Lawal, 2018).
Over the period, waqf evolved to take care of the wider scale of the needs
of people and the environment. To take this institution to the micro level,
cash waqfs (al-​waqf al nuqud –​movable waqfs established with liquid money)
were established to serve many areas like education, health, public services,
culture, trade, finance, and so forth (Bulut, 2021).
Cash waqf, generally considered an Ottoman innovation, is a multidi-
mensional tool of Islamic finance for social and financial inclusion and eco-
nomic development (Madni, 2022). It served as a financial intermediary like
modern banking and nonbanking institutions working under the principles
of Sharī’ah. The managers of the waqf funds (mutawalli) collected the
funds from the donors (wāqifs) and invested the money in micro, small, and
medium-​sized ventures and/​or other Sharī’ah compliant investment oppor-
tunities. Accordingly, researchers indicate that the waqf system can be used
for essential services in health, education, and municipal sectors and may
contribute significantly to modern economies leading to a reduction in public
sector expenses, resulting in a smaller budget deficit and a lower need for
government borrowing.
A visible revival of the institution of waqf has been witnessed over
the last two decades, particularly in countries like Indonesia, Malaysia,
 Introduction and Historical Perspective of Waqf 7

South Africa, Jordan, and other parts of the world. But, in many countries
like Pakistan, neither the “waqf” is playing its historical role of socio-
economic uplift, nor deep research has been conducted to activate the
movement for its revival. Many trusts, endowments, NPOs/​NGOs, soci-
eties, and entities are working to help the poor and the needy in sectors
like health, education, civic facilities, catering to emergencies or calam-
ities, employment generation/​women entrepreneurship, housing for the
poor and environment for sustainable future of mankind. At the corporate
level, many entities are allocating voluntary funds for CSR under section
42 of the Companies Act, 2017, while some companies are doing social
welfare functions as a part of regulatory requirements as in the case of oil
and gas companies (e.g., OGDC, Mari Petroleum Company, etc.). In add-
ition to the well-​known names of Edhi Trust, Indus Hospital Trust, many
memorial hospitals and universities/​ education centers working under
various trusts, many NPOs/​NGOs are operating to serve the social and
economic cause in the society.
However, the entities listed above have failed to create a visible impact in
ameliorating the sufferings of the poor across the country and contributing
to shared growth of the economy by creating business opportunities and
increasing production for consumption and value-​added exports. Further,
the public has not wholeheartedly supported some of the NGOs working
for social and political rights. A sort of negative impression developed about
such NGOs due to foreign funding and the perception that they might be
working for the support of the Western agenda. There are, however, some
organizations in Pakistan that have earned good names, such as Akhuwat
Foundation, Edhi Welfare Trust, Ansar Barney Trust, Shaukat Khanam
Trust, Hamdard Foundation, and Anjuman Himayat-​e-​Islam. To name a few
more NPOs:

(1) Pakistan Poverty Alleviation Fund (PPAF) –​an apex institution for
community-​driven development and poverty alleviation –​set up under
section 42 of the Companies Act, 2017
(2) NRSP –​National Rural Support Program
(3) Baluchistan Rural Support Program
(4) Goth Seengar Foundation
(5) HANDS Pakistan
(6) SABAWON Urban WASH and Thardeep Rural Development Programme
(7) Pakistan Space Science Education Centre

Many NGOs and CSR-​related entities are helping the government in pro-
viding support to the low and middle classes in the society in health, and
education sectors, and mitigating the loss due to calamities like earthquakes,
floods, and terrorist activities. During the worst flood (2022) in Pakistan’s
history which affected over 33 million people in all provinces of the country,
8 Introduction and Historical Perspective of Waqf

formal and informal welfare activities by almost all groups in the society
enabled the State, to some extent, to revive the economy at micro and macro
levels.
Despite all welfare and social activities as listed above, the objective of
achieving broad-​based general welfare and growth of economy is not likely
to be realized. It is in the interests of national development, therefore, that the
voluntary charity sector is reorganized, developed, strengthened, and made
viable through the re-​emerging institution of waqf. According to a study by
the Pakistan Centre of Philanthropy (PCP) (2015), 69% of charity in Pakistan
is given in the form of money. If some of the compulsory (zakāh) and volun-
tary charity (infāq) were channeled through waqfs to provide employment to
those who have some capacity to do business, it could bring about a social
revolution in society and contribute to sustainable development.
In light of the issues facing Pakistan’s economy and its potential, the
inability of the State institutions and nonprofit entities to work for the wel-
fare of certain groups in the society, and the role of the re-​emerging institu-
tion of waqf, the problems this research-​based book explores are:

(1) How the historical institution of waqf, as emerging in various parts of

the world, could be evolved as a tool to alleviate poverty, develop social
capital, increase financial and social inclusion, and provide employment
opportunities through promoting entrepreneurship?
(2) What could be the legal, operational, and regulatory frameworks for
the waqf system keeping in view the good governance principles? How
various provisions of law could enable the independent but minutely
regulated functioning of various awqāf at micro, macro, public, and cor-
porate levels?
(3) How would the proposed institution work on a sustainable basis as per
the principles of Islamic law and what would be the transfer/​alienability
principles for awqāf?
(4) How the charity giving would be easy and safe –​donations for different
awqāf could be given, based on their performance and socioeconomic
impact, with ease without violating the rules applicable at the domestic
and the global level?
(5) How the effective oversight and governance of the waqf institutions could
be ensured to maintain the credibility of the noble system of awqāf?
(6) What would be the role of related State functionaries at provincial and
Federal levels, the auditors, and the financial market regulators?

1.4 Significance of the Research for the Book

The failure of government-​ sponsored programs in alleviating poverty in
developing countries like Pakistan indicates the need for developing and
implementing an effective system and programs to ensure visible improve-
ment in the socioeconomic conditions of the poor on a sustainable basis.
 Introduction and Historical Perspective of Waqf 9

Islamic institution of waqf, along with other institutions like zakāh, mutual
takaful, and qard hasan based microfinance for agriculture, small businesses,
and SMEs has the potential to provide a strong basis for developing a com-
prehensive system ensuring social justice, equity, and peace by enabling the
state to fulfill the basic needs of society (Zarqa, 1988; Siddiqi, 2004).
The study will help to reduce poverty and empower the poor through the
institution of waqf which has an excellent historical record in social devel-
opment. Application of the proposed system could reduce inequality over
time among a lower and upper group of society. Coincidently, the system of
Islamic banking and finance is being evolved in around 120 countries of the
world, also including Pakistan. However, despite its visible growth over the
last two decades to cover 20% of the banking system in the country since
2002, Islamic banking has failed to realize its objectives due mainly to the
credibility gap. That, in turn, is because the change is in form, not substance,
as many products are mere replicas of conventional products.
IBFIs are considered entities whose social goals are at least (if not more) as
important as making a profit (Hannifa & Hudaib, 2007). The World Bank’s
2030 agenda for sustainable development seeks to eradicate poverty in all
its forms and emphasizes Islamic finance to promote responsible and risk
sharing based finance. It is a recognition of the core principles of Islamic
finance, a form of Socially Responsible Investment providing mechanisms
for redistribution to address imbalances that may occur during the wealth
production and distribution cycle in any market economy (Solimán, 2017).
Through proper linkage between the real sector and finance, the investors
contribute to the growth process. It is, however, a serious issue that the IBFIs
have not so far been able to move toward achieving the goal of social and
socioeconomic inclusion. This book makes a case for persuading the IBFIs
to adopt qarḍ hassan and other financing techniques through waqf. It also
suggests innovative instruments like al-​khair ṣukūk for socioeconomic devel-
opment and addresses environmental, social, and ethical safeguards, side by
side with the business for profits.
In other words, there is a need to provide a way to expand the scope of
banking or financial intermediation, enabling banking companies to serve
the social cause, in addition, to doing business for profit. IBFIs will be giving
a helping hand in the revival of the historical institution established by the
Prophet (PBUH) himself and operated for centuries in many parts of the
world. The book provides the combined and feasible framework for the joint
working of the awqāf, the Islamic tradition, and trusts, the British tradition.
With the suggested framework of waqfs, the lacuna in the operation of trusts
could be reduced to minimum, if not removed.
During the interviews and the focus group meetings a few of the participants
expressed the view that while many trusts are operating in Pakistan, there
might not be any need to develop (new) institutions of waqf. But the view
was strongly opposed by majority of the research participants on the ground
that by giving an out-​of-​the-​way edge to the trust, not only the “sunnah of
10 Introduction and Historical Perspective of Waqf

waqf” is being erased5 but also the true potential of waqf is not utilized.
Introduction and application of welfare-​oriented waqf law could be helpful
in removing the lacuna in the running of trusts in the country, thus enhancing
their efficiency as per their trust deeds.
The current law based on the colonial rules dealing traditionally with
masjid, madrasa, and mazār has no link with present-​day socioeconomic
realities and requirements. It does not have the potential to provide for the
introduction and evolution of waqf as an institution for the socioeconomic
growth of the economy and society.

1.5 Spending as an Inspiring Part of Belief in the Islamic Paradigm

Spending for others is a sublime part of the Islamic belief system. Reward for
charitable giving in the hereafter and its inspiration is of much more value
for the Muslims than the possible benefit of community welfare in the secular
structure. A crucial condition for virtuous giving is that the giver must avoid
taunting and hurting (Qur’an: 2:264). All wealth belongs to Allah, and one
should be grateful for being given and enabled to spend it, so one should be
thankful and spend for the sake of Allah what belongs to Him, for barakah
in this world and reward in the hereafter.
Giving to one’s relatives, orphans, the wayfarer, beggars, and for the sal-
vation of the poor debtors helps in building a cohesive society. Qur’an (107:
1–7) warns that

those who are not kind to the orphan, do not urge others to feed the poor,
they are hypocrites not performing their salāt (prayer) properly, do any
good deeds only to be seen, and withhold (simple) assistance to fellow
beings.

Qur’an and Sunnah of the Prophet (PBUH) cherish the act of spending for
others which helps in building a case for a society where spending by way of
waqf could be a common characteristic of the well-​off, philanthropist, and
the institutions involved in socioeconomic development.
The very first few verses of Al-​Baqarah indicate that Qur’an is a book
of guidance for those pious and mindful believers in Allah and the Day of
Judgment who donate from what Allah has provided for them (2:2–​4). While
spending with moderation is liked by Islam even for own family, spending
for others as a way to please Allah (SWT) fetches manifold rewards by Allah,
based on the level of sincerity of the donor which according to Islamic law
is very well known by Allah. While defining the virtue and piety, Qur’an
declares,

… true righteousness consists in believing in Allah and the Last Day, -​-​-​-​,
and in giving away one’s property in love of Him to one’s kinsmen, the
orphans, the poor and the wayfarer, and to those who ask for help, and in
 Introduction and Historical Perspective of Waqf 11

freeing the necks of slaves, and in establishing Prayer and dispensing the
Zakāh (2: 177).

More importantly, spending for others should be from the goods or prop-
erties that are quite dear to one as Qur’an declares, “By no means shall you
attain Al-​Birr (piety, righteousness), unless you spend (in Allah’s Cause) of that
which you love; and whatever of good you spend, Allah knows it well” (3:92).
The Prophet (PBUH) also emphasized spending for others. Following
ahādith are particularly important in the context of helping others:

(1) The example of the believers in their affection, mercy, and compassion
for each other is that of a body. When any limb aches, the whole body
reacts with sleeplessness and fever (Sahih Al-​Bukhari).
(2) The believer for another believer (in a community) is like that of a well-​
compacted building where one part of the building strengthens the other
(Sahih Al-​Bukhari).
(3) No one of you becomes a true believer until he likes for his brother what
he likes for himself (Sahih Al-​Bukhari).
(4) If someone shows no compassion (to people) he will not be shown any
compassion (by Allah) (Sahih Al-​Bukhari).

Islam accepted the instinct of self-​interest as the basis of the market

economy but made others’ interests competitive to self-​ interest by
commanding some prohibitions, and by putting a divine reward of spending
for others more than 700 times the worldly reward (Qur’an; 2:261, Hadith;
Sahih Bukhari, 6126). A Muslim is not expected to go on increasing its
eating expenses without any limit just because of an increase in income.
“He is not a believer whose stomach is filled while the neighbor to his
side goes hungry”, warned Prophet Muhammad (PBUH) (Albāni, Sahih
al Jamie, 5382). Accordingly, an Islamic economy is to ensure sufficient
food for all by prohibiting overeating and a lavish style of consumption. It
implies that all well-​to-​do in an Islamic society are responsible for ensuring
that all in one’s society are fed.
The Prophet (PBUH) highlighted in one of his sayings:

The one who looks after and works for a widow and for a poor person
(dependent), is like a warrior fighting for the cause of Allah, or like a
person who fasts during the day and prays throughout the night.

While zakāh and ‘ushr are obligatory, optional infāq by the well-​to-​do could
be informal in the form of spending to ameliorate the life of others in the
society, and formal that may take the form of waqf and any cooperative
arrangements for mitigating the losses of others. Spending to help others
through the formal means of waqf had been the most effective institution for
socioeconomic activities in Islamic history.
12 Introduction and Historical Perspective of Waqf

Spending for others only for pleasing Allah promotes a mutual help and
brotherhood culture, a beneficence approach, and a cooperative environment.
It tends to redefine “profitability”, and real success for human beings, and
that is by helping the poor and fulfilling social responsibilities. It highlights
how the institution of waqf and donating to the general welfare may play a
crucial role in the socioeconomic growth of Muslim societies.

1.5.1 Maqāṣid al Sharī’ah and Their Relevance with Awqāf

Waqf is an institutional tool that helps in realizing the higher purposes

of Sharī’ah. Maqāṣid al Sharī’ah for development and human rights as
postulated by Jasser Auda (2015) could best be realized by developing waqf
as a tool for socioeconomic development and sustainable growth. All three
levels of human needs, i.e., ḍarūriyyāt (essential), hājiyyāt (complimentary),
and taḥsiniyyāt (tertiary) (Zaprulkhan, 2018), of all members of a society can
be fulfilled in case the carefully evolved system of waqf is in the application.
The maqāsid, general or specific, are related to the life of mankind.
Fulfilling the fundamental and essential needs of all human beings is a social
obligation that must be fulfilled by the State or by the well-​off in society. The
Prophet (PBUH) is reported to have said, “Any community, whosoever they
are, if a person among them became hungry; they will be removed from the
protection of Allah Almighty” (Hanbal, 2001, p. 482).
Maqasid also include jināyat which refer to al-​amr bi al-​ma‘rūf and al-​
nahy ‘an al-​munkar (commanding good and righteous behavior and dis-
courage vice and immorality). Auda (2015) reconstructs maqāṣid al-​Sharī’ah
by offering six features: cognitive nature, wholeness, openness, interrelated
hierarchy, multidimensionality, and purposefulness. He uses the approach of
system philosophy and indicates the contribution of maqāsid to the devel-
opment of Islamic law and human rights. This approach views the world
and the functions of nature and its components in the context of a holistic
system comprising infinite subsystems having interactive, open, hierarchical,
and purposeful natures (Auda 2015, Zaprulkhan, 2018). Hence, awqāf have
to be evolved for all activities ranging from fulfilling the basic needs of all to
commanding good deeds and preventing immorality and evil in any form.

1.6 The Concept of Waqf and Its Historical Role

Waqf (plural: awqāf), literally means “to hold” a property, hence also termed
as habus (withheld property) in North Africa. Technically, waqf refers to
tying up by someone a property in perpetuity for any virtuous purpose or
for benefit of any specified group of persons. In other words, waqf involves
retention of a property by someone for the benefit of a charitable or humani-
tarian objective, or for a specified group of people such as any charity institu-
tion or the members of the donor’s family. The purpose of all such spending
is pleasing Allah. Irsād that is a variant form of waqf, where the assets used
 Introduction and Historical Perspective of Waqf 13

to be set aside by the State or the government to cater to identified social

needs also served for the social needs of some societies (IRTI, 2014). Waqf
as a religious charity was also in pre-​Islam era. A rich person used to assign
a property to a temple, and monks used that property or its income for the
temple expenses.
The Hanafi Jurist Al-​Kasani (d. 587/​1189) defined waqf as a continuous
charitable act for the sake of Allah Almighty. IRTI’s Islamic Social Finance
study (2014) says, “The institution of waqf implies holding or setting aside
certain physical assets by the donor and preserving it so that the asset benefits
continuously to a specified group of beneficiaries or community”. It implies
that once declared as waqf, the maker relinquishes all his property rights,
transforming it into Allah’s name, an inalienable “claim of Allah”. Hence,
waqf, governed by the fundamental principles of perpetuity, inalienability,
and irrevocability has the potential to create robust not-​for-​profit entities
that may address the education, healthcare, and other social needs in Muslim
societies.
One of the well-​known awqāf in Islamic history is by the Second Caliph
Umar (RA) who acquired a land at Khyber. He came to the Prophet (PBUH)
and said: “Allah’s Messenger, I have acquired land in Khyber; I have never
acquired property more valuable for me than this, so what do you command
me to do with it?” The Prophet said: “If you like, you may keep the corpus
intact and give its produce as sadaqah”. So Umar (RA) gave it as sadaqah
declaring that the property must not be sold or inherited or given away as a
gift. He devoted the produce to the poor, to the nearest kin, and the eman-
cipation of slaves, etc.; there is no sin for one who administers it, if he eats
something from it in a reasonable manner, or if he feeds his friends and does
not hoard up goods (for himself).
The importance of waqf as a long-​term or perpetual sadaqah is proven by
the Prophet Muhammad (PBUH) as he said,

Among acts and good deeds for which a believer is rewarded after death, a
piece of knowledge he has taught and diffused, a virtuous progeny he has
brought up, a mosque or a wayfarer’s house he has constructed, a river
he has caused to stream or alms he has handed out of his riches while still
healthy and alive so that he benefits therefrom in the afterlife.
(Ibn Majah)

A traditional example of waqf is that of donating or setting aside land for

the construction of a mosque, a school, or a hospital. According to the waqf
regulations developed in the 3rd-​century hijrah, waqf is established by a legal
deed that names the owner of the endowed property, the substance of the
endowment (‘ayn or ‘asb), and the beneficiary of its income.
Executing a waqf, like ordinary sadaqah, but unlike zakāh, is a voluntary
act. Waqf is distinct from ordinary sadaqah in the sense that the benefits
flowing from waqf are by default sustainable. Like ordinary sadaqah, waqf
14 Introduction and Historical Perspective of Waqf

is flexible in the sense that its beneficiaries need not be restricted to Muslims.
And unlike ordinary sadaqah, zakāh and infāq that are usually in the nature
of specific financial flows, waqf provides for flow of benefits on a sustained
basis. The mechanism of waqf should result in a corpus that is either intact
or growing. It has a legal identity separate from its manager and, therefore, it
is most suitable for the creation of an institution in the voluntary or not-​for-​
profit sector. The trustee manager is described as mutawalli or nāzir.
According to Abattouy and Al-​Hassani (2013), the subjects of waqf included
properties such as agricultural land, farms, gardens, as well as apartment
buildings, houses, hotels, warehouses, shops, baths, mills, bakeries, looms,
soap works, paper works, oil and sugar presses, stables, and post houses.
They also indicated that in Islamic history, waqf had been relied upon for the
comprehensive development of the community, ranging from various social
institutions such as hospitals and schools to religious objects like mosques, and
welfare schemes like highway facilities and water supply. Historically, waqf
endowments were insulated from imperial/​state authority (Joseph, 2014).
As indicated by Kahf (2003), waqfs have been traditionally established for
immovable property such as land, fields, farms, or buildings like mosques,
schools, hospitals, or basic infrastructures such as bridges, roads, water
supply, etc. and movable property like books, cattle, crops, and shares. But
the cash awqāf have been equally important for welfare objectives. Many
studies have argued that cash waqf can pool more resources and ensure
wider participation of individual donors (Sadeq, 2002;Salman Sheikh, et.
Al.,2017). If movable assets like books and cattle can serve a good purpose
as far as they exist, cash also can be used for sustainable welfare objectives
with proper investment and risk-​management plans. One may donate the
benefits of a fund, any individual asset, or a pool of assets. The idea of per-
petual corporate entities that are based on share capital/​equity has also been
accepted by the Sharīʿah scholars.
White (2006) has classified waqf into three types: Religious Waqf, Family
Waqf, and Philanthropic Waqf. But to qualify as a charitable institution, the
ultimate purpose of the waqf must be of the nature of virtue and piety (Çizakça,
1998). It is the reason that waqf must be irrevocable, perpetual, and inalien­
able. According to Çizakça (1998) and Abattouy and Al-​Hassani (2013), the
awqāf system has remarkable resilience, and many awqāf had survived even
for more than a millennium and some considerably longer than half a millen-
nium. But, if any waqf is terminated due to any reason, its assets have to be
given to charity.
White (2006) mentions the following elements of waqf:

a) A declaration of waqf by the legal owner of any asset (waqf deed);

b) The specific purpose of waqf should be stated –​the beneficiaries be clearly
defined;
c) Waqf needs to be managed as per criteria set by the maker;
d) Mutawalli (trustee) needs to be appointed along with his successors;
 Introduction and Historical Perspective of Waqf 15

e) Fiduciary duties of the mutawalli;

f) Employees, if required to assist the mutawalli;
g) Judicial oversight of mutawalli and the work.

Regarding the management of waqf, Sharīʿah provides for the institu-

tion of nāzir or mutawalli as the trustee-​manager of waqf assets. The State
plays a supervisory role devoid of actual ownership or direct management
of waqf assets. Presently, in some Islamic countries like Pakistan, there is
concentration of authority in the hands of the State due mainly to the reason
that awqāf generally pertains to graveyards (mazārs) and masques (IRTI,
2014) with chances of corruption.

1.6.1 Waqf in Historical Perspective

The history of awqāf in the Muslims’ era is very rich with prominent
achievements in enhancing welfare in general and serving the poor. Muslims
established various kinds of awqāf for education and research, healthcare,
and other public utilities. Awqāf for education also covered scientific
research, including research in astronomy, mathematics, pharmacology,
physiology, etc. (Ahmed, 2007). Abattouy and Al-​Hassani (2013) indicated
that in Islamic history, waqf had been relied upon for the comprehensive
development of the community, ranging from various social institutions
such as hospitals and schools to religious objects like mosques, and any
welfare schemes.
Waqf played a crucial role during the Ottoman Empire, covering Türkiye,
the Middle East, and Eastern Europe. Awqāf used to have immovable assets,
such as production facilities, residences, shops, and other public/​social facil-
ities. It used to provide consumption goods such as operating commuter
ships, delivering water to a local area, supporting retired sailors, defending a
town, paying neighborhood taxes, etc. In the mid-​9th century, three-​fourths
of lands in the Ottoman Empire were established as waqf lands. Similarly,
waqf-​related agricultural land constituted one-​third of Tunisia and half of the
size of Algerian land. In the mid-​20th century, one-​eighth of Egyptian land
belonged to awqāf.
The introduction of cash waqf by the Ottoman was a game-​changer in the
institutional history of awqāf. It had been playing a role in providing employ-
ment and promoting entrepreneurship in Ottoman Europe and some other
Muslim societies (Bulut, 2021).
The term “cash waqf” refers to the historical institutions of the Ottoman
Empire (15th century). It was used for public services like education and
healthcare. Common people used to contribute funds with the stipulation
that the principal sum will remain intact while its return (over investment
into projects/​modes of financing, allowed by Sharī’ah) shall be utilized for
the benefit of the public. These peculiar endowments were an innovation of
the Turks against customary “foundations of immovable property”. Wealthy
16 Introduction and Historical Perspective of Waqf

people could save their original assets in such initiatives. The idea of cash
waqf has recently been highlighted by almost all Islamic economists.
The cash waqf model is an avenue to improve and establish public prop-
erties under waqf institutions. Since cash waqf, once established, is financial
in nature it is a logical consequence to manage it under an organization that
may look like a financial institution or bank. It covers activities of mobilizing
funds and distributing them in productive activities/​projects. In addition,
it includes the activity of distributing income generated from investment
placement.
Cash waqf is considered a trust fund established with money to support
services to mankind in the name of Allah. Others may contribute to such
Funds at the micro level. Cash waqf and waqf ṣukūk, or the certificates, can
be used to mobilize capital for awqāf. Through cash waqfs, Islamic banks
can provide finance to smallholders for tools/​machinery at a lower rent.
The waqf went beyond meeting the immediate needs of the poor to provide
means for long-​term amelioration and welfare. It played a role in developing
various aspects of society and the economy in the sense of modern economies
(Zuki, 2012). Çizakça (1998) indicated that from the Atlantic to the Pacific,
all over the vast Islamic world, awqāf system financed and maintained, for
centuries, magnificent works of architecture as well as a myriad of services
vitally important for society. Awqāf worked for different social sectors
including:

Awqāf for Health Facilities

Awqāf has been used in the past for health services, covering the expenses
of patients as well as the provision of physicians and training, besides
the construction of hospitals. In addition to the construction of male and
female bathrooms in hospitals, waqf provided food and special clothes to
the patients. In women’s awqāf, health services received the lion’s share and
many hospitals had been established offering medical education and free
treatment to poor patients.
Hospitals and medicines had been the most famous subsectors of awqāf
(Ahmed, 2007). In 88 Hijrah, Caliph Walid ibn Abd al-​Malik was the first
who built a hospital or bimaristan and appointed doctors and paid for them
to care for the sick and for quarantine of the lepers. The revenue of waqf
would pay for the maintenance and running costs of the hospital, and some-
times even small stipends to the patients upon discharge. Such hospitals in
the 3rd Islamic century were spread all over the Islamic world and were a
source of happiness for the Muslim community because the patient received
treatment, care, food, and clothing. Additionally, many of these hospitals
performed the function of a medical education center along with treating
patients.
Mannan (2005) and Hasan (2006) indicated that an important benefi­­
ciary of Muslim awqāf had been the health and hygiene sector. In Egypt, Ibn
 Introduction and Historical Perspective of Waqf 17

Tulun built the first hospital in 261 AH and endowed it with several waqfs
to provide for its expenses. According to Abattouy and Al-Hassani (2013), in
every town of reputation in the Islamic world, particularly Cairo, Baghdad,
Makkah, Madinah, Aleppo, Tunis, Ray, Granada, and Marrakech, there had
been at least one waqf hospital.
Al-​Nuri Hospital was built on waqf land in Damascus in AD 1145. It
remained in operation for seven centuries and was one of the first hospitals
to adopt medical records. Doctors were paid from the endowed funds and
the waqfs covered all expenses on food, lodging, medicine, and treatment of
the patients. In the early 20th century, awqāf healthcare centers and hospitals
were established in Türkiye. A special children’s hospital was built in Istanbul
out of the waqf fund.
In Spain, hospital facilities were available for both Muslims and non-​
Muslims alike. The well-​known Qalāwūn Complex built by Sultan Al-​Nasir
Muhammad Ibn Qalāwūn in AD 1284–​85 in Cairo included a hospital, a
school, and a mausoleum. It was once the most impressive hospital of its
time and functioned throughout the late Ottoman period, till 1910. In the
Complex, medicines were prepared in addition to the research and teaching
facilities. Hospitals provided medicine, food, clothing, and shelter to the sick
and poor. Pharmaceutical drugs were also produced for medical treatment.

Awqāf for Basic and Professional Education

Human resource development is the pivotal factor in the success of any

poverty-​alleviation and social development programs. The provision of basic
and professional education funded through waqf can enhance the income-​
earning potential of the beneficiaries.
In many Islamic countries, with a very large segment of the young popu-
lation, it is vital to educate all members of society and provide them with
professional and technical training, particularly the matter relating to infor-
mation technology and artificial intelligence. For an effective role in socio-
economic and sustainable development, the focus has to be on waqf-​based
human development and finance institutions providing technical training and
microfinance to farmers and small enterprises. Awareness and orientation
regarding the role of awqāf for qarḍ hassan based microfinance as the case of
“akhuwat” in Pakistan is also necessary.
Education is the second most important social activity attracted by the
awqāf in Islamic history. Waqf had been the source of funds for the estab-
lishment of schools and universities. Awqāf also supported medical educa-
tion and research and preparation of medicines. Along with schools and
hospitals, medical education was also offered in mosques and universities
such as Ai-​Azhar. In Syria, a number of waqfs financed a large number
of educational institutions such as madāris, maktab, Dār al-​Qurān, and
Dār al-​Hadīth. Awqāf also stipulated the curricula for these institutions
(Frenkel, 2009).
18 Introduction and Historical Perspective of Waqf

Al-​Azhar University, the best-​ known place of learning in the Islamic

world, was founded in AD 972 in Cairo with the endowment of a charitable
trust and financed by its waqf revenues until 1812 when the government of
Muhammad Ali took control over the awqāf. Financing from waqf covered
expenses on books, libraries, stipends to students, and salaries of teachers
and other staff. Other significant education related to awqāf included: (i)
Nizāmiyya school established in Baghdad in 459 H; (ii) Mustansiriya school
established in 623 H from the endowment by Abbasid Caliph Al-​Muntasir
Billah; supplemented in 631 H it was the best school in the world at that
time; (iii) Al-​Bashiriya school and library established in 1255 in Baghdad;
(iv) Al-​Zahiriyya School established in Damascus in 678/​1279, its library
contained books on all sciences; and (v) In Makkah, Sultan Qaitbay School
established in 884 H was endowed from awqāf funds. Besides, there were
many schools in Egypt, Syria, Yemen, and other areas.
In the Ottoman period, the number of institutions of higher education built
by the waqfs stood at over 500 after conquering Constantinople (Istanbul)
until the 19th century (Babacan, 2011). Waqf funds were also used to estab-
lish libraries, reading rooms, labs for research activities, and translation of
valuable materials. With the support of the waqf funds, Muslim scholars and
scientists either wrote or translated many books. Research using scientific
and empirical methods was also encouraged and supported by waqf funds.
Awqāf also provided support for education in different parts of South
Asian Muslim areas where schools (madāris) or orphanages had been
getting sufficient waqf funds in Muslim communities. Thousands of madāris
that also provided boarding facilities had been established, financed, and
managed through awqāf funding in Pakistan, India, Bangladesh, Malaysia,
and Indonesia. This system needs to be developed to include education and
orientation in emerging areas of science and technology.

Awqāf for Shelter/​Habitation and Protective Wear

Shelter with proper drinking water and sanitation facilities is the basic right
of human beings for modesty and also as an adornment. Similarly, they need
proper clothing for protection from severities of weather (Qur’an, 7:27).
Waqf can provide the infrastructure and create a source of revenue for social
welfare enhancing activities at family, community, and state levels. In the
history of awqāf, the endowment documents many times included clauses
for the distribution of clothing and provision of food (Frenkel, 2009). Hasan
(2006) indicated that in modern times, awqāf could play a much greater role
in providing shelters, arranging water to any locality, and supplying food to
the poor and especially children.
Providing housing facilities and proper shelter to the poor is also a respon-
sibility of the State and the well-​off communities in any society. While the
resources available in most of the States in the Muslim world might not
be sufficient to provide shelter of a bare minimum standard to all, awqāf
 Introduction and Historical Perspective of Waqf 19

can provide a helping hand for providing simple habitation with the basic
amenities of life like drinking water, sanitation, education, and basic health
facilities.

Awqāf for Providing Economic Opportunities and Empowerment

A poor not having proper employment, food, education, or health facility

cannot be a free and respectable member of any society. Cash waqfs can
be a good source of revenue generation for charitable work, including qarḍ
hassan for employment and poverty alleviation and also for start-​up projects
through the issuance of ṣukūk. Like the Ottoman waqfs that used Ijārah as
one of their financing modes, the cash waqfs by Islamic banks could provide
finance to the smallholders for tools/​machinery at a lower rent.
Islamic banks, by dint of being Islamic institutions managing the wealth
of the society, are required to play a role in realizing maqāṣid al-​sharīʿah by
serving the community through poverty alleviation and welfare activities for
the common people. In this perspective, Islamic banks may establish waqf-​
based Islamic microfinance institutions (Ahmed, 2007).
For socioeconomic inclusion in OIC member countries, it is necessary
that financing to the extremely poor and small farmers, businesses, and
entrepreneurs be based on qarḍ hassan or trade-​/​lease-​based modes at a lower
cost. Credit cost combined with the increasing cost of other inputs work
as a double-​ edged sword against small farmers, micro-​ level commodity-​
producing units, and SMEs. Any scheme that involves a market competitive
charge to groups having small means would result in negative effects such as
higher income inequality and soaring interest (Adams & Von Pischke, 1992).
Due to the overwhelming status of modern corporations and interest-​based
systems, the potential of waqf remained untapped over the last 200 years.
Going forward, authors like Sadeq, Ahmed, Hasan, Manjoo, and others
have presented the idea of waqf-​based microfinance institutions for poverty
reduction (SESRIC, 2015). A study by SESRIC (2015) indicated a consensus
among the respondents from Malaysia, Indonesia, and Bangladesh that waqf
could play a significant role in providing financing for human development
programs related to microfinance and poverty alleviation.

1.7 Waqf Laws in British India and Countries Like Pakistan

If we discuss waqf laws in Pakistan, as a case study, it inherited both the
waqf and trust laws as well as the waqf and trust organizations from the
British colonial period. It was a legacy that has been lasting to date, of course
with some changes. The Wakf Act 1923 did not impose any official supervi-
sion on awqāf but required the submission of the particulars of awqāf and
their annual accounts with the state functionaries. Given the politically sensi-
tive nature of the regulation of awqāf, the colonial administrators deemed it
appropriate to delegate the issue of such regulations to provincial legislatures.
20 Introduction and Historical Perspective of Waqf

Therefore, various provincial legislatures such as Bengal, United Provinces,

and Delhi established separate public bodies which were vested with wider
administrative powers of supervision over awqāf.
After the creation of Pakistan in 1947, the Punjab Muslim Awqāf Act
1951 was passed to “provide for the proper administration of Muslim Awqāf
in Punjab”. The Act established a Board that had limited supervisory powers
over awqāf. The main functions of the Board were limited to the registra-
tion of awqāf, conducting inquiries about the administration of awqāf, and
appointment of mutawallis.
The Government revised the waqf laws and promulgated the West Pakistan
Waqf Properties Ordinance 1959 and the West Pakistan Waqf Properties
Rules of 1960 with the aim to curtail the powers of peers (spiritual guides)
and sajjadah-​nashins and to regulate the religious endowments under the
apparatus of the state. The rationale behind this policy was that these shrines
were being exploited by their administrators; therefore, the State took over
their control. The Ordinance enabled an awqāf administrator to take over
the control of waqf property. Hence, the authority of the shrine holder was
replaced by the authority of awqāf administrator, who was a state official.
The policy corresponded to the social and economic aims of the state, one of
which was to control religious elements.
A statistical survey of Pakistan revealed that by the year 1984, 344
shrines, 648 mosques, 31,913 acres of culturable lands, 48,188 acres of
unculturable lands, 2,215 shops, and 1,869 houses had been nationalized
(Malik, 1990: 72).
Practically, the public awqāf in Pakistan are strictly regulated by the State
because of their entrenchment with the politics of peers (spiritual guides).
Private awqāf, though relatively lightly regulated, are economically ineffi-
cient. Therefore, most philanthropic activities in the country take place in the
form of various English law institutions such as registered societies, trusts,
and not-​for-​profit corporations. Of course, many awqāf properties exist
belonging mostly to mosques, madāris, shrines (dargahs), and graveyards
which continue to be established as awqāf (Abbasi, 2019).

1.8 Scheme of the Book

The research project for study on waqf that became the basis for the book
adopted an specifically thought-​out sequence based on the relevance and
rationale of different aspects discussed in it. The first chapter details the
objectives and scope, methodology, the problem statement, and importance
of infāq (spending for the cause of Allah) as per Qur’an and Sunnah and its
relevance to the institution of waqf, literal meaning and technical definition
of the waqf, its establishment, consolidation, and various stages of the devel-
opment of waqf. It also provides a historical role of waqf in various periods
in socioeconomic sectors. The scheme of the other chapters of the book is as
follows.
 Introduction and Historical Perspective of Waqf 21

The second chapter figures out the evolutionary aspects of the waqf as an
institution. It gives explanation of waqf as an institution. Besides, a debate
is generated on stages of institutionalization of awqāf, both from an Islamic
viewpoint and from the Western one. The future requirements for the insti-
tutionalization of waqf are also highlighted, keeping in view the UN’s SDGs
2030. Categories of waqf are also explained.
The role of awqāf in promoting entrepreneurship is discussed in the third
chapter. Here, the importance of entrepreneurship for economic development
is elaborated. It also discusses Ottomans’ manufacturing guilds, and their
urban waqf arrangements. A scheme of collective capital accumulation is
explained here as it can push humanity out of an individualistic capitalistic
mindset into the new age of shared market economy. The importance of cash
waqf for entrepreneurship is also discussed here.
The fourth chapter discusses key aspects of socioeconomic development
by awqāf. Here basic concepts of socioeconomic development, the few scien-
tific approaches developed so far, and their implications are included while
stages of development in Islamic perspective are also detailed. The Ottoman
model of capital accumulation and redistribution of wealth is covered here.
The debate is generated for maqāsid al sharī’ah and the western conception
of sustainable development where waqf can have a balancing role.
The fifth chapter is about the role of financial intermediation, fintech, and
other technical developments regarding the potential of waqf. Fundraising
strategies are also explained here. The use of various financial instruments
and institutions including Islamic ones, which collect funds for waqf, are
added. The focus of the chapter remains on the appropriateness of institutions
and instruments for waqf in terms of compliance with Sharī’ah standards in
Islamic finance. Waqf-​based financial instruments include ṣukūk, cash waqf,
al Khair deposits, al-​khair (mutual) funds, and takaful. Methods and issues
of financing, and so reviving, the old waqf properties, are also described. The
chapter also works out the role of the financial regulators (central bank/​SEC),
along with accounts and audits in managing the waqf-​specific instruments
and institutions.
The sixth chapter deals with the management and governance issues of
the waqf organizations. The latest approaches for the management of cor-
porate firms and organizations are debated. The critical aspects of the role
of trustees, the structure of the managing boards, and accountability/​audit
arrangements are detailed. The chapter looks at the aspects and extent of the
interference of government departments. The Ottoman historical records for
management are also discussed, where Qādi was an integral part.
The seventh chapter discusses the present legal frameworks at work in
Pakistan for trusts and awqāf and also provides insights for the future. It also
suggests the future legal requirements of the awqāf. Here, some taxation-​
related issues and restrictive methodologies of the state apparatus are
described. The chapter explains how Sharī’ah-​based legal structure of waqf
emerged over time.
22 Introduction and Historical Perspective of Waqf

The last chapter is on recommendations for realizing the potential of

waqf for shared growth and sustainable socioeconomic development. It also
summarizes the aspects and the potential of waqf with focus on alleviating
poverty, promoting entrepreneurship at micro level, and social inclusion.

1.9 Summary and Conclusion

The broader-​level welfare schemes can be initiated through the revival of
the institution of waqf as it evolved in Islamic societies in the historical per-
spective. Poverty-​alleviation strategies need to be designed that may enhance
social inclusion and cohesion in society. Many waqf-​based humanitarian
and infrastructural projects have been working in the Muslim world such
as establishing orphan houses, springs development for providing water for
public consumption, helping the handicapped and the poor, financing the
marriage of young people, building and operating hospitals and universities,
and building bridges and highways (Zuki, 2012). Perpetuity complemented
by the profitability of the waqf asset could make the waqf institutions sus-
tainable for a longer time to come. Therefore, waqf is more effective when
compared to individual charities, in matching the social targets and providing
sustainable sources of funds to the beneficiaries.
The concept of cash waqf provides innovative opportunities to involve
the well-​off at the micro level. A consensus has emerged among Muslim
scholars about the legitimacy of cash waqf (Abbasi, 2019; Mohsin, 2013).
The founders of cash awqāf could be individuals, institutions, companies,
organizations, NGOs, and public or private sector corporations. Merging the
institution of waqf with that of CSR funds and activities might also enhance
the potential of the welfare schemes and activities of the companies.
Currently, the awqāf in Islamic countries like Pakistan is limited to
mosques, shrines, and graveyards due to the traditional regulatory regime and
the misconception about waqf. It is not surprising to note, therefore, that for
the provision of welfare services, the institutions like trusts, registered soci-
eties and cooperatives, foundations, and not-​for-​profit companies (registered
under section 42 of the Companies Act 2017) lack sanctity that is associated
with the institution of waqf as was witnessed in historical perspective.
Banks and takaful companies can use waqf for social welfare, cooperative
risk mitigation, and promoting entrepreneurship (Abbasi, 2019). Helping
others is an in-​built characteristic in the instinct of human beings. Belief in
Allah and manyfold reward in this world and also the hereafter makes it pos-
sible that a waqf is developed as a grand system of mutual help and sacrifice
for others for shared growth and welfare. Islamic philanthropic institution of
waqf provides solutions to socioeconomic problems and it is requirement for
peaceful co-​survival. Financing as a way of kindness and sacrifice for others
is what made the Islamic civilization a just, beautiful, lasting, and rich in all
respects of human life.
 Introduction and Historical Perspective of Waqf 23

Notes
1 “Man”, as human being, refers to both male and female that have been created
spiritually equal. The Qur’an says: “Those who do good, whether male or female,
and have faith will enter Paradise and will never be wronged … .” (4:124). In the
book, wherever used, “man” will mean any human being irrespective of gender,
color and creed.
2 According to Forbes, most of the mega-​ wealthy are American, for example,
Amazon’s Jeff Bezos, Microsoft’s Bill Gates, Berkshire Hathaway’s Warren Buffett,
and Facebook’s Mark Zuckerberg, who collectively are worth $357 billion.
3 www.sbp.org.pk/​repo​rts/​stat_​revi​ews/​Bulle​tin/​2021/​Sep/​Domes​tic%20and%20E​
xter​nal%20D​ebt.pdf
4 According to Abdeljaouad, the waqfiyya inscription says, “In the name of Allah,
the Compassionate, the Merciful”, the irrevocable inscription begins. Abu Salih
Hayr al-​Hadim (or al-​Khadim) gave as alms his farm in Kafr Tabaria and all his
land in Kafr Kana, by means of an inviolable waqf, which may not be sold or given
or transferred in inheritance or damaged by usury, or modified, for better or worse.
“It is permanently protected in accordance with its fundamental regulations and
the shares assigned to the beneficiaries in whose favor it has been made a waqf for-
ever …”.
5 Dr. Usman of Hamdard University Karachi used the word Sunnah, for waqf, in
Pakistan and in that manner, if waqf, as an institution, is substantially revitalized
and utilized at mass scale, it would be akin to the revitalization of a Sunnah of the
Prophet Muhammad (PBUH).
2 Evolution of Waqf as an Institution
for Socioeconomic Growth

2.1 Introduction
As briefly indicated in the first chapter, the institution of waqf initiated from
the persuasion by Quran that piety or righteousness could be achieved only
by spending what one loves to please Allah Tā’la [for benefit of others (3:92)].
It was to remove the misconception of the Jews about righteousness based
on legalistic approach of their jurists.1 Quran declares that the righteous­
ness is based on the love of Allah and spending in His way and giving one’s
loved assets or goods for ease and welfare of fellow human beings. When
the Companions of Prophet (PBUH) started giving their valuable assets like
orchards and date palms as sadaqah, Prophet’s advice was that the corpus of
the orchard(s) might be kept intact, and their produce be given as sadaqah
to make it a continued source of helping others. Such first waqf by Prophet’s
Companion Abu Talha and his wife consisted of 600 date palms the product
and proceeds of which were meant to help out Madina’s poor (Khan, 2020).
Accordingly, the advice to make the charity perpetual served as the basis
for evolving the formal institution of waqf (‫)و ْقف‬, َ also termed as hubous
(‫) ُحبوس‬, individually by the well-​off Muslims, and collectively by the groups
and the Islamic state. Waqf is considered a system of creating and managing
an inalienable charitable endowment as per Islamic precepts of sacrifice for
others for the sake of Allah (SWT) with an ingrained sense of reward from
Allah and expecting reward from Him. The person making such an endow-
ment on permanent basis is known as a wāqif (the donor).
Although the waqf system is believed to be initiated on Sunnah of the
Prophet Muhammad (PBUH), there are instances, however, that similar
system of donations also existed in the pre-​Islamic cultures. Of course, the
specific full-​fledged Islamic legal form of endowments in the form of waqf
emerged in AD 9th century.
Waqf as a discretionary part of the Islamic social finance system played a
distinct role throughout the centuries in ensuring economic and social sta-
bility as well as financial stability. Commercial capitalism and mercantilism
emerging from Europe and spreading to the whole world in the 19th and

DOI: 10.4324/9781003477549-2
 Evolution of Waqf as an Institution for Socioeconomic Growth 25

20th centuries led to the accumulation of capital and wealth in certain groups
and persons. In this backdrop, waqf, particularly the cash waqf continued to
play its role, as a ribā-​free system, particularly in Ottoman Europe to meet
the basic needs of the society. It, thus, fulfilled the financial needs of priority
sectors of the economy like that of farmers, craftsmen, entrepreneurs, produ-
cers, and merchants through Islamic modes and practices (Bulut, 2021)
Çizakça (1998) indicates that the real potential of awqāf lies in the cash
waqf. Timur Kuran (2001) noted that income generated by the businesses by
awqāf for hundreds of years provided for the maintenance of mosques, soup
kitchens, and traveler and pilgrim inns. In Aleppo, during the 18th century,
a waqf included ten houses, 67 shops, 4 inns for the traveler, 2 storerooms,
several dyeing plants and baths, 3 bakeries, 8 orchards, 3 gardens, and agri-
cultural land, Kuran added. Waqf thus served the objectives of socialization
of the financial system for shared and peaceful growth of human societies
and of Islamic civilization even during the period when the capitalist and the
colonial mindset created an imbalance in the society.
This chapter discusses the elements that made the waqf an institution
which, in turn, helped in socialization and institutionalization of the society.
It also discusses how waqf evolved into a system of financial intermediation
through the tool of cash waqf, or the money waqf.
The provision for cash waqf enables people to contribute for a waqf or to
establish a waqf even if they do not own any real estate. The institution of
waqf can be used effectively in the contemporary world if we distinguish the
perpetuity of an object itself and the dedication of its benefits. It is important
to note that in the case of a waqf only the value capital is to be preserved per-
petually, whereas the investment capital could be transformed into different
types of assets that might be considered suitable for maximizing the benefits
from the waqf (Mohammad et al., 2006).
Further innovations over the last three decades in cash waqf in the form of
different financial market instruments pertaining to charity giving have also
been discussed. It also relates the tradition of charity to the pre-​Islam reli-
gious traditions and compares it with the secular tradition of philanthropy of
the Greek-​Western civilization.
But let’s first briefly discuss the Theory of Institution to discuss further and
explain the institutionalization of waqf.

2.2 The “Theory of Institutions” and Assessment of Waqf as an

Institution
North (1990) defines an institution as a humanly devised constraint that
structures the political, economic, or social interactions. Accordingly, insti-
tutionalization can be further divided into sociological institutionalism,
historical institutionalism, and political institutionalism (Amenta and
Ramsey, 2010).
26 Evolution of Waqf as an Institution for Socioeconomic Growth

Waqf is an institution, if the definition by North (1990) is followed, as it

pertains to both economic and social constraints applied and implemented
by some person(s) on the properties or assets (termed as hubous, or deten-
tion of asset) as we discussed briefly in Section 2.1.2 The hubous here is of a
voluntary but permanent nature, which helps structure social and economic
interactions, if not political ones,3 by providing either immediate assistance
for the poor or through community development projects. As this constraint
is applied on a permanent basis, in most cases, over the donated assets, its
impact on the social assets is long term and cumulative.
North (1990) pushes for the system of exchange and so for the market,
though exchange can also be in voluntary giving and taking. Market-​based
institutions are important for development, but still, before the creation of
profit-​oriented institutions (market), there was something that helped estab-
lish the human settlements. Waqf is one such institution that involves both
informal restraints (the tradition of donating for the sake of Allah on a vol-
untary basis) and formal rules that are devised to create order and reduce
uncertainty (in exchange).4 Beyond-​market segment is an important part of
economies, particularly in Islamic economy. Mutual cooperation and sacrifice
for others or helping others had been a tradition in all human civilizations as
was the tradition of “al-​nahad” for mutual survival in times of trade caravans
in Arab civilization (Ayub, 2022, Ch. 11).
Any institution involving cooperation reflects an important humanistic
attitude that all revealed religions tried to inculcate among the people. The
behavior of cooperation keeps prevailing among humans despite the inven-
tion and strengthening of market and all other institutions. As Islam orders
to “keep cooperating for the acts of goodness and piety”, so the religions
assert for the humanistic inclination for cooperation and spending for others
for communal survival.
Waqf can also be termed as an institution if analyzed from the angle of
being an instrument of durable social interactions, as Bowles (2004) indicates.
Interactions determined by waqf are long term and durable as waqf itself is
a long-​term phenomenon.
Further, it is important to look how the system of waqf evolved, if seen
from the Western lenses of the theory of evolution of an institution. Waqf
developed in Muslim society out of persistent practices, leading to the level
of collective activity in the society, that acquired the level of a tradition and
legal norm, whereby its specific laws were developed. The same stages for the
evolution of institutions have been indicated by North (1990) and Hodgson
(2006) that reflect the importance of “habit or customary practice” in rules
formation.
Waqf is also relevant to the definition of rules. Greif and Laitin (2004)
suggest that rules are “behavioral instructions” through which individuals
choose behavior according to the situations. It is important to understand
here that as per divine instructions only the Prophet(s) [Peace be upon all of
them] can initiate habits or behavioral actions under divine guidance.5 So,
 Evolution of Waqf as an Institution for Socioeconomic Growth 27

habit (in particular, if adopted by a group that can be documented and then
made a rule, acceptable for all the society) is something important and its
impacts must not be ignored. One such customary practice of Muslim society
is creating awqāf.
Accordingly, waqf, a Sunnah initiated by the Prophet Muhammad (PBUH)
is an institution that exhibits an element of institutionalization of “creating
rules” (Stacey and Rittberger, 2003). Waqf, indeed, involves rules for many
of the segments of society –​the poor, donors, state authorities, lawmakers,
financial institutions, religious leaders, and sometimes the nationals living
abroad and the foreigners.
Such rules that helped create waqf-​like institution did not exist before
Islam, while waqf helped create, later, the same sort of institutions/​laws in
all parts of the world. Early jurists of Islamic law were from the third gener-
ation of the Companions and so, the theorizing of the waqf should have been
quite near to the spirit of the practices of the Companions. In that manner,
the waqf’s early laws should provide an original spirit of Islamic civilization
for any institution. So, the documentation and theorizing of the most natural
and genuine tradition into a law means that the preservation of an institution
provides the best possible way for the welfare and socioeconomic develop-
ment of worldly beings.
Waqf is an important microeconomic and macroeconomic tool for poverty
alleviation in Muslim societies (Azad, 2018). At macro level, two possible
causes of poverty are low level of GNP, and uneven distribution of income. At
micro level, a person may be poor because one is unemployed, handicapped,
and so on or just one is born in a poor family and hence is deprived of equal
social opportunities (Foyasal Khan, 2010). In this perspective, an institution
that could be helpful in alleviating poverty at both micro and macro levels is
waqf. Through awqāf, well-​off people in Muslim societies take responsibility
for providing basic needs and financial security for those who are devoid of
resources while expecting to find a return from Allah (Qaradawi, 2008).
It’s believed, therefore, that waqf or assets donated for community devel-
opment ensure social interaction wherein people can utilize the most possible
potential of the assets, besides other uses. The common wisdom should also
suggest that a sincere and honest use of a collective asset with the objective of
fulfilling social responsibilities should have higher level of utility. All this led
to the formation of the waqf as a formal and impactful institution.

2.2.1 The Institutional Characteristics of Waqf

Sacrifice for others and cooperation are the salient characteristics of waqf
that could play a role in mitigating the negative impact of the functioning
of a market economy in terms of available opportunities and distribution
of income. It is to replace the exploitative tools of ribā, gharar, and short
selling for the benefit of the poorest segments of the Muslim society by chan-
ging the spending and consumption behavior of the rich. If it is proved that
28 Evolution of Waqf as an Institution for Socioeconomic Growth

a waqf is a form of cooperation, the very basic institution that provided

the understanding of the word “institution”, then religion is the main game
changer from the unhindered market trends based on self-​centered approach
of capitalism. It highlights the relevance of cooperation for the best social
and economic outcome and sacrifice for others for welfare at a broader scale.
The spirit of cooperation, perpetuity, and inalienability of waqf also added
to the understanding of the institutions for humankind. Hence, considering
the very basic definitions and the characteristics that the earliest jurists
attached to the waqf, these elements were quite important in defining the
nature of waqf. Had it been the case that early jurists ignored these important
elements, the waqf would not have been converted into an institution and
most of the benefits would have remained limited and quite temporary.
In fact, the two properties of waqf (perpetuity and inalienability) ensure
that the waqf becomes an institution for the perpetual benefit of society.
Waqf properties cannot be used even for collateral for getting financing from
banks. In Malaysia, according to Azad (2018), neither the waqf institutions
are eager to use waqf land as collateral, nor are the banks willing to accept
the waqf land because of potential legal problems caused by the feature of
inalienability and perpetuity of awqāf.
Through waqf, the poor and the needy can be provided the most essential
social services without any cost to the government (Çizakça, 1998). While
banks and financial institutions might not provide, as part of their normal
business, the interest-​free loans or financing to the poor who could become
good entrepreneurs, the institution of awqāf can provide an alternative by
involving the well-​off people and financing the micro businesses, SMEs and
the strategic commodity sectors like agriculture, agro-​ based value-​ added
products, and renewable energy sectors.
With the aforementioned characteristic, waqf looks like microfinance
and the recently innovated “syndicated finance”. But waqf-​related financial
support is different from conventional microfinance or similar other schemes
in a number of ways. A crucial difference is regarding the source of funds,
which, in the case of waqf, are perpetual endowments, while generally interest
based, or commercial funding is in the case of conventional microfinance
institutions. This institutional characteristic of waqf provides a basic solution
for poverty alleviation and the creation of job opportunities by encouraging
entrepreneurship, instead of jobseekers in the macro-​level corporate sectors.
The study by SESRIC (2015) presents an “Integrated Waqf-​based Islamic
Microfinance” model comprising components like waqf, microfinance,
human resources, takaful, project financing and poverty alleviation. In this
model, waqf institution is the funding entity, while Islamic microfinance
institution is the “implementing agency”, which also provides takaful and
human resources development programs. The microfinance institution would
also provide project financing facilities through Islamic modes. For fostering
the upgrading of knowledge and skills of the finance recipients, skill-​
development programs have been suggested as a requirement for additional
 Evolution of Waqf as an Institution for Socioeconomic Growth 29

financing. The report of SESRIC (2015) concludes that the model suggested
by it can be a viable alternative tool for poverty alleviation. This model is
shown in Figure 2.1.
One objective of the waqf, from sociopolitical angle, is the governance
of community-​related matters. The governance system had been at action
in waqf since centuries along with its philosophies into the societies of
the Muslim South Asia and Ottoman Europe. Hence, waqf can also help
achieve the objectives of promoting good governance of community-​related
institutions.
A strength of Islamic social theory is clubbing the different communi-
ties and groups in terms of their religious values into one nation under the
constitution. This opportunity may enable the state to serve the masses by
improving governance without compromising on the basic objectives of the
state. It is possible for Islamic countries, therefore, to realize the objective of
a good institutional governance process by promoting waqf as a cooperative
policy action.
Waqf as a beyond-​market institution served as a main source of insti-
tutionalization of the Muslim society and hence to the civilization. As the
benefactors of humankind involving sacrifice for others for the sake of Allah
Almighty, waqfs should be distinguished from the institutions with the motive
of profit, the market. This refers to the self-​sustained and holistic account-
ability in waqf compared to the corporate or secular concepts of account-
ability in business and even the NGOs working in secular perspective, though
with the objective of the welfare of certain groups.
Waqf, being the supportive institution for the State for promoting pros-
perity by reaching out to the poorest and by providing ribā-​free access to
finance, can have far-​reaching impact on economy. Among others, it could

Figure 2.1 Waqf –​Islamic Microfinance and Project Financing Model for Poverty
Alleviation.
Source: SESRIC (OIC), 2015.
30 Evolution of Waqf as an Institution for Socioeconomic Growth

improve the behavioral and business ethics of the society because of spending
for the welfare of the fellow being to please Allah. It will also improve the gov-
ernance quality of the institutions by enhancing the acceptability, improving
the cultural harmony, and providing long-​term solutions to issues created by
poverty.

2.2.2 Waqf and Trust

Waqf and the phrase trust (as used generally for welfare/​social entities),
apparently both are aimed at socioeconomic development. Wynen (1949)
explains that the term “trust” was borrowed from the Islamic term “waqfs”.
Trust was to mitigate the intensity of problems created by capitalism that
divided human societies into two groups –​fewer rich by earning money from
money and other exploitative tools, and the increasing poor. On the other
hand, the economic and social infrastructure that developed under the insti-
tution of (cash) waqf was instrumental in sharing the rents of the waqf prop-
erties, fulfilling the consumption needs of the poor, promoting production,
and providing the capital required by the bottom ranks in the societies for
micro businesses.
The Western civilization, superimposed by self-​interest and capitalistic
paradigm, generated the quagmire of unemployment, abandoned children,
chronic disability, and poverty with unequal wealth as indicated by Bremner
(1956) and Rodgers (1998). It led to the creation of “trusts” in the West.
Further, the concept of waqf is different from the formal or informal charity
that is present in almost all civilizations. The main point of difference is the
waqf’s link with its perpetual and manifold reward in the life hereafter, as we
have discussed in the first chapter. With this objective and the main features
of waqf, any term could be used for the institutions operating for the broader
level and long-​term welfare of the poor, needy, sick, jobless, or even for the
progeny of the donor provided the objective is their welfare in socioeconomic
perspective. One such term used for waqf is “Foundation” as operating in
Türkiye. The acceptance of cash waqf as a valid form of waqf made it easy for
foundations to undertake social-​welfare activities all over the world where
Muslims have a presence. The only requirement for such social spending to
be covered under waqf is the urge to please Allah (SWT), and reward in the
afterworld (Bulut, 2021).
The system of trusts worked side by side with increasing monopolization
through the accumulation of wealth and richness in fewer hands. Waqf, on
the other hand, provided a long-​term and stable tool to spread wealth in the
bottom ranks of all segments of society in an equitable manner with a unique
economic, social, and institutional structure based on the concept of balance
(Bulut, 2021).
Waqf, as a term, cannot be subordinated to the socioeconomic develop-
ment, nor should its objectives be restricted merely to the western frameworks
for development. It is because the trust, the main framework for mitigating
 Evolution of Waqf as an Institution for Socioeconomic Growth 31

the undesired results of the capitalistic system, is taken from the waqf and
not vice versa. Yet, some comparison could be drawn for framework for
socioeconomic development based on the principles of Islamic civilization.
The question is whether the waqf still has something to offer to the civiliza-
tion in the future that the trust could not yet offer.
The answer to the aforementioned question is in a positive direction. As
indicated earlier, waqf as the new institution in human history emerged within
the very 1st century of Islam under the guidance of the Prophet (PBUH) and
his Companions (RAA). Its formal law was introduced during the lifetime of
Imam Abu Yusuf (d. 113 AH). Çizakça (1998, indicated that the legal struc­
ture of waqf funds was established as a firm institution during the second half
of the 2nd century AH, while Abdurrashid (2019) indicated that the legal
formalities completed by the 3rd century or 250 AH with the “formative
period” of waqf.

2.3 Evolution of Waqf in Terms of Activities Covered and Impact

Waqf is an institution for socioeconomic development that contributed
to strengthening the Islamic civilization characterized by doing good with
and sacrifice for others, and cooperation for the betterment of the fellow
beings in the society. Waqf can, therefore, be explained by “socioeconomic
development”, the term used for the provision of food, health, education,
and shelter besides widening the choices for economic opportunities in the
economy.
Accordingly, in terms of objectives, waqf has two dimensions, i.e., reli-
gious dimension and socioeconomic dimension. Religious dimension means
that waqf is regarded as giving one’s property to others with the expectation
of reward in the hereafter. As indicated by Affandi and Nufus (2010), people
are motivated by religious aspects as they expect manifold rewards if they
undergo some religious activities like ibādah including charity for waqf any
time and especially during “Ramadan”, the fasting month. The tradition of
contributing more charity during Ramadan shows the relevance of religious
factors.
Social dimension constitutes sacrifice for others, cooperation, assistance,
and help to the needy as a social obligation. The primary priority of cash
waqf prior to the 20th century was masques (management, maintenance,
and running expenses), education (salary of teachers, provision of books,
etc.), and the needy like orphan, poor, and detainees (Kahf, 2007). Mannan
(2005) contends that waqf funds can be used to provide public (building
infrastructure for public facility) or private goods (utilizing waqf funds for
consumption by the public, as in the case of any natural calamity). According
to Masyita et al. (2005, cf. Affandi and Nufus, 2010), cash waqf funds can
be used for five sectors, namely, rehabilitation of poor, education and cul-
ture, victim of any natural disaster, social service facility, and health and
cleanliness.
32 Evolution of Waqf as an Institution for Socioeconomic Growth

Within the framework of cash waqf, it may have further six schemes. First,
in waqf shares scheme, in countries like Malaysia, Indonesia, and Kuwait,
the trustee issues waqf shares and calls for public contributors who buy
these shares. The amount collected is invested and then its generated rev-
enue is channeled to the beneficiaries. This model financed many projects
such as providing free medical services to the poor and needy, entrepre-
neurship development, and poverty-​ alleviation programs. Kuwait has
established an International Islamic Charitable Organization (IICO) to pro-
vide global humanitarian aids. Through IICO, ten cash waqf schemes have
been established including water wells scheme, educational scheme, orphans’
scheme, and relief scheme.
Second, in Deposit Cash Waqf scheme, the founder contributes to a spe-
cific institution or a religious authority through a bank account. The bank
then invests the money according to the agreement between the bank and
the institution which acts as a trustee. The institution gives the revenues
generated through such investment to the charitable beneficiaries. This kind
of public waqf has been practiced largely in Singapore, Bahrain, and South
Africa to fund a range of programs.
Third, in the compulsory cash waqf scheme, monthly compulsory
contributions are made by Muslim employees depending on their monthly
gross income. These contributions are deducted from their monthly salary
by their employer which is then channeled to beneficiaries. This model is
practiced in Singapore.
Fourth, in a corporate waqf scheme, the founder, which can be an indi-
vidual or a public or private corporation, establishes an Associated Waqf
Institution as the trustee. It then asks its subsidiaries to contribute part
of their profits to the corporate waqf on a regular basis. The trustee then
manages and invests the cash waqf accumulated from different founders,
and the revenue is given off to different specified projects. This public waqf
scheme has succeeded in providing different goods and services in Malaysia,
Türkiye, and Bangladesh. Hamdard Waqf is a good example of corporate
waqf which was established by a family member in India, and it reached
Pakistan and Bangladesh.
Fifth, in the deposit waqf product scheme, a bank acts as a trustee. The
founder deposits money as cash waqf in a specified bank account. The bank,
as a trustee, collects and invests the amount through mudarabah contract.
The revenue generated is utilized to provide services to beneficiaries. It is
practiced by two banks in Bangladesh.
Sixth, cooperative waqf scheme has been practiced in Uzbekistan since
1992. Each district acts as a trustee where the citizens, acting as founders,
contribute money to their districts. The trustee (district) manages and
invests the collected funds, and the earnings are used for different devel-
opment projects within the district. Hence, cash waqf is a powerful insti-
tution that collects funds from different founders to meet the crucial needs
 Evolution of Waqf as an Institution for Socioeconomic Growth 33

of society without depending on the government budget (Mohsin, 2013;

Abbasi, 2012).
Regarding the socioeconomic impact of cash waqf, Affandi and Nufus,
2010) indicated that the potential of cash waqf in Indonesia could be in
trillions annually, which could help the government boost the national
economy and make enhanced allocation for the prosperity of society. It
may also lead to better distribution of income and increase in the consump-
tion level by the masses that, in turn, would boost production capacity in
the economy. The cash received by waqf could be used for any productive
activity, and the produce or return could be used for any social purpose as
per the relevant waqf deed.
Abdurrashid (2019) explores origins and transformation of waqf and
divides its evolution in five stages, namely:

(a) The formative period, till the start of Abbasid period;

(b) The post-​formative period –​from 250 AH/​AD 864 to 648 AH/​AD 1250);
(c) Maturing period –​from 648 AH/​AD 1250 to 1000 AH/​AD 1592);
(d) The transformation period;
(e) The deterioration of the system of awqāf from the middle of the 19th cen-
tury through World War I, when the interest-​based system of lending and
investment became a normal commercial activity in the world including
the Muslim majority areas, many of which were colonized.

Briefly, during the formative period, the definition of the waqf was codi-
fied among various schools of Islamic thought. During the post-​formative
period, waqfs emerged out of cultural and terminological diversity. In the
third period, waqf matured and affected a variety of places and beneficiaries
in Muslim world. At this stage, Islamic societies developed mechanisms to
cultivate an atmosphere of social and financial inclusion of marginalized
segments for the first time in the history of mankind. In the transformation
period (fourth period) issues of concreteness and perpetuity of waqfs began
to be applied to cash, more mobile and useful for new world. The last and
fifth period was of the deterioration of waqfs. In the following, we give some
detail of these stages:

• In the formative period, the term waqf got codified across legal schools of
Islam. It adopted concrete forms of mosques and madrasas. In early stages,
terminological problem emerged, and jurists employed the terms such as
ḥubs, aḥbās, ṣadaqah, ṣadaqāt muḥarramāh, and ṣadaqāt mawqūfāh.
Mālikīs, early Shāfiʿīs, and Ẓāhirīs employed the terms ḥabs or ḥubs (to
retain or detain). Imam Shāfiʿī preferred the Sadaqāt muḥarramāt, or
inviolable charity, and explained that hubs is a term that meant ṣadaqāt
muḥarramāt, a term for waqf. Later Shafie scholars followed that view and
now universally employ the term waqf.
34 Evolution of Waqf as an Institution for Socioeconomic Growth

• Early Ḥanafī scholars also employed different terms and later settled on
waqf as were Hanbalī scholars. Mālikī scholars retained ḥubs instead of
waqf and so ḥubs became normative in North Africa and Al-​Andalus.
Shiah scholars employed both ḥubs and waqf, where ḥubs was not
intended to extend into perpetuity. Islamic arts and sciences flourished
in the same period. Major mosques, madāris, and libraries belonged
to awqāf.
• In the evolution period, waqf expanded from madrassa mainly to many
diverse forms. Many new types and facilities were developed. These
included sufi lodges; construction and maintenance of tombs of scholars;
travelers’ inns; soup kitchens; public baths; famine relief centers, hospitals;
veterinary services, animal fountains; prayer rooms along travel routes;
libraries; public water fountains; orphanages; public baths cemeteries;
kindergarten/​primary schools founded independently adjacent to many
mosques for the primary purpose of teaching Qur’an; institutions devoted
to charitable causes such as feeding the poor, paying debts, the distribution
of gifts on the two eids, and the preparation for burial of the deceased.
• Deterioration period of waqf started in the middle of the 19th century
and lasted until World War I. The waqf system deteriorated due to the
direct involvement of colonial powers and the evolution of interest-​based
finance and investments. Further, waqfs were gradually nationalized as the
Muslim world began the transition to nationalism. Over time, this led to
all waqfs becoming bankrupt and without any operational funding. The
governments proved unable to meet the needs of the public and incapable
of providing the same level of social services as that of waqf and this led to
increasing impoverishment and general neglect.

2.3.1 Nationalization of Awqāf

The awqāf were traditionally administered by the trustees appointed by the

creators of awqāf or any representatives of the beneficiaries. The shift of
waqf management to government started with the establishment of waqf
administration by the Ottoman Empire in 1826, which led to the liquidation
of most Islamic awqāf of that time (Ihsan, H. 2007). Besides, under colonial
rule in the 20th century, the waqf properties and their management were
given under the colonial regimes or their representatives in most Muslim
lands (Ihsan & Ayedh, 2015). Even after the independence of Muslim coun­
tries, waqf properties were controlled as part of the public sector in Syria,
Egypt, and Türkiye (Al-​Jaowhary, 2001).
Turkish attempt for nationalization may refer to the state’s power and
commitment toward the welfare of the citizens. Though there are too many
opinions about the rights or wrongs of the nationalization, the post-​colonial
trend of state control by the Muslim rulers didn’t show a good sign. It nei-
ther was a successful move nor was conducted by a commitment toward the
development of society.
 Evolution of Waqf as an Institution for Socioeconomic Growth 35

2.3.2 Continued Functioning of Awqāf

Looking at the speedy creation of waqf law (to start in the 1st century
and maturation in the 3rd century AH) to take root as an informal (or a
nongovernment) institution seems to be a miracle. It might be because of the
in-​built strength of the system initiated by the Prophet (PBUH) and practiced
by the Companions (RAA) and the next generation(s). It was also due to a
dominant trend in the society that Muslims were not only so generous and
keen to do the volunteer and relief/​rehabilitation work, but rather helped
develop volunteer institutions. It was also an urge of the Muslims to assist
the state functionaries for the welfare of the masses. Another reason could
be that there were many wars in the early periods that rendered too many
orphans, widows, and the disabled. It encouraged the Muslims to build an
institution for permanent care for such segments of the society as waqf and
develop its basic law.
The forms, management rules, and the role of waqf as an institution
have been changing throughout Islamic history due mainly to the changes
in the community’s material and historical circumstances. However, waqf
retained the substance of its sacred and spiritual imperative (Khan, 2020). It
is believed, therefore, that in any form or status of evolution, waqf must fulfil
the following requirements (Khan, 2020):

(a) The wākif, one who endows an asset, or the subsequent manager/​
mutawalli, uses the principal and its proceeds or produce to charity.
(b) The endowment be specifically and legally removed from commodifica-
tion, that is, it is no longer “on the market” (for sales or transfer).
(c) The sole purpose be charitable, with the beneficiary group expli-
citly named.

In the earliest stage of evolution during the time of the Prophet (PBUH),
the proceeds of the endowed orchards/​gardens were used for feeding the poor.
As time passed, the waqf activities covered increasing categories of almost all
kinds of socioeconomic needs of the society. During the crusades, waqf dealt
with war-​related problems like nursing the injured and feeding and housing
the displaced and orphan (Abdurrashid, 2019). While many hospitals and
education centers were managed by awqāf, some commercial centers were
also owned by different waqfs. The Haseki Sultan charitable complex in
Jerusalem in the 16th century owned many shops, a covered bazaar, 2 soap
plants, 11 flour mills, and bathhouses.6
Due to overwhelming status of modern corporations and interest-​based
systems, the potential of waqf remained untapped over the last 200 years.
Going forward, many authors have presented the idea of waqf-​based
microfinance institutions for poverty reduction (SESRIC, 2015). A major
milestone in this respect was evolving cash waqf in the current finan-
cial framework. While the cash waqf had been historically important in
36 Evolution of Waqf as an Institution for Socioeconomic Growth

Türkiye, the concept of cash waqf, stock, and other waqf-​based securities
has been implemented in Indonesia since 2004. Some of the waqf-​related
institutions and instruments established in Indonesia included Indonesian
Waqf Deposit, Centre for Justice and Caring of Ummah, Ummah Daarut
Tauhid, and many other cash waqf institutions (Affandi and Nufus 2010).
A study conducted for SESRIC (2015) indicated a consensus among the
respondents from Malaysia, Indonesia, and Bangladesh that waqf could play
a significant role in providing financing for human-​development programs
related to microfinance and poverty alleviation.
Syndicate finance is another option where finance-​related awqāf could
contribute for promoting start-​ups and entrepreneurship for welfare of the
lower-​and middle-​income groups of the society. Any cash waqf could serve
as an arranger or become a part of a syndicate for financing any project of
social or economic infrastructure. The responsibility of a lead arranger waqf
can also be shared by more than one co-​lead arranger as per the defined terms
of reference of their respective mandate. Such awqāf dealing in syndicated
finance will be subject to the governance and regulatory standards as applic-
able to Islamic finance institutions, and as per the respective regulatory rules
in different markets. Further details about the microfinance and syndicated
finance and SME financing models based on waqf have been discussed in
Chapter 5.

2.4 Taking Waqf to Micro Level

Institutionalization of cash waqf resulted in taking waqf to the micro level
enabling the middle-​income groups in Muslim societies to charitable giving
for long-​term impact. Islam likes every act of kindness and help to others
and manifold reward is promised for such acts of kindness. Specifically,
spending for others does not only fulfill a religious obligation (zakāh)
but also enables purification of the heart and the beautification of one’s
character. Charitable giving with intention to please Allah, whatever the
amount could be, certainly resounds at the deeper level of the soul’s sal-
vation (Khan, 2020). It is based on saying of the Prophet (PBUH), “Kind
words, helping another across the road, removing litter from the street,
showing affection towards spouse, feeding the poor, etc. are considered
charitable in Islam”.
Based on the aforementioned philosophy of spending and sacrifice for
others, cash waqfs could enhance the financial services for micro-​and
medium-​sized enterprises (Lahsasna, 2010). Lahsasna adds that the cash
waqf model can be used as a mechanism through its commercial and finan-
cial aspect to enhance the micro and medium enterprises (MMEs) and facili-
tate their business. As per Malaysian definition, Lahsasna (2010) included
the following sectors in the MMEs: primary agriculture, manufacturing
(including agro-​based), manufacturing-​related services (MRS), and services
including information and communications technology.
 Evolution of Waqf as an Institution for Socioeconomic Growth 37

Cash waqf has the potential to improve the economic growth of Pakistan
economy and play a vital role in the socioeconomic development by allowing
the SMEs, small enterprises (SE), and small and medium start-​ups7 to have
access to the financial services. In Pakistan, for example, enterprises with
annual sales turnover up to PKR 150 million are considered SEs while entities
with annual sale turnover of PKR 150 million to PKR 800 million are the
medium enterprises.
The well-​to-​do persons in the society may pool their funds to jointly create
Corporate Cash Waqfs to create learning and capacity building centers, uni-
versities, hospitals, or the projects of civic amenities like creation of solar
energy for the local population, providing drinking water and sanitary ser-
vices. Currently, many such institutions are providing services, particularly in
education and health sectors under the banner of “trusts” due mainly to the
absence of law and legal and regulatory framework related to creation and
operation of waqfs that certainly have the sense of sanctity and perpetuity.

2.5 Categories of Waqf Based on the Purpose or the Beneficiaries

Various categorizations of waqf have been mentioned by the researchers.
White (2006) has classified waqf into three types: Religious waqfs, Family
waqfs, and Philanthropic waqfs. Farfor (2001) categorized waqf based on
purpose into (i) general or public waqf, (ii) family or posterity waqf, and
(iii) the private or philanthropic waqf. Usufruct of a general purpose or
public waqf is used for a wide range of public interests such as hospitals,
schools, public restrooms, masques, etc. Family waqf implies that usufruct
of the waqf property must be designated for the wāqifs’ children and their
offspring without their right to sell or dispose of the property. Private or phil-
anthropic waqf is for a specific charitable purpose such as poor in a specific
area, or buildings with its revenues to be used for waqf, masques, schools,
etc. Accordingly, there are five broad categories of waqf beneficiaries, viz.,
general public, heirs, religious institutions, educational institutions, public
health, and others (Foyasal Khan, 2010).
Waqf can be created anytime by owner of any asset(s), but in the case of
will (wasiyyah), waqf cannot be of more than one-​third of the wāqif’s wealth
left for the inheritors. Wasiyyah is a gift of property or its benefit subject to
the death of the person doing Wasiyyah.8
Kahf (1998) categorizes waqf on the basis of the output into two
types: direct waqf and investment waqf. Here direct waqf means the donated
assets that generate consumable services or are used directly by beneficiaries.
Such a waqf could be a waqf in the former case, and in the case of one-​time
charity it might not be a waqf. Income or return on investment waqf has to
be used by the intended beneficiaries as per the waqf deed.
To qualify as charitable institution, the ultimate purpose of the waqf must
be of the nature of virtue and piety (Çizakça, 1998). It is the reason that
waqf must be irrevocable, perpetual, and inalienable. According to Çizakça
38 Evolution of Waqf as an Institution for Socioeconomic Growth

(1998) and Abattouy and Al-Hassani (2013), the awqāf system has remark­
able resilience, and many awqāf had survived even for more than a millen-
nium and some considerably longer than half a millennium, and this was due
to inalienability. The nature of the expected benefit or purpose of the waqf
must be clearly stated in the waqf deed or document created by the donor.
Further, law may explicitly provide a framework for cash and corporate
awqāf, including their investment dimension and the list of beneficiaries.
To properly differentiate the public and the family waqfs, the jurists suggest
that where more than 50% of the net available income of a waqf property is
exclusively applied to any common religious and charitable purposes, such
a waqf may be deemed to be a public waqf. Similarly, waqfs where more
than 50% of the net available income is meant for the wāqif’s descendants,
may be treated as family waqf. Ultimate objective of both public and family
waqfs is virtuous, but the nature of beneficiaries is different, and this distinc-
tion has to be taken care of in the law. The law must provide for an explicit
basis of distinction in the case of mixed waqfs. In any case, the waqf law
must provide for proper management of even private waqfs with transpar-
ency and accountability to avoid misappropriation by some at the cost of
the others.
Keeping in view some innovative forms of cash waqf, waqf can be created
for movables, financial and intangible assets, e.g., cash, stocks, ṣukūk and
other financial securities, transportation vehicles, rights on land and building,
rights of leasing, and rights of intellectual property. Cash waqf deposits
are being offered in countries like Indonesia and Malaysia. Affandi and
Nufus (2010) have discussed the Indonesian Waqf Deposit (IWD) from the
foundations of cash waqf. They also identified the amount of IWD’s revenue,
the amount of cash waqf allocation from IWD on productive sectors, and the
amount of IWD’s cash returns waqf fund. The categories and functions of
waqfs of immovable properties and cash are shown in Figure in Figure 2.2.

2.6 Sustainability of Waqfs

Regardless of the category, a waqf has a characteristic of perpetuity, without
which it cannot be considered a waqf. It requires that cash and liquid assets,
fixed assets, and movables must be generating a flow of cash or returns that
could be used for welfare of the beneficiaries. Sukmana (2020) defines the
waqf as an endowment (donation) made by a Muslim under Islamic law to a
fund manager (mutawali/​nazir) who is responsible for generating profits that
are subsequently used to support socioeconomic development. So, a waqf
should be able to generate return over investments.
This is why the old literature of Islamic theorists suggests that waqf has
to be an immovable asset. Cizaka (1998) defined the waqf with the same
characteristics as a privately owned property … endowed for a charitable
purpose in perpetuity and the revenue generated is spent for that purpose.9
So, an element of “investible asset that can generate some return”, along
 Evolution of Waqf as an Institution for Socioeconomic Growth 39

Figure 2.2 Waqf –​Immovable Properties and Cash –​Categories and Functions.

Source: Authors’ own.

with the second element of perpetuity, is described by many of the authors

as important characteristic of the waqf. M. A. Mannan socialized cash waqf
in Bangladesh through Social Investment Bank Limited (SIBL). The SIBL
issued Cash Waqf Certificate to collect funds from the rich, invested the funds
in business and distributed the returns of the managed funds to the poor
(Foyasal Khan, 2010).
40 Evolution of Waqf as an Institution for Socioeconomic Growth

While any act of charitable distribution or act of goodness could be a

noble act, all the acts of the goodness cannot become a waqf. So, in that way,
the direct charity leading to consumption without any possibility of gener-
ating cash through investment may not fall into the definition of waqf, as
Kahf (1998) indicated.
With the advent of cash waqf, the awqāf framework can also be extended
to global level for collection of donations and investments. It would be the
internationalization of waqf. Islahi (1992) contended that the institution of
awqāf needed to be internationalized by encouraging voluntary giving for
alleviation of poverty and welfare of Islamic communities in OIC member
countries and around the world. He suggested that a nongovernment world
Muslim foundation should provide public goods and social services on larger
scale to combat poverty, illiteracy, sickness, and lack of technical know-​how.
Combating the situations created by disasters and calamities could also be an
objective of such global level waqfs.

2.7 The Expected Impact of Waqf and Charitable Foundations

The charitable foundations, historically, have been, a staircase for economic
development, providing basis for building strategic frameworks related to
economic inclusion. Giloth (2019) found that “foundations” help achieve
concrete results in the form of economic development. Muslim rulers were
wise enough to create foundations, across the Islamic history, for the purposes
of education and social welfare. This way, they intended to ensure concrete
economic development.
The slow but steady promotion of charitable foundations in Muslim coun-
tries, after they got independence from the colonial powers, is leading to the
institutionalization of the education, health centers/​hospitals, employment,
and other social-​welfare activities. These foundations have assisted the state
in maintaining social and economic balance to some extent even in the capit-
alistic environment. Without involvement of the charitable foundations and
their contribution, it seems that a state-​based and mass-​level extensive system
of the development would have been quite difficult.
It is to reiterate, based on the aforementioned discussion, that the insti-
tution of waqf, particularly cash waqf, offers a community-​based frame-
work to build a sustainable bridge across the gaps created by operation of
the forces of demand, supply, and competitiveness in market economy. So
far, the philanthropists at individual level and the private and public sector
organizations have not utilized the potential of the cash waqf concept which
could be instrumental in taking the culture of formalized giving at micro
level. The movement in many countries in the Middle East, Indonesia, and
Malaysia during the last three decades is a step-​forward in reviving the concept
of spending for others through waqf. The effort by scholars and practitioners
has revived waqf institutions by developing the financial products for the
improvement of waqf properties.
 Evolution of Waqf as an Institution for Socioeconomic Growth 41

This holistic framework comprising cooperation, brotherhood, care, and

sacrifice for the psycho–​physical enrichment and survival of those among
the mankind who might remain behind due to market forces or any personal
disability could lead to shared, broad-​based, and sustainable socioeconomic
growth in Muslim societies (Azad, 2018). Particularly, Islamic banks and
other financial institution can take some waqf-​related initiatives for pro-
moting entrepreneurship in commodities and energy-​producing sectors, thus
alleviating poverty from society. Islamic banks and NGO/​NPOs like that of
Akhuwat in Pakistan may jointly create such awqāf and involve the well-​off
people in the society.
Promotion of fintech opens another avenue for enhancing the potential
of formalized philanthropy through waqf. Financing to the technology-​
driven SMEs would accelerate economic value creation through investment
in innovative businesses. Another development is creation of awqāf for
“Intellectual Property”. In Bangladesh, some waqfs of Intellectual Property
have been created that consist of copyright of books. The beneficiaries of
such waqfs who own printing presses and buildings are the children and fam-
ilies of the authors (Foyasal Khan, 2010). Capacity building through waqf-​
based learning centers could enhance intellectual capital through creativity,
insights for innovation, know-​how, and management skills. Promoting intel-
lectual capital must lead to intellectual property rights (IPR) such as patents,
copyrights, design rights, or trademarks to the natives for real and longer-​
term benefits for the people and economy of respective countries.
Regarding the current situation in many OIC member countries, of course,
it is difficult to assess the potential of awqāf in alleviating poverty and playing
a role in socioeconomic development. In Pakistan, for example, it seems to
be nil because awqāf are presently serving some religious services to a group
of society without any visible impact toward alleviating poverty. An effective
application of this system with application of modern techniques of financing
might be helpful in cutting government expenditure in all civic sectors.

2.8 Waqf and the UN’s SDGs 2030

Abdullah (2018), like many other authors, finds that most of 17 develop­
mental goals of the SDGs 2030 comfortably match with the long-​term object-
ives of the Sharī’ah and so with those of the awqāf. He discusses some of the
SDGs which are also congruent with the maqāsid al-​Sharī’ah. He also finds
that the awqāf system at global level may have sufficient financial capacity
to help Muslim majority countries to realize some of the most relevant and
urgent maqāsid-​oriented SDGs in a timely manner. Abdullah also provides
a framework for enabling the awqāf system to spearhead the initiative by
Islamic charities in realizing the maqāsid-​oriented SDGs in Muslim majority
countries.
The SDGs pertain to all socioeconomic areas including health, gender,
jobs, and poverty reduction, and are part of a comprehensive global
42 Evolution of Waqf as an Institution for Socioeconomic Growth

agenda to end poverty in a single generation. Particularly, the redistribu-

tive and social equality elements of Islamic social finance, also including
waqf, have an important role to play in realizing SDG1, “End poverty in
all its forms everywhere”, in the world (OECD, 2020). Waqf can also con­
tribute to SDG4, “Quality Education”, SDG6 “Clean Water and Sanitation”,
SDG7 “Affordable and Clean Energy”, and SDG11 “Sustainable Cities
and Communities”. For that, the specific SDGs need to be indicated in the
waqf deeds.
The twin goals of the World Bank Group to end poverty and build shared
prosperity in a sustainable manner that also correspond to the SDGs are the
top priority of any Islamic economy as well. Efforts for realizing the SDGs
could also be helpful in promoting risk and reward sharing and entrepre-
neurship, financial and social inclusion, responsible governance systems and
economic and environmental sustainability.
The OECD conducted a study in 2020 to identify the opportunities that
Islamic finance presents for donors in Arab countries and anywhere in the
Muslim society, as they look to deliver the SDGs. There are opportunities to
accelerate the delivery of the SDGs through the development and use of sev-
eral Islamic finance concepts and tools, particularly the social finance tools
including zakāh, waqf, ṣukūk, and Islamic microfinancing.
There are different estimates of the awqāf assets worldwide. As per OECD
(2020), DinarStandard considered awqāf assets to be $410 billion in 2016,
while the Dubai government estimated that awqāf could amount up to $1
trillion. According to another estimate, assets might amount to $3 trillion,
which, with an estimated return of 5% or $150 billion annually, could be
used for socioeconomic goals. As reported by Shirazi et al. (2017), only a few
developing countries have explored the untapped source of raising revenue
through waqf and zakāh for social welfare and poverty alleviation.
Although there might be some issues from Islamic perspective in a few
goals like those related to gender behavior, but the awqāf system and Islamic
charities might not be facing any problem in education and empowerment of
women while remaining within the basic norms of Sharī’ah.

2.9 Waqf Institution in Pakistan

While taking Pakistan as a case study for this book, four Waqf Ordinances
were promulgated for the four provinces of Punjab, Sind, NWFP (presently
KPK), and Baluchistan in 1979 during the period of General Muhammad
Ziaul Haq (Abbasi, 2019). It was the time when many businesses and service
sectors had been nationalized earlier by the civil government led by Zulfiqar
Ali Bhutto. The main function of the Provincial Awqāf Departments was to
take over the administration and control of the waqf properties to ensure,
as claimed, better management of the properties, to improve the standard of
religious services, to ensure that incomes are used for the original purposes
and to enhance religious education.
 Evolution of Waqf as an Institution for Socioeconomic Growth 43

The Awqāf Department of Punjab in Pakistan had around 37 famous

shrines and 24 mosques under its management. Also, the government of
Punjab had nationalized 276 shrines, 406 mosques, and 483 other properties
as awqāf. It included 73,884 acres of land, 1,741 mosques, and 1,596 shops.
It was also running one hospital and 14 dispensaries under its social-​welfare
program. In Sindh, the Awqāf Department controls around 189 shrines,
mosques, and other attached properties. This department has 10,912 acres
of land and 4,419 units including shops, houses, flats, and plots (Shirazi
et al., 2015). In most cases, the Chief Administrator Auqaf took over the
management and control of waqf property. In the KPK province, the awqāf
department owns 65,108 kanals (8,138 acres) of lad and many shops. In
Baluchistan, the number of waqfs is very small, and subsidy is provided by
the government of Pakistan for running the administrative expenses.
Paradoxically, state regulation of awqāf did not lead to efficient use of waqf
properties; it rather led to institutionalized corruption as is evident from a
number of reported judgments in which officials of awqāf departments tried to
grab waqf properties for their private use (for details about such inefficiency,
see Abbasi 2019). The waqf land was illegally and dishonestly appropriated
by the functionaries of the awqāf department for themselves to the detriment
of the waqf. The land was divided into various plots, which were given on
lease by the Chief Administrator for a period of 99 years at a nominal rent of
Rs. 1 per Marla per month. (After litigations, the court declared the action of
the Chief Administrator in granting lease to its employees to be without any
lawful authority.)

2.10 Summary and Conclusion

The formal journey of waqf as giving for pleasing Allah (SWT), and longer-​
term benefit of the poor and the needy in a society started over 14 centuries
ago from giving one’s loved assets for manifold reward in the hereafter. Real
estate was the form of waqf in early Islamic era, but later other movable,
financial, and intangible assets were included, and the legal framework might
allow and facilitate cash endowments. Later, waqf evolved as a financial
intermediation system and a tool of financing during the second decade of
the 21st century.
Historically, the system served the cause of society in all respect with
morally accountable social ethos of Muslim society as the property donors,
asset owners, and the managers felt spiritually and financially invested in
uplifting the less fortunate. But then it deteriorated as the paradigm of life
and approach of Muslims was changed due mainly to the direct involve-
ment of colonial powers and the progression of interest-​based system of
investments and financing as normal practice of business even in Muslim
societies (Khan, 2020).
Waqf can serve religious, educational, or charitable causes. It also benefits
the community by financing housing sector, schools, and hospitals for serving
44 Evolution of Waqf as an Institution for Socioeconomic Growth

the general public (OECD, 2020). One major milestone covered by the evo­
lution was that of creating the cash waqf by anyone involving the common
man. Waqf properties are inalienable as they have to remain waqf in per-
petuity. Hence, the concept of cash waqf, investment of such funds and use
of returns for welfare purposes resolved many problems enabling the insti-
tution to play multifaceted role in socioeconomic growth of economies and
societies.
As indicated by Abbasi (2019), cash waqf led to further six schemes in
public and private sectors, and at micro and macro levels. It turned the waqf
into a kind of financial intermediation through which smaller amounts of
charities could be channeled into many subsystems of socioeconomic welfare
in education, healthcare, hospitality, and other infrastructural sectors.
As indicated by Timur Kuran, waqf at its height presented a “credible
commitment device to give property owners economic security in return for
social services” and was thus an integral tool for providing public goods
through local trusts.
Awqāf can act as vehicles for both public and private giving if managed
according to the Sharī’ah principles. As long as they are established with a view
to delivering a social benefit to a community, the financial resources can come
from government or private donors, business, and corporate entities. Awqāf can
contribute to social infrastructure in developing economies over a long period
of time, which could be used for humanitarian or development purposes.
Institution of waqf could comprise public, private, or corporate waqfs;
direct and investment waqfs; and social waqfs. The private or family waqf is
the one in which revenues of such waqfs are reserved for the benefit of the off-
spring of the founder. Corporate awqāf could be for welfare of stakeholders
of any corporate entity that could be direct or indirect. Though to qualify as
charitable institution, the ultimate purpose of the waqf must be of the nature
of virtue and piety.
Cash waqf could be an alternative solution amid the inability of govern-
ment in providing even minimum social safety requirements and welfare
facilities for the public at large (Affandi and Nufus, 2010). According to
Lahsasna (2010), cash waqf would promote entrepreneurship and equity-​
based financing of the SMEs. The mechanism of cash waqf could also pro-
vide interest-​free loan (qard hassan) to the SMEs through a safety mechanism
based on trusteeship model, profit equalization reserve, and surplus fund of
the cash waqf.
The 21st-​century innovations of securitization by way of waqf/​al-​khair
ṣukūk, green finance, fintech, and crowdfunding has enabled the policymakers
in Islamic societies to develop the system further to use the waqf institu-
tion for alleviation of hunger and poverty, promoting entrepreneurship and
microfinance for shared and broad-​based growth, and sustainable future for
the mankind.
The well-​off people in Islamic countries who give a sizable amount of
charity, though unplanned, should create awqāf to address the specific needs
 Evolution of Waqf as an Institution for Socioeconomic Growth 45

of economy, while the middle-​income population may donate to different

cash awqāf that different institutions like banking and nonbanking com-
panies and other entities in public or private sectors may create for socio-
economic purposes in the country. The state authorities need to facilitate
giving formal charity, creation of cash waqfs by individuals, banking and
nonbanking institutions, different chambers of commerce, business and
industry for different welfare activities and socioeconomic development,
and sustainable growth (Sukmana, 2020).

Notes
1 Maulana Maududi writes in “Tafheem” in this context, Their notion of “righteous­
ness” consisted of outward, formal conformity to the code, and they evaluated all
day-​to-​day actions, especially the trivial ones, in terms of conformity to that code.
Narrow-​mindedness, greed, covetousness, meanness, concealment of the Truth and
readiness to barter with it lay beneath this veneer of formal piety. www.isl​amic​stud​
ies.info/​tafh​eem.php?sura=​3&verse=​92&to=​92.
2 According to Abdurrashid (2019), “The Prophet (PBUH) instructed the Second
Caliph Umar (RAA) to sequester the principal and devote the proceeds for charit-
able causes, of his property”. Here sequester means to isolate or restrict the prop-
erty from being bought, sold, gifted, or inherited.
3 In the short run, political institutions might not be affected by the changes made in
the economic and social institutions but in the long run many of the political factors
are determined by the changes in economic and social institutions. So, in the long
run, waqf should have an impact on the political institutions. In the “language/​ter-
minology of the institution”, we can say that the political constraints can be altered
by the changes in the socioeconomic institutions also including waqf.
4 Institutions that consist of both informal constraints and formal rules (constitutions,
laws, and regulations) are devised to create order and reduce uncertainty (in
exchange).
5 Homer, the poet, born in 8th century BC, is said to be the first one to identify this
very law related characteristic of Prophets (May Allah Shower His Blessings Upon
Them All).
6 The Endowment Charter (Waqfiyya) of Haseki Hürrem Sultan can be seen at
https://​isl​amic​art.museum​wnf.org/​databa​se_​i​tem.php?id=​obj​ect;isl;tr;mus01;38;en
7 As per SBP’s “Policy for Promotion of SME Finance” launched in 2017, six
Regulations were issued for SMEs and SEs. But then in 2022, SBP provided separate
definitions for the SMEs and the SEs (SBP, 2022). Small and medium enterprises up
to 5 years old are considered start-​up SEs and MEs. www.sbp.org.pk/​publi​cati​ons/​
pru​dent​ial/​SME-​PRs-​Upda​ted.pdf.
8 It is important to note that a will is valid irrespective of its being made in a state of
health or during the last illness, and in both cases the rules applicable are the same
according to all the schools of Islamic law. Of course, if one intends to create waqf,
it must not have any link with the will. In the case of will, the endowment cannot
be of more than one-​third of the wealth left as two-​thirds of inheritance has to be
the right of the inheritors.
9 Murat Cizacka (1998) contends that waqf stands out as one of the major
achievements of Islamic civilization.
3 Promoting Entrepreneurship
through the System of Awqāf

3.1 Introduction
Entrepreneurship is the growth engine in any market economy and the best
tool for broad-​based and shared growth, leading to common welfare in any
society (Durrani & Boocock, 2006). This particularly fits in the structure of
an Islamic economy, the basic goal of which is a just and equitable distri-
bution of wealth for common welfare in the economy. Entrepreneur takes
the initiative to produce, creates job opportunities, and encourages social/​
development activities (Cravoy et al., 2009) resulting in the maximization of
social benefits, as opposed to profit maximization in the capitalistic paradigm
(Ahmed, 2007), and alleviation of poverty (Nixson & Cook, 2005).
As we discussed in the preceding chapter, originally waqf implied donating
any land, building, or property for any religious purposes. Upon advice by
the Prophet (PBUH), Umar (RA) retained the property as waqf (sadaqah
jāriyah) with the condition that it would not be sold, gifted, or inherited,
and to give its proceeds as sadaqah for the poor, kindred, wayfarers, and
slaves. It was the beginning of social welfare to provide a sustainable source
for the poor, needy, and the unemployed. Later, it became an institution for
the general welfare of the public or any specific group of people with a focus
on the poor and the needy, also involving commercial activities based on the
resources of waqf.
It is important to observe that waqf as an institution for welfare did not
emerge in response to socioeconomic issues created by the modern capitalistic
paradigm. It had been there from the very beginning of Islam since the time
of Prophet Muhammad (PBUH) until the last Ottoman Empire (Çizakça,
1998; Arshad & Haneef, 2016).
In the Islamic empire, guilds1 rose from the 9th century in main Califate
cities like Bagdad, Basra, Damascus, Cairo, Samarkand, etc. and developed
strongly from the 11th century. As in Western Europe, the guilds had a
complicated character and had religious, social, political, and economic
functions (Gustafsson, 1987). They had an important role in providing a con­
ducive atmosphere for the entrepreneurs and craftsmen. A unique function of
the craft guilds was that they aimed at giving stable incomes to their members
DOI: 10.4324/9781003477549-3
 Promoting Entrepreneurship through the System of Awqāf 47

and afforded equal opportunities to achieve a standard of living in accordance

with their station. They also controlled the quality of the products with the
aim of guaranteeing a stable market, turnover, and income to their members.
Waqf as a tool for general welfare played a crucial role in Ottoman areas,
Mughal India, and the Malay region. Arab and Indian Muslim traders who
settled in the Malay states also introduced a variety of public purpose and
family waqfs (Alias, 2013). By dint of the juristic innovation of cash waqf, it
involved providing job and business opportunities, rehabilitation from any
calamity, education, and capacity building. Thus, cash waqf worked like a
financial intermediary. If we add up all these functions, it will imply that
waqf served as a tool for promoting entrepreneurship to provide business
opportunities by financing or capacity building, and for providing socio-
economic infrastructure in Islamic societies.
There is a connection between the capitalistic paradigm and poverty.
Elimination of poverty in Islamic countries is not possible without changing
that paradigm to Islamically consistent human resource based societal devel-
opment paradigm and process (Hasibuan, 2010). It would require entrepre­
neurship to be carried out at the micro level to produce goods and services
for use by human beings, rather than serving merely as employees to get fixed
wages or earning money from money on the supply side of finance. Such a
system is human centered using values derived from religious teachings on
sacrifice for others and cooperative risk and reward sharing.
The cash waqfs enabled the Ottomans to run the economy with a coopera-
tive economic mindset and paradigm at a time when the concept of maxi-
mizing self-​interest was the priority. It was based on the Islamic economy’s
contented, selfless, sharing, and participatory behavioral approach for mutual
benefit and social uplift maximization (Bulut, 2021, p. 65). It also enabled
fulfilling the needs of investors and entrepreneurs who wished to act in the
framework of credit and partnership and sharing the concepts of economy
in the areas of finance. The Europe-​centered modern capitalism and mindset
for maximization of self-​interest at any cost penetrated the Asian, African,
and American continents. However, it could not dominate the Ottoman
Empire till its fall in the 1920s, and it was made possible by the institution
of cash waqf.
Muslim societies, particularly the Ottomans, practiced the awqāf system
for social and economic objectives since the 15th century. The objectives of
waqfs were twofold: (1) financing and holding the purposes of the waqf as a
social effect, and (2) extending loans for entrepreneurs as an economic effect
(Bulut, 2020). Financial support for social inclusion as well as entrepreneur­
ship was provided by the cash waqfs. In this respect, the Ottomans’ experi-
ence of support for low-​income groups in the society and enabling them to
initiate any business or production activity through waqf and thus leading to
socioeconomic development had been a golden experiment. The cash waqfs
also offered loans to entrepreneurs in the market (Çizakça, 1995).
48 Promoting Entrepreneurship through the System of Awqāf

3.2 Entrepreneurship in Historical and Wider Perspective

Entrepreneurship reflects an instinctive part of human beings in the process
of establishing a business or an enterprise. This instinct leads a person to be
willing for initiating any economic activity or a business to generate an expected
income at the cost of possibility of loss of his efforts and/​or his physical assets
in the process. The most crucial component in the process of entrepreneurship
is the willingness to bear any risk involved in developing such an activity.
An entrepreneur is a person who establishes a business by bringing together
labor, capital, and natural resources in order to make a profit, manages this
business, and assumes the risk of loss of reward for work and capital. The act
of establishment of businesses is as old as the civilization itself.
Only human beings can be entrepreneurs because it requires a decision
whether to take the risk or face uncertainty involved in the activity. Those
who are willing to take calculated business risks look forward to becoming
entrepreneurs. Conversely, those who are not willing to take any risk in eco-
nomic activity, choose to serve as labor against a fixed wage rate for specif-
ically defined work.
In modern economics, it was after the Keynesian revolution that economic
policy radically changed to focus on wage rate, labor market, and money
market. This moved the concept of entrepreneurship to the “firm” “physical
capital” and to financial and monetary capital that carried interest rates. It
tended to reduce the demand for entrepreneurs for benefit of the owners of
monetary and financial capital, thus increasing the share of monetary and
financial sectors in national income and reducing that of the commodity-​
producing sectors (Ayub, 2022). Above all, the institution of interest did
not allow financial resources to demand small entrepreneurs, particularly in
developing countries.
Entrepreneurs could be primary or secondary. The primary entrepreneurs
conceive and initiate the business, and are ready to bear the risk of loss, in
case the eventuality arises. Their reward is post-​determined, that is, what is
left behind from value added after paying the wage/​rent of the hired factors
of production employed in the business (Ayub, 2022). They put their time,
effort, and resources at stake in the business to bear the loss, if it arises.
The secondary entrepreneurs offer only the usufruct of their resources (non-
human capital), not on hire against fixed rent, but for a share in the profit
(post-​determined) and they also bear the risk of loss.

3.2.1 Determinants or Success Factors for Entrepreneurship

Before we discuss the role of waqf in promoting entrepreneurship, let’s briefly

see the determinants of entrepreneurship in any economy. The researchers have
identified many personal and nonpersonal success factors for entrepreneurs.
The personal factors include, inter alia, willingness to take rational and
calculated business risk, knowledge and tech-​based skills, hands-​on training
for experience, entrepreneurial creativity, honesty, patience, or willingness
 Promoting Entrepreneurship through the System of Awqāf 49

to sacrifice short-​term gains to benefit in the long term, business networking,

persistence, and last but not least, the leadership. These factors certainly
have their impact of promoting entrepreneurship, but here we are primarily
concerned with the nonpersonal factors including financial resources/​financing
and facilitations for capacity building that could be provided by cash
awqāf. Availability of required infrastructure at affordable costs, taxation
and trading policies, stable exchange rate system, and training and orientation
opportunities for innovative businesses and techniques are some general factors
that determine the level of entrepreneurship in any economy.
Figure 3.1 gives a general idea of the determinants of entrepreneurship in an
economy.

Figure 3.1 Success Factors for Entrepreneurship.

Source: Authors’ own.
50 Promoting Entrepreneurship through the System of Awqāf

3.3 Role of Entrepreneurship in Socioeconomic Development

Balanced growth in a broader perspective is the key to any stable and growing
economy. It is possible by promoting entrepreneurship to create wealth at
micro and family levels. Corporate businesses are increasingly widening the
gap between the rich and increasing poor in the national as well as global
economies (Ayub, 2022).
Understanding entrepreneurs from the Islamic perspective, their market,
and providing them the seed capital and working finance on fair and afford-
able terms and conditions has significance for growth and business oppor-
tunities particularly for Muslim countries. It could help their policymakers
accelerate development and reduce the growing inequalities and distributive
injustices that the capitalistic paradigm has created in all economies.
As the trade and business are included in the noble professions in Islam,
Muslims had been instrumental in promoting trade with the objective
of earning valid profits in all parts of world. The historical reality is that
Arabs were entrepreneurs and traders, and the Prophet Muhammad (PBUH)
practiced trade at young age. He married a woman (Khadijah, may Allah be
pleased with her) who was known for financing the trade caravans. Qur’an
allows trading profits (2:275) and mentions the trading custom of Arabs
in Surah Quraysh (106:1–​4). Quraysh were accustomed to the journey for
trading in winter and summer.2 Trading caravans brought them prosperity.
As such, the business was an integral part of Arab society that continued
during the Islamic civilization.
Role of entrepreneurs and the principle of risk and reward sharing in
Islamic framework plays a crucial role in developing factors’ markets and
economies. In this framework, finance/​liquid capital is a risk-​bearing factor
of production and hence encourages human beings to look for entrepre-
neurial activities more than for fixed-​wage economic activity. Accordingly,
the entrepreneurs take the business risk, particularly the risk of loss as their
profit is the net of total proceeds of the business minus the expenses. Hence,
policymakers in all economies of OIC member states must provide condu-
cive opportunities for human resources to become entrepreneurs, rather than
mere wage earners as labor.
Promoting entrepreneurship and the market of entrepreneurs must be
the primary focus in any such economy that has capable human resources.
A policy framework with a focus on promoting entrepreneurship in the per-
spective of the principle of equitable “risk & reward sharing” would help in
understanding “who creates the wealth” and “how wealth is to be distributed
among the factors of production fairly”. It would result in increasing job
opportunities, improved production, shared growth, care for the environ-
ment and sustainable development in the economy resulting in the welfare of
all members of the society.
“Beyond market” institutions and tools of social finance, namely, waqf,
zakāh, and ‘ushr, and supply of qard al hasan in special circumstances are the
 Promoting Entrepreneurship through the System of Awqāf 51

salient parts of Islamic economy that play their role along with the market
economy based on efficiency, competitiveness, and motive of profit maxi-
mization. It would facilitate entrepreneurship in poor families and ensure
the employment of all such persons who could do any value addition to the
processes of production, distribution, and exchange of wealth, as per
the market norms. Those who may not be in a position to add any value
due to any inability would be sharing in the growth process by transferring
payments through waqf and zakāh. The circle of community welfare is thus
completed.
An overarching principle of any economy based on solid social norms
is that while no one in a community should sleep hungry, the bare basic
needs of all pertaining to food, abode, health, and education have to be ful-
filled. The state as well as the rich and affluent are held responsible to ensure
this, and it can be accomplished by promoting entrepreneurship, and/​or by
“beyond market” activities. The institution of waqf is one such tool for enab-
ling fulfilment of the responsibility of community and the state.
In the developing/​OIC member countries, access to finance is a challenge
for micro business and the SMEs, and therefore for promoting entrepreneur-
ship. As Muslims are becoming aware that Islam encompasses all aspects of
life, including financial dealings, Islamic financial institutions, and Sharī’ah-​
compliant financing have evolved over last 50 years. But the role of social
finance in development has not yet been explored. It is particularly the case
of waqf that could take the form of a financial intermediary for financing
the start-​ups in industrial and technological sectors and the new businesses.
Framework for financing entrepreneurs from waqf resources can be developed
in the light of Ottomans’ experience of financing the small businesses from
awqāf. The objective of such a framework would be fulfilling the requirement
of finance for waqf-​based entrepreneurs in Muslim countries and societies.
The most common reason for lower levels of entrepreneurship in developing
countries is the lack of finance. Commercial banks and other development
finance institutions generally do not finance the start-​ups, micro businesses,
and the small enterprises due to lack of collateral with such groups. Here
comes the role of waqf-​based financial intermediaries for the purposes of
business in general and for the social enterprises, in particular.
Waqf is the best tool for realizing the social as well as economic objectives
of any growing economy. According to Lindawati (2019), eight characteristics
differentiate social enterprises from general businesses: (a) social enterprises
have a sustainable social mission in their production activities and services;
(b) social enterprise businesses depend primarily on social funds or donations;
(c) social enterprises are not-​ for-​
profit-​
oriented businesses; (d) social
enterprises’ employees, particularly the higher-​level layer of management, are
paid a minimum rate3; (e) social enterprises rely on stakeholders’ voluntary
actions; (f) social enterprises’ business ideas are often initiated by the group
members themselves; (g) the decision-​making process in social enterprises is
performed through a spirit of togetherness and participation by community
52 Promoting Entrepreneurship through the System of Awqāf

members; and (h) social enterprises do not emphasize profit maximization

but rather economic benefits for the community. It is established, therefore,
that waqf being a social finance institution could be the most suitable tool for
social-​cum-​economic development in any economy.
Waqf can be a good vehicle of entrepreneurship in pursuit of well-​being.
There is evidence that in addition to use of the awqāf system and the waqf
funds for health and education fields, there are many instances of use of waqf
funds to participate in establishment of cooperative housing, industrial com-
panies, libraries, laboratories, and research centers. It thus has a direct effect
on the promotion of economic growth and gross domestic product of the
country (Ariff, 1991).
In many parts of the world, there is now a growing interest in waqf as a
framework of business and entrepreneurship that essentially derives from the
principles of wealth creation (Amuda, 2013). Waqf is well conceptualized
in the context of a business model (Sanep and Nur-​Diyana, 2011; Norinah
et al., 2015), corporation (Muhammad, 2010), as well as social entrepre-
neurship (Salarzehi et al., 2010; Azliza et al., 2013). However, the workable
models of waqf-​based business entrepreneurship need to be further developed
and practiced.

3.4 Entrepreneurship and Waqf Linkage

The historical roots of waqf and entrepreneurship need to be explored to
create an effective linkage between the two and to derive a feasible model.
Waqf system basically required endowments for the purpose of long-​term
welfare with a target group broader than that of zakāh, ‘ushr, or sadaqāt
coming under any obligatory religious levy. From an economic perspective,
waqf implies diverting resources and funds from current consumption to
future welfare through productive and investment activities.
The immovable and real assets of high value are involved in the awqāf
system with the characteristic of perpetuity. Therefore, the waqf-​based wel-
fare function may involve all social and economic activities that could play a
role in poverty alleviation, empowerment of the poor and the weak, health,
education, and civic facilities for the public, providing minimum level abode
for all families, and financing the micro businesses and SMEs. It may lead
ultimately to financial and social inclusion and shared, stable, and broad-​
based growth. All these functions would require organizing the system of
awqāf on both sides of getting resources/​funds in a variety of forms, and the
use of such resources/​funds for entrepreneurship.
Waqf provides flexibility in fund utilization as compared to zakāh which
has to be given only to a specific group of beneficiaries (Qur’an 9:60). On
the other hand, the institution of waqf can be used to provide a wide range
of welfare services to Muslims as well as non-​Muslims, and the beneficiaries
could also be other living beings and the environment. For instance, animal
protection programs and environmental preservation expenditures can be
 Promoting Entrepreneurship through the System of Awqāf 53

provided funds through waqf. Above all, waqf can transform capital into
social and public infrastructure. It provides a permanent social safety net to
the beneficiaries because of its perpetuity nature.
Resources available with the awqāf system would be augmented by the
most effective way of using the immovable properties, investment of liquid
assets of awqāf/​the cash waqfs created at micro and macro levels in the
best possible Sharī’ah-​compliant portfolios in terms of risk and reward.
Other sources for sustainable waqf are voluntary contributions by the
waqf borrowers as in the case of Akhuwat, contributions from the State
institutions working for social welfare/​poverty alleviation like Ehsaas/​BISP
(in Pakistan) and CSR funds of the corporate bodies, part of zakāh and ‘ushr
funds that could be used for specific welfare functions, donations/​charities by
the banking and nonbanking finance institutions, unclaimed properties of the
deceased persons in the society, the “wills/​bequests” (wisāya) as per Islamic
law4 or any other social funds that the State may levy even on non-​Muslim
well-​off persons in the society as part of their social solidarity services.
Encouragements could also be announced for getting qualified donations
(‫)نذر‬/​dedicated amounts of funds for specific purposes of entrepreneurship by
the unemployed and poor.
Islamic banks and nonbanking financial institutions (NBFIs) can play an
effective role in promoting entrepreneurship in an Islamic economy. While
banking institutions will be channeling resources for micro, SMEs, and small
farmers and for projects financing to facilitate the entrepreneurs, the NBFIs
including fund managers, crowdfunding platforms, venture capital (VC) and
Startup Capital entities, Mudarabah, and leasing companies would facilitate
the potential entrepreneurs to start their own production and business set-​up
at micro levels.
For the supply of sufficient funds for the projects, all NBFIs can also be
enabled to provide facilities to get funds from the public on commercial as
well as waqf basis and finance the micro-​level entrepreneurs and specific
small-​scale projects. They will be serving as open-​ended mutual funds funded
by the general investors from the public. They may particularly finance the
socioeconomic projects at micro and local levels. It would lead to an unpre-
cedented model of financial inclusion and hence increase the growth in the
economy. The entrepreneurs may get project financing either directly from
the financier or by issuing any Sharīʿah-​compliant certificates or ṣukūk.

3.4.1 Waqf for Entrepreneurship in Historical Perspective

In this subsection, we shall discuss the role that waqf played during the
Ottomans’ era and in other parts of the world in the past. Waqf, which was
used for supporting the poor, and subsidizing the cost of living in many ways,
was also a source of support for business initiatives. In Ottoman Empire
only, there were already 2,840 waqfs in Istanbul and 485 in Aleppo by the
16th century. In the mid-​18th century, revenues from waqf lands represented
54 Promoting Entrepreneurship through the System of Awqāf

up to 30% of the imperial budget (Çizakça, 2000). Seventy-​five percent of

arable land in Türkiye were waqf lands (Singer, 2008) and a large portion of
this consisted of Miri lands [lands that were given by the state for conditional
public use (Çizakça, 2000).
Historical uses of waqf revenues, by the list of preferences, include
(1) mosques, (2) education, (3) poor, needy, orphans, persons in prisons,
and (4) health services. Mosques being the first use, is the most favorite
and utilizes most of the revenues. Education came in the very beginning,
as recorded by Kahf (n.d.), as a use of revenues where schools (madrasa)
used to have a waqf property having regular revenues. As indicated by Kahf,
Jerusalem had 64 schools at the beginning of the 20th century; all of them
were supported by waqf-​related agricultural and metropolitan properties in
Palestine, Türkiye, and Syria. Of these schools 40 were made awqāf by the
Ayubites and the Mamalik rulers and governors.
Schools might not be considered entrepreneurial ventures because the edu-
cation was not private business; instead, it was voluntary and free education
for everyone. But it comes under the social services. Social enterprises like
support for orphans and the poor are also included among the social services
that have an impact on business and economics as well. Health services can
be considered an entrepreneurial activity. It is because the students (of reli-
gious education) used to learn tibb (medical education) for earnings. Waqf
funds were used to provide free health services but there were formal private
health services. Every waqf providing free health services must have hired the
services of the hakim (doctor), thus providing a job to the medical graduates
and creating the entrepreneur for medical professionals. So, organized med-
ical facilities, most of the time in the urban centers, free for everyone but with
paid work for medical professionals, can be considered an entrepreneurial
activity.
Waqfs of the large agricultural lands in the Ottoman period were indeed
dynamic and diverse entrepreneurs that generated income and vast surplus
and brought the commodities to the market. It provided a stimulus for the
development of the market economy. Besides, the urban waqfs at that time
had their entrepreneurial departments out of which some manufacturing
branches of waqfs were exclusive trader of their niche products. As such,
awqāf helped develop and expand the internal market in the caliphate.
Waqfs could also be considered major credit institution for entrepreneurs
at the Ottomans’ time. It was the largest co-​owner and administrator of urban
property, besides conducting the operations of building and construction. So,
its role was as a financier of urban producers. In the initial few centuries of
the Ottoman caliphate, waqf remained an institution that commanded suffi-
cient capital for investment with the entrepreneurs (Radushev et al., 2003).
Besides generating collective capital, waqf had a role in the development of
the private-​sector development.
Then comes the role of cash waqfs, and incomes of the immovable waqf
assets. All three main kinds of cash waqfs “neighborhood avāriz funds”,
 Promoting Entrepreneurship through the System of Awqāf 55

“artisan guild funds”, and “janissary funds” had enough probability to

finance various kinds of entrepreneurs. There are instances when cash waqfs
were also brought together in a fund pool.
Ottoman cash waqfs are perceived as an institution of capital distribu-
tion, as well as capital accumulation (Çizakça, 2000). The underlying result
seems to be that capital accumulation was not as efficient as required to meet
the financial requirements of the Ottoman caliphate. The strategy of cap-
ital pooling, among various funds, was adopted but the clientele was small
businesses or consumers. Exception, at best, is an example from a European
province of the caliphate, when cash waqfs of Bosnia financed merchants
with major trade capital, as Faroqhi (2004, pp. 225–​239) reported. Besides,
Stefini (2014, pp. 12–​14) observed substantial capital pooling by merchant
partnerships from as many as 15 waqfs.
Most of cash waqf during the last century of Ottomans (1815–​1915)
were established in Anatolia. The late 19th century was characterized by
the rise of small-​scale cash waqfs across the Anatolian provinces. Anatolian
cities had a greater number of cash waqfs with smaller amount of endowed
capital whereas cash waqfs in Istanbul were greater in both number and
capital. It seems that, as foreign banks started making their entry to the
provinces, cash waqfs may have developed a comparative advantage on pro-
viding small-​scale loans at local level. Studies on microfinance confirm that
cash waqfs mostly provided credit to those who lived in close physical prox-
imity to them.
Financing of merchants with “major trade capital” and “substantial cap-
ital pooling” by “merchant partnerships” from a large number of waqfs
provides evidence that Ottoman cash waqfs were not mere source of redistri-
bution of capital but functioned as an institution of capital accumulation, at
least in some parts.5 But the question remains here that why the Bursa cash
waqfs avoided the financing of major trade capital, through substantial cap-
ital pooling for merchant partnerships, while the Bosnian ones were not. It
refers to a focus on micro-​level entrepreneurs against the capitalistic focus on
corporate business emerging at that time.
Some more quasi-​ facts can also be deduced from the articles on
Ottoman waqfs that should help understand the role of waqfs in facilitating
entrepreneurs. Annual funds raised from the returns over the invested lands/​
investments received into the waqfs would have huge volume, and so it
would have been a noncentralized development finance bank of the Ottoman
Empire. Imagine the volume of return from three-​quarters of all the arable
land of waqf in Türkiye.6 The sultans had got fiscal leverage and a system of
successful collective operation (collection, recording, and distribution with
prior plans and approvals) of funds. Indeed, each day should have added
a permanent property/​asset into the waqfs during the five centuries (15th
through 19th). Besides, there was the capital accumulated by urban waqfs.
This collective capital accumulated through waqf was not a tool for exploit-
ation; instead, it was a tool for just redistribution.
56 Promoting Entrepreneurship through the System of Awqāf

Waqf was not mere revenue collection; instead, it was an interactive insti-
tution where everyone used to either donate, receive something or be part of
management or at least get benefit of the facilities created by waqf. So, these
were all the entrepreneurial skills for everyone, the ruler, the manager of
waqf, and the users as well as donors.
Another aspect of Ottomans’ waqf is centralization/​nationalization of the
awqāf system. It will be discussed in detail in ­chapter 6 on management and
organization of the waqf system. It is crucial to indicate here that according to
many authors, awqāf properties were a source of growth for private sector before
the Ottomans resorted to centralism. Kahf (2012) contends in this context:

Awqāf practically became part of the public sector, with all the known
evils of waste of resources, lack of accountability, lack of motivation
to improve performance and efficiency, slow and irresponsive decision
making, favoritism, political interference in management and finally but
not the least moral, financial, and economic corruption.

It implies the issues that authors like Kahf indicated in awqāf after being
nationalized, such as inefficiency and morality.
Regarding the role of waqf in Muslim India, successive Muslim sultans
in India had been very generous in funding awqāf from as early as the 13th
century. With the arrival of Mughal Empire in the subcontinent, in the 16th
century, the scale and magnitude of awqāf grew to unprecedented levels
(Husain & Rashid, 1979; Habib, 1992; Abdullah, 2015). The waqf managed
by the Mughal Empire benefitted mosques, and educational and religious
institutions (Ansari, 1974). However, after the collapse of the Mughal Empire
and the rise of British colonial rule in the Indian subcontinent, in the 18th
century, this socioeconomic institution fell into disarray and lost its potential
growth except in rare cases (Ahmed & Khan, 1998; Abdullah, 2015).
The Mughal rulers of Muslim India were capable of developing an
organized and well-​developed monitoring institution of Sadru-​us-​sudoor that
supervised the waqf assets. But sufis were unable to utilize huge (regular,
sometimes) donations for the betterment of the masses through investments
into entrepreneurship. They could not take the steps that the Ottoman Turks
took regarding waqf. Masses remained impoverished and subdued to the
financial interest of Hindu mahajin, at first, and to the colonial wishes of
the European anger, at last (Farooqi, 1986). Sufi shrines remained on the
highest pedestal of the spiritual powers and enlightenment while the madrasa
scholars never missed the highest grounds of Islamic law in personal lives and
individual piety. However, these traits were not converted into the develop-
ment of the collective lives of the Indian Muslims.
In most of the countries, under the European colonies or in the post-​colonial
regimes, waqfs were controlled by the government for two reasons: (a)
to tame the spiritual leaders, and (b) to take control of the revenues and
 Promoting Entrepreneurship through the System of Awqāf 57

administer the huge number of employees attached to the waqf (Moumtaz,

2021; cf. Gennardi, 1921). Colonial powers were careful enough to initiate
subsequent legislation, after the registration, to ensure that the state subjects
should have a common reference point for obedience.
However, the real issue for either Ottomans or other Muslim countries was
that neither the waqf funds nor the bank finance was utilized for a successful
adoption of the industrial revolution through entrepreneurship. This caused
very high levels of imports vis-​à-​vis exports and so led to the debt crisis.
In recent years, efforts have been initiated in many Islamic countries. In
Pakistan, for example, steps have been taken to promote entrepreneurship
through commercial as well as social channels. Within the social channels,
the Ehsaas program that was developed by the government in 2019 by mer-
ging the BISP, zakāh, and ’ushr and some other poverty-​alleviation schemes
also considered the technical, financial, entrepreneurial, and outreach
support that nongovernment stakeholders could provide to Ehsaas (Barber
and Shahzad, 2022). As a mixed social and economic channel, Akhuwat with
its headquarters at Lahore is running different programs for promoting micro
business and entrepreneurs mainly in the urban areas of Punjab. However,
these socioeconomic activities have no roots in the institution of waqf that
have yet to be explored at conceptual level.

3.5 Possible Modes of Entrepreneurial Finance from the Waqf Funds

While the need for involving waqf in promoting entrepreneurship for
balanced and broad-​based growth in the economy has been established, the
next area to be explored is the mechanism and process of involving waqf for
financing the entrepreneurs from waqf funds.
Islamic banks may not be able to reciprocate adequate finances to meet
the growing SMEs’ demand in developing economies like that of Pakistan.
So waqf funds may be required to step in to finance the entrepreneurs and
micro/​small businesses. The majority of Islamic banking products over the
last five decades have also been developed to cater to certain types of finan-
cing where micro and SMEs are not part of the equation. Islamic banks,
like conventional banks, are attuned to evaluate the repayment capacity of
the borrowers through formal procedures, and the collateral that borrowers
could offer.
Entrepreneurship-​related uses of waqf funds would involve financing the
entrepreneurs based on qarḍ hassan with or without service charge (to cover
the actual cost of managing such financing and recovery operations), credit-​
based murābaha, istisnā’a, and salam sales for working capital finance, leasing
(ijārah) and sale & lease back, project-​based financing by way of istisnā’a-​
ijarah, diminishing musharakah, or any other hybrid financing structures
developed in the light of Islamic principles of business and contracts. In the
following, we briefly discuss the aforementioned options:
58 Promoting Entrepreneurship through the System of Awqāf

(a) Mushārakah-​cum-​Ijārah Product: The cash awqāf and the IBFIs that
would create waqfs could join hands with professional construction,
engineering, and manufacturing companies on mushārakah basis to
produce such assets, energy-​producing units, etc. on building and trans-
ferring on build, own and transfer basis. Such projects could be leased
for medium and long terms. Upon completion of the assets, the same
could be leased against rentals payable to the partners also including the
waqfs based on their shares.
  For providing infrastructure, project-​ specific partnerships of short
duration can be created in which the assets and properties acquired
could be held as community property until the end of the partnership
period. The bank would be acting as one of the co-​financiers and not dis-
tinct from other financiers. It could also be a long-​term venture in which
the bank might provide a portion of the equity of a newly established
firm or buy into an existing corporation. The regulator(s) may deter-
mine the maximum amount of equity participation by the banks/​NBFIs,
and the minimum amount of participation by other partners in the
ventures. The banks could be allowed to sell their shares whenever they
deem it appropriate.
(b) Mushārakah-​cum-​Installments Sales Model: It could be the partnership
of short-​and medium-​term duration in commercial, production, and ser-
vices activities. The banks’ share in the partnership could be sold on
completion to the entrepreneur partner on installment basis with a profit
margin for the financing partner(s).
(c) Istiṣnāʿa-​cum-​Ijārah: An istiṣnāʿa-​ijārah mode incorporates an istiṣnāʿa
contract that applies to the construction phase of a project, and an
ijārah contract for the operations phase. This structure is used com-
monly because the istiṣnāʿ matches the requirements of a procurement
agreement, while the ijārah provides the mechanism for the repayment
of the financing facility.
(d) Wakālah-​cum-​Ijārah Contract: The client is employed as bank’s agent
in accordance with the terms of an agency agreement for project finan-
cing. The client/​agent would procure the design, engineering, construc-
tion, testing, commissioning, and delivery of the assets identified in the
wakālah agreement for the financier who would bear the risk of all the
aforementioned activities. After completion, the project can be leased to
the client.
(e) Salam and Istiṣnāʿa-​Based Financing: Salam and istiṣnāʿa have huge
potential to empower men and women in the handicraft business to sell
their innovative products by e-​commerce through business partners who
are trustworthy and wish to create wealth not only for themselves but
also for the underprivileged men and women in the handicraft business.
Financing based on these modes may enable the poor to become successful
entrepreneurs and financially independent in a few years, provided the
 Promoting Entrepreneurship through the System of Awqāf 59

system is implemented by the regulators and managed with care and

commitment.

Thus, the waqf-​entrepreneurship linkage model could be as per Figure 3.2.

The linkage model conceives that income from the immovable properties
of awqāf and returns on investment of cash waqfs will be pooled, first for
the instant help of the needy, poor in routine, or any groups in problem
due to calamities and disasters. Second, a major part of waqf resources
will be used for promoting entrepreneurship because that would be helpful
in business development, employment generation for poor families, pro-
moting agro-​based industries in all subsectors of farms, cattle, fish and

Figure 3.2 Waqf-​Entrepreneurship Linkage Model.

Source: Authors’ own.
60 Promoting Entrepreneurship through the System of Awqāf

poultry, exports enhancement, and import substitution, thus reducing the

trade deficit.
Lahsasna (2010) has suggested a cash endowment (waqf) scheme for
financing the micro-​level entrepreneurs and other SMEs. The members of
a business association would divert funds from consumption on waqf basis
for investing in productive activities by the entrepreneurs. The donor him-
self could be one of the beneficiaries of the waqf. It will promote economic
activities by providing the following: (i) liquidity to the business sector; (ii)
financing the SME in the industry; (iii) circulating the fund in the market, and
(iv) creating business and employment opportunities.
Flow of waqf funds must be maintained, to make the system sustainable,
through micro-​level waqfs, voluntary (as per Section 42 of the Companies
Act, 2017 in Pakistan) and obligatory CSR funds (as in the case of oil and
gas companies), endowments by the corporate sector, a part of zakāh and
‘ushr funds and other social security funds by the State. The state institutions
may be required to give a part of the zakāh and ‘ushr and other schemes like
poverty alleviation for the awqāf system to promote entrepreneurship even
in the lowest-​income groups in the society. Different awqāf and associations
may also issue “Cash Waqf Certificates” to be taken by corporate bodies
and philanthropists in general. The proceeds of such certificates would be a
potential source for a sustainable waqf-​based financial system for promoting
entrepreneurs (Lahsasna, 2010).
For this, the Small and Medium Enterprises Development Corporation
(SMEDC) may create a cash waqf and appoint a trustee that might also
be required to donate matching amount as a token of virtuous spending
for social causes. The SMEDC waqf will mobilize waqf funds from NGOs,
financial institutions, and state institutions working for social welfare and
poverty alleviation in the country. The cash waqf funds will be invested in
Islamic mutual funds, stocks, time-​bound equity, and other medium-​and
long-​term financing based on murābahah, Ijarah, salam and istiṣnāʿa, cor-
porate ijarah ṣukūk, etc. Profits generated from investments would be used
for financing the entrepreneurs and for providing risk coverage to those
SMEs that might incur unbearable loss due to any calamity or any market-​
related reasons. Cash waqf funds, their returns and their possible uses are
shown in Figure 3.3.

3.5.1 The Financing Contracts and Rates Charged

by Waqfs from the Entrepreneurs

As indicated by Bulut (2016), the cash waqfs in the Ottoman era used
interest-​free methods in credit transactions. Islamic prohibitions set the limits
by prohibiting interest, but it did not mean that the funds were necessarily
return-​free. There had been criticism about the financing methods applied
in cash waqfs as contended by Gürsoy (2018) that cash waqfs were used to
 Promoting Entrepreneurship through the System of Awqāf 61

Figure 3.3 Possible Use of Cash Waqf’s Profits.

Source: Retrieved from Lahsasna (2010, p. 108).

advance credit against pre-​fixed rates based on methods like the ribā. The
rates charged were generally between 10% and 15%. According to Bulut
(2016), as this rate remained stable for years, there was financial stability in
the market, and entrepreneurs while making business decisions could foresee
the finance rates. Further, as the rate charged on such trade-​based financing
was very close to the profit rates in the trade market, it also prevented capital
accumulation in fewer hands. Bulut concluded that the financing rate in the
cash waqfs was one of the factors that prevented the accumulation of capital
in certain groups and persons in the Ottomans’ period.
Cash waqf financing dealings followed two main borrowing procedures
of Ottoman commercial transactions: “Muamele-​i Ser‘iyye” and “Bey” (Sic)
(Gürsoy, 2018). But from late 19th century, the purchase of bonds was started
as reported by Gürsoy (2018). Muamele-​i ser‘iyye was used as a heelah to
avoid ribā agreement wherein money was advanced with an amount of profit,
while there was another transaction of purchase and sale included within the
process of lending, with a pre-​approval of the Qādi (Gürsoy, 2015, p. 68).
The “bey” as Özcan (2003, pp. 69–​70) reports included “bey‘bi’l-​vefa” and
“bey‘bi’l-​istiglal”. Bey‘bi’l-​vefa, a type of sale agreement, where persons
pledged their goods as security in order to get loans from the market. Bey‘bi’l-​
istiglal means receiving the profit and revenue of a property. It is the type of
sale in which an item was rented to the debtor for the purpose of benefiting
from its income (Abdülaziz, 1992). About such tactical transactions as an
effort to avoid ribā in letter, Gürsoy (2018) writes,
62 Promoting Entrepreneurship through the System of Awqāf

The item sold by the trustee to the borrower on credit was returned to
the trustee again by changing hands several times with the inclusion of a
third person intervening the process after the procedure. Here, the item
was sold not at its real value but at a price equal to the accretion of the
borrowed money to be repaid. A person who borrowed from the trustee
1000 kurush at the rate of 15% for 1 year needs to repay 1150 kurush at
the end of the year. The 150 kurush in between was the accretion revenue
of the foundation and, at the same time, the value of the item sold during
the borrowing.

However, as profit-​taking on genuine trade activities is permitted as per

Islamic law, the views that financing was interest is debatable. In case all
requirements of valid trade as per Islamic law are fulfilled, the transaction
and the profit would be valid. Use of juristic tricks to circumvent the pro-
hibition of ribā must have been avoided, and it was responsibility of the
Qādi. It is particularly important in the context of Ottomans’ society that
was sensitive in terms of avoiding ribā due to its prohibition, and that too
regarding the conditions recorded in the “waqf deeds” (waqfiyyahs). If a
person donates his property ever for the cause of Allah, he would not allow
the waqf managers to engage in the interest-​bearing transactions and even
risk of interest (Bulut, 2016).
Of course, such practices have been classified as hila by many authors as
viewed by many in the present-​day Islamic banking operations. The Council
of Islamic Ideology Pakistan in its Report (1980), Jeddah-​ based Islamic
Fiqh Council, Bahrain-​based AAOIFI, the most trusted institution in issuing
Sharī’ah, ethics, and governance standards for the Islamic finance industry,
and Sharī’ah councils in different parts of the world, Sharī’ah boards or
supervisory committees of all IFIs across the world allow charging profit
margin on trade-​based modes of credit or forward sales, namely, bai muajjal,
murabaha, salam, and istisnā wherein the ultimate price of the subject matter
of the sale contract has to be agreed and fixed at the time of execution of the
contract.
All categories of valid modes of business are crucial in economic activities
in any economy (Ayub, 2022). Trade-​based modes and contracts, as accept­
able in the Islamic Sharīʿah, not only complement the sharing modes but also
provide flexibility of choice to meet the needs of different sectors and eco-
nomic agents in the society according to their risk profiles. Murābahah with
lesser risk and better liquidity options has several advantages for financiers
vis-​à-​vis other techniques, though may not be as fruitful in reducing income
inequalities and generation of capital goods, as the leasing and participatory
techniques. Yet, if applied properly they can be helpful in employment gener-
ation and alleviation of poverty.
Ijārah-​ related financing, which requires the financier to purchase and
maintain the assets and afterward dispose of them according to Sharīʿah
rules, requires the financing institutions to engage in activities beyond mere
 Promoting Entrepreneurship through the System of Awqāf 63

financial intermediation. Leasing can be very conducive to the formation of

fixed assets and medium and long-​term investments. This can help in capital
formation in the economy and the institutions including cash awqāf may
resort to this mode for financing of the development activities.
Salam can also be used for financing by any awqāf. It has a vast potential
in financing productive activities in SME and micro-​business sectors, par-
ticularly agriculture, agro-​based industries, and the rural economy. It also
provides incentives to enhance production. Since the seller in Salam gets the
price in advance, he will spare no effort in producing, at least the quantity
needed for settlement of the amount of funds taken by him. Salam can also
lead to creating a stable commodities market, especially the seasonal com-
modities and therefore to the stability of their prices. Further, it would enable
the savers to direct their savings to investment outlets without waiting, for
instance, until the harvesting time of agricultural products, or the time when
they need industrial goods and without being forced to spend their savings
on consumption.
Accordingly, in case the “Deed” of any cash waqf or any landed property,
small or large, waqf provides for financing the SMEs and entrepreneurs from
the waqf funds on any interest-​free basis, financing could be provided by way
of any modes provided the transactions do not involve interest, uncertainty
regarding the subject matter and its delivery, and/​or the price (gharar) and
gambling.
Waqf-​based project financing and fund management can also play a crucial
role in promoting entrepreneurship in the country (Ayub, 2018). Waqf funds,
zakāh and ‘ushr funds, and hajj funds can provide finance for various social,
economic, and religious activities. Such funds would be invested in various
socioeconomic projects like energy supply in a locality, capacity building and
training centers, agro-​based small-​and medium-​level units, and any diver-
sified pool of properties. The “Fund of Islamic Funds” would serve as a
multimanager and might be operated jointly by the regulator’s representatives
and the private-​sector investors to help any fund at the time of dire need for
liquidity. In many cases the properties of awqāf can be securitized through
the issuance of ṣukūk on the usufruct of waqf properties. The proceeds could
be used to expand operations and build new social projects.

3.6 Summary and Conclusion

The institution of waqf achieved its apex during the Ottoman period in
terms of numbers, assets, and the services it rendered to the citizens ranging
from municipal services to religion, education, health, culture, and business.
As a multipurpose tool for social and economic development, it played a
role throughout Islamic history, of course with some gaps due to coloni-
alism and the commercial mindset emerging from the western capitalistic
paradigm. Prophet Muhammad (PBUH) dedicated his awqāf for all welfare-​
oriented purposes including, inter alia, the poor and needy, disaster relief,
64 Promoting Entrepreneurship through the System of Awqāf

the travelers, the migrants, etc. (Cajee, 2022). While educational institutions,
hospitals, and travelers’ inns were included in the waqf beneficiaries list soon
after the Islamic state expanded in AD 8th and 9th century, the Ottomans
started financing the traders, craftsmen businesses, and farmers from the
awqāf funds.
Cash waqfs served the role of financier, granting loans to people in need
of them (Çizakça, 2000). The returns obtained by the cash waqfs were also
channeled to the public purposes determined by the waqf founder ranging
from education to food support for the poor, etc. (Çizakça, 2006). The waqf-​
based structure of Islamic social finance has a broader scope for spending the
funds donated with virtuous objectives for better socioeconomic impact in
terms of shared growth and welfare of the community.
The banking and nonbanking financial institutions operating under the
capitalistic framework are not inclined to finance the entrepreneurial start-​ups
that could activate poor and developing economies for realizing the object-
ives of sustainable growth and shared prosperity. The re-​emerging institu-
tion of waqf can fill the gap as an institution for social and entrepreneurial
finance by generating and providing perpetual social finance. Flexibility in
the rules of waqf enables it to serve beneficiaries directly or through financial
institutions and to provide a wide range of social services.
Balance growth in a broader perspective is the key to sustainability. It is
possible by promoting entrepreneurship for creating wealth at micro and
family’s level. For commercial reasons, microfinance programs in general
usually miss the poor and hence are ineffective in reducing poverty or facili-
tating growth (Saad & Anuar, 2009). “Beyond market” institutions and
tools, namely, waqf, zakāh, and ‘ushr, and supply of qard al hasan will be
facilitating the entrepreneurship in poor families. It will ensure employment
of all such persons who could make any value addition to the processes of
production, distribution, and exchange of wealth as per market norms. Those
who may not be in position to add any value due to any inability would be
sharing in the growth through transfer payments.
Lack of finance and avenues for capacity building for the younger popu-
lation are the major causes of low levels of entrepreneurship in developing
economies, of course, with some other infrastructure and policy-​ related
factors (Haneef et al., 2014). The improved capacity building and health
infrastructure developed with funds from the cash awqāf can enhance the
income-​earning potential of waqf beneficiaries. Developing cash waqf finan-
cing model would improve the financial services for micro-​and medium-​
level entrepreneurs. Based on such financial infrastructure, the micro-​level
businesses and production activities would overcome their financial challenges
and obligation in business and commerce (Lahsasna, 2010).
As most of the Muslim-​ majority countries are developing with huge
debts and debt-​servicing obligations resulting in fiscal deficits, they gener-
ally lack capacity for development spending and financing the micro-​business
and production sectors (Shaikh et al., 2017). Any growth-​oriented finance
 Promoting Entrepreneurship through the System of Awqāf 65

programs for micro business and entrepreneurship in commodity-​producing

sectors also need to provide training, capacity building, and micro takaful
facilities (Obaidullah & Khan, 2008). In the economies like that of Pakistan,
developing the waqf-​based financing framework could be helpful as a comple-
mentary alternative to governments, banks, and financial institutions which
might not be in a position to finance the start-​ups and the entrepreneurs
because of lack of funds and collateral or commercial nonviability.
Cash waqf funds would be invested in diversified portfolios with proper
risk-​mitigation measures and the return thus generated would play a cru-
cial role in augmenting the incomes from immovable properties of awqāf.
The funds thus collected could be used for financing the entrepreneurs on
the basis of all valid modes like qard, in which case the loanees may like to
donate as cash waqf at their discretion, as in case of ‘Akhuwat’ , trade and
leased based contracts and partnership-​based modes, and hybrid structures
while ensuring that every financial contract has proper linkage with the real
sector activity or business based on Islamic law of contracts. Bahrain-​based
AAOIFI has provided the best benchmarks for Sharī’ah-​compliant and feas-
ible contract structures in the form of Sharī’ah standards, the governance
standards, and the ethics standards.
The awqāf would also establish capacity building, training in emerging
technologies, and orientation and awareness centers. Such capacity building
centers may also enable the senior/​experienced professionals such as soft-
ware engineers, engineers in other technologies, and doctors to offer services
through the awqāf network for growth, and welfare of the entrepreneurs and
their families. It has been empirically proved that such professionals are eager
to donate both time and money with welfare objectives (Shaikh et al., 2017).
Unlike zakāh money, waqf funds have a flexible option for investments
and using for either public or the deserving. So, waqf can provide a better
usage for the best allocation of resources. Use of waqf or other social funds
for business entrepreneurial financing has not been a priority in Islamic
society. Of course, there is a possibility that cash waqfs, based on returns
from investment of waqf funds and the immovable waqf assets, are used for
permanent source of earnings for the poor, and the potential entrepreneurs.
Waqf funds may provide a large spectrum of opportunities for developmental
activities. Such activities may include farming, production of goods and ser-
vices, trade of goods for public use and facilitating the government services
or subsidizing the public goods, and many more.

Notes
1 Guilds (naqabat), by definition, were organizations intended to provide a support
network and protect the common interests of their members, craftsmen, traders, or
members of a certain profession generally. These were the pre-​capitalist industrial
organization in Western Europe from the 12th century. These continued up to the
middle of the 19th century when the craft guilds were abolished with the introduction
66 Promoting Entrepreneurship through the System of Awqāf

of free trade (Gustafsson, 1987). So, Ottoman craftsmen’s organizations –​guilds

were the organizations for providing a support network.
2 In summer, they traveled northward to Syria and Palestine, for they are cool lands,
and in winter southward to Yaman, etc. for they are warm.
3 In the capitalistic structure, the difference between the salaries of the top manage­
ment and the employees in lower and even middle cadres is untenably high. It is the
case even in present-​day Islamic banks and financial institutions resulting in unfair
treatment and injustice with the latter (employees) (see Ayub, 2019).
4 According to Islamic law of transfer of property to others, one can write a wasiyah/​
“will” to give, during life, a part of wealth to anyone and for any purpose, with a
condition that transfer will be effective after the testator’s death. Only up to one-​
third of one’s property, not beyond that, could be given so that the rights of the
legal heirs are not adversely affected. Wasiyah can be made only for the benefit of
nonheirs.
5 Here three interesting phrases are used by the author. The words used, “major
trade capital”, if depict the reality, suggest that entrepreneurial activity was a main
objective of these waqfs. Second phrase is “substantial capital pooling” that shows
that there was not a small waqf effort by trading entrepreneurs. Third phrase is
“merchant partnerships” which indicates that these were ribā-​free arrangements.
6 Most of the waqf land was being managed through Timār. Timār was a land tenure
system for the conquered lands that were distributed among soldiers against their
free service in sultan’s army.
 Waqf for Accelerating
4 
Socioeconomic Development

4.1 Introduction
In Islamic history, waqf has been working as the most effective institution
for broad-​based socioeconomic activities with mutual efforts in an organized
way. It facilitated for (re)distribution of resources for social as well as eco-
nomic objectives, with other tools like zakāh, sadaqat, and infāq fi Sabeel
Allah (IFS) (Tohirin, 2010). In the present-​day Islamic world, waqf must be
revived and used as a tool for economic and community-​based services.
Economists may suggest this institution to the policymaking departments
in Islamic countries’ economies to complement the “market” and the State’s
efforts for growth and prosperity with social progress. It will help in the
accomplishment of the responsibility of the state and make the economy effi-
cient and socially inclusive.
The State must provide the means of sustenance, that is, food, clothing,
housing, and such other basic facilities so that everyone may maintain a family
in a befitting way. These are fundamental rights and everybody, irrespective
of race, religion, caste, and class, is entitled to them. The State, the society,
and the individuals are responsible for ensuring that no one sleeps hungry or
is shelterless. The Prophet’s saying, “Each one of you is a shepherd, and all of
you are responsible for your flocks” (Bukhari, 893). It explains responsibility
at different levels. The Prophet (PBUH) encouraged the provision of security
for the widows, orphans, and the poor as he highlighted in one of his sayings:

The one who looks after and works for a widow and for a poor person
(dependent), is like a warrior fighting for the cause of Allah, or like a
person who fasts during the day and prays throughout the night.

Historically, waqf played a role in developing various aspects of society

and the economy (Zuki, 2012). The waqf went beyond meeting the imme-
diate needs of the poor to provide means for long-​term amelioration and
welfare. Çizakça (1998) indicated that from the Atlantic to the Pacific, all
over the vast Islamic world, the awqāf system financed and maintained, for

DOI: 10.4324/9781003477549-4
68 Waqf for Accelerating Socioeconomic Development

centuries, magnificent works of architecture as well as a myriad of services

vitally important for society.
Waqf also played a role in realizing maqāsid al sharī’ah and safeguarding
the Islamic beliefs, values, and culture in the colonized areas of the world.
Bosnia, once the land of waqf, was a great example of this system in Eastern
Europe during the Ottoman Caliphate’s rule (1463–​1878). There, it helped
the Muslims against the constant threat to socioeconomic, political, and cul-
tural problems and eased many of their worries by granting them greater rec-
ognition and protection as opposed to their marginalization by the Roman
and Byzantium empires (Omercic, 2018).
According to Kahf (2003), waqf emanates from principles of the sharī’ah
and Muslim culture. It involves immovable properties like land and buildings,
and liquid waqf, shares and stocks for public utilities, social work, agricul-
tural machinery, livestock, etc. (Omercic, 2018). Although waqfs have served
predominantly for specific religious purposes it has also been used in educa-
tion, health, infrastructure, etc. (Çizakça, 2000; Sadeq, 2002; Kahf, 2003).
Masjid which is waqf for Allah (SWT) has been serving as a “Community
Development Centre” throughout Islamic history (Spahić, 2014).
While conventional economics results in “survival of the fittest” (Pirson
& Lawrence, 2010), broad-​based welfare-​oriented development is ultimately
good for human society and requires the concept of “Mutual survival” of
mankind. This objective can better be served by promoting the culture of
doing charity by developing the system of waqf.

4.2 The Concept and Facets of Socioeconomic Development

Development can be defined as a process of self-​reliant growth, achieved
through the participation of the people acting in their own interests as they
see them, and under their own control (South Commission, 1990). It implies
that the participation of the people for their own interests as they consider,
and under their control is the crucial element in the process and objective of
development.
Human beings by nature are social beings and the opportunity of living in
society does bring several benefits and creates some responsibilities (Hasan,
2007). The development in an Islamic country would require that the growth
process must involve the ethical and social norms of Islam that conform to
the norms prescribed by the divine authority as per the natural requirements
of human society. Therefore, the social sector entailing religious (belief
system), social, and cultural aspects is part and parcel of an Islamic society.
The objectives of such a process would be to eliminate extreme poverty, pro-
vide productive employment, and satisfy the basic needs of all through the
efficient functioning of market forces, and by transfer of resources based on
beyond market institutions (Choudhury, 2009; Ayub, 2022). It is the broader
concept of welfare, which was accepted even by the father of modern eco-
nomics, Adam Smith. Smith [1976 (1837), p. 46] made several points to
 Waqf for Accelerating Socioeconomic Development 69

establish an important link between the philosophical and economic aspects

of his study of man in the society, while constituting a reminder that welfare
should not be considered solely in economic terms.
Traditionally, socioeconomic development refers to the development in
economic and social indicators in an economy leading to the welfare of the
society. It refers to the transformation of the society in an economy about
social and economic dimensions. The significance of socioeconomic develop-
ment is explained by Stemplowski (1987, p. 5). A sufficiently high growth in
GDP, PCI, and other measure of economic growth would be supplemented
by equity and income-​distribution aspects and improvements in the social
indicators. It involves a higher level of efficiency, well-​being, human develop-
ment with humane consideration, and social policy with justice adjusted with
the economic policies.
Social development is the ultimate objective of economic development to
bring about sustained improvement in the well-​being of individuals, fam-
ilies, community, and society at large. Socioeconomic development embraces
changes taking place in the social sphere, mostly of an economic nature
(Chojnacki, 2010). It involves a sustained increase in the economic standard
of living of the masses, normally accomplished by improvement in living
standards in relative terms while keeping in view the social and cultural
norms of any society.
Two basic types or models of the development process can be
distinguished: (1) spontaneous processes, and (2) target-​oriented processes
governed by the activity and behavior of people and designed to achieve cer-
tain specified final states that can be the goals of any development-​related
activity.
Islam provides the second model of socioeconomic development involving
economic as well as philosophical aspects. It not only harnesses the instinct
of self-​interest in line with the market forces that operate with a right and
nature-​oriented discipline but also makes others’ interests competitive to
self-​interest by putting a divine reward of spending for others more than
700 times the worldly reward (Qur’ãn 2:261). Based on this paradigm, the
inner and behavioral part (values system) must be integrated into the outer
life socioeconomic matters. Accordingly, economic thought and practices
must be restructured based on values that are the same in all religions.
Thus, a broader-​level composition of an Islamic economy can be depicted in
Figure 4.1.
For a balanced society characterized by common welfare, Islamic law
provides a framework that creates a desirable balance through efficient
market forces and the best allocation of resources. The state is required to
take remedial measures in case justice is not available to any group or indi-
viduals in society. The tools include both obligatory and optional activities
involving the transfer of resources for creating balance in the society for
peaceful co-​survival. Such optional actions are charities beyond zakāh and
‘ushr, relieving hardships of others, and cooperation for risk and reward
70 Waqf for Accelerating Socioeconomic Development

Figure 4.1 Broader-​Level Composition of an Islamic Economy.

Source: Ayub (2022, p. 277).

sharing at the community level. The voluntary institution of waqf provided

an effective tool for the Ottomans to face the challenge of the rising capital-
istic paradigm of concentration of wealth in the era of colonization. Waqf
was basic to the redistribution policy.
Waqf is a specialized institution for “socioeconomic development” (an
umbrella phrase for broad-​based welfare of society), achieved through the
provision of health, education, and shelter besides widening the choices
for economic opportunities. Community development is the better word
that should be used to reflect the changes that the waqf organizations
can initiate for social inclusion. In this study, therefore, we will elaborate
upon socioeconomic development mainly in the context of community
development.
In line with features of an Islamic economy, as depicted earlier, socio-
economic development leading to balanced and shared growth can be
depicted in Figure 4.2.
Waqf played a role in the development of agriculture and rural economy,
industry and urban economy, and business. The institution was developed
systematically to take care of social, economic, financial, and commercial
needs and even relationships between different stakeholders in the economy
including artisans, entrepreneurs, investors, employees, and even the associ-
ations of artisans and traders called “guilds”. Guilds were part of traditional
Ottoman economic organizations at the time when capitalism was taking its
roots in Europe. In the 17th century, there were several hundred guilds in
Istanbul. During this period, the urban community was literate and innova-
tive and could help keep a balance between the growth of emerging industries
and the system of corporations. Guilds organized the craftsmen by registra-
tion, training, and providing credit. They were part of an effective model for
the development of the economy as an Islamic alternative to capitalism.
 Waqf for Accelerating Socioeconomic Development 71

Figure 4.2 Socioeconomic Development in Islamic Perspective.

Source: Authors’ own.

4.2.1 Waqf Foundations versus Companies: Role in Development

Modern companies/​corporations represent the main pillar of present-​day

capitalistic economies to maximize the shareholders’ value. The waqf-​based
structure, on the other hand, coupled with the Islamic perspective of remu-
neration of various factors of production, tends to maintain a balance in the
distribution of resources among all members of the economy (Ayub, 2022,
pp. 143–​166, Chap. 6). Waqf and trust (as used in present-​day economic
framework) both are aimed at socioeconomic development. As indicated in
Chapter 2, the term “trust” is borrowed from the Islamic term “waqf” (Wynen,
1949). The added feature of “waqf” of course is its religious ground in the
light of which believers are incentivized to spend in the cause of Allah (SWT)
with a sentiment of sacrifice for others’ benefits. Contrary to the present-​
day companies, the most significant element underlying the establishment of
72 Waqf for Accelerating Socioeconomic Development

waqf-​based foundations, movable or immovable, is the idea of social respon-

sibility, cooperation, and common welfare for self-​purification.
The superiority of waqf institution over “trust” stems from the inten-
tion/​objective of the donating person and the perpetuity of a waqf. In its
basic features, waqf is irrevocable, perpetual, inalienable, and unconditional
(Abbasi, 2012). So, it requires an environment that must ensure that a deep
religious intention stays within the framework of the waqf. Therefore, it will
have some conflict with the secular tradition of “trust” and its global as
well as local frameworks. Such frameworks will have to be aligned with the
waqf, in letter and spirit. Otherwise, a superficial comparison with sustain-
able development would cause serious harm to Islamic society.
Waqf foundations pool the resources, as modern companies do. But one of
the fundamental differences between waqf foundations and companies is the
issue of social responsibility that is inbuilt into the former, unlike the latter. It
has been observed that present-​day businesses underestimate social responsi-
bility projects although they perform compact financial operations to main-
tain their existence. However, the focus on profit maximization is resulting
in failures in respect of the social and sustainability factors. The disadvanta-
geous situation resulting from the calculation of the extra burdens that are
likely to be bred by the projects financed by the banks and the NBFIs for
earnings maximization has estranged the businesses from social and envir-
onmental values for many years. Their harmful effects surface afterward and
rise incrementally with each passing day.
In line with the SDGs 2030, efforts are underway to switch to respon-
sible/​greener investments and financing by banks and nonbanking financial
institutions (NBFIs) and funds. However, little success is visible, and it has
been noticed that the bigger banks and NBFIs of developed and industrialized
countries are bigger offenders of the green financing protocols. A recent study
concludes that1

The findings have been calculated by looking at the overall carbon foot-
print of the UK’s major banks, including investment in fossil fuels, and the
proportion of their overall net assets represented by each £1,000 saved by
an individual in the bank.

Accordingly, only a system with an inbuilt discipline like Islam’s social

finance system could help avoid social and environmental hazards.
By virtue of the endowments made on a waqf basis, the support offered to
the poor, widows, and orphans, the sick and disabled, those who are about
to start a business or get married and other needy people reflects the major
function of the Islamic social system. The foundations during the Ottoman
era that served just like the social security institutions or pension funds in our
day also provided for the repair and maintenance of architectural works of
art and infrastructural investments. As a notable indicator of the care for the
 Waqf for Accelerating Socioeconomic Development 73

environment, the underground and overland natural sources in the Ottoman

state functioned as foundation enterprises (Gürsoy, 2018).

4.2.2 Awqāf-​Related Business Associations and Economic Development

Micro businesses, cottage industries, and small business associations may

serve as an effective link among the state institutions dealing with welfare
aspects, the entrepreneurs and business community getting funds from awqāf,
employees, and the donors/​holders of waqf certificates/​al-​khair ṣukūk. This
process would be like that of Ottoman guilds and similar associations that
maintained an effective linkage among the various stakeholders. There were
hundreds of thousands of artisans with skills, expertise, and experience in
all spheres of life. Their scientific education, innovation, and industrializa-
tion of their innovative products could have led to the indigenous industrial
revolution.
But there was no conscious effort to support the innovative options of
the guilds. It was also due to ignoring the power of the collective capital
accumulation by awqāf and the financial support for the innovators at the
community level. It had a cost that the industry in the infancy stages was not
adopted at a collective level by the waqfs and the guilds. Instead, it turned
into a capitalistic move. One such example was contracting the construction
of the railways to European firms. This is how the centuries-​old institution of
guilds was not utilized for development.
Many studies have argued that cash waqf can pool more resources and
ensure wider participation of individual donors (Sadeq, 2002; Sheikh et al.,
2017). The idea of perpetual corporate entities that are based on share cap­
ital/​equity has already been accepted by the Sharīʿah scholars.

4.3 Islamic Perspective of Market Economy and Waqf

An Islamic economy is also a market-​based economy added, of course, by
value proposition and inbuilt disciplines for exchange and nonexchange
dealings. The paradigm and the approach are different from that of capital-
istic liberalism. It tends to make human beings responsible for using carefully
the resources created by nature, and in dealing with others. In other words, it
deals with (i) the market or the exchange economy at micro and macro levels,
(ii) beyond market economy –​also termed as the third-​sector economy which
comprises the benevolent transfer of resources, value-​based social enterprises,
social cum microfinance systems, social business, care for others, etc. (Molla
& Alam, 2013). Specifically, it involves compulsory as well as benevolent
transfers to the poor and the persons of lesser means; and (iii) the cooperative
economy where people share the risks and the fortunes for attaining shared
prosperity. According to Qur’ãn (2:177), the real virtue, in addition to a firm
belief in Allah (SWT), is spending on the near kinsmen, the orphans, the indi-
gent, the wayfarers, and the needy, and in freeing the slaves and keeping up
74 Waqf for Accelerating Socioeconomic Development

the prayer, and paying the zakāh . It highlights the virtuous and cooperative
behavior that Islam cherishes and requires for human society.
The State must protect the life, property, respect, and other civil rights
of all citizens. The state has also to play an enabling role in providing infra-
structure and a peaceful atmosphere necessary for efficient working of the
markets. A hadith beautifully defines the fundamental rights of everyone in
a society, “The Son of Adam has no better right than that he would have
a house wherein he may live, a piece of clothing whereby he may hide his
nakedness and a piece of bread and some water” (Tirmidhi, 2341, 4/​150).
The rulers have to be mindful to fulfill this responsibility as they are account-
able to Allah (SWT) for this. In a famous saying, the pious Caliph Umar (RA)
said, “If a sheep dies on the bank of the Euphrates, Almighty Allah will ask
me about it on the Day of Judgment” (cf. Ayub, 2022, p. 275).
Society as a whole or the Muslim community is also responsible for ensuring
that all people of a community can fulfill their basic needs. According to a
hadīth (Hanbal, 2001, Vol 8, p. 481), if a person in a community remains
hungry overnight, the whole community is removed from the protection of
Allah. It may imply that if a community is not able to provide necessary food
to all its members, a hungry person who commits the crime of theft for food
will not be punished by the amputation of hand.

4.3.1 Consumer and Firm Behavior and the Role of Waqf

The behavior of individuals and firms is crucial in enabling society for real-
ization of the objective of socioeconomic development. Self-​interest at the
micro level is associated to the community’s interest in such a way that indi-
viduals abstain from devouring the others’ rights, while they are eager to
help others in an orderly and formal manner. It would result in an exchange
system based on independent market forces and sharing of resources for the
community’s welfare at a larger level.
Negation of extravagance and consumption beyond required limits would
help in sharing resources for the welfare of all in society. Maximizing wealth
in self-​interest without caring for the just rules of exchange, and then giving
charity in an unsystematic way may not be leading to development with social
inclusion. It highlights the role of waqf, particularly the cash waqf. The act
of creating waqfs gets strength from belief in Allah and the Day of Judgment
(ākhirah). As per a hadith reported in Sahih Muslim, “When a man dies, all
his acts come to an end, except three: ongoing charity, beneficial knowledge
by which people benefit, or a righteous child who prays for him”. It provides
sufficient incentive to rich Muslims to donate their assets to the beneficiaries
or the Ummah for their well-​being.
Rationality in the Islamic perspective is the use of common sense in the per-
spective of normative values. Hence, rationality reflects an attitude of respon-
sibility in behavior while remaining within the limits set by the Sharīʿah and
 Waqf for Accelerating Socioeconomic Development 75

fulfilling the needs of the fellow being. This has to be done to please Allah
SWT and for self-​betterment in this life and the hereafter. Height of right-
eousness can be attained only by serving human beings and spending good/​
loved things for benefit of others (Qur’an 3:92).
There are specific rules for exchanging common goods and that of
money. The most important rules in this context are: (i) one cannot get
the right of others in any exploitative/​illegal way; (ii) there must be com-
plete disclosure and transparency in exchange matters; (iii) money is only a
medium of exchange, not a tradable commodity like other goods; and (iv)
short selling is banned except with the conditions applicable for salam and
istisnā’a sales.
Mutual care by the members of a Muslim society became the basis of
the Islamic legal maxim “al-​dharar-​o-​yuzal” (damage/​harm/​calamity should
be removed/​eliminated). Due to its broader coverage, Islamic socioeconomic
system is unique as developed by the Prophet (PBUH) and the Companions
(RA) who were also the merchants, under divine guidance (wahi). Under this
system, income/​profit can be earned as much as possible, but through legit-
imate means, keeping in view ethical values with complete disclosure and free
consent of the other party to the contract.

Box 4.1 The Basic Principles of Infāq fi sabil Allah

(i) Seeking countenance of Allah with high standard of intentions

and not to expect any favor from anyone in return;
(ii) Spending for increase in self-​purification, not to showoff;
(iii) Patience and self-​contentment expected of the givers and takers –​
deserve before you desire;
(iv) Must be practiced at home first;
(iv) To be paid when others’ need is seen, on time when due;
(v) Proactive behavior –​finding out the needy and making the best
possible use of spending for others;
(vi) Purposive spending –​to accomplish good causes, e. g. poverty
alleviation, treatment of the sick, provisioning of civic facilities
to the deserving class, etc.;
(vii) Inclusiveness –​spending for anyone from the needy like relatives,
orphans, poor, the wayfarers to get reward from Allah (Qur’an
2:215);
(ix) Altruism in charity –​considering that being in a position of giving
in charity is a gift of God and spending for self-​purification; and
(x) Secrecy in charity, the best option of spending; could be open to
encourage others (Qur’an 2:270, 4:114).
(Hasan, 2007)
76 Waqf for Accelerating Socioeconomic Development

While extravagance and conspicuous consumption are discouraged and,

in some cases forbidden (Qur’ãn 7:31), spending generously for the benefit of
others and the society is emphasized and highly appreciated. A Muslim is not
expected to go on increasing its consumption without any limit just because
of an increase in income. “He is not a believer whose stomach is filled while
the neighbor to his side goes hungry”, warned Prophet Muhammad (PBUH)
(Albani, Sahih al Jamie, 5382).
Infāq fi sabilillah (IFS –​virtuous spending in the way of Allah SWT) is
a unique tool for Islamic system, which is not available in the conventional
framework, due to the reward of such spending in the hereafter. A minimum
of such spending or donation is obligatory and is called zakāh and ‘ushr.
Infāq (of wealth for the benefit of others) is part of the voluntary economic
sector. It leads to socioeconomic justice, equality of opportunities to all, and
an exploitation-​ free distribution system. This way, the Islamic economy
integrates values with economic theories and principles and creates harmony
within fellow beings. The inner unity in society brings peace and prosperity
at all levels. The resultant “social inclusion” leads to general welfare in the
cooperative framework.
The basic principles of IFS as indicated in Box 4.1 are fully met in making
endowments or creating awqāf.
The discussion in the aforementioned paragraphs implies that well-​to-​do
people in an Islamic society are responsible for ensuring that all in one’s
neighborhood are fed. An Islamic economy is to ensure sufficient food for all
by prohibiting overeating and lavish style of consumption. It is regarded as
extravagance. The Prophet (PBUH) said,

The Son of Adam will not fill a pot worse for himself than his stomach. It
is enough for one to eat a few bites that strengthen his spine. If he likes to
have more, then let him fill a third with food, a third with drink and leave
a third for his breathing.
(Ibne Ma’jah, 3349)

Accordingly, avoidance of wastage of resources by conspicuous/​ lavish

consumption, motivation to spend for the needy, disclosure and transpar-
ency, and creating market efficiency are the distinctive features of economic
policy in the Islamic framework. It creates an enabling role for charity giving
for the welfare of the society as shown in Figure 4.3.

4.3.2 Potential for Charity Making and Donations for Common Welfare

Islam requires efficiency in creating wealth and justice in distribution. While

efficiency is required for maximization of economic prosperity, equity, equal
opportunities, and fair treatment to and care for all are key to social har-
mony. Beyond market economy has to play a role in creating balance in the
society, while the State has to play an enabling role in this regard.
 Waqf for Accelerating Socioeconomic Development 77

Figure 4.3 Socializing Charity Giving in an Islamic Society.

Source: Authors’ own.

But the economic development neither takes place on its own nor is it
imminent. It requires certain careful, planned, and financed actions. In this
perspective, if the belief and norms of the society are not taken care of, the
results could go wrong due to the social disruption. The social disruption can
be intensified if the concepts, approaches, methodologies, and finances are
borrowed from such foreign and value-​free sources that may create extremely
poor majority with a few ultrarich and cause socioeconomic disruption in
the economy and society. So, waqf, based on the Islamic approaches and
methodologies, having funding from the well-​off citizens in the society and
managed efficiently, may avoid any economic and social disruptions.
It would need an institutional framework for systematic transfer of
resources from the rich to the poor. The objective of such transfer of resources
to the poor can be their permanent rehabilitation, enabling them to do any
business in micro/​SME framework, and not making them parasites and eco-
nomically inefficient.
This tends to promote a wider distribution of food, as individuals are
encouraged to eat what is required. This is the most salient feature of Islam’s
78 Waqf for Accelerating Socioeconomic Development

“beyond market economy” concept, in contrast to the capitalistic approach

of promoting overconsumption –​consumerism.
Social and faith-​based financing tools like zakāh, waqf, and charities are
significant sources of financing that can be better leveraged to alleviate human
suffering and reduce vulnerability. As a part of faith in the hereafter and many-
fold reward of spending for others, Muslims donate generously to Islamic
social finance mechanisms (World Humanitarian Summit – WHS, 2016).

4.3.3 Cash Awqāf for Common Welfare

Ahmed (2007) indicated that cash waqf and waqf ṣukūk or certificates could
be used to mobilize capital for awqāf. Besides charity of perpetual nature and
casual giving by the public, other sources of fund for awqāf-​related activities
and projects could be the government institutions dealing with poverty allevi-
ation, charitable entities, NGOs working for social welfare, and social fund-​
raising schemes by various groups in the society. CSR-​related allocations by
banks/​ financial institutions and other corporations, Islamic Development
Bank (IsDB), World Bank, and other international development institutions
could also be helpful in supply of necessary funds for the awqāf.
Sadeq (2002), while proposing an integrated approach to alleviate pov­
erty, suggested that waqf institution could issue two types of certificates, that
is, of high denomination and low/​medium denomination. He refers to the
macro and micro instruments to raise funds for growth and development.
The institutions and individuals would be buying these certificates according
to their saving capacities. By this, the waqf institution can pool cash funds
and finance-​development projects on sustainable basis. Takaful reserves and
profit-​equalizing reserves can be introduced as a safeguard for the benefi-
ciaries in the case of loan defaults caused by any unforeseen events.

4.4 Waqf for Socioeconomic Development in Islamic Cooperative

Perspective
Islamic economy seeks to ensure equitable distribution of wealth through
its social support system (Hasan, 2007). The four areas of support and
cooperation are: (i) takaful within the family –​provision of maintenance
including food, health, clothing, housing, education, marriage support for
close relatives, and inheritance and bequests; (ii) takaful within the commu-
nity through zakāh; (iii) cooperation among small groups and associations of
neighbors and local residents; and (iv) voluntary charities and endowments/​
waqf.
Waqf served as a tool for general welfare throughout Islamic history. The
Ottomans’ experience of support for low-​income groups and enabling them
to initiate any business or production activity through waqfs had been a
golden experiment. Cash waqf also facilitated in providing job and business
opportunities, rehabilitation from any calamity, education, and capacity
 Waqf for Accelerating Socioeconomic Development 79

building. It would imply fulfilling the basic needs of all enabling them to add
value one way or the other to the community cause.
Poverty is the most serious social problem and waqf can play effective role
in reducing poverty. Tariq Khan (2015) has indicated seven problems of pov­
erty that could be meted by the waqf system. These include (i) hunger –​mal-
nutrition (shortage of food leading to ill health); (ii) ill health –​inadequate
levels of health, lack of medical facilities, medicine, and nonhygienic life; (iii)
lack of education and educational opportunities; (iv) lack of shelter, clothing,
and empowerment; (v) lack of economic opportunity, economic resources,
and lack of income; (vi) lack of water (for drinking, sanitation, and irri-
gation), public utilities, social welfare, and deficient social relations, poor
social, and cultural life.
During the last couple of decades, waqf also turned out to be a con-
tributory tool for bridging infrastructural deficit. With this feature, waqf
can be used for promoting entrepreneurship to provide business oppor-
tunities for employment generation, import substitution, enhancing export
potential, and thus realizing the objective of financial and social inclusion.
Application of waqf in social and economic sectors like health, education,
civic facilitation for urban population, financing the rural economy and
commodity-​producing sectors at micro, small, and medium levels could
revolutionize the economy of the OIC member states. In the following, we
discuss all these aspects in detail.

4.4.1 Economic Role of Awqāf

Development is based on an inquiry about political economy, “whether the

goals of the economic system should be focused upon the exchange value
(profit centered production-​oriented market based capitalistic system) or
upon the use value (impact on people and prosperity for all)?” If capitalistic
system is preferred, then the market decides whom to benefit and whom to
exclude. Here, development targets, like the framework of waqf and even the
SDGs, would be subordinated to the market.
However, the state institutions have to ensure the development for all
and not to leave all the decisions on the impulses of the market. A group,
in the market, might be getting an increasing share in the wealth and
created resources due to any fair or unfair means, while the others might
be increasingly devoid of even the basic needs for life. So, the conflict is
basic that requires an ongoing review of the results of the market forces
while deciding to ensure the aims and objectives of the welfare state and
change the implementing strategy as and when needed. It would need effi-
cient function of beyond market or the third sector of economy for transfer
of resources to achieve the objective of fair, just, and equitable distribution,
and shared growth. The focus of the strategy would be creating a balance
between efficiency and social justice while ensuring that economic values are
not superimposed on the social values.
80 Waqf for Accelerating Socioeconomic Development

It implies that for effective role of any system like that of waqf, the pre-
sent paradigm of maximization of self-​interest at any cost will have to be
replaced with society’s norms and value system. Socioeconomic emergence
marks a real turning point, passing from a poor economy to a better with a
balance of efficient, equitable, and sustainable growth. Rostow’s five stages
(1960) for moving from a traditional society to maturity and the age of
mass consumption may explain it with the added element of community’s
role for social cohesion through the beyond market norms and institutions.
A voluntary sector of waqf is basic in this perspective, to the redistribution
policy.
Waqf solves the problem of the undersupply of public goods (and ser-
vices). Cizkca (1998) reports that the essential services such as health, edu­
cation, municipal services, etc. were provided through waqf at no cost to the
government. As such, awqāf can significantly contribute toward reduction in
government expenditure, and so toward reduction of budget deficit. It lowers
the need for government borrowing thus curbing the crowding-​out effect and
may lead to a reduction in money market rates consequently reining a basic
impediment for private investment and growth, Çizakça adds. Thus, the
waqf system can significantly contribute toward that ultimate goal of every
modern economy.
Çizakça (1998) also contends that awqāf system can provide basis for
gradual elimination of ribā and such enabling role of waqf should be given
serious consideration in countries like Pakistan that have to transform their
economies to Islamic principles as per their Constitutional requirements and
the Shariah court’s judgment (Federal Shariat Court, 2022). Islamic banks,
having higher levels of interaction with the real market with the Islamic
financial products will have better probability to survive during all good/​
bad times. Islamic financial products have better appeal for the market being
Islamic and then having favorable terms for the producers. So, ribā would
be eliminated over the time from the market or will become a useless instru-
ment, having no real impact on the financial markets.

4.4.2 Waqf and Community Development

Waqf is a crucial tool for ensuring social justice system of Islam (Samiul,
2007). It is comparable to the state’s welfare departments, or even more,
sustainable, durable, and beneficial for the community, if looked at from the
angles of institutionalization, because awqāf institutions continue from one
government to the other, without any unwarranted interference by political
governments.
Community development and SMEs’ development are the two main
approaches adopted for the socioeconomic development. This approach of
socioeconomic development is close to that of the community development
that is “pursuit of solidarity and agency by adhering to the principles of self-​
help, felt needs, and participation” as indicated by Bhattacharyya (2004).
 Waqf for Accelerating Socioeconomic Development 81

The waqf-​ provided finances are injected, by default, to (1) the most
deserving people for instant needs, education, and health, and (2) small
farms and entrepreneurs that ensure uninterrupted production of goods and
services at reasonable rates for the urban population and thus reducing the
inflation. The support through financing (and skills) through waqf projects
is durable and sustainable. It is provided for the poor and the skilled (or for
those ready to improve skills) who utilize funds for permanent employment
(self-​employment) and production. It may lead to the resolution of issues
including (i) employment of masses to the most appropriate levels, (ii) best
use of the available financial resources that remain underutilized in most of
the developing countries due to the lack of trust (among the banks and the
entrepreneurs) and due to the lack of implementation of finance related legal
frameworks and injustices prevailing at the ground levels, and, last but not
least, (iii) production of necessary goods and services at the most affordable
prices. It serves the purpose of community development at grassroots level.
Production and enhancing the level of supply (of goods and services)
can ease down the inflation pressures. Small farmers and firms financed by
awqāf, unlike the big corporate entities, can undertake immediate productive
activities utilizing local solutions to produce the required goods providing
employment at community level. This can lead to reducing the impacts of
recessions and inflation for the common people.
Awqāf Properties Investment Fund (APIF) managed by the Jeddah based
IsDB on mudarabah basis is an investment platform with social impact.
Usually, the awqāf ministries, directorates, and institutions, Islamic banks
and financial institutions, donor institutions, and individual investors pro-
vide subscription capital to the APIF. This funding is helping women and
young people in Bangladesh with training to develop skills, and a small grant
to help them set up their businesses. The training provides knowledge of
the business, and reduces the negative impact of discrimination, and human
rights (Awqāf Properties Investment Fund, 2022).
In the following, we discuss the role of waqf in community development
in specific sectors like education and health.

Waqf’s Role in Enhancing Education in Muslim Societies

Ghani et al. (2019) indicate that educational institutions established under

the concept of waqf include mosques, schools, and universities.2 Since the
beginning of Islam, in the early 7th century, education has been financed
by voluntary contributions and waqf. Through waqfs, all students, be a
poor or a rich, had opportunities available for self-​development and know-
ledge. Government financing of education also used to take the form of
constructing a school and assigning certain property as waqf that provided
regular revenues to cover the operating expenses of the school.
Awqāf of the Ayubites (1171–​1249) and the Mamalik (1249–​1517) in
Palestine, Syria, Lebanon, and Egypt are good examples. Islamic cities like
82 Waqf for Accelerating Socioeconomic Development

Cairo, Baghdad, al-​Quds, and Nishapur were relics of waqf-​financed educa-

tion. The 9th-​century University of al-​Qarawiyyin in Fez is the oldest existing
university in Morocco. Excellence was exercised by many Islamic institutions
like al-​
Azhar University (Mujani, Abdullah, & Bakar, 2012) and public
institutions of Malaysian higher learning (Mujani, Muttaqin, & Khalid,
2014), to name a few.
Waqf financing of education usually covered libraries, books, salaries of
teachers and other staff, and stipends to students. Financing was not restricted
to religious studies; it covered all branches of knowledge including science,
philosophy, and translation of books from other languages. In addition to
freedom of education, this approach of financing helped creating a learned
class not derived from the rich and ruling classes. At times, the majority of
Muslim scholars used to be coming from the poor segments of the society
and very often they strongly opposed the policies of the rulers (Kahf, 1992).
Caliph al-​Ma’mun made a vital change in the institutionalization of the
waqf by giving an important concept of “agency endowment”. Al-​Mamun
argued that the continuity of educational/​scientific activity was not dependent
on philanthropic rulers only, but also required public support (Ashrohah,
2012). Agency endowment meant the establishment of independent waqf
organizations with the financial support from rulers as well as from public
philanthropic donations. It resulted in establishing scientific and cultural
institutions that can be termed as permanent endowments, or the independent
awqāf that were neither under the state nor under the clergy. These served as
purpose-​guided (educational and scientific studies) waqfs, supported by the
state, ‘ulema and the public. Many of these took the form of family waqf.
The advent of the independent “agency waqf” and the “family waqf” was a
key aspect of institutionalization of waqf, which took the form of “trust” in
the western civilization. The socioeconomic value of this change in the nature
of the waqf has yet to be understood, in full.
The educational institutions and systems of pondok in Malaysia in 15th
century and madāris in Pakistan and India by Muslim rulers since the begin-
ning of the 8th century after the conquest of Muhamad Bin Qasim and Arab
countries point toward the inevitability of the waqf for the Muslim society.
Malaysia had waqf practices among the earlier Muslims when pondok and
madrasah (religious schools) were founded on waqf land. Examples include
Madrasah Hamidiah (now Maahad Mahmud) in Kedah, Madrasah al-​Sultan
Zainal Abidin (now a university) in Terengganu and Kolej Islam Malaya
(now Kolej Islam Klang and Kolej Islam Sultan Alam Shah) in Selangor
(Khoo, 1980; Mohd Syakir et al., 2015 as reported in Mujani et al., 2017).
The nationalization of these waqf institutions by the government caused a
disruption into the tradition of waqf.
Currently a variety of waqf-​related activities for promoting education are
undertaken in various parts of the world. The sources for waqf-​funded edu-
cation in Malaysia, Indonesia, Türkiye, and the United Kingdom comprise
cash waqf, business activities by awqāf/​trusts, and allocations by government
 Waqf for Accelerating Socioeconomic Development 83

and respective alumni. Pitchay et al. (2018) and Mahamood & Rahman
(2015) indicate that waqf funds are alternative sources of funding for uni­
versities which could reduce the burden of the government in supporting
the university’s expenses. This type of waqf is important in providing the
financial assistance to the community and also strengthening the academic
quality of the students. In Malaysia, the instruments of cash waqf are used
to solicit donation from public raised either through salary deduction via
electronic means or by setting up special fund for education purposes such
as research, development, providing education facilities that benefit the
students, and so on.
In Bangladesh, the “IsDB-​Bhaban” building is a waqf property of the
Islamic Development Bank and Bangladesh Islamic Solidarity Education Waqf
(IsDB-​BISEW) estimated to be worth $50 million. The complex has been
rented out allowing the waqf to earn stable financial income. For the year
2018–​19, the gross income of the complex was approximately $4.56 million.
It has enabled IsDB-​BISEW to have a sinking fund of $10.68 million. The
waqf allocates about $1.23 million each year for educational and human
resource development purposes and to support the programs including
(i) the IT Scholarship Program, (ii) the Vocational Training Program, (iii) the
Madrasah Program, (iv) Scholarships for 4-​Year Diplomas in Engineering
Program, and (v) the Orphanage Program. These programs have served over
42.5 thousand beneficiaries, creating over 6.5 thousand job placements.
The IT scholarship program is to transform unemployed non-​IT university
graduates into a productive workforce. The Vocational Training Program
aims to help high school dropouts and boost their abilities to create jobs in
the fields of electricity, mechanics, and welding and fabrication. It is also
to create opportunities for Vocational Program graduates of the Madrasah
Program to complete 4-​ year Engineering Diplomas in government poly-
technic institutes by providing necessary expenses. Waqf also helps in several
running courses for orphans of the Khaiyarbhanga Orphanage in Madaripur.
In Iran, Pakistan, India, Khurasan, Transoxania, and Afghanistan,
madrasahs were also endowed with permanent sources of income, such as
land, or rent-​bearing urban property, set aside in perpetuity. These waqfs
paid the salaries of the faculty and stipends for students. In Bangladesh, more
than 8,000 educational institutions have been established on the basis of
waqf as reported by Salarzehi et al. (2010).

b) Awqāf for Health Facilities

Other users of waqf revenues include health services which cover construction
of hospitals and spending on physicians, apprentices, patients and medicines,
and medical pharmaceutical research. Hospitals and medicines had been the
most famous subsectors of awqāf (Ahmed, 2007). Awqāf for health services
covered the expenses on patients as well as the provision of physicians and
training, besides construction of hospitals. In addition to construction of
84 Waqf for Accelerating Socioeconomic Development

male and female bathrooms in hospitals, waqf provided food and special
clothes to the patients. In awqāf created by women, health services received
the lion’s share and many hospitals had been established offering medical
education and free treatment to poor patients (Tariq Khan, 2015).
In 88 hijrah, the Caliph Walid ibn Abd al-​Malik was the first who built
a hospital (bimāristan) and appointed doctors and paid them to care for the
sick and for quarantine of the lepers. The revenue of waqf was used for the
maintenance and running costs of the hospital, and sometimes even small
stipends to the patients upon discharge. Such hospitals in the 3rd Islamic cen-
tury were spread all over the Islamic world and were a source of happiness
for the Muslim community because the patients received treatment, care,
food, and clothing. Additionally, many hospitals performed the function of a
medical education center along with treating the patients.
Mannan (2005) and Hasan (2006) indicated that an important beneficiary
of Muslim awqāf had been the health and hygiene sector. In Egypt, Ibn Tulun
built the first hospital in 261 H, and endowed it with several waqfs to pro-
vide for its expenses. According to Abattouy and Al-​Hassani (2013), in every
town of reputation in Islamic world, particularly Cairo, Baghdad, Makkah,
Madina, Aleppo, Tunis, Ray, Granada, and Marrakech, there had been at
least one waqf hospital.
Al-​Nuri Hospital was built on waqf land in Damascus in AD 1145. It
remained in operation for seven centuries and was one of the first hospitals
to adopt medical records. Doctors were paid from the endowed funds and
the waqfs covered all expenses on food, lodging, medicine, and treatment of
the patients. In the early 20th century, awqāf healthcare centers and hospitals
were established in Türkiye. Shishli Children Hospital was founded in 1898
in Istanbul out of the waqf fund.
In Spain, hospital facilities were available for both Muslims and non-​
Muslims alike. The well-​known Qalāwūn Complex built by Sultan Al-​Nasir
Muhammad Ibn Qalawun in AD 1284–​85 in Cairo included a hospital, a
school, and a mausoleum. It was once the most impressive hospital of its
time and functioned throughout the late Ottoman period, till 1910. In the
Complex, medicines were prepared in addition to the research and teaching
facilities. The hospital provided medicine, food, clothing, and shelter to
the sick and poor. Pharmaceutical drugs were also produced for medical
treatment.

4.4.3 Waqf, Maqāsid al Sharī’ah, and the SDGs

Well-​being of community is one of the higher purposes (maqāsid) of sharī’ah

(Khan et al., 2019). Waqf as an optional and perpetual charity in the form
of endowments of tangible and liquid assets plays a crucial role for alle-
viating poverty and realizing the higher purposes of Sharī’ah by extending
welfare and benefit (maslahah) to mankind and preventing it from harms
and hardships (mafsadah). Accordingly, researchers suggest that there is a
 Waqf for Accelerating Socioeconomic Development 85

deep and strong interrelationship between waqf and maqāsid al sharī’ah for
preservation of humans.
Waqf resources are used for spreading the message of Islam, creating
awareness among the people about the injunctions of Qur’an and Sunnah,
and for understanding the righteousness, piety, and contentedness. It provides
sustenance to the poor, orphans, needy, sick, and unemployed, thus helps in
building the social bridges in the society for coherence. Waqf also helps in
keeping the Islamic traditions and culture alive as the tradition of teaching
Islamic fiqh and memorizing Holy Qur’an, management of masājid. Last,
but not least, it helps in promoting entrepreneurship, developing agricul-
ture and micro business, strengthening industry, thus realizing the economic
objectives.
The SDGs (2030)/​the targets in areas of poverty reduction, health, edu-
cation, job opportunities and empowerment of women, and sustainability
of climate are part of a comprehensive global agenda to end poverty in a
single generation, and sustainability of human beings. Since 2015, the IDB
and UNDP have been working for realization of the SDGs through a memo-
randum of understanding. According to the IDB-​ WB Report (2016) the
World Bank Group aims to achieve a more equitable distribution of growth
benefits by focusing on the advancement of the poor and vulnerable segments
of the society. It relies on policies such as (i) raising growth potential, (ii)
financial and social inclusion, (iii) fiscal sustainability, (iv) environmental
sustainability, and (v) institutional and governance reforms.
All aforementioned policy-​ related functions require funding which is
becoming increasingly scarce in developing countries due mainly to the
increasing debt-​servicing requirements. Waqf could be the best option for
Islamic countries facing debt stress provided a proper framework is made
available in making formalized charity easy and its effective use in all socio-
economic areas in the economy.
Globally, the development of educational institutions such as Harvard,
Oxford, and Cambridge has been through the concept of waqf-​like
endowments. “The Sutton Trust Report (2003)” states: “the way forward
is through endowment”. Waqf fund injection can reduce the government
expenditure for specific purposes, especially education. The study also
observed that waqf fund successfully upgraded the education system in these
countries and provided opportunity for the poor and needy.
Abdullah (2018) finds that most of 17 developmental goals of the SDGs
comfortably match with the higher purposes of Sharī’ah and so with those of
the awqāf. There might be some cultural issues in respect of some goals but
the goals that are crucial in welfare of a Muslim society certainly include: no
poverty, zero hunger, good health and well-​being, education for all, clean
water and sanitation, affordable and clean energy, decent work environment
and economic growth, industry, innovation and infrastructure, sustainable
cities and communities, responsible consumption and production, climate,
life on land, life below water, and partnership to achieve the goals. Islamic
86 Waqf for Accelerating Socioeconomic Development

countries and societies are required to realize the SDGs in line with their own
ethics, culture, and civilization.
Sekolah pondok –​Islamic boarding schools –​are one good example of
waqf-​based education that began in 1450 in Malacca state of Malaysia. It
spread to Kelantan, Terengganu, and Kedah in the 19th century and attained
popularity in the early 20th century with trained religious teachers, strong reli-
gious beliefs among the Malays, and adequate facilities. However, by 1918,
sekolah pondok began to wane due to the colonial mindset with English and
Malay schools. In spite of the pressures and challenges, it was not completely
eliminated. Among madrasah cum pondok models that are built on the waqf
land and financed by waqf funds include Madrasah Hamidiah, in Kedah,
Madrasah Sultan Zainal Abidin in Terengganu and Kolej Islam Malaya in
Selangor (Khoo, 1980).
Some government bodies also contribute for waqf funds in Malaysia gen-
erally to the awqāf established by the Universities. University Sains Islam
Malaysia (USIM) is managing AL-​Abrar USIM Waqf Funds. Under this fund,
establishing medical clinics by USIM is a priority which aims to facilitate
needy people to get health service. It also gets funds from the Islamic Religious
Council of Negeri Sembilan (MAINS) that provided a grant of MYR 2 million.
The grant consisted of MYR 1 million as waqf endowment and the leftover
1 million as interest-​free loan (qardhul hasan) to be returned without any cost.
In Indonesia, waqf funds finance some higher education institutions such
as in Pondok Modern Gontor Darussalam (PMGD) and Islamic University
of Indonesia (UII). PMGD is developing more than 20 branches with 21,892
students. Subsequently, alumni of PMGD are widespread around the world.
PDMG has 31 kinds of SMEs which consist of material shop for the con-
struction, restaurant, pharmacy shop, stationary shop, and mineral factory.
This business uses Mudārabah contract.
In Türkiye, there are no private universities. Whosoever wants to estab-
lish university, it must be a nonprofit organization, it cannot be business
for profiteering. In 2016, there were around 200 universities; 75 of them
were owned by awqāf while the rest were in the public sector. Ilim Yayma
Foundation is one famous waqf in Türkiye. It established Istanbul Sabahattin
Zaim University in 2010. This institution is one of the success examples of
the waqf-​based universities in Türkiye. In many cases, the endowment funds
by the business community also finances public sector universities based on
the principles of waqf. There are several requirements from the government
for establishing any university.

4.5 Need for Waqf-​Based Socioeconomic System in Economies Like

That of Pakistan
Pakistan is currently facing a serious socioeconomic problem emanating
mainly from the huge budgetary and trade deficits, heavy and increasing
 Waqf for Accelerating Socioeconomic Development 87

debt servicing, and unstable exchange rate. The unrestricted market-​based

trade, bank-​friendly monetary and other economic policies have resulted
in widening the gap between the rich and the poor. There had been some
poverty-​ alleviation programs but with limited impact. There was some
revival in 1980 after reversing the nationalization, as was witnessed in the
form of economic growth, increased remittances, improving macroeconomic
situation, and decreasing poverty. The zakāh and ‘ushr system introduced
in early 1980 also played some role as masjid-​based zakāh committees were
involved for better utilization of funds for instant use and rehabilitation. But
subsequently the system lost its effectiveness due to sectarian differences and
politics involved in zakāh committees.
The poverty rates increased in 1990s, as the economic situation worsened
with high unemployment and external debt plaguing the economy. This
period saw limited developments in new antipoverty programs like the
launching of the Bait-​ul-​Mal and Social Action Program (SAP).
The Benazir Income Support Program (BISP) launched in 2008 expanded
the coverage of antipoverty schemes. BISP was the largest social safety
network in Pakistan with nearly 5.7 million families benefitting by the
unconditional cash transfers. The BISP was expanded over time to include
conditional cash transfers in the Waseela-​e-​Taleem initiative and live-
lihood generation. When Ehsaas program was launched in 2019, by the
new government, BISP became one of the implementing agencies of Ehsaas.
Ehsaas, headed by Dr. Sania Nishtar, worked to integrate more than 134
fragmented and poorly implemented social protection programs under one
new program.
Ehsaas comprised 16 programs for 16 disadvantaged groups, 292
initiatives in their support, and 6 quantifiable goals. There were several
agencies implementing Ehsaas’ initiatives. Ehsaas has crucially moved
beyond the singular cash-​transfer model that BISP offered –​in line with
the global move toward integrated poverty reduction schemes. Instead, in
forming a comprehensive approach to antipoverty, BISP-​Ehsaas program is
moving toward developing the capacity and human capital of beneficiaries,
as well as the Government of Pakistan’s capabilities to deliver on innova-
tive and comprehensive programs with limited resources (Barber & Shahzad,
2022). However, the available resources are deficient in fulfilling the need for
an efficient socioeconomic development process.
The institution of waqf and its model for rendering services to the com-
munity can be replicated easily, provided a proper and suitable frame-
work is developed and applied in the country. It would also be helpful
in realizing all such SDGs 2030 that pertain to economic development
and social inclusion in Muslim societies. Accordingly, there is a need to
assess the compatibility and usefulness of the waqf vis-​à-​vis the maqāsid
al sharī’ah and the current focus on UNDP’s development agenda like
SDGs 2030.
88 Waqf for Accelerating Socioeconomic Development

4.6 Summary and Conclusion

Any system, institution, or discipline must involve the effective utilization of
society’s resources for the well-​being of mankind (Smith, 1976). An economic
system based on ethics, values, and beliefs provides the best structure for
realizing socioeconomic objectives of any society. Every stakeholder in such a
system is morally anchored for a common cause that is better served based on
the values like excellence, fairness, trust, equity, and cooperation and sacri-
fice for others (Hassan & Shahid, 2010). The growth and prosperity achieved
through the market-​based efficient allocation of resources alone is insufficient
to attain a balanced and harmonized social environment and broad-​based
welfare (Alam et al., 2018).
An effective tool for such kind of system is waqf that has historic-
ally proved its usefulness. It played a significant role in welfare activities
by rendering socioeconomic services in the areas of education, healthcare,
civic facilities in urban areas, environmental, and other community-​based
programs. It provided all the essential services to the public at no cost to
the state (Çizakça, 1998). As such, waqf also played a role in realizing the
maqāsid al Sharī’ah (Alam et al., 2018).
Waqf creates a permanent, cumulative, and continuously increasing cap-
ital base that sustains growth, as well as expands the scope of benevolent
activities in addition to compulsory zakāh and normal charities. This tool of
benevolence benefits all areas of social welfare and economic activities and
such sectors that are considered a part of the domain and responsibility of
governments (e.g., health, education, and defense) (Kahf, 2012).
Proper education for all is an established tool for social as well as eco-
nomic growth, and historically waqf has played impressive role in this regard.
Throughout Islamic empire, it financed educational projects and covered
books, libraries, salaries for teachers, and stipends for the students. The
support for education facilitated the creation of an educated class beyond the
rich and ruling class of society. It implied that offering waqf-​financed educa-
tion provided the poor an equal opportunity with the rich in acquiring edu-
cation. It also contributed to the dynamics of leadership change and wealth
circulation in Muslim society, circulated power and wealth, and eliminated
the opportunity of creating an aristocratic class that monopolized wealth and
political power (Kahf, 2012b).
Fair play, justice, economic equity, and social harmony have to be the
basic objectives of economic policy in Islamic framework. All this requires
a well-​defined enabling role of the State in functioning of the market and
beyond market sectors, also including awqāf, for socioeconomic justice.
A well-​functioning awqāf system may lead to reduction in government
expenditure with associated benefits.
However, the role of the State must not go beyond providing an effective
legal, organizational, and regulatory role for ensuring transparency in ful-
filling fiduciary and religious duties by mutawallies. Nationalization of
 Waqf for Accelerating Socioeconomic Development 89

awqāf, and interference in administrative matters of waqf properties or use

of waqf funds caused serious harms to the noble cause of welfare of mankind
through waqf.
The operational framework of waqf may be developed while taking care
of all issues pertaining to (i) the waqf deed containing different provisions
or conditions, (ii) the wāqif (the founder of waqf), (iii) purpose of waqf,
(iv) beneficiaries of the waqf, and (v) instructions regarding appointment of
the trustee (mutawalli). The conditions of waqf as indicated in the deed are
crucial and have to be employed as long as they are not against any Sharī’ah
injunctions. Legal maxim, “‫​– ”شرط الواقف كنص الشارع‬implying that the condi-
tion of the founder of waqf has an equal obligation to be fulfilled like the text
of the sharī’ah, is crucial in this context and does not allow the State or the
management to use the waqf funds in any other avenue. Hence the frame-
work must involve such guideline for the potential waqf founders.
The institution of waqf must be revived in all Islamic societies for rendering
socioeconomic services. This role covers much more than the current role of
awqāf properties dedicated for masājid, shrines, and other ritualistic causes
as in the case of Pakistan. It would include all nonprofit or for-​profit non-
governmental sectors entailing social and related economic activities that
could lead to welfare of any segments of the society. Islamic banks and finan-
cial institutions can use waqf to provide social finance for fulfilling their
CSR-​related and allied obligations toward the society. It suits them better
for rendering social obligations by banks against the huge business they are
getting from the society, than in the case of typical CSR activities that might
be undertaken presently. If handled properly and intellectually, waqf could
be helpful in realizing all such objectives of Sharī’ah that pertain to any facets
of socioeconomic aspects of society.

Notes
1 https://​pressr​elea​ses.res​pons​esou​rce.com/​news/​103​288/​brit​ain-​s-​worst-​banks-​for-​
car​bon-​emissi​ons-​revea​led/​ [13 October 2022]
2 It is important to note that mosque is also categorized as an educational institution.
 Waqf-​Based Financial
5 
Intermediation, Fintech, and
Crowdfunding for Realizing
the Potential of Islamic Social
Finance

5.1 Introduction
Financial intermediation in human societies is as necessary as blood circu-
lation in human bodies. Modern-​day financial institutions are formal inter-
mediaries between those who might have money more than their instant
needs and those who might need money for consumption and business
purposes. The intermediary services must be as equitable and efficient as
the heart is required to efficiently supply blood to all organs required for a
healthy human body as a whole. The financial institutions, currently under
operation, created problems of inequity leading to rampant poverty in both
developed and underdeveloped countries and concentration of wealth in
increasingly fewer hands.
The increasing share of the financial sector at the cost of the real economy,
and the resulting inequitable income distribution and excessive consumption
habits have resulted in catastrophic socioeconomic, financial, and environ-
mental impacts. Despite huge financial gains and increases in production,
hunger, poverty, financial and social exclusion, and environmental crisis are
the critical challenges faced by human societies. The system based on profit
maximization at any cost is leading to injustice, inequity, and an increasing
escalation of the environmental crisis.
It requires easy, affordable, and sufficient access to finance by the pro-
duction and business units in the real economy that could be translated into
equitable sharing of resources for fulfilling the basic needs of all in the society
without the choice of exploitative production and excessive consumption by
the rich. Waqf is a discretional part of faith-​based philanthropy that makes
the rich spend for others and provides financial institutions with an impres-
sive tool to align themselves with the sustainable development paradigm. By
involving the community at the micro level through waqf creation and man-
agement, Islamic banks (IBs) can provide affordable finance and address the
issue of inequity and injustice being meted out currently.
Islamic finance was institutionalized in the second half of the 20th century
in OIC member countries to resolve the problem of increasingly inequitable
income distribution due to exploitation tools of ribā and gharar. The UNDP,
DOI: 10.4324/9781003477549-5
 Waqf-​Based Financial Intermediation, Fintech, and Crowdfunding 91

World Bank, and other forums also initiated efforts for poverty alleviation
and the latest move in this context is the adoption of SDGs 2030 agenda as
we indicated in the earlier chapters. But both the initiatives failed, so far, in
creating a dent in poverty as can be seen in the “World Inequality Report,
2022”1 and similar other evidence coming over the last few years.

5.2 Financial Intermediation for Social Inclusion

Financial intermediation for social inclusion is much more than bringing all
persons in a society under a formal banking network. It necessarily involves
providing micro credit and finance to those who do not have access to formal
institutions. It would mean “full and fair access to collective resources and
activities; the maintenance of social relationships with the family, friends
and acquaintances, and the developing of the sense of group belongingness”
(Aparicio, 2013). The goal would be balanced growth benefiting all groups
in the society with efficient and just working of market and “beyond market”
sectors in the economy. Scarcity amid abundance as of now is one major
factor that needs to be taken care of through any value-​based, just, equitable,
and benevolent financial system.
Regarding the failure of conventional microfinance schemes during the
early years of the 21st century, Stewart et al. (2010) found that some people
were made poorer by some microfinance programs, particularly micro-​credit
clients. Sinclair (2012) indicated the need for reconstructing the microfinance
system in suitable ways to avoid failures. Therefore, ultimate objective of
financial intermediation must be social inclusion in addition to financial
inclusion.
The best tool for intermediation leading to common welfare could be the
social cum business finance based on waqf, benevolence, and the principles
of risk and reward sharing on an equitable basis. The risk-​sharing system
needs to be re-​ emphasized both by the public and the private, banking
and nonbanking financial institutions as well as at the State’s level. Murat
Çizakça (2014) presented case studies of the 13th-​century Venice, the 19th-​
century Germany, and the 20th-​century United States to show the histrionic
achievements of risk sharing in the West.

5.2.1 Cash Waqf Enhancing the Potential of Waqf as a Financial Intermediary

Cash waqf, as a financial intermediary, has great potential and benefits to

society and can effectively meet different needs. Çizakça (2004a) defined
Cash Waqf as “charitable endowments established with cash capital”.
Çizakça (2004b) also defined it as a “Trust Fund established with money
to support services to mankind in the name of God”. Kahf and Mohomed
(2017) defined Cash Waqf as “a perpetual or temporary holding of endowed
cash to produce repeated benefits or usufructs for an objective of general
or private righteousness according to the founder’s stipulated conditions”.
92 Waqf-​Based Financial Intermediation, Fintech, and Crowdfunding

This broad definition encompasses both forms of cash waqf, which is using
cash as lending waqf to provide interest-​free loans and investing cash and
assigning its net return to the waqf beneficiaries. Kahf (2014) deliberated that
the principal of cash-​lending waqf is used for easing the liquidity problems
of beneficiaries, whereas, in cash-​investment waqf, only the income is used
for philanthropic, religious, or private beneficiaries as assigned by the waqf
founders.
Kahf (2014) affirms that cash-​investment waqf dates back as early as the
1st century of Hijrah. He added that there was enough evidence that cash
waqf existed throughout Muslim history, particularly in areas where the
Maliki or Hanafi schools were prevalent. He provided evidence from Imam
Bukhari, Imam Malik, and Ibn Nujaym.
Cash waqfs also operated since the early times of the Ottomans who used
the waqf’s basic principle of perpetuity as the main tool for collective, and
not individual capital accumulation which otherwise was not a function of
the medieval Arabs. Therefore, Turks resorted to the most basic conversion
toward the permanence of the waqf as financial intermediary. The utilization
of the collected capital in the form of cash waqf could be termed a “public
development bank” –​a bank that has a successful experience of working for
over four centuries. Cash waqfs maintained their importance with the eco-
nomic modernization and globalization of the 19th century and operated at
the periphery of the financial sector that was dominated by foreign capital.
In all these aspects, cash waqfs had a competitive edge over local branches of
major foreign and domestic banks.
Çizakça (2004b) found that about 20% of the Bursa cash endowments
had survived for more than a century according to Bursa Cash Waqf Census
Registers. There were 2,517 waqfs established in Istanbul during the period
1456–​1551 out of which 46% (1,161) were cash waqfs, while in Bursa,
there were 761 cash waqfs during the 18th century. In the year 1954, extant
Ottoman cash waqfs’ capital was pooled to create a modern bank, the Bank
of Awqāf (Vakiflar Bankasi) in Türkiye (Çizakça, 2004a).
Collation of waqf properties and funds could be useful in providing large
funding and building capital assets that produce an ever-​increasing flow
of revenues/​usufructs to serve the diversified objectives and social welfare
activities (Alam et al., 2018). In that sense, waqf can be considered an early
version of present-​day corporations (Kahf, 2003). As the cash waqfs do not
pay any interest or payment to the capital owner, the cost of capital for a cash
waqf is zero, which leads to the transfer of profits through social and pious
purposes (Çizakça, 2000).
According to Çizakça (2004), cash waqfs had an important role in the
economy for capital distribution among small consumers and entrepreneurs.
The credit and deposit volumes of awqāf were limited to endowed cash and its
returns. Bulut (2021) also considered the cash waqf as a redistributor of capital
in a society instead of considering them as capital-​accumulation institutions.
Some statistical data has shown that the borrowers of cash waqfs were small
 Waqf-​Based Financial Intermediation, Fintech, and Crowdfunding 93

consumers instead of entrepreneurs and investors (Çizakça, 2000: 35). Thus,

cash waqfs not only met the basic social and pious investments but also met
capital needs of small farmers and consumers.
Mohsin (2013) discussed the Sharī’ah aspects of cash waqf and its role in
different countries focusing on six cash waqf schemes (waqf shares scheme,
deposits cash waqf scheme, compulsory cash waqf scheme, corporate waqf
scheme, deposit product waqf scheme, and cooperative waqf scheme).
Mohsin (2013) affirmed that in the 21st century, cash waqf schemes are
being practiced in several countries.
Ramli and Jalil (2013) analyzed the structure of the corporate waqf model
applied in “Wakaf Selangor Muamalat” established in 2012, a collaboration
between a state-​owned waqf management institution and an Islamic com-
mercial bank (BMMB). Aziz and Yusof (2014) evidenced that students in
Malaysia need waqf bank to get Islamic finance for their education cost.
At least four universities in Malaysia have their waqf endowments. One
of the universities has constructed rentable buildings. Based on the survey
conducted by Aziz, et al. (2014), it is evidenced that students in Malaysia
need waqf bank to get Islamic finance for their education cost. Every year,
IIUM succeeds to help 4,000 students to have scholarships funded from
waqf funds.
Islam (2015) worked on Social Investment Bank Ltd which was the first
in Bangladesh to introduce Cash Waqf Certificates (CWC) in 1995 and used
the cash waqf for micro, small, and medium enterprise financing in terms of
fund mobilization from the individuals, organizations, SME members, and
government, and its investment.

5.2.2 Sustainability of Cash Waqf

The sustainability of the collected funds is an important requirement for

waqfs. Arshad and Haneef (2015) contended that in the management of
liquid waqf, it is important to preserve the original value of funds and to
develop the value over time. Shulthoni et al. (2018) offered three approaches
for that: (1) the venture philanthropy of the waqf model, (2) the value-​
based capital model of waqf, and (3) the social enterprise waqf fund model.
Various models have been developed by Mahamood (2006), Mohammad
(2006), Jalil and Ramli (2010), Alias (2012), and Zakaria, Samad, and
Shafii (2013).
Shulthoni et al. (2018) suggest the venture philanthropy waqf model
(VPWM) where wāqif endows a fund to the nāẓir who would invest in the
highly prospective social impact enterprises. The main goal of VPWM is to
maximize the social benefit rather than to concentrate on financial return
maximization as accomplished in traditional venture capitals. The second
model is Value-​Based Capital Model of Waqf. The focus here is to preserve
the value of the dedication rather than the physical object of the subject
matter.
94 Waqf-​Based Financial Intermediation, Fintech, and Crowdfunding

The third model is Social Enterprise Waqf Fund model. Here welfare is the
ultimate priority and so it is the most suitable model for cash waqf manage-
ment. Administrators have to innovate new practices to produce additional
and various sources of revenue. In this model, wāqif (founder) contributes to
the social enterprise through waqf handing over to the nāẓir. Nāẓir manages
and invests waqf fund. The investment returns can be distributed to nāẓir not
more than 10% of the return, while 90% of it should be circulated to the
beneficiaries.

5.2.3 Institutions for Financial Intermediation

Islamic finance institutions, both banking and nonbanking financial

institutions, briefly termed as IBFIs, can play an effective role in promoting
financial as well as social intermediation. The institution of waqf, both fixed
assets, and liquid assets like cash-​and ṣukūk-​based waqf donations would be
providing funds for carrying out socioeconomic operations at different levels.
The tools of waqf for financial intermediation include cash waqf, takaful, al
khair ṣukūk, al khair bank accounts (ABAs), waqf for financing government
debt, qard hassan, and financing infrastructure projects.
The banking institutions will be channeling resources for micro
enterprises, SMEs, small farmers, and for project financing to facilitate
the micro-​level production sectors, SMEs, and entrepreneurs. The NBFIs,
Fund Managers, crowdfunding platforms, Venture Capital, Startup Capital
entities, Mudārabah, and leasing companies would facilitate the potential
entrepreneurs to start their own production and business concerns at micro
levels while keeping in view the protocols for green finance and ESG.
Crowdfunding is a well-​suited technique to raise waqf funds and other
philanthropic donations from a large audience, where everyone provides a
small amount of the funding requested. It takes place through social networks,
especially the internet. The entrepreneur gives the objectives, the business
plan, and the potential business activities. It is the main innovation of com-
munity funding for other forms of finance, as the entrepreneur might not
need an intermediary like banks, and get resources directly from the investors
(OECD, 2015, p. 53). Crowdfunding may take the form of donations, qarḍ
hassan, reward or sponsorship, a variety of credits, private equity, and time-​
bound equity instruments like ṣukūk, etc.
Waqf-​based intermediation is also possible through takaful. Waqf and
takaful are used in combination to provide Sharī’ah alternative to insurance.
Takaful, starting in 1979 in Sudan, has been adopted the world over, with
its global market reaching $73 billion by the end of 2021 (Rifinitiv, IFDR,
20222). Waqf emerged as a part and parcel of takaful system, particularly in
the case of wakālah model. Takaful-​based risk cover on a mutual basis can be
provided to all on an equitable basis by employing waqf where every member
contributes toward the waqf funds and receives the mutual indemnity against
the agreed-​upon contribution to the waqf pool. In fact, mutual insurance,
 Waqf-​Based Financial Intermediation, Fintech, and Crowdfunding 95

where participants themselves are the owners, is nearest to the Islamic con-
cept of mutual loss mitigation or takaful.
Waqf and takaful have many conceptual and practical similarities. Nasir
et al. (2021) clarify that takaful originates from the philosophy of brother­
hood, mutual contribution, assistance, and cohesive utilization of donations
by members. If the concept of waqf is used by takaful entities based on
Musharaka al-​ta`awuniyyah model (Ayub, 2017), it could help realize the
objectives of social welfare and equitable risk and reward sharing by the
members.
It is the primary responsibility of the state institutions and government
representatives to provide a platform where takaful is overseen by a joint
forum of waqf and takaful, though banking and finance industry can also
be part of the initiative. In this way, the orientation of the takaful industry
would change from the corporate culture as at present to the cooperative one
and thus would be able to provide durable and long-​lasting socioeconomic
solutions.
For re-​takaful, the best option is that all takaful companies in the country
create a joint risk pool that would serve as a buffer for bearing the losses
possible to risk pools of the individual companies. Alternatively, such a re-​
takaful entity can be created at the OIC level. Besides, there can be numerous
re-​takaful private bodies wherein takaful-​waqf funds can enjoy the liberty of
pooling their funds within the country and abroad and link themselves with
the chain of some other large Islamic financial institution that can have the
financial ability to provide re-​takaful.
A mutual and community-​based takāful system based on mushārakah al-​
ta‘āwuniyah (mutual cooperation, protection, and responsibility) is a special
feature of Islamic culture that can be traced back to some pre-​Islam histor-
ical systems including, inter alia, al-​nahd. The cooperative entities serving
as the “Mutuals” would aim at community well-​being at grassroots levels.
Various community organizations, charities, waqf funds, and individuals
would become members to pay donations/​contributions to a common pool
managed by the representative of the respective community. Such “mutuals”
may also serve the function of Fund Managers for the investment of the
pool or its members’ savings and funds. They may also give qarḍ hasan,
or even grants for consumption by the poorest, or for small businesses by
those who have the potential to be entrepreneurs. This mutual system could
also be used as a vehicle for savings/​investments and house construction/​
motor vehicle/​education/​marriage, etc. IFIs may also become members of
such organizations as part of their community services programs that could
be funded from bank equity, current accounts balances, or even the awqāf
for help to the indigent and the poorest. Community takāful in the proposed
structure could become an institution for social and financial inclusion of
those who either abstain from banking and insurance due to Sharī‘ah pro-
hibitions or are not in a position to approach conventional institutions due
to some deficiencies.
96 Waqf-​Based Financial Intermediation, Fintech, and Crowdfunding

5.2.4 Waqf and Recent Finance-​Related Moves for Welfare

During the last decade, a few moves have been initiated at the global level
to enhance the welfare of the common man, the most pertinent of which is
setting the SDGs 2030 by the UNDP. In this perspective, the waqf entities
in the world offer opportunities for Islamic finance institutions to move to
social finance and create waqf-​based banks for broad-​based growth develop-
ment and social inclusion at the global level. As reported by Omercic Jasmin
(2018, pp. 155–​158), the BIH [Bosnia and Herzegovina] Waqf Directorate
had great opportunities to create a waqf community bank with the help of
the Bosnian Muslims living in Germany and elsewhere.
The UN Secretary-​ General advocated, in the World Humanitarian
Summit (WHS) held in Dubai on January 17, 2016, for recognition and use
of Islamic financial solutions. The session was convened to secure collective
commitments toward the development of platforms for Islamic social finan-
cing mechanisms, leading to the mobilization of additional financial resources
for humanitarian assistance. The WHS also called for supporting innovations
for mobilizing finance such as the issuance of social impact or humanitarian
ṣukūk (HS) programs, and enabling funding from nontraditional sources dir-
ectly to frontline responders. Cash waqf is the most crucial innovation in this
context to be explored actively.
Many wealthy persons in Islamic societies may be eager to help the
indigent and spend their wealth on social welfare. There must be specific
institutions to formalize such welfare moves and organizations. This can be
accomplished with the revival of the institution of “Cash Waqf”. It implies
that the cash capital donated perpetually by the philanthropists might be
invested on the basis of risk and reward sharing (Çizakça, 2000). It may
need forming community associations at city, town, and even village levels
to create such cordial relationships among members of the society that they
help one another in all times of sorrow and happiness. Such associations may
also establish awqāf and charities, and launch various schemes for providing
finance for micro businesses to the members and for mitigating losses to the
community. It will also help in realizing the SDGs.

5.3 Cash Waqf and Modern Banking

The cash waqfs that started to be involved in the Ottoman financial system
by the end of the 15th century continued their existence for about 450 years.
Perpetuity of the cash waqfs was ensured by an active cash management
strategy where the potential decrease in the fund was prevented.
The competitors of cash waqfs, domestic banks, appeared as late as
1909 that reached the rural market and financed large landowners and the
urban merchants but not small producers, as Hüseyin and Akar (2019)
documented. On the other hand, cash waqfs were meant for the public in
the neighborhoods and were determined to provide financing for masses,
 Waqf-​Based Financial Intermediation, Fintech, and Crowdfunding 97

farmers, and artisans at the founder’s declared low rates. Karagedikli and
Tunçer (2018) suggest that cash waqf was an appropriate option for local
borrowers due to providing (trade-​based) credit at lower transaction costs.
The cash waqf open-​fund pool is for benevolent purposes and an IB, as
the fund manager, is not expected to charge a management fee, particularly
when (i) CWF is partially funded by temporary waqf deposits and external
donors. This is because the CWF benefits the IB in terms of image and market
reputation and charging a management fee for managing the CWF for its
customers may have a moral issue of customers’ exploitation especially if the
funds come from CSR, and (ii) the financing is restricted to the IB’s customers
only. If the bank does not restrict the scheme to its customers only, it may
then charge actual management expenses.
The funds for cash waqfs may also come from CSR contributions of
IBs individually for internal CWF, and collectively for different cash waqf
foundations. Some donors may give funds as waqf permanently, but some
may choose to give temporary cash waqf funds subject to redemption on
demand or after a given period. The open fund structure can accommodate
temporary waqf funds. Kahf (2014) discussed this issue saying that people
might be willing to help with their available financial resources for a given
time, but they would like to retrieve their principal later. He added that this
becomes like loans as defined in Sharī’ah “an act of charity in which the
lender sacrifices the benefit of using cash during the period of the loan”.
Investment of cash waqf is different from other property waqfs owing to
the nature of the endowment. The Awqāf Properties Investment Fund (APIF)
of the Islamic Development Bank (IsDB) defines the investment as “devel-
opment and growth of waqf properties, whether assets, rents or surpluses
through Sharī’ah permissible means of investment”. The nāzir is not restricted
to any specific form of investment –​can change investment from one asset
to another. The OIC’s Islamic Fiqh Academy resolved in 2004 (Resolution
No. 140-​15/​6) that if cash waqf funds are invested in any assets, it is as if the
nāzir bought with its real estate or manufactured with it an item, and those
objects and assets do not become the waqf assets in place of the cash; they
may be sold for continued investments and the waqf remains the original
amount of cash.
Risk-​management measures by awqāf administrators include avoiding
high-​risk investments, diversifying portfolio, relying on economic feasibility
studies, making efforts to achieve social return without sacrificing profit for
the benefit of original beneficiaries and abiding by the endower(s) conditions
for nazir’s use of endowment properties.

5.3.1 The Source and Uses of Funds in Waqf-​Based Banking

Various kinds of donations, deposits, and returns on the earning assets of

waqfs are the sources of any waqf-​based banking channel. The experts have
suggested a variety of instruments like Cash Waqf Certificates (CWS) and
98 Waqf-​Based Financial Intermediation, Fintech, and Crowdfunding

ABAs. For getting a donation in the form of cash waqf, a “Form” has been
developed in Türkiye, which takes care of all aspects of donations made for
any specific purpose or the beneficiary. This form is copied here as Cash
Waqf Donation Form (Figure 5.1).
As can be seen, the cash waqf form is comprehensive in terms of the inten-
tion of the person who donates with demographics and the currency of dona-
tion, the area(s) where the amount is to be spent or given as finance with the
mode of finance and the rate (murābahah, leasing, etc.), the profit sharing
ratio, the purpose (education with level and nature), religious service (with
the specification of service), fight against poverty and others (restorations,
infrastructure, social policy, or without any constraint). Such a form will
have to be finalized and conveyed by the central banks to the banks.
While “cash waqf certificates” would reflect perpetual donations for wel-
fare purposes, time bound al khair deposits could either reflect waqf forever,

Figure 5.1 Cash Waqf Fund Donation Form.

 Waqf-​Based Financial Intermediation, Fintech, and Crowdfunding 99

or a qarḍ hassan for the purpose of onward financing. As a large number

of current accounts holders are currently keeping huge sums in the banks
without getting any return, it is amply possible that many well-​off persons
will keep term-​based al khair deposits with advice to the banks that the same
would be the part of the waqf pool created by the bank and used for qarḍ
hassan for micro businesses, micro farms, and small entrepreneurs. This,
however, will require a brisk regulatory step to be taken by the central banks
to initiate awareness campaign for the public and to oblige the banks to
divert a part, may be up to 50% of their current accounts’ balances for the
waqf pools, if the account holders may so desire.
The idea of the “open cash waqf” fund is to enable the waqf to receive
contributions at any time in contrast to a closed fund. Islamic financial
institutions may come up with innovative ideas to encourage their
customers to make waqf contributions to this fund that is for a benevo-
lent cause whether by cash contributions or other means. For example,
Al Rajhi Bank has an innovative Islamic credit card –​the Ehsan card that
enables cardholders to make a charitable donation to the Orphan Care
Organization via points accumulated through purchases that are converted
into cash equivalent.
Lahsasna (2010), quoting from Mannan (1998), has mentioned cash waqf
deposits and CWCs for promoting finance for SMEs and the micro businesses
(Figure 5.2). CWCs can be taken in the name of other beloved family members
to strengthen family integration among rich families. Mannan suggested the
following objective of CWCs:

• to equip banks and other waqf management institutions with CWC,

• to help collect social savings through such certificates,
• to help transform the collected social savings to social capital, as well as to
help develop the social capital market,
• to increase social investment,
• to encourage rich communities’ awareness on their responsibility for social
development in their environment, and
• to stimulate integration between social security and social welfare.

Waqf-​related fintechs are all about the cash waqf. In most of Islamic coun-
tries, so far, the cash waqf is not a popular mode of donation. However, it
is a growing area under the fintech, as the fintech itself is growing. In fact,
the fourth industrial revolution is shaping the economy through innovations
by enabling easy access to internet services for all in various fields of needs
and activities including digital financial services. Islamic financial service
providers are also using digital platforms. Waqf foundations, being among
the financial service providers, have to rise to the occasion to realize the
potential.
The profits from the cash waqfs will be used as per the policy given in the
waqf deed and shared with the contributors. A specific policy for spending
100 Waqf-​Based Financial Intermediation, Fintech, and Crowdfunding

Figure 5.2 Cash Waqf Deposit Account by SME Development Corporation (SMEDC).

Source: Lahsasna (2010).

waqf funds in the form of an agreement will provide guidance in all related
matters. Such a policy for the operation of the cash waqf scheme as provided
by the social investment bank in Dhaka (IABC, 2013) is given hereunder:

(a) Waqfs are made in perpetuity and the account is opened in the title given
by the wāqif. The amount in cash waqf of the account is a perpetual
deposit.
(b) Wāqif has the opportunity to create multiple cash waqfs at a time. The
deposits can start with any amount.
(c) Wāqifs have the right to give standing instruction to the institution for
regular realization of cash waqf at a rate specified by him/​her from any
other account maintained with the institution.
(d) Wāqif has the liberty to choose the purpose(s) to be served either from
the list provided and identified by the institution, covering (a) family
empowerment credits, (b) human resource development, (c) health and
 Waqf-​Based Financial Intermediation, Fintech, and Crowdfunding 101

sanitation, and social utility services or any other purpose(s) permitted

by Sharī’ah.
(e) Wāqif can also instruct the institution to spend the entire profit amount
for the purpose specified by him/​her.
(f) Cash waqf amount earns profit [to be used for the above purposes]
at the highest rate offered by the institution from time to time. Cash
waqf amounts remain intact and only the profit amount is spent for the
purpose(s) specified by the wāqif.
(g) Unspent profit amounts are automatically added to the waqf amount and
earn profit to grow over time.

Sarker (2019) analyzed the role of Cash Waqf Deposits (CWD) in the
banking sector of Bangladesh that are playing a beneficial role in the socio-
economic development of the country. CWD started with BDT 250 million
in 2010 and increased to BDT 1056 million in 2016. It reflects the growing
participation of the people in the socioeconomic activities of the country.
If proper policies are formulated and the prime stakeholders like the waqf
administration of the Government, the National Board of Revenue, and
Bangladesh Bank create the overall environment-​incentivized marketplace,
the socioeconomic infrastructure of the country would grow further for
socioeconomic development.
The operation of cash waqfs to be created and managed by the banks and
other financial institutions is depicted in Figure 5.3.
The use of waqf funds and investments is the main and most critical dimen-
sion of the waqf. Among them, financing of the old waqf properties is also
crucial and requires a careful strategy for the advancement of the waqf-​based
financial intermediation on a sustainable basis. If planned and executed with
caution, the development of old waqf properties as in countries like Pakistan
can lead to the way to salvation in many backward communities.

5.3.2 Ottoman Cash Waqf-​Based Microfinance

As indicated earlier, cash waqfs remained involved in the Ottoman financial

system for about 450 years. Perpetuity of the cash waqfs was ensured by an
active cash management strategy where the possible decrease in the fund
was prevented. The strategy was to use awqāf’s own cash assets instead of
borrowing from (money) markets at low rates and offering credit at higher
rates, thus avoiding the financial leverage.
The Ottoman foundation system involved three types of pooled waqf
funds: artisan funds, avāriz funds, and Janissary squad funds aimed at
sustaining the socioeconomic needs of society. These were available in every
neighborhood: rural and urban. Fund trustees were elected from among the
notable members along with the decision of a predecessor.
Agriculture Bank (Ziraat Bankasi) of Ottomans had a good chance to reach
the farmers, though with the Western and non-​Islamic financial practices.
102 Waqf-​Based Financial Intermediation, Fintech, and Crowdfunding

Figure 5.3 Operations of Cash Waqf by Banks and Financial Institutions.

Source: Authors’ own.

However, its credit did not reach the small producers and cultivators as the
local moneylenders used to borrow from the bank to lend to the peasants
with higher interest rates. As against the cash waqfs, it had higher collateral
requirements. Of course, it could have been used as a supervisory bank for
cash waqfs to avoid the aforementioned problems.
The experts suggest precautions for making investments of awqāf proper-
ties. These include avoiding high-​risk investments, diversifying the portfolio,
relying on economic feasibility studies, making efforts to achieve social return
without sacrificing profit for the benefit of original beneficiaries, and abiding
by the endower(s) conditions for Nazir’s use of endowment properties.
 Waqf-​Based Financial Intermediation, Fintech, and Crowdfunding 103

IsDB has played an important role in revitalizing the awqāf properties. One
such model is developed by the APIF which drives a shift away from short-​
term fixes for hard development issues toward long-​term, intergenerational
solutions. IsDB’s Awqaf Properties Investment Fund (2019) defines the invest­
ment as “development and growth of waqf properties, whether assets, rents
or surpluses through Sharī’ah permissible means of investment”.
Pakistan shares a legacy of Mughal dynasty where shrines and Sufi trad-
ition had a very influential role in the education and awareness of the masses.
Sufi shrines cover a vast majority of the waqf properties from where the
society used to receive the lesson for tolerance and self-​purification. There
is a need to involve the Sufi traditional leaders in the development of the
waqf properties on modern lines. Waqf properties have to be managed and
developed on modern lines so that they should provide enough returns which
could be used for social purposes.

5.3.3 Al Khair Ṣukūk

For moving to social finance, IBs would have to take the lead in issuing Al
Khair Ṣukūk to be issued to those who wish to become a part of the social
welfare scheme. The proceeds would be used to provide financing based on
qarḍ hassan, trading-​or leasing-​based contract to microbusinesses, small
entrepreneurs, and farmers, as per the ṣukūk deeds.
Waqf ṣukūk could be issued by IBs to provide a sustainable source of funds
for continuing qarḍ hassan projects by them. Khan (2016) has suggested phil­
anthropic ṣukūk to provide people of small means with opportunities to have
acts of perpetual charity to their credit for reward from Allah (SWT). After
a waqf fund is established by any bank, it may be issuing perpetual and
redeemable charitable ṣukūk so that it could serve as a hub for social inclu-
sion in an area/​society.
Waqf ṣukūk that would not bear any profit or return on investments
for the holders may be registered with the stock exchanges. Thus, if any
of the affluent persons wish to give their excess funds forever or for any
given time, ṣukūk could be issued to them, and if holders of time-​bound
ṣukūk wish to withdraw from the scheme, they could do so by exchanging
the ṣukūk in the exchange at par to others, intending to participate in the
social welfare scheme (Khan, M. Fahim, 2016). The banks would be able
to issue such ṣukūk through a special-​purpose vehicle (SPV) created for this
purpose. Such ṣukūk would not bear any profit or return on investments for
the holders.
Al-Khair Ṣukūk and Social Impact Ṣukūk certificates can be issued by
waqf and other nonprofit institutions and philanthropists for social welfare
projects. In this social finance network, IBs need to involve the donor and
waqf institutions.
The waqfs once created by the IBFIs could be replenished by: (i) bank’s
shareholders allocating a certain percentage of the bank’s profits for this
104 Waqf-​Based Financial Intermediation, Fintech, and Crowdfunding

purpose; (ii) account holders contributing, at their discretion, by direct

donation or by a percentage of profits earned from their deposit/​investment
accounts regularly; and (iii) the government and international donor agencies
may donate to the waqf as part of their poverty-​alleviation initiatives.
Though cash waqf collection increased six times in Malaysia from RM
0.39 million in 2010 to RM 2.8 million in 2019, it makes only RM 0.28 per
Muslim in the country, which is quite modest (Ismail, 2021). It shows that the
government of Malaysia needs to invest into fintech for waqf. Some studies,
such as Pitchay et al. (2014) suggest that the cash waqf contributions could
reach RM 4 billion. Regarding the use of funds so collected, Pitchay et al.
(2014) suggested the priority-​wise list as first being education, second being
health, third being masjid/​madrasah, and fourth being social care/​welfare.
Projects-​based Islamic microfinancing with waqf and charity funds and
investments by the affluent in society could be helpful in building a caring
society to live in peace with shared prosperity. It is through mutual help,
cooperation, sharing of wealth with the poor through zakāh, waqf, and
charity, close monitoring, and follow-​up that poverty can be eliminated to
achieve a just society that makes the Islamic system unique and universal.

5.3.4 The Idea of a Separate Waqf-​Based Capital Market

Once the waqf capital becomes sustainable, then the entrepreneurs facilitated
on the basis of waqf may have their own capital/​stock exchange. It is because
of the commitments and the peculiar characteristics that the waqf-​based
system and waqf-​supported entrepreneurs do require different laws and
different dimensions.
Based on the concept of collective capital accumulation under waqf, and
mutual cash endowment schemes in different subsectors as we discussed in the
earlier section, a separate capital market can be developed for entrepreneurs
associated with waqfs. Assets of waqf are perpetual; they don’t diminish over
time, if not get doubled or redoubled, as they make returns. Careful use
of the returns at the individual waqf level as well as at the collective level
under the guidance of the central awqāf administration makes waqf-​based
sukuk sustainable for long time. It may become a self-​sustained and progres-
sive system for realizing the objective of socioeconomic growth. If buildings/​
assets of waqf are rented, then their secondary markets can also exist. As
there could be a rent agreement with a definite clause of increase in the rent
by a fixed percentage, the return can be securitized to serve as short-​term
assets eligible for investments by private investors as well as the banks. For
banks, such ṣukūk or waqf certificates could also be eligible for their statu-
tory liquidity reserves (SLR) requirements. Such a stock exchange could serve
as the Islamic alternative to the interest-​based and gharar-​led exploitative
tools and instruments.
Ṣukūk are priced using profit-​ sharing modes or some variations of
it and are not based on paying a pre-​agreed fixed interest irrespective of
 Waqf-​Based Financial Intermediation, Fintech, and Crowdfunding 105

the outcome of the use of funds. Accordingly, an equity-​based behavior is

encouraged, namely, that the investors and the fund users, through SPV,
agree to share in the risk of the investments (hence a profit share) while the
latter has to give ownership of part of the assets to the investor. It restricts
unlimited borrowing by businesses. As contended by Safari (2013), “Ṣukūk
are somewhat like socially responsible investment firms that put people
and planet before profits”. Mutual funds that subscribe to socially respon-
sible investments also put people and the planet before profit as their motto
(Safari, 2013).

5.4 Waqf-​Based Development and Public Sector Financing

Waqf can provide effective solutions to the financing of large-​scale infrastruc-
tural projects in various sectors like water and sanitation projects, sustain-
able and affordable energy, transport, roads, and shelters for the extremely
poor. Investment into infrastructure is needed to support the expansionary
macroeconomic projects to create jobs, raise incomes, and generate demand.
Hence, a developmental plan is needed that might lead to social inclusion.
Re-​distributive mechanisms of Islamic economics and finance ensure that
the benefits of production do not miss out on the poorest ones, yet the levels
of production are kept in focus. Islamic finance could be helpful in keeping
the economy away from greed, unearned income, speculation, and gambling.
There are quite rational approaches under the Islamic framework that ensure
the appropriate allocation of the available resources, among them, is the
waqf financing for financial intermediation.
Waqf and other charities historically played a vital role in alleviating pov-
erty and led to wider social and financial inclusion. Waqf funds can be used
for the provision of social infrastructure such as education, hospitals as well
as economic infrastructure such as roads and bridges (Sadeq, 2002). It has
been argued that the entire health, education, and welfare budget during
the Osman caliphate based in Istanbul came from charity foundations
(Çizakça, 2004).
While some OIC member countries have developed policies for the revival/​
development of waqf properties, other countries like Pakistan need to devise
laws of awqāf, also allowing the cash waqf to help recover, preserve, and
develop the awqāf system.

5.4.1 Easing the Issue of the Budgetary Deficit through Waqf

Regarding public finance, Pakistan has been taken as a case study. The
ironic condition of Pakistan’s economy is that with the low level of eco-
nomic output, its debt to GDP stood at 83.50% on June 30, 2021 while
domestic debt was 55.1% of GDP.3 The government takes measures to
counter the rising debt levels by selling out public assets or increasing
[mostly the indirect] taxes that further harm the production capacity and
106 Waqf-​Based Financial Intermediation, Fintech, and Crowdfunding

export competitiveness of the commodity-​producing sectors. Waqf can be

used as an alternative Sharī’ah compliant Islamic solution.
The development projects also involve education, health, and civic facil-
ities sectors that, in turn, play a crucial role in strengthening the develop-
ment base of the economy. Other relevant development projects may be that
of renewable energy (solar, wind, and hydel) and infrastructure for micro
farms, business, and value-​adding production units aimed at import substi-
tution and export enhancing. As we discussed in the chapter on promoting
entrepreneurship through awqāf, any waqf-​based projects and schemes could
reduce the public sector expenditure for building the overall infrastructure in
the economy.
For development-​ oriented projects involving the social infrastructure,
waqf ṣukūk can be issued involving the affluent/​philanthropists in the society.
The government would declare the infrastructure assets like schools and
hospitals as waqf, so such projects and their management departments can
be dealt with as waqf for public welfare, with funds donated for continued
reward in the hereafter. Such welfare-​oriented projects will have funding ease
by the UN, World Bank, IsDB, other global infrastructure institutions, and
philanthropist entities abroad.
Çizakça (1998) believes that “the waqf system can significantly contribute
towards the ultimate goal of every modern economist; massive reduction
in government expenditure which leads to a reduction in the budget def-
icit, which lowers the need for government borrowing” (p. 44). Waqf ṣukūk
can be initiated for social-​sector development projects. Waqf can also assist
modern governments in eradicating interest (ribā) as well as promoting better
distribution of income. This can be achieved by instructing Islamic banking
institutions to combine cash waqf with mudārabah firms or “joint-​stock
company shares” (Çizakça, 1998). The government may also ask all banking
companies in the country to create huge collective waqf for public welfare
projects based on the returns that the banks get from investment of current
accounts balances with them on which they pay no return to the depositors.
During the Ottoman caliphate, the waqfs used to send their surplus amounts
every year to the central government. Such a scheme can also be adopted
with some of the waqfs, in particular, with the public waqf foundations that
are established in public-​private partnerships. For the integrity of the system,
there should be a state-​led independent commission that should work out the
assessment of the emergency and the transfer of the funds from the waqfs to
the public sector projects and government.

5.4.2 Waqf-​Based Islamic Fund Management

Islamic fund management plays a significant role in mobilizing savings to

promote economic growth while ensuring Sharīʿah compliance (Al Rahahleh
and Bhatti, 2022). Islamic funds address many issues faced by an individual
investor seeking Sharīʿah-​compliant investment avenues, including selecting
 Waqf-​Based Financial Intermediation, Fintech, and Crowdfunding 107

investments with the lowest cost, analyzing financial ratios of investee com-
panies, and Sharīʿah governance in the form of investment reviews and audits.
There could be a regulation that all cash endowments given under the waqf
system might be invested in listed Islamic funds. Return on such investments
could be used for any socioeconomics objectives also including entrepreneur-
ship for providing business opportunities and enhancing production capacity
in the economy.
Waqf can be used to strengthen business support to the institutions to lower
the cost of supply of goods and services to the poor and to support and build
infrastructure institutions. Types of funds regarding the investment portfolios
and the managers that best suit projects financing are private and corporate
equity funds, wealth funds, commodity funds, venture capital funds, pension
funds, index funds, fund of funds, real estate investment trusts (REITs), and
other funds suiting various investors based on their risk and profit payments
requirements. Islamic funds would invest only in Sharīʿah-​compliant stocks,
portfolios, or projects, based on the approved Sharīʿah screening process and
compliance criteria. In this regard, the Guiding Principles on Governance for
Islamic Collective Investment Schemes (ICIS) issued by the Islamic Financial
Services Board (IFSB-​6) must be implemented.

5.5 Waqf and Fintech

Fintech is an effective way of enhancing financial inclusion. Waqf-​related
fintech is a process of using technological advancement to enable waqf-​related
Sharī’ah-​based financial services in collecting funds, investing, receiving back
returns, and spending for public welfare. As those who generally donate cash
as waqf are literate and mostly aware of tech-​based banking and finance, waqf
fintech can be useful for the provisioning of public goods and social services
and realizing socioeconomic objectives. Adoption of fintech in Islamic social
finance (waqf and zakāt) can increase financial inclusion as it necessitates the
opening of bank accounts to access the funds. Most beneficiaries usually con-
duct one transaction per period to withdraw the entire funds which are then
spent to meet their daily needs. Islamic finance can be utilized to make these
beneficiaries of donations self-​sustaining, and eventually, contribute toward
lifting others out of poverty.
Social funding can be collected and channeled through digital bank
accounts which may also be supported by blockchain technology thus redu-
cing the incidence of fraud, while ensuring the financial inclusion. Fintech
can provide integrated solutions to the entire waqf-​zakāh value chain
encompassing the collection, distribution, and intermediation of funds to
the improved identification of beneficiaries. Technology can also facilitate
bringing more donors to the network.
Ismail (2013) finds that cash waqf is also useful for public goods such
as education, health, social care, and commercial activates. Ismail (2021)
also indicates that contributors of cash waqf are literate urban Muslims
108 Waqf-​Based Financial Intermediation, Fintech, and Crowdfunding

that have a higher ranking for education and health. Such a priority ranking
points toward the requirement of urban civic facilities through waqf in
the most modern Muslim societies show that Islam is still relevant. So, the
use of recent technologies for the provision of basic civic facilities would
enhance the relevance of Islamic culture, Islamic organizations, and Islamic
institutions.
Waqf fintech has been suggested for small farms in agriculture, where banks
generally do not provide finances. PT Patel Agriculture (Indonesia) offers
fintech-​based contracts in murābahah, mudarabah, and salam to finance
agri-​projects (Bilal et al., 2021). Ali et al. (2019) have recorded all the apps
of fintech in Islamic countries, among them are apps for crowdfunding for
social finance that include Beehive, Ethics Crowd, Kapital Boost, and Narwi.
Tajudin et al. (2020) conducted a case study that helps prove a specific con­
clusion that, using waqf, fintech can help alleviate the poverty of the under-
privileged Muslims. Citing some studies, Al-​Shater (2022) suggested that the
specific way of crowdfunding, used to establish waqf endowments, can still
be used through fintech. Zain et al. (2019) recommended crowdfunding for
the waqf model. Crowdfunding is found by an effective tool for solving the
problem of idle waqf properties according to an applied study of Azganin
(2019). Hapsari et al. (2022) suggest that it can be a source of sustainable
funding for waqf, where fintech companies can provide a valuable plat-
form. They also found that education on waqf is the most critical compo-
nent in raising public awareness about crowdfunding for waqf and should be
promoted among beneficiaries such as schools, mosques, government offices,
and social groups.
With a customer base of nearly two billion people, projected to reach
around three billion people by 2060, the waqf-​based Islamic fintech sector
has the potential to take the global finance industry beyond the time-​honored
bottom line of profit. It offers ethical and sustainable alternatives in terms of
investment methodology and products. The fact of the matter is that Islamic
finance provides sustainable models along with higher Sharī’ah objectives
coupled with financial digitalization and e-​commerce thus giving a perfect
foundation for a societal build-​up enough to cater to the development of a
nation.
Some of the successful Islamic fintech entities include Kuala Lumpur-​
based philanthropic fundraising giant “Global Sadaqah”, UK-​based Qardus,
Islamic Finance Guru, Path Solutions (serving over 150 Islamic institutions
across 40 countries), US-​ based Wahed, P2P financier Amartha Mikro
Fintek & Bank Sumut, UK-​ based peer-​ to-​
peer property investment plat-
form “Yielders”, BNPL platform “PayHalal”, Sydney-​based MRHB DeFi
Network and coinMENA for the MENA region.
Fintech-​based waqf, like fintech itself, would need an Efficient Account
Information Service (AIS) and a Payment Initiation Service (PIS) that could
be provided through the “Regulatory Sandbox” as a tool for financial
innovations, and a part of the comprehensive and effective regulation. Leaving
 Waqf-​Based Financial Intermediation, Fintech, and Crowdfunding 109

fintech without regulation or a robust legal framework will render the whole
innovation susceptible to abuse, misuse, and devastating manipulations.
While cash waqf in Indonesia has been legalized by the law, fintech apps
are permitted as long as they are not in breach of the law. A wave of fintech-​
based waqf started in 2018 under the (informal) umbrella of government
waqf-​governing agencies. The Itqan mobile company collects funds through
crowdfunding and then, with the help of some financial intermediary plat-
form, provides the collected donations as capital to small firms, again through
mobile apps, on large scale, the return of which is then spent for social wel-
fare projects (Nurhayati, 2021).
For the current applications of fintech in the Islamic capital market, there
has been a significant increase in the adoption of technology and innova-
tive solutions in leading jurisdictions offering Islamic financial services. For
instance, in Malaysia, the Investment Account Platform (IAP) was introduced
as a cross-​border multicurrency platform for facilitating regional and global
financing opportunities for emerging business ventures. The IAP is based on a
consortium of several IBs that help as financial intermediaries to channel the
funds to deserving business ventures. Malaysian fintech dialogue, a year-​wise
dialogue platform, that works under Malaysia Digital Economy Corporation,
a government body to regulate the fintech, is to build an inclusive fintech eco-
system that should include zakāh, waqf, and sadaqah space.

5.5.1 Fintech Sector in Pakistan

The authors of this study conducted various interviews and arranged focal
group meetings. For Pakistan, some research participants suggested that waqf
should be allowed to be set up through the Roshan Digital Account. State
Bank as well as the SECP, as per their due diligence policy, may facilitate
in establishing such waqfs. A retired SBP officer indicated that the Roshan
Digital account’s concept paper was started in 2016. In such accounts, char-
ities are authorized to get donations provided they are registered with the
Economic Affairs Division of the Government as approved charities. So, it
was recommended that waqfs should be authorized to get such donations.
Roshan Digital Account which is approved for Pakistan is very convenient
for getting donations from abroad through digital accounts.
The fintech ecosystem is subject to several hindrances comprising threats
to data security and intellectual property, trouble attracting the right talent
and customer base, and an uncertain regulatory environment discouraging
entrepreneurs from venturing into the fintech environment. Besides, overall
low economic performance is also responsible for little progress in the devel-
opment of fintech. The problem of low financial access, only 7% of the
adult population, has long plagued the Pakistani economy (World Bank,
2017). Pakistan occupies a low rank in financial inclusion when compared
to regional and global standards (Nenova & Ahmad, 2009). High intermedi­
ation costs with high interest rate spreads, financial illiteracy, high collateral
110 Waqf-​Based Financial Intermediation, Fintech, and Crowdfunding

requirements, and prohibitive lending rates have put finance out of the reach
of small and medium enterprises.
Of course, Pakistan is an attractive market for fintech growth, owing to
being fifth largest youth population, disruptive internet, smartphone pene-
tration, consumer preference for mobile phones and social media, booming
online commerce facilitating digital payments, and an overall financial system
having absorption capacity for innovation. Rizvi and Naqvi (2018) found
that the verification of 132 million biometrically certified SIMs paved the way
for digital wallets and payments through mobile phones. Among nonbank
players, Easypaisa, by Telenor Pakistan is a prominent mobile phone app with
more than 70,000 agents in the country. Karandaaz Pakistan, a nonprofit
organization, is also providing them grants to fintech start-​ups in Pakistan
for access to financial services, payments, e-​commerce, and interoperability.
Meezan Bank, the premier IB in Pakistan, has launched a digital supply
chain financing platform (Wisaaq) in partnership with Haball, an Islamic
B2B fintech that digitizes business payments to enable a cashless and digital
supply chain. Wissaq connects distributors, banks, and the corporate on
a single platform and enables clients to benefit from improved cash flow
efficiencies. It provides an investment solution for nonresident Pakistanis.
Wisaaq will be available through the exchange’s Karachi Internet Trading
System (KiTS) and will facilitate any digital account client of an IB focused
on investing in Sharī’ah compliant securities, through the services of over 100
securities brokers and trading right entitlement certificate (TREC) holders
that use KiTS as an order management system. All such systems can help pro-
mote the institution of waqf with sustainable sources of funds and efficient
use of funds for all social and economic sectors of the economy. SBP has also
developed a mobile application for Asaan Mobile Account (AMA) to facili-
tate mobile banking interoperability.
A digital asset management regulation was issued on August 1, 2022 by
the SECP outlining the role of digital asset-​management companies (AMCs)
as licensed nonbanking finance companies (NBFC). In this concept, the regu-
lator intends to lower the barrier to entry. [Details about fintech-​related
financial regulations can be seen in research by Rizvi and Naqvi (2018)].

5.6 Summary and Conclusion

Welfare-​oriented financial intermediation which should potentially be
the objective of every economy must lead to full and fair access by all to
resources while helping those who might remain behind due to any inability
or functioning of the market forces. Financial intermediation for social inclu-
sion is much more than merely bringing all under a formal banking network.
Academic studies conclude that tools of Islamic social finance such as zakāh,
sadaqah, waqf, Islamic microfinance, and cooperative takaful models lead to
financial as well as social inclusion and help reduce income inequality. Such
intermediation services could be provided through cash awqāf.
 Waqf-​Based Financial Intermediation, Fintech, and Crowdfunding 111

A good tool for social and financial inclusion is the cash waqf (Ismail,
2009).. Cash waqfs relieved the budget of the Ottoman Empire by doing such
investments in education, health, and infrastructure which were financed by
governments in the economic structure of other parts of the world. Thus, the
capital need of the empire was reduced, and the money demand of the gov-
ernment decreased which caused lower interest rates in the entire economy
(Çizakça, 2000).
In the present world with innovative concepts of fintech and crowdfunding
already well established, waqf can play a more effective role in enhancing
financial and social inclusion by collecting donations at the micro level and
investing the return from the fixed properties awqāf for socioeconomic
purposes. The role of the regulator is crucial because it has to implement and
monitor the waqf-​related community laws, fintech rules, as well as financial
laws and regulations.
Running expenses for managing the affairs by the trustees of public and
financial intermediary waqfs will have to be limited to a certain extent, say
10% of the income in the case of general waqfs and 5% in the case of finan-
cial intermediary awqāf. The cash donation forms to be used by the banking
and nonbanking institutions will have to be approved by the regulators and
the central Sharī’ah committee.
The waqf base intermediation system could also be used as a vehicle
for savings/​ investments and providing relief packages to the poor and
middle classes for education, house construction, motor vehicles, etc. IBs
and financial institutions may also become members of such organizations
as part of their community services programs that could be funded from
banks equity, current accounts balances, or awqāf funds for help to the
indigent and the poorest. Community takāful in the proposed structure
could become an institution for social and financial inclusion of those who
either abstain from banking and insurance due to Sharī‘ah prohibitions or
are not in a position to approach conventional institutions due to some
deficiencies.
The social welfare and development concepts, principles, and theories in
the Islamic perspective will also apply to the waqf. So, the waqf-​related inter-
mediary services would require experts to work out the practical options at
each phase of the work.
Islamic finance, as inclusive finance, may also promote, under waqf,
modern methods of green financing through the issuance of green ṣukūk, as
in Malaysia and Indonesia, which can be attributed as one step ahead toward
clubbing belief and sustainability.
Islamic finance, digital economy, and waqf could be termed as the Key
Economic Growth Activities (KEGA) for the OIC member countries. They
must build an inclusive fintech ecosystem comprising IBs, AMCs, fund man-
agers, Islamic fintech start-​ups, corporates, NGOs, waqf and zakāh platforms,
and practitioners in the areas of waqf, zakāh, and charities. Globally, a total
of 138 companies were offering Islamic fintech services as identified by the
112 Waqf-​Based Financial Intermediation, Fintech, and Crowdfunding

IFN Islamic Fintech Landscape across 11 verticals as of the end of December

2019 (Aziz, 2021).
Leaving fintech without a robust legal framework will render the whole
innovation susceptible to abuse, misuse, and devastating manipulations.
Therefore, regulatory technology or RegTech may have to step up its pro-
active regulations to regulate fintech applications. A RegTech framework has
been experienced in Malaysia with the enactment of the Capital Markets and
Services (Prescriptions of Securities) (Digital Currency and Digital Token)
Order 2019. Malaysia is also said to have the most sophisticated Islamic
fintech regulatory framework (Aziz, 2021).
Pakistan and many other OIC member countries are lagging behind some
other Islamic countries in promoting the use of fintech for enhancing finan-
cial and social inclusion. They must build an inclusive fintech ecosystem
comprising IBs, AMCs, fund managers, Islamic fintech start-​ups, corporates,
NGOs, waqf and zakāh platforms, and practitioners in the areas of waqf,
zakāh, and charities. Beyond RegTech, there is a need for a regulatory
sandbox for the application of fintech in financial services.

Notes
1 Prepared and coordinated by Lucas Chancel (Lead author), Thomas Piketty,
Emmanuel Saez and Gabriel Zucman, UNDP as Scientific partner (World Inequality
Lab, 2021).
2 The report accessed from: www.refini​tiv.com/​en/​isla​mic-​fina​nce
3 www.fina​nce.gov.pk/​reb​utta​ls_​d​etai​ls1.html#:~:text=​Howe​ver%2C%20the%20p​
osit​ i ve%20deve​ l opm​ e nt%20is,GDP%20f​ r om%2056%25%20l ​ a st%20y ​ e ar.
Accessed on Aug 22, 2022.
6 Management and Governance
of Awqāf as Social Finance
Institutions

6.1 Introduction
The success of the financial management strategies of awqāf depends a great
deal upon long-​term planning by the founders to maintain the sustainability
of their foundations, the activation of control mechanisms by means of
coordinating the incomes and expenses of foundations and the diversifica-
tion of economic instruments under the market conditions (Gürsoy, 2018).
Three traditional principles of waqf are perpetuity (assets/​ purpose),
inalienability, and irreversibility. However, contemporary scholars take a
lenient view and accept temporary awqāf as well as reversibility under cer-
tain conditions for ensuring sustainability. The Waqf Core Principles (WCP)
as indicated by a Working Group on Waqf (IWG-​2018) acknowledges that
there are different schools of thought related to the law and the implemen-
tation of awqāf. Cash waqf becomes important in this context and it has
taken the form of a financial intermediary connecting philanthropists with
a variety of beneficiaries. The WCPs have been structured around certain
basic building blocks focusing on “benevolence” and “mutual benefit” from
cash and tangible assets awqāf while also seeking to harmonize alternative
viewpoints (IWG-​2018, p. 12).1
As waqf and charitable organizations share similar characteristics (Sadeq,
2002), so the conception of governance, the hallmark of public sector govern­
ance overlaps with that of nonprofit institutions like that of waqf. However,
there is certainly a difference between governance in corporate culture and
the waqf and other social institutions’ governance. While the conventional
corporate culture focuses on efficiency for earnings maximization, waqf
involves accountability to God, human beings, society, and the environment
as part of the belief system. This aspect makes much difference between the
management of the corporate entities and that of the waqf institutions that
might be working at the micro or corporate level.
There are recent empirical studies that assess various aspects of manage-
ment around all the aforementioned concepts. Accountability is a rather more
effective feature of governance of institutions that manage people’s money for
people’s benefit, and common welfare in the economy. It requires a deep
DOI: 10.4324/9781003477549-6
114 Management of Awqāf as Social Finance Institutions

understanding of the working for the sake of meeting the expectations of the
endowers, beneficiaries, and other stakeholders in using the waqf resources to
achieve the desired pious ends. Hence, the management of such belief-​based
institutions has to be based on principles different from that of the manage-
ment and governance of conventional corporate business entities. It requires
different factors and processes for meeting the expectations of stakeholders
by using the donated funds optimally and efficiently.

6.2 Framework of Waqf Management and Governance

Ensuring good governance is the hallmark of the awqāf system. The overall
structure of management and governance of the institution of waqf has a
wider spectrum than that of management in general or corporate govern-
ance. There are recent empirical studies that assess various aspects of man-
agement around all the aforementioned concepts. Accountability is a rather
more effective feature of governance of institutions that manage people’s
money for people’s benefit, and common welfare in the economy. It requires
a deep understanding of the working for the sake of meeting the expectations
of stakeholders in using the waqf resources to achieve the desired pious ends.
Standards of governance pertain to independence, fairness, and account-
ability. Accountability in waqf management measures responsibility, trans-
parency, disclosure, participation, self-​ regulation, and adherence to the
founder’s objectives/​donors’ rights [governance, privacy, and others]. Such a
standard of governance helps in maintaining the integrity of the system and
acceptability among the masses.
Sundqvist et al. (2014) indicate four close corporate concepts of manage­
ment namely efficiency, effectiveness, quality, and governance. They define
efficiency as “meeting all internal requirements for cost, margins and asset
utilization” while effectiveness is meant for “satisfying all requirements of the
customer”. In the case of waqf, accountability to Allah (SWT), fellow human
beings, and society is equally important. It can be depicted as in Figure 6.1.

Figure 6.1 Five Factors of Waqf Management.

Source: Authors’ own.
 Management of Awqāf as Social Finance Institutions 115

The major reason behind this is the difference in the objectives –​public
welfare and thanksgiving to Allah SWT and getting His favor in the former,
and profit/​earnings maximization in self-​interest in the latter case. This wider
spectrum of waqf management and governance is depicted in Figure 6.2.
The aforementioned structure implies that the mutawalli (nāzir) is expected
to manage all affairs under the guidance of the waqf board with the help of
professionals like accountants, auditors, and supervisors/​regulators. The pro-
cess covers all stages starting from the creation of waqf, getting donations,
and providing instant and long-​term solutions to the needy with proper dis-
closure and accounting processes. It requires that we discuss the formation
of the awqāf, related parts of the AAOIFI’s Standard on waqf, duties of nāzir
and related matters, accountability as a special feature of waqf institutions,
and the WCPs as suggested by IWG on waqf (2018).
Nāzir is the main role player for waqf and is considered a change maker as
his dynamic leadership paves the road to the institutional evolution of awqāf.
Historic records suggest that nāzir used to have some flexibility that helped
initiate institutional changes, such as the pooling of cash waqf assets, that
too working under an environment of strict Sharī’ah law. However, the flexi-
bility has to be carefully watched for proper risk management, particularly in
respect of cash waqfs and the use of waqf funds for financing entrepreneurs
and other socioeconomic projects.

Figure 6.2 The Management and Governance Framework of Waqf Institutions.

IFP, Immediate Funds Transfer.
Source: Authors’ own.
116 Management of Awqāf as Social Finance Institutions

As the awqāf system for socioeconomic objectives has to be revived in

almost all OIC member countries necessarily including Pakistan, it would
also require strategic management of the evolutionary process. It might not
be possible without strategic policy formulation and implementation at all
levels.
Fortunately, the revitalization of waqf institutions has become top on the
agenda of Muslim communities around the world for the past few decades.
The awareness of waqf revitalization is increasingly gaining popularity
amongst Muslim countries. The governments of most Muslim countries
have realized the need for the revival of waqf as an important tool for cre-
ating a better society (e.g., Kuwait, Jordan, Sudan, Malaysia, Indonesia, and
Bangladesh). In addition to this, many international waqf conferences were
organized by the Islamic Development Bank (IDB) through its subsidiary,
the Islamic Research and Training Institute (IRTI) (later renamed as IsDB
Institute), and some universities in Malaysia and Indonesia also demonstrate
a growing interest and awareness in waqf institutions and consider it as one
of the tools of community development (Cajee, 2008; Ayedh & Ihsan, 2013).

6.2.1 Governance of Awqāf vis-​à-​vis the Corporate Governance

Good governance is a critical success factor for revitalizing awqāf institutions

(Kahf, 2007; Saad et al., 2016; Cajee, 2007; Ayedh & Ihsan, 2013; Hassan
Rusni et al., 2022) but the fact is that historically there was no framework for
the not-​for-​profit sector until a decade away (Hyndman & McDonnell, 2009).
Many studies are found (such as for Malaysia) that have gone a stage ahead
for the assessment of waqfs by the government’s councils that manage these
waqfs. Hassan et al. (2022) conducted a qualitative study that compared the
impact of good governance and best practices on the management of waqf by
selected SIRCs in Penang, Perak, and Kuala Lumpur to Singapore, Kuwait,
and the UAE as model framework countries. Studies find that there is inef-
fective administration and management of waqfs that hinders their develop-
ment and expansion in terms of broader objectives of waqf.
Organization of Economic Cooperation and Development (OECD, 2005)
has adopted six principles: (i) corporate governance framework should pro-
mote transparent and efficient markets and be consistent with the rule of
law; (ii) the rights of shareholders are protected; (iii) an equal treatment of
shareholders is ensured; (iv) the role of stakeholders is recognized; (v) accurate
disclosure of the company’s finances; and (vi) monitoring of the management
and accountability by the board.
There are different aspects of accountability of nāzir where most rele-
vant are those suggested by Ebrahim (2003). As corporate governance is
linked to good governance, so the measures suggested by Ebrahim (2003)
are compared with the King Report for Corporate Governance South Africa
and OECD’s corporate governance (OECD, 2005). Looking at the study
by Ebrahim (2003) that provides five standards for accountability of nāzir,
 Management of Awqāf as Social Finance Institutions 117

this book suggests, from the comparison of corporate governance, seven

principles for the accountability of nāzir. These include disclosure statements
and reports, performance assessment, participation, self-​regulation, social
auditing, adherence to the founder’s objectives and protection of donors’
rights, promotion of transparent and efficient waqf financial markets, and
consistency with the rule of law. Abu-​Tapanjeh (2009, pp. 17–​19) has given a
nice comparative position of Islamic principles of corporate governance with
the revised principles of OECD.
King Report II on Corporate Governance for South Africa (2002) suggests
a few principles for corporate governance for charities that include discip-
line, transparency, independence, accountability, responsibility, fairness,
and social responsibility. It moved from the single bottom line (shareholders
approach) to a triple bottom line, which embraces the economic, environ-
mental, and social aspects of a company’s activities It implies that for the
good governance of charities, the word “corporate governance” is also used
that refers to the structure of rules, practices, and processes used to direct
and manage a company. A company’s Board of Directors is the primary force
influencing corporate governance.
Governance, in the context of waqf institutions, refers to the process and
structure of directing and managing the affairs of the waqf institution toward
enhancing the social welfare of the rightful recipients as well as demonstrating
accountability to the waqf donor. Efficiency shows how well the institutions
are using their resources to meet their objectives of socioeconomic justice like
reducing poverty (Saad et al., 2016).
Saad et al. (2016) found that due to legislative lacunae, administrative
lapses, lack of political will, indifferent attitude of the management of the
awqāf, and lack of honesty/​integrity, the commercial waqf properties are not
being maintained efficiently and so they do not yield optimal level of benefits
to the society.
As waqf and charitable organizations share similar characteristics (Sadeq,
2002), so the concept of its governance overlaps with that of the nonprofits,
too. As the governance system in nonprofits (Western society in particular)
encompasses the board of directors, the perspective of corporate manage-
ment from the business sector can also be adopted (Hyndman & McDonnell,
2009). Here principal-​agent theory might be relevant because the provider of
funds wants money to be spent for the objective of the donation. Saad et al.
(2016) compare two concepts, efficiency and governance, where efficiency is
the measure of the use of resources to meet objectives while, governance, as
explained by UNDP (1997), is how management power is exercised along
with the accountability toward the donors.
The concept of accountability is the major difference between the conven-
tional and Islamic codes of governance. Ayedh et al. (2018) identify the main
historical stages of the development of accountability in awqāf. The first stage
of waqf introduction and emergence at the time of the Prophet (PBUH) and
his companions –​ad hoc in nature mainly relying on the individual piousness
118 Management of Awqāf as Social Finance Institutions

and honesty of the nāzir. The second stage of “growth and development”
witnessed the expansion of waqf in many aspects of the community such as
religion, education, health, economic aid to the needy, etc. As accountability-​
related issues surfaced, mechanisms were developed as and when needed. These
included: establishing diwan al hisbah for recording all transactions at the time
of the second pious caliph (Omar Ibn Al khattab RA) especially for awqāf in
the Fatimid period, and appointment the Qādi (judge) to supervise directly
the nāzir and to ensure that the waqf is being used and managed in the right
manner. The third “declining and collapse” stage started after the coloniza-
tion of the Muslim areas in the world. The waqf properties were mismanaged,
the role and contribution of waqf to the community shrunk to only worship
places, and the institution lost the trust of the Muslim community.

6.2.2 Concept of Holistic Accountability in Awqāf

Accountability is a central theme in Islam because accountability to Allah

and the community is paramount to a Muslim’s faith (Lewis, 2006). Askary
and Clarke (1997) asserted that the word hisāb which is interrelated with
accounting, and accountable is repeated more than eight times in different
verses in the Qur’an. In the Islamic perspective, the holistic accountability
model is the most pertinent which was developed by Ihsan (2017) in his
study on accountability practice in a waqf institution in Indonesia (Ayedh
et al., 2018). This model of holistic waqf accountability based on studies by
O’Dwyer and Unerman (2008) and Ebrahim (2003) encompasses upward
and downward accountability.
In management of waqf, the religious dimension is added where the waqf
money is devoted to Allah SWT in search of His favor for the welfare of
human beings and all other creatures. In that way, the waqf governance
extends the sphere of the term to some very broader levels. It increases the
sphere of the external elements on one side by adding accountability, and the
internal elements as it covers all aspects of administration.
Ebrahim (2003) reviewed five broad mechanisms of accountability to be
practiced by the NGO. These are reports and disclosure statements, perform-
ance assessments and evaluations, participation, self-​regulation, and social
audits. Each mechanism, tool or process is analyzed along three dimensions
of accountability: upward–​downward, internal–​external, and functional or
strategic. He found that practically in the NGOs accountability emphasizes
“upward” and “external” –​accountability to donors while “downward”
and “internal” mechanisms remain comparatively underdeveloped.
Ayedh et al. (2018) found that nāzirs tend to prioritize upward account­
ability instead of downward accountability. It means that they give more
attention to the government and donors. Hence, the government’s role must
be well defined, and effective while avoiding interference regarding the
waqf activities. Other measures may include: (i) regular issuance of finan-
cial reports, (ii) report of nonfinancial welfare activities, and (iii) conducting
customers’ (beneficiaries) satisfaction surveys.
 Management of Awqāf as Social Finance Institutions 119

There must be a focus on accountability in managing the system of

awqāf. Accountability in the Islamic perspective means much more than
the conventional conception of accountability. It is the most forceful and
effective element in management as every believer has been held account-
able to Allah SWT for all activities and actions (Qur’an, Al-​Zalzalah 99:7).
Haniffa (2002) takes the view while getting support from the Quranic
verse (2:284), that the ultimate accountability in Islam is to Allah since all
deeds will be counted in the hereafter. “To Allah belongs all that is in the
heavens and on earth. Whether you show what is in your minds or con-
ceal it, Allah will call you to account for it” (Qur’an, Al-​Baqarah 2:284).
Secondly, accountability is identified as part of Ibādah (servitude to Allah)
and amal sāleh (virtuous deeds) in attaining al-​Falāh (benefit for the people
in this world and the hereafter) (Haniffa, 2002). Therefore, Ibrahim (2000)
comes up with the concept of dual accountability whereby human beings
are accountable to Allah SWT as well as to the people to fulfill any contract
made among them. Shahul (2001) named it Islamic accountability which
leads to some principles of good governance in Islam. Similarly, Zein et al.
(2008) derived some good governance principles from Qur’anic verses and
the principle of tawhid.
The first such principle is amānah which refers to a contract between
God and man that determines the individual’s relationship with society. If
an individual understands the concept of amānah, the issues regarding rights
and responsibilities can be resolved. The fulfillment of amānah would bring
to adālah (justice), the second principle of good governance. According to
Shahul (2001), adālah in an Islamic economic scheme is aimed at achieving
social welfare. Adālah principle leads Muslims to work with full objectivity.
Other important aspects of accountability are functional accountability
(accounting for resources, resource use, and immediate impacts) and stra-
tegic accountability (accounting for the impacts that an NGO’s activities
have on the actions of other organizations and the wider environment)
(Ebrahim, 2003). Ebrahim (2003) also found that the NGOs and donors
focused primarily on short-​term “functional” accountability responses and
not the longer-​term “strategic” processes that are necessary for long-​term
social impact.
Ebrahim (2003) has indicated the key characteristics of the accountability
mechanisms in the form of a table (Table 6.1).

6.2.3 Accountability of Nāzir (Mutawalli or Manager)

Accountability of nāzir is important in the management of waqf. Nāzir is

accountable to (i) the wāqif (donor), (ii) government/awqāf institutions,
(iii) the waqf beneficiaries, (iv) the related NGOs, (v) the similar waqf
organizations, (vi) the society, and (vii) accountable to Allah SWT (Ayedah
et al., 2018). Rashid (2008) contends that the phenomenon of lack of account­­
ability in waqf is due to the decline of the standard of morality. Various
120 Management of Awqāf as Social Finance Institutions

Table 6.1 Key Characteristics of Accountability Mechanisms

Accountability Accountability Inducement (internal Organizational

mechanism (tool (upward, or external) response
or process) downward, or to (functional or
self) strategic

Disclosures/​ –​  Upward to –​  Legal requirement –​  Primarily

reports (tool) funders and –​  Tax status functional,
oversight agencies –​  Funding with a focus
–​  Downward (to a requirement on short-​term
lesser degree) (external threat of results
–​  Disclosures/​ loss of funding or
reports (tool) tax status)
to clients or
members who
read the reports
Performance –​  Upward to –​  Funding –​  Primarily
assessment funders requirement functional at
and –​  Significant (external) present, with
evaluation potential for –​  Potential to become possibilities
(tool) downward a learning tool for longer-​
from NGOs to (internal) term strategic
communities and assessments.
from funders to
NGOs
Participation –​  Downward from –​  Organizational –​  Primarily
(process) NGOs to clients values (internal) functional if
and communities –​  Funding participation
–​  Internally to requirement is limited to
NGOs themselves (external) consultation
–​  Significant and
potential for implementation
downward from –​  Strategic if
funders to NGOs it involves
increasing
bargaining
power of clients
vis-​à-​vis NGOs,
and NGOs vis-​
à-​vis funders
Self-​regulation –​  To NGOs –​  Erosion of public –​  Strategic
(process) themselves, as confidence due in that it
a sector to scandals and concerns long-​
–​  Potentially exaggeration of term change
to clients and accomplishments involving codes
donors (external loss of of conduct
funds; internal loss
of reputation)
 Management of Awqāf as Social Finance Institutions 121

Table 6.1 (Continued)

Accountability Accountability Inducement (internal Organizational

mechanism (tool (upward, or external) response
or process) downward, or to (functional or
self) strategic

Social auditing –​  To NGOs –​  Erosion of public –​  Functional

(tool and themselves (by confidence to the extent
process) linking values (external) it affects the
to strategy and –​  Valuation of social, behavior
performance) environmental, of a single
–​  Downward and ethical organization
and upward to performance on –​  Strategic to
stakeholders par with economic the extent it
performance affects NGO-​
(internal) stakeholder
interaction,
promotes
longer-​term
planning,
and becomes
adopted
sector-​wide

Source: Ebrahim (2003).

authors suggest different aspects of accountability of nāzir (Jacobs, 2000;

Brennan & Solomon, 2008; Ebrahim, 2003).
According to AAOIFI Shari’ah Standard no. (60) on Waqf, Para: 5/​2 p.832/​
2015, the nāzir should perform the following tasks: (1) management, main-
tenance, and development of the waqf; (2) leasing of the assets or usufructs
of the waqf and leasing of the waqf lands; (3) development of the waqf prop-
erties either directly through Shari’ah-​sanctioned methods of investment or
through financial institutions; (4) increasing the waqf money by investing it
in Mudarabah and other similar forms; (5) changing the operational form
of the waqf assets with the aim of maximizing the benefit generated for the
waqf and its beneficiaries; (6) defending the right of the waqf; (7) settle-
ment of the debts of the waqf; (8) payment of the entitlements of benefi-
ciaries; (9) replacement of the waqf; (10) safeguarding the waqf properties
against occupation or seizure by others; (11) using takaful to safeguard the
waqf assets; and (12) preparation of the waqf accounts and the submission
of statements and reports on them to the concerned authorities (IWG-​2018).
There is another concept, “quality” used for the “quality management”
(QM) with focus on the customer. Quality encompasses “aligning the product
(as per the required internal standards) with the customer’s needs (external
demand)” and can be termed both as “doing things right” (efficiency) and
“doing the right things” (effectiveness). So, the term “quality” implies both
internal and external, as well as short-​term and long-​term perspectives. While
122 Management of Awqāf as Social Finance Institutions

efficiency emphasizes internal and short-​term issues, effectiveness tends to

emphasize long-​term issues that are both internal and external.

6.2.4 Need for Standardized Waqf Management Rules

As can be inferred from the aforementioned discussion, accountability is a

central theme in in the context of waqf management. Here, good govern-
ance is based on the concept of the absolute unity of Allah (tawhid) and
belief in the life hereafter. The waqf charter, based on the Qur’anic guidance,
originates a specific set of operational principles such amānah and adālah
which reinforce the processes of governance. Critical academic studies have
discussed various approaches for waqf that are based on the management of
large commercial/​financial corporations of Western origin. These approaches
have high-​end standards for transparency and accountability.
Waqf management protocols start from the formation of a waqf and the
deed for creating a waqf. There is a need to find an appropriate set of tools
for the standardized procedures for the creation and supervision of waqfs.
Conditions for formation of waqf, as suggested by Hasan (2007), are given
in Box 6.1.

Box 6.1 Major Conditions for Waqf Formation

1. The property must be a real estate or a thing with some meaning of

perpetuity (e.g. land, buildings, vehicles, books, cash /​liquid assets,
tools, etc.)
2. The property should be given on a permanent basis (temporary waqf
is only for family waqf).
3. The waqf founder must be an adult Muslim of good health and able
to take such an action.
4. The founder must be the legal owner of the property and have the
property in question under his/​her possession.
5. The purpose of waqf must, at the end, be an act of charity from
points of view of both Sharī’ah and the founder (waqf on the rich
alone is not permissible because it is not charity).
6. The founder must use certain prescribed words and verb forms con-
ventionally understood as signifying the notion of perpetuity, such
as waqf, hubs, etc.
7. The object of the endowment must be property whose utilization will
not result in its dissipation or consumption.
8. The creation of the waqf has to be declared formally according to the
country’s legal framework.
Source: Adapted from Hasan (2007)
 Management of Awqāf as Social Finance Institutions 123

A new thought process has evolved in respect of concepts and practices that
fulfill the modern-​day requirements for social welfare. Now, cash waqf has
become a major institution within the overall concept of awqāf for helping the
needy. The standards require a much deeper understanding of the working of
waqf institutions with belief and knowledge of the specific stages of evolution of
the waqfs. Impressive work has already been done on standardization and pro-
viding an effective framework for waqf operations in the modern age. AAOIFI
issued its Sharī’ah Standard on waqf which indicates all Sharī’ah-​related and
many operations-​related aspects. The IWG (2018) also suggested a compre­
hensive set of Core Principles for the operation and supervision of awqāf in
October 2018. These WCPs have been structured around the basic building
blocks of social finance focusing on “benevolence” and “mutual benefit” by
harmonizing the alternative viewpoints regarding the three principles of per-
petuity (preservation of the assets along with its purpose), inalienability, and
irreversibility.
The WCPs allow the commingling of endowment funds with other
philanthropy-​driven funds with the condition that there is divine motivation
and the waqf portfolio is restricted only to halal businesses. These principles
pertain to the legal foundation, supervision, good governance, risk manage-
ment, and Sharī’ah governance of any waqf and its activities. IWG’s tech-
nical report is the main reference document for measuring the performance
of waqf management that also accommodates the technical and operational
aspects (IWG-​2018).
By adopting the Basel Core Principles (BCPs), the WCPs represent an inter-
national standard of high-​level principles to achieve and assess waqf super-
visory practices. In case the banks create and manage waqfs, the BCPs that
have already been adopted by banks in more than 150 countries, may represent
the best model to emulate for waqf supervisory practices (IWG-​2018).

Box 6.2 Basic Information Contained in an 18th-​Century Waqf

Register

1) The name of the waqf, locality, trustee.

2) The purpose for its establishment.
3) Original capital of the waqf.
4) Later additions to capital (either by individuals or by other awqaf).
5) Annual return obtained from the capital (the murabaha fi sene-​I
kamile)
6) The purpose for which the annual return was designated.
7) Finally, information about the borrowers of the endowment capital:
8) The borrower(s)’ name(s), locality, religion and gender.
9) The amount of capital they borrowed.
Source: Adapted from Hassan (2007, p. 214)
124 Management of Awqāf as Social Finance Institutions

Quality is measured empirically also for waqfs. In a study of empir-

ical measurement on one aspect of quality (reporting), Hanefah et al.
(2021) found that in Malaysia, the quality of waqfs remained at a mod­
erate level as it scored 40.29%. Though it seems quite a smaller (less than
50%) achievement, yet, in the times of the renaissance/​re-​emergence of
Islamic social institutions, it is quite healthy, if it continues to grow with
the process of emergence. However, as disclosure is the most effective cor-
porate principle, lapses in the reporting of disclosures have to be removed.
The basic information about any waqf in the Ottoman period is given in
Box 6.2.
According to the WCPs, a temporary waqf donation can also fulfill its
charitable objectives and result in two benefits –​one for the beneficiaries
as per the waqf deed throughout its specified period, and the other for
the benefit of the wāqif who may need his property in the future (AAOIFI
Sharī’ah Standard no. (33) Waqf p.832/​2015).
There must be many additions to the list about the receipt of donations,
investments, grants, qarḍ hassan, financing based on trade-​and lease-​
based modes, and the benefits accruing to the nazir and the members of the
Waqf Board.
Hanefah et al. (2021) measured five factors that influence quality waqf
reporting practices. These are relevance, faithful representation, understand-
ability, comparability, and timeliness. A similar study was conducted by
Kamaruddin (2018) that found some lapses in the reporting of waqfs under
investigation including many nondisclosures. There “information disclosed”
is defined as, what the stakeholders desire, rather than what nāzir (waqf
administrator) wants to disclose. This observation is closer to the fifth cor-
porate principle of the OECD on disclosure and transparency, “accurate dis-
closure of the company’s finances”. So, corporate principles are employed for
monitoring the waqfs.

6.3 Management of Awqāf in Some Jurisdictions

Waqf administration went through five stages during the Ottoman Caliphate
starting from 1486, wherein each stage, the level of the caliphate’s inter-
vention increased while the mutavallis’ powers and shares of waqfs in the
revenues reduced.
Ottomans managed waqfs, in later stages, by centralization/​nationaliza-
tion in various stages. The system worked well, though some authors hinted
at nationalization-​related issues of performance, efficiency, and morality.2
Internal management was performed by the waqfs themselves, as the waqf
was an institution of the people for the people and managed by the people.
It would have promoted self-​governance and so should have inculcated the
habit of self-​rule while working under the laws of Sharī’ah, a set of ultimate
principles of social justice.
 Management of Awqāf as Social Finance Institutions 125

6.3.1 Management of Cash Waqfs in Ottoman Caliphate

As cash waqfs are quite different from other waqfs, their management is
also different. Cash awqāf became an institution of credit that was managed
under the same administration led by nāzirs. Cash waqf made up 50% of
the total number of waqfs in the 16th century with features of permanence,
perpetuity, accountability, and most importantly, risk management. The
role of Qādi in the administration and record keeping of the cash waqfs, as
for other waqfs, was quite efficient and so impressive. As there was no con-
cept of the financial Qādi/​court, so the same Qādi used to examine, record,
and provide decisions on the matters relating to the cash waqfs, under the
Sharī’ah law.
Qādi used to record the vakfname (waqf deed) along with the operating
procedures and accretion (return) rates. Three main kinds of cash waqfs
“neighbourhood avariz funds”, “artisan guild funds”, and “janissary funds”
were managed in the same way as there was no mention of kind specific rules.
The waqf trustees used to work just like the present-​day fund managers
of pool funds as a single authority. The amount endowed by each founder,
the accretion rates (on trade-​or lease-​based financing) he or she finds appro-
priate, the rents received from the properties and the demanded services
differed from one another. Within this view, the accounting of each waqf
endowed to the funds was recorded in the same book but on separate pages.
Cash waqfs were like equity-​based companies where they were administered
by a single elected trustee as reported by Gürsoy (2018). The single trustee
was appointed by the founder and recorded by the Qādi. Onwards, the assets
were managed by a single trustee under the Sharī’ah law and the protection
of the executive powers of the caliphate.
Vakfname (deeds) were important in managing the risks and uncertainties
as there used to be necessary guidelines such as the characteristics of loan
seekers (Gürsoy, 2018). Similar was the warning against advancing the loans
without a strong guarantor and/​or a valuable good(s) against uncertainties.
Immovables taken as pledged assets were insured against potential natural
risks. Devaluation risk was also managed by cash management, avoiding the
use of multiple currencies and mentioning the currency type, as there were 36
different currencies in the early 19th century.
Vakfname also included the explicit mention of the voluntary supervi-
sion of the “reliable people” such as well-​known people in the neighbor-
hood, artisan masters, and Janissary headmen. There was a mechanism of
public accountability too, as trustees were instructed to show all accountings
to anyone who wished. The checking of the accountings at intervals by
official supervisors was another risk-​reducing precaution. Provided that no
complaints were available against foundations accounting, they were not
required to be checked by official authorities every year. In this way, the
optimum output gained out of the risk-​management processes manifested
itself in all areas of the waqfs. Thanks to these risk-​management practices
126 Management of Awqāf as Social Finance Institutions

the cash waqfs that started by the end of the 15th century continued their
existence for about 450 years.
The risk management of the cash waqfs during the Ottoman period was
an integral part of financial management. The purpose of such risk manage-
ment is the sustainability of the endowed assets without decreasing and pres-
ervation of the waqf resources. The administrative risk also contained the
possibility of malpractice and corruption (Gürsoy, 2018).
Although the maintenance of the optimum balance through a well-​conducted
analysis of the possible risks concerning the monetary foundations and funds
was the task of the trustees, the necessary warnings were included in the endow-
ment deeds against uncertainties. Among all, the characteristics of those asking
for a loan were the leading warnings. While it was specifically suggested in the
following statements that those in debt, the ill-​natured people, the greedy, the
extravagant, the arrogant, and the imposters should not be lent money, such
people like soldiers, kadis, ameers, and governors were also included among
those to be avoided in terms of lending (Suceska, 1990, p. 273).
Through the second warning within the context of risk management, it
was requested that no money should be lent without the presence of a strong
guarantor and/​or a valuable good against the uncertainties. Special attention
was paid in picking the guarantors from among the close acquaintances of
the borrower such as relatives, spouses, or colleagues.
Through the third warning, precautions were taken against the risks likely
to result from the potential devaluation of the endowed money over time.
Through this warning which can also be associated with cash management,
the loans lent in the markets in which multiple currencies were transacted
were asked to be returned in the same kind of currency. The foundation
expenses were also defined by the endowed currency type. As the income and
expense balance in foundations were almost well suited, even the slightest
fluctuation could lead to problems. Considering the transaction of 36 different
currencies in the Ottoman economy in the early 19th century, the importance
of the desire to transact upon the same sort of currency becomes apparent.
The warning system played an important role in preventing deficiencies and
corruption. Also, the trustees had to show all foundation accountings to any
requestor. The checking of the accounting at intervals by official supervisors
was another risk-​reducing precaution. Provided that no complaints were
available against foundation accountings, they did not require to be checked
by official authorities every year. Even though the concept of risk manage-
ment was not directly used in foundations, precautions were taken in several
transactions considering the potential risks. In this way, the optimum output
gained out of the risk-​management processes manifested itself in all areas of
the trust institution.

6.3.2 Waqf Management in Muslim India

Mughal rulers of Muslim India were able to donate huge funds and lands
to the Sufi shrines and madrassas. They also developed a well-​developed
 Management of Awqāf as Social Finance Institutions 127

monitoring institution of Sadru-​us-​sudoor for the supervision of waqf assets.

They, however, could not take the steps that Ottoman Turks took to increase
the central working of waqfs.
Under the Mughals, as Ernst and Lawrence (2002) reported, the State
began to appoint a mutawalli who oversaw the financial aspects of dargahs
including the endowment (waqf). The mutawalli was typically but not always
a Muslim and was not necessarily related to the sufi or his descendants.
Islamic scholars and sufis that were managing the waqfs could have helped
change the use of waqf funds donated to the shrines and madrassas. There
were many cases and appeals regarding the shrines’ assets in the past century,
with decisions as recent as 2013. Documents regarding the waqf (endow-
ment) and shrine administration dating from the 16th century onward were
admitted as evidence in these cases, some of which are available as published
legal proceedings while others could be found in colonial administrative
archives.

6.3.3 Management of Waqf in Malaysia and Indonesia

Indonesia and Malaysia are currently going through the modern applica-
tion of governance models of large corporations for waqfs. In the corporate-​
oriented governance models, according to Pitchay (2018), donors cannot
intervene in the outcomes of waqf’s productivity, because no channel should
allow communication afterwards. Other issues of these governance models
include, inter alia, the lack of reporting standards, lack of professionalism,
and absence of strategies for the development of waqf assets (Masyita et al.,
2005; Shaikh, et al, 2017)).
There are three processes of accountability-​ oriented govern-
ance: monitoring, Sharī’ah audit, and shura. The monitoring mechanism
includes the office of qādi, the board of trustees, and the audit committee.
Rofiqoh et al. (2021) studied the establishment of a multicase model of
Islamic Corporate Governance for Indonesian and Malaysian entrepreneurial
cash waqf endowments and found that such governance models were built
from a unique CSR based endowment membership scheme. Three points of
the transferability of the governance model of cash waqf based on entre-
preneurship are: (1) addition of wāqif (corporate partners), involving the
general public, and the selection of permanent donors; (2) the productivity
of endowment funds intended to finance qard al hasan on the qualifications
of seedlings, shoots and business development and other financings; (3) job
training in potential sectors (sewing, haircuts, and other job training) is
a multibenefit project development strategy. The synergy of sustainable
multibenefit projects in entrepreneurial money-​based endowments is the key
to the transferability of the governance model of cash waqf based on entre-
preneurship endowments.
The governance of the waqfs, in Malaysia, faced various constraints such
as legal, financial, and administrative. Legal constraints include loopholes in
the legal framework that arise due to regulations of various state laws. There
128 Management of Awqāf as Social Finance Institutions

are waqf laws only in Selangor (since 1999) and in Malacca (since 2005).
Also, the state jurisdiction creates various problems in understanding and
interpretation of waqf operations that lead to contradictory fatwas across the
states (Ibrahim, 2012). These situations resulted in the incoherent implemen­
tation of some of the Islamic laws including waqf practices (Alawiah, 2012).
The cash waqf is an impressive tool for the Islamic religious council in
Malaysia to generate financial resources. It is more productive for the benefit
of waqf institutions, and society in general at the macroeconomic level. Tax
incentives have been given to the people to encourage them to dedicate property
including cash waqf for charitable purposes (Ibrahim, Nor, & Mohammad,
2013). Because of the available potential of waqf assets in Malaysia, the
Federal Government of Malaysia took a significant step to enhance SIRC’s
role in administering and developing waqf assets through the allocation of
funds for developing waqf assets. In this respect, the Federal Government
took initiative to implement projects with the cooperation of SIRCs.

6.3.4 Management of awqāf in Kuwait

Historically, waqf in Kuwait dates back to 1695, but notable development

started in the 1930s and reached a significant stage in 1993 with the enact-
ment of awqāf laws.
Before the governmental involvement in waqf management, Kuwait’s
waqf sector was administered by founders (wāqfien) or their representatives
(nāzir/​mutawalli) where the appointments of representatives were endorsed
by judges of the court of law. But from the 1930s, a department of waqf
was established followed by the establishment of Waqf Affairs Boards in the
1940s. After the independence of Kuwait in 1962, the Ministry of Awqāf and
Islamic Affairs was established to perform several tasks including the respon-
sibility of managing waqf properties (Al-​Osman, 1997).
The waqf sector in Kuwait is administrated by the Kuwait Awqāf Public
Foundation (KAPF) established in 1993 (Al-​Osman, 1997). The Decree
provided KAPF the status of a governmental body with relative autonomy
in decision-​making to regulate and manage the system to take care of waqf
affairs internally and externally.
Waqf funds in Kuwait that have independent management are expected
to contribute to the development of waqf practices to fulfill the community’s
needs. For that, KAPF established ten operational waqf funds broadly in
three areas: social welfare-​related funds, religious development funds, and
education/​scientific development funds (Khalil et al., 2014).
The main missions of the KAPF are to consolidate the concept of waqf as a
developmental mechanism in the community and activate its role in achieving
the objectives of the founders in addition to reinforcing the tendency of con-
temporary Islamic civilization. While the major responsibility of KAPF is to
encourage people to establish new awqāf, managing them to allocate funds
for activities and investment of the assets are its general tasks. In addition,
 Management of Awqāf as Social Finance Institutions 129

KAPF coordinates with governmental and nongovernmental bodies for the

establishment of Sharī’ah-​compliant waqf projects to achieve related object-
ives. This coordination includes specifically managing specialized funds in
the waqf sector, regional institutions for the waqf development, and the man-
agement of family waqf.
For the sake of risk management that saves from the erosion of perpetuity,
the KAPF developed a strategy based on three aspects: (i) real estate develop-
ment (by establishing a company), (ii) long-​term investments, and (iii) finan-
cial investments. Under the direct long-​term investment, KAPF introduced
to invest in charity educational institutions as well as providing consulting
services in the areas of administrative and training programs. Besides, KPAF
made investments in Sharī’ah-​compliant investments such as investing in
medium and long-​term mutual funds.
As Afadli (1998) identified, KAPF ensures an appropriate distribution
mechanism –​the revenues of awqāf (and allied funds) are distributed as per
the founder’s conditions with the involvement of civil society institutions,
and the involvement of families for family waqfs.

6.4 General Regulatory Framework of Waqf Management

The group working under IRTI-​Bank Indonesia in their report of waqf core
principles (IWG-​2018) suggested a general regulatory framework for the
management of awqāf (Figure 6.3).

Figure 6.3 General Regulatory Framework for Waqf Management and Supervision.

Source: IRTI-​Bank Indonesia (IWGWCP, 2018, p. 17).
130 Management of Awqāf as Social Finance Institutions

However, waqf laws may differ widely across countries and jurisdictions.
The most important task of the regulator is to supervise the waqf man-
agement, which includes ensuring Sharī’ah compliance, financial transpar-
ency, and economic efficiency. Therefore, there is a need to build a strong
supporting system, such as strengthening the function of the Sharī’ah
Supervisory Board, standardization of the waqf accounting and finan-
cial reporting system, assessment of waqf management performance, a
monitoring system for operational efficiency, economic and social impacts
for beneficiaries, and collaboration with financial institutions for Islamic
microfinance.
The IWG (2018) has indicated two models for managing waqf,
centralized and decentralized. Some countries such as Kuwait, Qatar, and
various other MENA countries have applied the centralized model while
others have applied the decentralized model, or a combination of both
models at the same time, such as in the case of Indonesia. Following is the
proposed institutional and regulatory framework for waqf management
and supervision.
The regulations for waqf management institutions may comprehensively
cover all operational aspects of the waqf institutions with the following
objectives:

(i) Optimizing the collection based on supporting governing rules.

(ii) Maximizing the effectiveness of waqf management operations and to
promote its governance.
(iii) Maximizing waqf roles in supporting equitable economic development
and poverty alleviation.
(iv) To open the possibility of cross-​sector financial activities such as the
capital market, banking sector, takaful, and zakāh management.

6.4.1 Waqf Board and Its Duties –​Strategies of Waqf Board

Another important element in the waqf system is the apex body, often termed
the Waqf Board, which acts as a regulator and supervisor. Each country
has its own rules about the power, composition, and functions of the Waqf
Board. For example, according to article # 40 point (1) Indonesian National
Act no. 41/​2004 on waqf, the duties and responsibilities of a Waqf Board are
as follows: (i) to improve the nāzir’s capability for managing and developing
waqf treasury. (ii) To manage and develop both national and international
waqf treasuries and abandoned waqf assets. (iii) To provide approvals and
permissions for waqf asset status; to officiate, dismiss, and replace a nāzir
in the case of mismanagement and corruption. (iv) To provide consider-
ation, approval, and/​or license for the correct alteration and status of waqf
treasury. (v) To provide advice and consideration for the government in the
formulation of waqf policies. In the same article, point (2) states that in
 Management of Awqāf as Social Finance Institutions 131

carrying out its duties, the Waqf Board collaborates with communities, mass
organizations, experts, international institutions, and both local and national
government bodies.
Strategies to accomplish the vision and mission of the Waqf Board include:

(i) To increase the competency and national and international networks

of the Waqf Board.
(ii) To compose regulation and waqf management policies.
(iii) To enhance public awareness and willingness to contribute for waqf.
(iv) To boost the professionalism and honesty of nāzirs in managing and
developing waqf assets.
(v) To coordinate and develop nāzirs.
(vi) To improve waqf asset administration.
(vii) To monitor and protect waqf assets.
(viii) To collect, manage, and develop both national and international waqf
assets.

The main duties of the Waqf Board are to manage waqf assets through
the nāzir both nationally and internationally. Additionally, the Waqf Board
must collaborate with communities, mass organizations, experts, and inter-
national institutions.
The nāzir or waqf manager should have the following qualifications:

i.Being a Muslim.
ii.Being sane and passing the age of puberty.
iii.Being completely trustworthy.
iv.Having complete knowledge and understanding of the waqf rulings and
regulations, as an essential requisite for senior management.
v. The relevant authorities may develop and perform a fit and proper test
in order to confirm the quality of the senior management of the waqf
institution.
vi. Being efficient and having the capability to manage waqf assets.

The nāzir should also pay attention to the following issues:

i. Maslahah (achieve benefit/​avoid harm). The nāzir must prioritize aspects

of maslahah as a form of responsibility to provide optimal benefits to
waqf beneficiaries.
ii. Transparency. The nāzir has to manage cash/​asset waqf transparently
and under good governance regularly produce financial and performance
reports that are accessible by the waqif.
iii. Productivity. The nāzir has to be able to manage the fund product-
ively so that the waqf beneficiaries can benefit from the cash/​asset waqf
continuously.
132 Management of Awqāf as Social Finance Institutions

iv. Trustable. The integrity of a nāzir is crucial. They must eschew any
business opportunity and process that may give rise to moral hazard.
All proposed business activities should be assessed based on Islamic law.
v. Sustainability. The nāzir must be able to maintain the sustainability of
the value of waqf assets.

If a wāqif has determined the amount of a nāzir’s fee, then the cost of
his services is adjusted to what has been determined by the nāzir. If this is
not done by the wāqif, then the determination is based on the rules and
regulations of the jurisdictions.

6.5 Core Principle of Waqf

Besides the principles for accountability of the nāzir, IRTI has developed core
principles for the governance of waqf. Core principles of waqf have been
suggested by a joint working group of the Bank Indonesia, in partnership
with Islamic Research & Training Institute (IRTI) and Islamic Development
Bank, Jeddah. The working group comprised experts from IRTI/​IsDB, Bank
Indonesia, and many waqfs (IWG, 2018).
The group has suggested optimal principles for waqf management for five
dimensions: legal foundations, waqf supervision, good governance for nāzir,
risk management, and Sharī’ah compliance. These make 29 WCPs. Each of
these principles is important because it helps in achieving these dimensions.
However, it should be kept in mind that these principles are developed for
Indonesia. So, the IRTI document suggests time and again that these are
context-​specific. Each country can receive guidance from them and develop
its own set of operational principles.
These principles tend to promote or maximize the benefits to others, inclu-
sively for all humans and living beings, and emphasize the importance of
maintaining public confidence high since the system is fully dependent upon
the public’s propensity to donate.
The WCPs have been formulated to address the objectives to provide a
brief description of the position and roles of the waqf and management and
supervisory system in the economic development program besides providing
a methodology for setting the core principles in the waqf management and
supervisory system.

6.5.1 Principles for Optimal Waqf Management as per the IWG-​2018

The main areas of Waqf core principles are given in Table 6.2.
The Waqf Core Principles in Short:

A Legal Foundations: For legal foundations, six core principles are:

• WCP 1: Relating to Responsibilities, Objectives, Powers, Independence,
Accountability, and Collaboration.
 Management of Awqāf as Social Finance Institutions 133

Table 6.2 Major Areas of Waqf Core Principles

No. Dimensions WCP numbers

A Legal Foundations WCP 1–​WCP 6

B Waqf Supervision WCP 7–​WCP 12
C Good nāzir Governance WCP 13
D Risk Management WCP 14–​WCP 24
E Shari’ah Governance WCP 26–​WCP 29

• WCP 2: Waqf Asset Classes: Assets classes may be based on

(a) Commercial –​Social; (b) Permanent –​Temporary (c) Economic –​
Benefit; (d) Immovable asset; and (e) Movable assets.
• WCP 3: Permissible Activities: Activities have to be under the principles
of sharī’ah and the management capacity of waqf institutions.
• WCP 4: Licensing Criteria: Licensing authority sets criteria for waqf
institutions and mutawallis (waqf managers).
• WCP 5: Transfer of Waqf Management: Waqf supervisor can review,
reject, and impose prudential conditions on proposals to transfer waqf
assets from an existing waqf institution to another waqf institution
(waqf manager).
• WCP 6: Takeover of Waqf Institution and Assets: The supervisor can
approve/​ reject and impose prudential conditions on, any takeover
or investments, against the prescribed criteria and to determine that
affiliations or structures do not expose the waqf institution to undue
risks or hinder effective supervision.
B Waqf Supervision: Six core waqf principles for supervision of waqf
foundations.
• WCP 7: Waqf Supervisory Approach: The supervision mechanism must
cover all aspects of waqf-collection, investment, management, and
disbursement.
• WCP 8: Waqf Supervisory Techniques and Tools
• WCP 9: Waqf Supervisory Reporting.
• WCP 10: Corrective and Sanctioning Powers of Waqf Supervisor.
• WCP 11: Consolidated Supervision.
• WCP 12: Home–​ Host Relationships: The home and host waqf
supervisors of cross-​border waqf institutions must share information
and cooperate for effective supervision of the group and the group
entities.
C Good nāzir Governance: One Core Principle:
• WCP 13: Determining Governance Level: To determine that waqf
institutions have robust and good governance policies and processes
that cover sharī’ah compliance, strategic tools, the control environment,
waqf management knowledge, and the responsibilities of the boards of
waqf institutions –​requirements relating to nazir.
134 Management of Awqāf as Social Finance Institutions

D Risk Management:
• WCP 14: Risk Management: Among the core responsibilities of the
administrator [details can be seen in the IRTI’s document].
• WCP 15: Collection Management: Efficiency in collections management.
• WCP 16: Counterparty Risk: Includes prudent policies and processes
to identify, measure, evaluate, monitor, report, and control or mitigate
counterparty risk on a timely basis.
• WCP 17: Disbursement Management: The system of distribution for
the profits of investments.
• WCP 18: Problem Waqf Assets, Provisions, and Reserves: Adequate
policies and processes for the early identification and management
of problem assets, and the maintenance of adequate provisions and
reserves.
• WCP 19: Transactions with Related Parties
• WCP 20: Country and Transfer Risks
• WCP 21: Market Risk: Having an adequate market risk-​management
process that takes into account their risk appetite, risk profile, market
and macroeconomic conditions, and the risk of a significant deterior-
ation in market liquidity.
• WCP 22: Reputation and waqf Asset Loss Risk: It pertains to market
risk and reputation and the loss risk to the endowment or the endower.
It is to ensure that waqf institutions have an adequate management
framework capable of handling any contagion, reputation, and waqf
asset loss risks.
• WCP 23: Revenue/​Profit-​Loss Sharing Risk: Having an adequate risk-​
management process that considers their risk appetite, risk profile, and
market and macroeconomic conditions. [The waqf supervisors need
to put prudential limits to restrict waqf institution exposures to single
counterparties or groups of connected counterparties.]
E Sharī’ah Governance: Sharī’ah governance is covered by four core
principles relating to waqf.
• WCP 25: Operational and Sharī’ah-​ Compliance Risk: The waqf
institutions should have proper operational and Sharī’ah-​compliance
risk-​management processes to minimize potential fraudulent practices,
anticipate system breakdown, and any other potential disturbance.
• WCP 26: Sharī’ah Compliance and Internal Audit: To have appropriate
sharī’ah compliance and internal audit frameworks to establish and
maintain a properly controlled operating environment in the light of
sharī’ah.
• WCP 27: Financial Reporting and External Audit: To maintain reliable
records of financial statements, annual publications, and the external
audit function.
• WCP 28: Disclosure and Transparency: To regularly publish consolidated
information that is easily accessible and fairly reflects their financial
 Management of Awqāf as Social Finance Institutions 135

condition, performance, risk exposures, risk-​ management strategies,

and waqf governance policies
• WCP 29: Abuse/​Misuse of Waqf Services: It is to control misuse of waf
assets and abuse of waqf-​related services.

6.6 Summary and Conclusion

The chapter provides a detailed background for the management of waqf
institutions. Indeed, good governance is a success factor for waqfs where
nāzir (administrator) remains in the center of the management though, in
recent years, the board of trustees or the Waqf Board members also share
many supervisory responsibilities.
As waqf and charitable organizations share similar characteristics (Sadeq,
2002), so the concept of governance of awqāf overlaps with that of non­
profit organizations. Standards of management revolve around four close
concepts: efficiency, effectiveness, quality, and governance. There are recent
empirical studies that assess various aspects of management around these
aspects. Besides, there is accountability that requires deep understanding of
the working for the sake of meeting the expectations of stakeholders in using
the waqf resources to achieve the desired pious ends. For the manager of a
nonprofit organization like waqf –​nāẓir, it needs a clear mission, careful
placement, and continuous learning and teaching, management by objectives
and self-​control, responsibility, and accountability to Allah SWT as well as
the society regarding performance.
To maintain the integrity and a certain level of acceptability among
the potential donors and the masses in general, the management of waqf
must avoid bad governance and corruption, and maintain an image of
serving the social cause. Systematic monitoring by the neutral monitors
and external auditors should raise the confidence level and hence ensure the
acceptance level among people while adding to the sustainability of the waqf
organizations. An effective waqf management system would require close
cooperation between the waqf management, supervisors, regulators, and
auditors. Concerted efforts are needed to develop, implement, monitor, and
enforce supervisory tools and policies on the optimal systems of management
and governance.
Waqfs used to be managed under very high morals. However, the mis-
management started in the colonization period and played destabilizing role,
especially in terms of the moral degradation of the nāzir that led to the misuse
of waqf assets. The phenomenon of lack of accountability in waqf is due to
the decline of the standard of morality. This issue must be taken into account
while planning revival in a country like Pakistan.
Extra care and efforts are needed to develop the awqāf system in Pakistan
with the objective of broad-​ based social and economic development.
According to Transparency International’s Corruption Perceptions Index
(Corruption Perception Index, 2021), Pakistan dropped 16 points in the CPI
136 Management of Awqāf as Social Finance Institutions

over one year, ranking 140 out of 180 countries. The report revealed that
the absence of “rule of law” and “state capture” resulted in a substantially
low CPI score for Pakistan.3 This trend could be the most serious hurdle in
evolving the system of waqf in the country.
A specific code of conduct has to be developed and introduced for all per-
sonnel involved in waqf operations. Schweitz (2001, pp. 8–​9) has suggested
the following for the management of any NGOs working for public welfare:

The most basic requirements of accountability stated in these codes are

that the organization has (1) a specified purpose or mission, and (2) a
transparent internal management system, free of conflicts of interest, dis-
crimination, favoritism, secrecy, corruption, and all other unethical
practices. Some of the codes explicitly require an elected, independent
board of directors and specify its responsibilities. Another crucial aspect
of accountability is proper, complete, and open financial accounting that
… is stressed in all codes but with varying degrees of specificity.

Accountability is a central theme in Islam being part of belief. Here, good

governance is based on the concept of the absolute unity of Allah SWT
(tawhid) and getting His favor in this world and the hereafter. This founda-
tional charter, when coupled with the Qur’anic guidance, provides a specific
set of operational principles such as amānah and adālah.
Mutawalli (nāzir) is the main role player and a change maker for waqfs.
Mainly, the dynamic leadership of nāzir could pave the road to the institu-
tional evolution of waqf. Historic records suggest that nāzir used to have
some flexibility that helped initiate institutional changes, such as the pooling
of cash waqf assets, that too working under an environment of strict Sharī’ah
law. But the flexibility for investments and financing the socioeconomic
projects must be coupled with strict accountability and supervision.
The management of waqfs in modern days in Arab countries is quite
innovative and effective. In the recent studies on waqfs, in some Muslim
countries such as Malaysia, a moderate level of waqfs’ working standards
(above 40%) have been noticed, which, looking at the initial re-​origination,
is not a small achievement. However, important lapses in the reporting of
disclosures in waqfs are also found as per some of the empirical studies that
need to be taken care of.
Cash waqfs/​endowed liquidity is a challenge to manage and maintain.
The maintenance (the perpetual existence) not only is very difficult but also
becomes a liability of the administrators, awqāf departments, and the state
and society, at large. An innovative scheme of creating hard backing of the
cash waqfs by the awqāf authorities must be devised. Further, the reliability
and responsibility of awqāf establishments have to be improved by awqāf
accounting, which is a proper tool to shape the truthfulness and account-
ability of waqf organizations.
 Management of Awqāf as Social Finance Institutions 137

Besides the principles for accountability of the nāzir, the WCPs for the
governance of waqf entities need to be applied for the revival and growth of
awqāf system in all countries having awqāf. These principles could maximize
the benefits to human societies inclusively and emphasize the importance for
keeping public confidence high since the system is fully dependent upon the
public’s propensity to donate. AAOIFI’s standard on waqf also provides a
crucial guideline for waqf and its regulatory framework.
Accountability for waqf organizations can be understood as a means
through which individuals and organizations are held responsible for their
actions. It is also a means by which awqāf managers, nāzirs, and other func-
tionaries would be performing as per their welfare-​oriented mission. The
waqf authorities need to introduce: (i) disclosure statements and reports
about assets, investments with a return thereon, expenses, grants, finan-
cing taken or given, etc.; (ii) performance assessment and internal and
external evaluation reports; (iii) level of participation and consultation with
stakeholders for indicating any lacunae and their removal; (iv) system for
self-​regulation by the managers, mutawallies and other personnel, and the
beneficiaries; (v) social auditing that refers to a process through which an
organization assesses, reports, and improves upon its social performance and
ethical behavior, especially through stakeholders’ dialogue.

Notes
1 The International Working Group on Waqf Core Principles’ comprising experts
from the IRTI (IsDB) Jeddah, Bank Indonesia, Indonesian Waqf Board, Padjadjaran
University, Indonesia, Institute Pertanian Bogor, Kuwait Awqāf Public Foundation,
Awqāf Bosnia Herzegovina, National Awqāf Foundation of Awqāf South Africa,
Awqāf New Zealand, and an Observer from the World Bank Group. Its report was
published in 2018.
2 Kahf states in his article “Kinds and Objectives of Islamic waqf” that Awqāf practic­
ally became part of the public sector, with all the known evils of waste of resources,
lack of accountability, lack of motivation to improve performance and efficiency,
slow and irresponsive decision making, favoritism, political interference in manage-
ment and finally but not the least moral, financial, and economic corruption.
3 www.dawn.com/​news/​1671​401
 Waqf-​Based Legal and
7 
Organizational Frameworks

7.1 Introduction
The role of waqf in funding religious, social, and general welfare related
activities, public services like education and health, etc. could be effective
only when the waqf system is based on an effective institutional, regula-
tory, and legal framework. All such subsystems must collectively provide
an effective legal framework for organizing the awqāf system, creating and
managing waqfs, and for accountability, transparency, and discipline of the
waqf entities. Any legal framework must comprise the definitions, and cat-
egories of waqf –​landed properties and liquid assets’ waqfs; principles, rules,
and the processes regarding the elements of waqfs –​the subject matter of
waqf also including the cash endowments, creation or establishment of waqf,
rights and duties of the creators, the beneficiaries, mutawallies, and the role
of administrators.
As a rule, a waqf is perpetual, although the Mālikī school of thought also
accepted the temporary or time-​bound waqf (Kader, 2021). This view is also
held by Imam Abū Yūsuf as reported by Ibn-​e-​Hammām (Fath-​al-​Qadeer,
Dar al Fikr, 2010, p. 89). This is contemporary thought as well as approved by
the AAOIFI’s SS on waqf (No. 60, Clause: 2/​4/​13). While the principle of per-
petuity is at the heart of waqf law (Kahf, 1999), the English tradition of trust
law supports the temporary establishment of charity foundations. Of course,
according to contemporary ijtihād, temporary waqfs are also permissible and
can be created, particularly cash awqāf. The sustainability of cash awqāf is
made possible by investing at least a part of the endowment and using its
return for welfare purposes as per the waqf deed. This aspect relating to the
sustainability of cash waqf has been discussed in the earlier chapters.
Rules are also needed regarding the investment or lease of the waqf assets
and the income of such assets, donations/​ endowments. A framework is
needed for adjudication by the Sharīʿah courts (for Sharīʿah-​related aspects)
as well as the civil courts for civil suits (regarding wrongful possession and
use of lease or sale of assets and allied matters of the use of waqf assets,
appeals, and disposal of such appeals. For waqfs working as financial inter-
mediaries, laws and rules need to be provided for various financial services,
DOI: 10.4324/9781003477549-7
 Waqf-​Based Legal and Organizational Frameworks 139

profit-​sharing ratios in sharing-​based financing or profit rates on sale or lease

based, tax-​exemption rules regarding endowments, etc.
Waqf entities present the concept of beneficial ownership in addition to
the title ownership. Waqf beneficiaries own a beneficial interest in the waqf
asset, while the manager/​administrator (nāzir al-​waqf) holds the assets in the
interest of the beneficiaries.
The four essential elements for the creation of waqf are: (i) the donor
(wāqif), (ii) the waqf declaration deed (ṣīghah), (iii) the waqf property
(mawquf), and (iv) the beneficiaries (mawqūf ʿalaihim). Regarding ṣīghah,
legal provisions also need to be provided for waqfs created through the word
of mouth. Jurists highly regard the assertion of ṣīghah which does not bear
the opposite intention of wāqif. So, waqf is not legally binding with mere
intention. Further, the establishment of waqf should not be attached to any
condition in the future (Abbasi, 2012).
Waqf can also be in the form of “wills” (waṣāya) –​testamentary waqf.
It would require specific rules so that the Sharīʿah tenets regarding inherit-
ance are not violated. As a rule, waqf asset or property cannot be subject to
transfer, assignment, or transmission on the death of the wāqif. The rules
are needed in case any waqf assets are required for any public use, or in the
case of any unavoidable needs. Therefore, istibdāl or change of assets would
also be covered by the legal framework. Equally important are the provisions
of law or the rules relating to accountability of nāzims/​mutawallies, the
administrators and other functionaries involved in usage, lease, investment,
istibdāl and maintenance of waqf properties, and accounting and auditing of
the awqāf affairs.

7.2 Forms of Waqfs and Their Establishment

Waqf can be established in many forms depending on its purpose or nature of
its outcome and the intended beneficiaries. The most common categories that
may require different legal provisions are (i) Religious waqfs/​philanthropic
waqfs, and (ii) Public and private/​family waqfs. Different rules are required
for different categories of awqāf and the assets to be endowed. During the
colonial period, the British judges declared the family waqf invalid because
they regarded it as a family settlement, distinguished from a charitable trust.
Mussalman Wakf Validating Act 1913 declared the family waqf valid. It was
also provided that, unlike a private trust, a family waqf is perpetual and
inflexible because its terms cannot be modified by either the administrator or
beneficiaries. Therefore, it is rarely used in current times. Old family awqāf,
however, may continue to operate.
Waqf can be made in all forms of wealth like orchards, arable land, com-
mercial properties, agricultural machinery, cattle, cash (nuqūd), shares, rights
or warrants in the companies, ṣukūk, medical equipment, books, money, uni-
versities or other buildings, a business, and any other form of wealth that
could generate income.
140 Waqf-​Based Legal and Organizational Frameworks

Kahf (1998) lists several new forms of waqf such as the waqf of financial
rights and waqf of usufruct. He derives this by using the term māl, which can
include both financial rights, such as the publication right of a manuscript,
and usufruct of a rented asset according to the majority of fuqahāʾ and the
contemporary collective fatāwa of the OIC Fiqh Academy. The income so
generated can be used for helping the sick, poor, needy, and jobless, rehabili-
tation and relief after any calamity, public or community services (utilities),
and so on. All income-​generating waqf objects must be valued in cash and
the cash value should be considered the principal capital of waqf, or waqf
value-​capital. All efforts need to be made to safeguard the value-​capital and
to invest it.
Historically, there have been three types of awqāf: (i) a religious waqf, all
revenue generated from such waqfs are spent on the operation and mainten-
ance of mosques, madāris, and for the propagation of Islam, (ii) a philan-
thropic waqf, which aims at supporting the needy and the poor segment of
the society and the activities of the community at large. Scientific research,
education, health services, and other civic amenities, the environment, parks,
roads, bridges, etc. are supported by philanthropic waqfs, and (iii) posterity
or family waqf for the benefit of the donor’s family and children.
The categories of waqf by its purpose include:

(i) Waqf khayrī –​philanthropic waqf, its beneficiaries are the general public;
one similar category of such awqāf is Waqf al-​sabil meaning to set up
and build the open utility assets like roads, parks, solar and other renew-
able power plants, water supplies, cemeteries, schools, and so on.
(ii) Waqf-​ahlī –​for posterity of the donor with the condition that the
recipient could not sell or dispose of the property against the provisions
of the waqf deed.
(iii) Waqf al-​awāridh –​the yield or income of waqf is held in reserve, to be
used at times of emergency or unexpected events that negatively influence
the livelihood and well-​being of people. Such waqf could also be used to
finance the maintenance of the utilities of a village or neighborhood.
(iv) Waqf-​istithmārī –​to be used for investment, the return from which is for
use by any or specified beneficiaries –​it is the most suitable category for
promoting entrepreneurship for micro business and commodity sector in
the economy.
(v) Waqf mubāshar –​the waqf assets are used to generate services to the
benefit of some charity recipients or other beneficiaries, like schools, cap-
acity building centers and utilities for low-​income groups in the society, etc.

Other relevant categories of waqfs regarding the beneficiaries and the

managers are public waqfs (waqf ʿām) and private waqfs. The proceeds/​
usufruct of public waqfs can be used for public interest (maṣlaḥah ʿāmah)
such as hospitals, mosques, public restrooms, and food centers, public water
dispensers, and renewable energy plants for any area or community. Such
 Waqf-​Based Legal and Organizational Frameworks 141

endowed properties/​assets cannot be disposed of either by the waqf creators –​

donors or by the beneficiaries.
In jurisdictions where waqf institutions have been developed on the line
of the modern organization, another category of waqfs is Incorporated
Waqf. Such waqfs are larger than a certain size in terms of the value of assets
earmarked as endowments and have fully incorporated status necessarily
subject to regulatory oversight.
Incorporated waqfs are further divided into Umbrella waqf, Private waqf,
and Corporate waqf. The proceeds of private waqf are used to serve a spe-
cific group of beneficiaries such as students, travelers, sick, etc. Waqf assets
of a corporate waqf are in the form of shares of companies that are issued
and managed by a corporate body. Umbrella waqf is incorporated to provide
administrative and legal support to an unincorporated waqf having proper-
ties/​assets less than a specific size.
All endowments donated for the benefit of the general public or any spe-
cific groups from the public are governed by the public awqāf rules. The
endowments made for any identified beneficiaries like posterity of the wāqif
are covered under the private awqāf rules.

7.2.1 Rules Regarding Waqf Management

The legal framework of waqf must also provide the rules about various
factors of waqf management. Such rules will govern the efficiency, govern-
ance, effectiveness, and quality of the management by the waqf board, nāzir,
and other functionaries. The law would also provide the characteristics of the
wāqif and the duties of the mutawallī as trustee of the waqf. A non-​Muslim
can also be an endower (wāqif) (AAOIFI Shari’ah Standard 60, Clause: 2/​4/​
3/​5; and IWG, 2018). Wāqif (donor) must be an adult natural sane person,
with free will for making the declaration of waqf and not have been legally
barred from transacting in the assets (Abbasi, 2012). These factors are shown
in Figure 7.1.

7.2.2 Waqf (under Islamic Law) and a Trust (under Common Law)

In common law, a trust acts like a waqf with ownership bifurcated. The trust
owns the assets in question that are administered by a trustee, who has a fidu-
ciary duty to administer trust property for the beneficiaries’ interest, who in
turn, holds beneficial ownership in the trust assets.
Trusts are versatile contracts recognized both in English common law and
Sharīʿah. They are an essential component of many modern Islamic financial
instruments. Indeed, trust law is a pre-​requisite for ṣukūk issuance. Waqf
structures can be used for trusts under English common law (Wilson, 2016).
Donating any property as waqf for religious, pious, and charitable
purposes would imply that a waqf once established, cannot be revoked unless
142 Waqf-​Based Legal and Organizational Frameworks

Figure 7.1 The Factors of Waqf Management.

Source: Authors’ own.

it is a testamentary waqf based on the will ‫وصیت‬, or cash waqf created for any
specified period (IWGWCP, 2018 and AAOIFI, SS # 60).
In waqf, the ownership of the subject matter becomes suspended (Kahf,
1999). Based on the underlying divergence between waqf and trusts or other
charities/​tabarruʿāt, the former has more scope for innovation for longer-​
term welfare projects than in the case of the latter.
Trusts are sometimes established to avoid or minimize inheritance taxes
with the wealthy transferring their assets into a trust which would not count
as part of their estate (Wilson, 2016). Accordingly, in the case of properties
given as trusts, or other tabarruʿāt given as charity, the ownership of the
given subject matter transfers from the donor to the beneficiary.
Hasan (2007, p. 91) has explained in detail the difference between a trust
and a waqf. The following points further clarify the difference between waqf
and endowments as trusts or ṣadaqah in general Islamic civilization:

(a) The subject matter of waqf cannot be owned in absolute terms, while the
subject matter of a trust as a charity is fully owned by the beneficiary.
(b) The stipulations of the wāqif must be adhered to as per the related waqf
deed. In contrast, the stipulations of the donor of normal charity or trust
 Waqf-​Based Legal and Organizational Frameworks 143

do not enjoy this status. Instead, any such stipulations would be taken
merely as a suggestion and not as a mandatory condition (al-​Shaybani,
1997, p. 250).
(c) If the wāqif becomes an apostate, his waqf would become void whereas
the apostasy of the donor of ṣadaqah would not affect the legal status of
ṣadaqah in any way (Abbasi, 2012, cf. Ibn ʿĀbidīn).
(d) The subject matter of a waqf could never be employed by the nāzir for
Sharīʿah noncompliant purposes; however, a ṣadaqah could be used by
its new owner in any manner.
(e) Waqf constitutes the property of the whole community, while ṣadaqah
belongs to a particular individual.
(f) While waqf laws and the arising issues, their implementation is decided
by the Sharīʿah courts (especially in Islamic countries), and trusts are
governed by the civil law, or the common law (of England).

In English common law jurisdictions, the waqf trustees can apply for rec-
ognition as a registered charity. This means the trustees of the endowment
might claim back any income tax paid by the donors provided the funds
received are not used for commercial purposes. The waqf will also benefit
from exemptions from corporate taxes and capital gains tax, although the
latter exemption is hypothetical as waqf endowments cannot be sold. In the
case of cash waqfs, any profits must be distributed for charitable purposes
and the trustees are not permitted to benefit from any financial gain.
To further differentiate trust and waqf, we discuss here briefly the waqf
and trust law in Malaysia to get a picture of the related issues. According
to Malaysian law, waqf refers to the dedication of any property, usufruct,
or benefit for any charitable purpose, or any welfare purpose. The registra-
tion of waqf lands must be a requirement to guarantee its sustainable man-
agement in the future as per the waqf deed. As per waqf law in Malaysia,
all waqf assets are vested in the States’ Islamic Religious Councils (SIRCs),
which are state statutory bodies. A waqf must be created according to
Islamic law which would come within the jurisdiction of the SIRC as the
trustee. The waqf, ipso facto, does not have legitimacy in the eyes of secular
law and does not fully qualify as a nonprofit organization. This centraliza-
tion of control in the state reflects the European trend that existed in the
19th and 20th centuries in the management of trusts and foundation assets
(Alias, 2013).
Of course, there is some confusion between the concept of waqf in Islam
and the concept of trust under common law. Many businessmen and profit-​
making bodies in Malaysia (as in other Islamic countries) tend to treat the
two alike (Kader & Norasiah, 2014). As indicated by Kader and Norasiah
(2014), the profit-​oriented bodies or individuals do not like to come under
the control of the SIRC for fear of a lack of competent personnel, general
distrust, and the desire to have full control over the management of the
waqf property. They wish to place the waqf property under the governance
144 Waqf-​Based Legal and Organizational Frameworks

structure of a registered society under the Societies Act, or in the case of a

public company, a trust company under the Trust Companies Act 1949.
In the case of the Societies Act, a trust deed is drawn up to deem the prop-
erty as a “trust property” under provisions of the Trustee Act 1949 and then
the trustees may elect to form a body corporate in the form of a foundation
registered under the Trustees (Incorporation) Act 1952. In such cases, any
legal dispute relating to the properties under the foundation will be decided
by the civil courts as opposed to waqf property which comes under the pur-
view of the Sharī’ah court. A waqf-​owned building or property cannot be
used for activities that are contrary to the principles of Islam. Of course, it
could come under the definition of “trust” within the meaning of the Trustee
Act 1949 (Act 208). It may imply that a waqf could also be termed as a
charitable trust, but all charitable trusts could not be waqfs simply because
all operations and activities by any waqf must be according to the Sharīʿah
principles.
To qualify for charitable status, waqfs must have their finances subjected
to an independent audit at the end of each financial year, with their accounts
submitted to the charity’s commission promptly. The commissioners also
require an institution applying for charitable status to submit its articles of
association and the names and contact details of the trustees. In return for
benefiting from favorable tax treatment, waqf endowments are required to
be financially transparent with their accounts open for public inspection.
Sound standards of corporate governance are also required, the evidence for
this being the robustness of the articles of association and the formal minutes
of meetings of the boards of trustees.

7.3 Existing Waqf Laws and Status in Pakistan

As little work has been done in Pakistan to revive the awqāf system as per the
emerging trend as a social welfare institution, we discuss in detail the law and
status of awqāf in Pakistan.
In Pakistan, there are only traditional religious awqāf with the exception
of a few waqfs working with welfare objectives. The existing legal framework
on waqf does not recognize cash waqf that could play a proactive role in gen-
eral welfare. There has been the least progress in terms of the role of awqāf
in the socioeconomic development and welfare of the community. There are
hundreds of madāris/​shrines-​related waqfs that own land, buildings, and
other properties but play almost little role in welfare or development. Of
course, they might be playing some role in imparting religious education.
So far, the Constitution of the Islamic Republic of Pakistan and the
waqf-​ related laws provide little room for promoting waqf and introdu-
cing a unified and comprehensive framework for waqf law that could play
a role in socioeconomic growth and public welfare. The awqāf affairs are
controlled by the provincial ministries of religious affairs. The ministry
appoints a waqf administrator in each province to control, manage, and
 Waqf-​Based Legal and Organizational Frameworks 145

maintain the waqf properties. The system is operating mainly for building
and maintaining mosques, madrasas, orphanages, and charitable institutions
(IWGWCP, 2018).
Awqāf departments in provinces that govern the traditional religious awqāf
own vast properties and lands, both farmland and buildings. Punjab with the
largest province in terms of population has more than 74,000 acres waqf
land. Similarly, Sindh, the second largest province owns 11,000-​acre waqf
land (Lashari, 2022). Opportunities are available for welfare-​oriented uses
of these properties. The Awqāf Departments are desired to be self-​sufficient
to have their own budgets and are not subsidized by the federal government,
except for Baluchistan where the number of waqfs is very small and subsidy
is provided for running the administrative expenses (Çizakça, 2000).
Awqāf departments in KPK and Baluchistan provinces are unable to gen-
erate income sufficient for their running expense. In KPK, the powerful land
mafia occupies 78% of the precious land in the province (50,612 kanals out of
65,108 kanals) (Malik, 2020). The police, education and health departments
have seized 1451 kanals of awqāf land in different cities of the KPK and
not paying a single penny to the awqāf department. Out of 30,000 mosques
constructed in the KPK on awqāf department’s land, only 78 are managed
by the department. The revenue of the department for 2019–​20 was Rs
115.9 million while the expenditure was Rs 168 million having a deficit of Rs
52.51 million. There was a scheme to use commercial land in the province to
construct mega plazas to generate extra revenue. Three commercial buildings
were to be constructed in Peshawar immediately (Malik, 2020).
In Baluchistan, the Baluchistan Waqf Properties Act 2020 covers the man-
agement of waqf lands. Of course, many waqf properties had been abandoned
since 2006 due to the law-​and-​order situation created by the terrorists, and
the cases pending decisions. Recently the decision has been made on all
pending cases of abandoned waqf properties in the province. As a result, the
rent of more than Rs 10 million could be collected from abandoned waqf
properties.
Following are the sources of earnings of the awqāf departments in Pakistan:

1. Cash boxes in shrines (about 50% of the annual income)

2. Income from gifts given in connection with vows, covenants, oaths,
etc. (15%)
3. Income from attached businesses (5%)
4. Income from rented urban properties (15%)
5. Income from rented agricultural land (10%)

The main head of expenditure (around 60%) is the salary of the

bureaucrats and staff of the awqāf department. Small amounts are spent for
social purposes like education (merely 6.7%), and health (around 11%) of the
total expenditure. Expenditure on maintenance of historical waqf buildings
is declining (Islamic Market).
146 Waqf-​Based Legal and Organizational Frameworks

Ibad (2013) gives a brief account of the waqf-​related laws in Pakistan,

adopted from British colonial legislative processes that defined basic waqf-​
related concepts and framed related rules. The same concepts are continuing
with minor changes regarding the language, concepts, terminologies, and
the intended results. Rather, the manner of control got increased over time
in all the subsequent laws with minimal space for the religious and/​or wel-
fare activities to be performed under the institution of waqf, thus crippling
the main national source of welfare and poverty alleviation. It might be the
reason that the most recent addition –​the Islamabad Waqf Properties Act,
2020 has been criticized severely. It not only violates the widely accepted
juristic principles of waqf but also against the human rights provisions of the
Constitution of the Islamic Republic of Pakistan (Hassan, 2022).

7.3.1 State Control over Awqāf in Pakistan

Due to the impact of British India, the following waqf acts were in force in
Pakistan before April 1959:

1. Mussalman Waqf Act 1923 and 1935 (Bombay Amendment)

2. The Qanoon-​e-​awqāf Islami, 1945 (Former Bahawalpur State)
3. The Northwest Frontier Province Charitable Institution Act 1949
4. The Punjab Muslim Awqāf Act, 1951
5. Mussalman Waqf Act (Sind Amendment), 1935!

The Mussalman Wakf Act 1923 provided for the compulsory registra-
tion of awqāf and for keeping a check on mutawallis by requiring them to
file annual accounts of awqāf with the officials. This Act did not apply to
family awqāf. After Independence, various statutes were passed for the regu-
lation of awqāf. West Pakistan Waqf Properties Ordinance, 1959, was issued
to establish a new department to maintain and regulate prominent shrines,
mosques, and other waqf properties. Accordingly, the Awqāf and Religious
Affairs Department started its work in 1960. Waqf could be nationalized
under “The Waqf Properties Ordinance, 1961”. In 1972, the Department
was made a provincial subject. Later in 1976, it was federalized but finally,
in 1979, it was again provincialized, with the same status as after the 18th
amendment.
The Waqf Properties Ordinance 1979 (of each province) governs the
awqāf in all four provinces of the country. Under this Ordinance, the Chief
Administrator of Awqāf is authorized to take over the administration and
control of a public waqf by notification. This Ordinance does not apply to
private/​family awqāf.
According to Malik (1990), a statistical analysis covering the provinces
of Punjab, Sindh, NWFP, now KPK, Baluchistan, and the Islamabad Capital
Territory revealed that by the year 1984, 344 shrines, 648 mosques, 31,913
acres of culturable lands, 48,188 acres of unculturable lands, 2,215 shops,
 Waqf-​Based Legal and Organizational Frameworks 147

and 1,869 houses had been taken into official control through the departments
of awqāf. Hundreds of waqf schools were brought under the control of the
awqāf department.
The nationalization was made with the slogan like, “Waqfs are misused
by the pirs, mutawallis, sajjada nasheens and other parasites” (Malik, 1990,
p. 75). The motives behind this move of waqfs could be summarized as
follows1:

1. The administration wanted to control the religious elements in the country

since waqfs were often associated with religious activities.
2. The state had an eye on the financial resources of the endowments.
3. Centralization meant bureaucratization of the religious establishment,
which was thus denied any opportunity for autonomy.

Due to the taking over of waqf land and properties by the government,
people do not go for waqf even in the case of genuine needs of some (disabled)
members of any family (where one may wish to create a waqf for permanent
support of such family members). It is commonly understood, “Waqf means
that you handed over your property to the awqāf department and then your
property is gone”, as indicated by a participant of the FGM, at IBA Karachi.
The nationalization of waqfs was against the waqf principles and the will
of the Father of the Nation, Muhammad Ali Jinnah, who, in his opening
address to the Indian National Congress in 1906, pleaded for the restoration
of the right of endowers’ control of Islamic endowments, which had come
increasingly under influence of British jurisdiction since 1887 (Malik, 1990,
p. 65).
The Council of Islamic Ideology (CII) also protested the confiscations as
being directly against Islamic law. The CII resolved that the waqf estates
must be exempted from the land reform of 1972. Of course, the Federal
Sharī’aht Court (FSC) that examined the Waqf Ordinance of 1979 along with
all the existing Acts ruled that nationalization was not against the Shari’ah.
Section 16 of the Ordinance (1979), which pertained to istibdāl transactions,
was considered to be justified as long as the original purpose of any waqf
continued to be served (Malik, 1990, p. 85).
Accordingly, the awqāf department has been accused of doing a disservice
to the traditional social aspects of waqf and replacing them with nothing
(Malik, 1990, pp. 91–​96). Thus, the waqfs were “neglected and misused”
and no longer available for any social or economic and wellbeing role in
society. It caused antisocial wastage of the unique institute of Islamic social
finance, and that of resources endowed for pious purposes.
Dr. Ejaz Shafi Gilani, a specialist in public opinion research, the Pakistani
affiliate of the Gallup International Association, and the Chairman of the
Pakistan Institute of Public Opinion (PIPO), who was a participant of the
Focus Group Meeting held at Islamabad for this research project contended
that waqf used to be in the hands of common Muslim citizens; it was given
148 Waqf-​Based Legal and Organizational Frameworks

under the state (authority) that deprived the common man of an inde-
pendent institution of welfare. “Muslims established this institution to get
rid of unnecessary government intervention. Waqf is a part of Sharīʿah, com-
plete Sharīʿah. If we take it out of it (complete Sharīʿah), and use it without
Sharīʿah, it will be partial (implementation)”, he added. The forum suggested
that the SECP or any other institution may provide facilitation for the estab-
lishment and registration of waqfs, but it should remain out of the clutches
of the bureaucratic state institutions.
During the 1980s, some waqfs were returned to their original mutawallis
in line with section 12 of the Regulations of 1961, section 16 of 1976, and
1979. It is considered, of course, that it also might be for reconciliation with
the politically powerful shrine holders. It is also possible that such waqfs
might be unprofitable.

7.3.2 Islamabad Capital Territory Waqf Properties Act, 2020

The Islamabad Capital Territory Waqf Properties Act, 2020 was passed in
September 2020. This enactment was without proper deliberation and a com-
prehensive understanding of the principles underlying waqfs and the related
issues (Madni, 2022). The rules regarding awqāf act were disseminated across
all the provinces and advertised on national media.2 As a subordinate law, it
is not in alignment with fundamental rights in the Constitution of Pakistan
on several grounds. The Act was severely criticized at the national level on
the ground that it violated the Sharīʿah rules regarding awqāf.
The Act of 2020 covers all properties donated for any purpose recognized
by Islam as religious, pious, or charitable, but does not include the prop-
erties of family waqf donated as per section 3 of the Musalmān Waqf
Validating Act, 1913 [under which the benefit is claimable for himself by
the person by whom the waqf was created or by any member of his family
or descendants].
Under section 8 of the Act, the Chief Administrator Awqāf (CAA) can take
over, by simple notification, any waqf property into control and assume the
administration, management, and maintenance of that property. The take-​
over notification shall be served upon the management or the mutawalli and
affixed on some prominent part of the property sought to be taken over.
The “control” and “management” shall include control over the perform-
ance and management of the religious, spiritual, cultural, and ceremonies
or rasūmāt at or in the waqf property. During the lifetime of the wāqif, of
course, the take-​over shall be subject to the consent of such person and on
such terms and conditions as may be agreed upon between such person and
the CAA. Section 6 of the Act requires that the waqf manager or mutawalli
must register the waqf property in the prescribed circumstances and manner.
Any property not registered with the CAA shall be deemed to have been
notified under section 8 (taken over by the Chief Administrative –​shall be
considered as nationalized).
 Waqf-​Based Legal and Organizational Frameworks 149

Section 10 pertains to the eviction of persons wrongfully in possession of

waqf properties. Regarding the leased waqf lands, if the CA is satisfied that
the lessee or tenant of any immovable waqf property has committed a breach
of the conditions of the lease or tenancy, the administrator may order the ter-
mination of the lease or resumption of the tenancy. Section 11 pertains to the
termination of tenancy. According to Section 12, any such building and crops
raised on such waqf land would be liable for forfeiture/​removal. Any appeal
against forfeiture or termination of tenancy could be made within 60 days
only to the CA Awqāf, who shall confirm, modify, or vacate the order made
by the administrator (himself) under sections 10 and 11. Any such decision
shall be final. Sections 26 and 27 of the Act provide for imprisonment for up
to 5 years and heavy fines of up to Rs 25 million in case any waqf assets are
not registered or information is not provided to the CA.
Madni (2022) contends in his analytical article the following regarding
the Act, 2020: “The Waqf Property Act has received a social backlash from
ulama, the political fraternity & the public. It is said that the Act is not only
against the Islamic law but is also against the Constitution of Pakistan”.
The challenges faced by the awqāf departments at provincial level
include: (i) ad hocism and inconsistencies in policies; (ii) bureaucrat admin-
istrative heads (Chief Administrator Awqāf) are changed frequently affecting
the policies of the management; (iii) development projects are prepared
without proper feasibility and then abandoned without completion thus
causing losses; (iv) traditional management practices and lack of strategic
managerial practices, neglecting emerging concepts of public administration,
and weak monitoring; (v) lengthy legal proceedings in courts –​the courts
grant statuesque in the case of leased land and buildings that affects the
income –​many cases are pending in different courts; (vi) no comprehensive
policy and plan for the suitable use of waqf lands; (vii) encroachments and
lose control over waqf properties, and weak will of the government function-
aries to retrieve land; (viii) lack of capacity building for management –​no
trainings for the field staff; and (ix) most importantly, trust deficit of the
community.

7.3.3 Rules Relating to Charities and Awqāf

Overall, a mix of the rules relating to charities and waqf laws and rules
cover all activities that may come under waqfs or trusts. Before the enact-
ment for Charity Commissions in 2021, the legal environment for charitable
foundations in Pakistan included the following laws:

i. The Companies Act, 2017 –​under section 42

ii. The Societies Registration Act, 1860
iii. The Charitable Endowments. Act, 1890
iv. The Trust Act, 1882
v. The Charitable and Religious Trusts Act, 1920
150 Waqf-​Based Legal and Organizational Frameworks

vi. The Social Welfare Act, 1961 [Voluntary Social Welfare Agencies
Ordinance 1961]
vii. The Pakistan Madrasah Education (Establishment and Affiliation of
Model Dini Madāris) Board Ordinance, 2001

If we take a case study for Punjab awqāf, generally the following laws/​rule
governed the affairs and activities of waqfs:

a) The Punjab Waqf Properties Ordinance, 1979

b) The Punjab Holy Quran (Printing and Recording) Act, 2011
c) The Punjab Waqf Properties (Accounts) Rules, 1982
d) The Punjab Auqaf Organization (Appointment & Conditions of Services)
Rules, 1994
e) For private and public trusts: Trust Act 1882 and The Punjab Trusts
Act 2020
f) The Punjab Waqf Properties (Administration) Rules, 2002

“The Punjab Waqf Properties (Administration) Rules, 20023” pro­

vide the framework for managing waqf properties, particularly the land
and buildings to be leased. With promulgation of these rules, “The Waqf
Properties (Administration) Rules, 1960” were repealed. The main aspects
that these rules cover include the appointment of managers, lease of waqf
properties, consolidation of land holdings, auction of trees on waqf land,
and appeal against the orders of zonal administrators. According to Rule 7,
an auction committee is constituted for lease of waqf lands, and the lease has
to be made through open auction after due publicity. The lease is governed
by the following subrules: (a) the lease shall be in writing; (b) the period of
lease shall be one year and shall not exceed three years with the following
breakup: (aa) first year’s money to be determined in the open auction; (bb)
second year, 20% increase; and (cc) third year, 20% increase. Rules have been
provided for further extension of the lease, but no extension in yearly lease
can be granted beyond four years, making a total of five years including the
auction year, on any ground of massive expenses by the lessee on improve-
ment or installation of tube well, etc.
Doing charity, which is certainly a noble cause, must be an easy and
problem-​free activity. Corrupt are to be trapped at source rather than teasing
the common man by clutches of revenue officials. As indicated by almost all
participants of the research project for this book, particularly, Dr. Amjad
Saqib of Akhuwat, tax-​related issues and supervisory hurdles are the main
hurdle in charity for welfare. Dr. Amjad pointed out:

Tax issues are there. We have many people who come and say, “get money
and we do not need any receipt with the name”. If the government asks us
to inform about all the donors, why should we tell? If someone wants a
receipt with name and address, should get it, but the one who doesn’t want
 Waqf-​Based Legal and Organizational Frameworks 151

to get, should not. The government’s job is to catch the corrupt earner
at the time of earning. But afterward, if someone wants to donate, then
should be allowed. -​-​-​ We or other welfare entities are not tax inspectors,
and so we have no right to know about the income, expenses, and source
of earnings of the donor. The State should do this job at the sources of
income. … People involved in community services like welfare trusts /​
NPOs say, “If NPOs have to work under such a law, then it is better we
close down it and leave the country. Why should I work? My audited
reports show our all receipts and expenses that you can see. I am registered
under SECP’s law, the most powerful regulator”, what else is your genuine
and valid requirement?

Dr Amjad referred to the Charity Commission in the provinces established in

2020 and contended that the commission reflected oppressive laws. He added:

It implies that after the establishment of trust/​waqf, a clerk of govt, upon a

delay in report, would come with non-​bailable warrants; they can change
the trustees on their own. They want to occupy and take administration
into their own hands. That will lead to the collapse of the charity-​based
welfare activities conducted already in the country, as it is happening in
the other government departments including religious awqāf taken over
by the Government.

7.4 Waqf Law and Rule in Selected Islamic Countries

Before we discuss the possible legal framework for evolving waqf system in
any country like Pakistan that need to develop awqāf system, it would be
worthwhile to see similar legal frameworks in a few selected countries where
the institution of waqf is being revived.
During the first half of the 20th century, many Muslim countries issued
awqāf laws which were based on the Ottoman laws. By the second half of
the 20th century, most Arab and Muslim countries had gained their inde-
pendence and enacted new laws that put awqāf under government control.
Large areas of awqāf land were nationalized in Egypt, Algeria, Syria, Tunisia,
Türkiye, and Palestine. The nationalization and the transfer of responsibility
from private mutawallis to ministries of awqāf meant the demise of the inde-
pendent identity of the waqf institution and made the waqf an instrument of
government policy.
But then it was felt that awqāf must be autonomous functioning under
the waqf boards or similar institutions so that every waqf could function
for the objective it was created. The wave of laws that reversed the nation-
alization started in Egypt in 1971 when the Egyptian awqāf authority took
over the management of awqāf properties from the Ministry of Awqāf
(Dafterdar, 2011, p. 659). In Iran, the “Waqf and Charity Organisation”
(WCO) was established in 1984 to develop, revive, expand, reconstruct, and
152 Waqf-​Based Legal and Organizational Frameworks

rehabilitate awqāf properties. In Sudan, the “Federal Corporation of Awqāf”

was established in 1987. Kuwait founded “Awqāf Public Foundation” in
1993. In Jordan, the Ministry of Awqāf, Islamic Affairs and Holy Places
established “Awqāf Properties Investment Corporation”. In Malaysia, at the
federal level, the Prime Minister’s Department established the Department
for Awqāf, Zakāh, and Hajj (JAWHAR) in 2004 to coordinate the activities
of the states’ religious councils in matters relating to awqāf development. The
“Qatar Awqāf Authority” was established in 2007 to take over the activ-
ities of the former Awqāf Department at the Ministry of Awqāf and Islamic
Affairs.
In Türkiye, waqfs are termed as the Foundations that are regulated under
the Foundation Law (Civil Law No. 5737, ratified by the Turkish Assembly
on February 20, 2008; By-​law on the Registration and Announcement of the
Foundations, No. 28269, published in the Official Gazette on 26.04.2013)
[Originally drafted in 1935 and modified at least 20 times]. The Foundations
law embodies 82 articles and includes general provisions, provisions for
Governing Foundations, Directorate General of Foundations, Foundations
Council, Organization of the Directorate General, and recruitment and
miscellaneous provisions. The objectives of Foundation law, as listed in
article 1, are “to set out the rules and procedures relating to the manage-
ment, operations and monitoring of the foundations; to ensure that their
movable and immovable listed properties at home and abroad are to be
registered, safeguarded, repaired and maintained; to ensure that the assets
of the foundation are economically managed and used; and to define the
organization, tasks, powers, and responsibilities of the Directorate General
of Foundations”. The following article gives the scope as:

This Law covers fused (mazbut), annexed (mülhak) and new foundations,
non-​Muslim community and artisans’ foundations, and the Directorate
General of Foundations. The international principle of reciprocity shall be
reserved in the implementation of the law hereof.

7.4.1 Legal Framework of Waqf Entities in Malaysia

During the British rule, in Malaysia, the Pahang Laws were enacted in 1596
(Rashid, 2012). Waqf mainly remained subject to court decisions and laws
originating from British, French, and Ottomans sources leading to foreign
norms that were superimposed upon the local practices during the 19th and
early 20th centuries till the independence of Malaya (Alias, 2013). In Johor
province, Waqf Prohibition Enactment 1911 was implemented, while in
Kelantan Islamic Religious Council and Malay Customs Enactment 1938
was passed after which in Perak Control of Waqf Enactment 1951 was
issued (Yacoob, 2013; Nooraini, 2015). Before 1950s, lands were donated
as waqf for mosques, surau, religious schools, and cemeteries (Kader &
Norasiah, 2014).
 Waqf-​Based Legal and Organizational Frameworks 153

The waqf system in Malaysia is implemented through several laws,

namely, the Federal Constitution 1957, the NLC 1965, the Administration
of Islamic Law (Federal Territories) Act 1993 (Act 505), Selangor Wakaf
Enactment (No. 7 of 1999), Trustee Act 1949 (Act 208), Malacca Wakaf
Enactment 2005, Negeri Sembilan Wakaf Enactment 2005 and the respective
Administration of Islamic Law Enactments of the various states as well as
other laws having an effect on the administration of waqf like the Trustee Act
1949, Specific Relief Act 1950, Contracts Act 1950 and others (Shafii, Iqbal,
& Tasdemir, 2016).
According to Malaysia’s Federal Constitution, it is within the exclusive
powers of the State government to legislate laws on the administration of waqf
and that of waqf properties in each of the States by the SIRC. SIRC has been
declared by the law to be the “sole trustee” of all general or specific waqfs in
any state. Waqf properties are registered in the waqf register maintained by
the Waqf Registrar in each SIRC. SIRC reports to the respective land offices
for the endorsement of the statutory vesting on the registered document of
title where the endorsement describes the SIRC as the sole trustee (Kader &
Norasiah, 2014). The SIRC is under a statutory duty to annually publish a
list of waqf properties, investments and assets under its jurisdiction in the
State Gazette.
As provided in Section 25 of the Civil Law Act 1956, the administration
of Muslim’s property must be in accordance with Islamic law. There are 14
SIRCs, one for each of the 13 states and one for the Federal Territory. The
first state law on the administration of Islamic Law in Malaysia, after inde-
pendence, that contained provisions on waqf was passed by Selangor in 1952.
The legal framework since 1952 is that all waqfs are registered in the name
of the SIRC as proprietors following the National Land Code (NLC) 1965.
A Majlis under the SIRC has the authority to register, regulate, monitor,
and manage consumptive waqf properties within the state. The Majlis has
an advisory board and a waqf properties management committee. The
advisory board consists of individuals, legal, and Sharīʿah experts appointed
by the Majlis along with the Mufti, the secretary of the Majlis, the state legal
adviser, and the State Director of Land as permanent members. Members
normally include state financial officers, scholars, and practitioners in a pro-
fession relating to Sharīʿah, property management, and financial manage-
ment (Tahir, n.d.).
Some states have specific laws for waqf administration like Johor’s Wakf
Rules 1983, Selangor’s Waqf Enactment 1999, Negeri Sembilan’s Wakf
Enactment 2005 and Melaka’s Wakaf Enactment 2005. The Selangor’s
Enactment has since been overtaken by the Waqf Enactments in Melaka and
Negeri Sembilan. It also contains provisions relating to the appointment of
a registrar of Waqf, a deputy registrar, and officers thereunder, the estab-
lishment of an Advisory Panel on the Management of Waqf, and the estab-
lishment of a Waqf Fund. Some of these rules also provide for forming a
waqf management committee, powers of the SIRC, and istibdāl (provision
154 Waqf-​Based Legal and Organizational Frameworks

for replacing any asset in the case of need for public use or making payment
against that to the beneficiary).
Waqf of any immoveable property is for the beneficiaries named by the
donor in the waqf deed. If provided in the deed, the property can be rented
out and the income could be used to help and assist the beneficiaries. The
waqf beneficiaries could be the underprivileged, poor or orphans, or even the
general Muslim public4 or the State if required for survival or welfare. With
the condition of getting approval from the respective SIRC, the intended
beneficiaries may sometime include the donor’s heirs and descendants.
The laws relating to waqf at the states level are of two categories: (i)
provisions in the state Administration of Muslim Law enactments, and (ii)
specific rules or enactments relating to waqf. The Enactments exclude the
concept of “trust” under the Trustee Act 1949 from the definition of waqf.
It implies that the waqfs are out of the jurisdiction of civil courts, and their
matters are decided based on the rules approved by the BNM’s Shariah
Advisory Council. Kader and Norasiah (2014) suggested that the provisions
relating to waqf management in the Negeri Sembilan Wakaf Enactment could
be used as a feasible template for the revision of waqf laws in other states in
Malaysia.
Waqf Lands Administration Manual, 2010, was provided by the
Department of Waqf, Zakāh and Hajj (“JAWHAR”) for the management of
the waqf lands in Malaysia. As the awqāf are under the control of the States,
JAWHAR at the federal level oversees the streamlining of waqf manage-
ment and administration in the country. It provides the official guidelines to
streamline the administration of waqf lands and represents the best practice
for managing waqf lands in Malaysia. The second chapter of the manual
discusses various processes of registering waqf lands at the land office under
the NLC. The third chapter deals with the processes for management and
administration of waqf lands like assessment rates, the creation of leases and
tenancies of the land/​buildings, termination of such leases and tenancies,
payment of quit rent, collection of rent of the waqf premise through counter
payment, maintenance of the lands/​buildings, application of state land for
the creation of waqf for the public interest (irsād), replacement of waqf
land (istibdāl), insurance of waqf property and claiming insurance, as well
as applications to the land office for conversion from leasehold to freehold
title. Guidelines are also laid down relating to court actions on waqf lands.
The National Land Code Amendment, 1992 (Act 832) facilitates the
transfer of land to the waqf administrator and provides for endorse-
ment of the statutory vesting of waqf land on the SIRC to be endorsed
on the Register Document of Title at the land office. It was notified by the
Director of Lands in 1999 (Directive No. 8/​1999) that all waqf lands must
be vested in the authority of SIRC by way of endorsement of the statutory
vesting on the Register Document of Title. The procedure for endorsement
of statutory vesting under s. 416c has also been laid down. SIRC gives a
written application to the registrar, or the land administrator accompanied
 Waqf-​Based Legal and Organizational Frameworks 155

by the documents or witnesses to attest the waqf creation. The statutory

provision of the respective law indicating the SIRC as the sole trustee of
waqf is also attached. As waqf land falls under the jurisdiction of each
state, the system lacks standardization and there are some inconsistencies
in implementation. Hence, the directive to use the vesting order as the
sole process of the endorsement of the vesting waqf on the SIRC is timely
although it merely provides a short term solution to waqf land (Kader &
Norasiah, 2014).
To ensure that waqf land is permanently protected, the land offices have
provided several procedures to ensure that the land of any waqf is legally
secured. One salient requirement is that the land must be registered under
the name of the waqf administrator who acts for the designated beneficiaries
or benefit of the ummah (in the case of the public waqf). Various forms have
been provided like 14A, 12A, and 12B for effecting the transfer of waqf land
in different situations. Sometimes, the concern is expressed as to what would
happen if any land is not immediately reserved or gazetted as waqf land in
a case where the waqf document goes missing from the land office or the
office of the SIRC. [The authors are of the view that the emerging tool of
Blockchain could be used for the preservation of the Waqf land and other
records.]
By citing a Case Law decision (Majlis Agama Islam Selangor v Bong Boon
Chuen & Ors [2008] 6 MLJ 488), Kader and Norasiah (2014) contended
that the validity and formal recognition of waqf are still subject to provisions
of the written law, although the creation of waqf land emanates from Sharīʿah
principles. Implications could also arise in cases where a waqf is created and
registered under the name of Imam or Qadhi, or the name of the head of the
village, and they die.

7.4.2 Waqf Law and Regulation in Indonesia

In Indonesia, that presents great potential in terms of waqf assets and funds,
the regulation for waqf was embedded in Act No. 5/​ 1960 on agrarian
matters. In 2004, Act No. 41/​2004 on waqf was provided; the act consists of
nine chapters which are divided into 71 sections. The birth of the Indonesian
Waqf Board [Badan Wakaf Indonesia (BWI)], based on Law No. 41 of
2004 regarding waqf, played a crucial role in the development of waqf in
Indonesia.
BWI is the embodiment of the mandate outlined in Law No. 41 of 2004 on
waqf. BWI is an independent agency to develop waqf in Indonesia in carrying
out its duties free from the influence of any authority and is accountable to
the public. In 2010, the President of Indonesia launched the National Waqf
Money Movement at the State Palace. The establishment of cash waqf in
Indonesia was led by a nonprofit organization that was established in 1993
by a group of journalists with the mission to help the needy through zakāh,
infāq, sadaqah, and waqf. Recognizing that cash waqf has the potential to
156 Waqf-​Based Legal and Organizational Frameworks

provide the necessary funds for charitable projects, including poverty alle-
viation, the Indonesia Waqf Board launched a cash waqf scheme known as
Tabung Wakaf Indonesia or the Indonesian Waqf-​shares (Shafii, Iqbal &
Tasdemir, 2016).
In Indonesia, trust law is also applied to manage awqāf. Waqf donors
could appoint their own trustee to manage their waqf upon registration with
the Indonesian Waqf Board through IWB branches, and representatives of
the Indonesian Ulama Council. Waqf property is controlled by the state, and
indirect endowments are considered part of national wealth (Article 33 clause
3 of the Constitution). If the waqf asset is impaired, waqf nāzir is responsible
in the case of mismanagement to ensure that the waqf stream stays beneficial
to the beneficiaries, even if it is sold and replaced with another asset. The
legal system, monitoring and oversight systems of awqāf in different coun-
tries are given in Table 7.1.

Table 7.1 Law, Court Monitoring, and Oversight of Waqf in Selected Countries

SR Enactment/​Law Türkiye Indonesia Malaysia

#

1 Dedicated Law Foundations Indonesian Waqf Federal Law-​Section

on Waqf/​ Law 2008 Regulation 25 of the Civil Law
Endowment 2007 and Cash Act 1956 –​Each
Waqf Act 2009 state has its own
Enakmen Wakaf
(13 states, 1
federal territory)
2 Waqf-​related Secondary No corporate 1. Companies Act
laws and rules and waqf practice 1965 (in the case
provisions regulations in Indonesia. of corporate waqf,
amended by Trust law is the company
Directorate also applied to managing waqf
General of manage waqf. has to also observe
Foundations Waqf donor Companies Act)
could appoint 2. Trustee Act 1949
own trustee (via the concept of
to manage his Amanah Hibah,
waqf upon waqf could be
registration initiated)
with 3. Labuan Islamic
Indonesian Financial Services
Waqf Board and Securities Act
through IWB 2010 (LIFSSA)
branches, and 4. Section 105
representatives allows for the
of Indonesian establishment of
Ulama Council. Labuan Islamic
Trust
 Waqf-​Based Legal and Organizational Frameworks 157

Table 7.1 (Continued)

SR Enactment/​Law Türkiye Indonesia Malaysia

#

3 Central Directorate Indonesian Waqf No central regulator

Supervisory General of Board (IWB). Majlis [State
Authority Foundations Consists of Islamic Religious
supervisory Council (SIRC)] of
board and each state. SIRC
board of acts as a regulator
directors and governing
(management) body that manages
waqf in each state.
Waqf Management
Committee is
established to
manage waqf for
its behalf.
A Department at
the Federal Level
JAWHAR plays a
coordinative and
advisory role, as it
does not the power
to regulate waqf
matters.
4 Sharīʿah/​legal As for Sharīʿah-​ Sharīʿah court in Mufti (Head of the
Court for related each city Islamic Religious
Legal and disputes, Council) of each
Dispute as Türkiye state
Resolutions is officially
a secular
country,
no such
institution
exists.
For legal
disputes, the
authorized
court is the
one where the
foundation is
settled.
5 Sharīʿah Advisory Not available Majlis Ulama Fatwa Council in
(in case Indonesia each state
mutawalli or (MUI)
managers are
not sure of
any Sharīʿah
aspects of waqf
operations)

Source: Adapted from Shafii, Iqbal, and Tasdemir (2016).

158 Waqf-​Based Legal and Organizational Frameworks

7.5 Proposed Framework for Waqf Law for Pakistan (as a Case Study)
Keeping in view various categories of waqfs, the donors, the purposes,
and the beneficiaries of waqfs, the structure of the proposed framework is
depicted in Figure 7.2.
Based on the current status in Pakistan that only religious awqāf are oper-
ating with a little role in social and economic development and welfare, the
best option could be to develop a new stream of waqfs while keeping the
current stream operating separately with some changes for improvement.
Hence, the legal framework will comprise two parts, one for the religious
awqāf currently operating or that might be created by individuals, the cor-
porate bodies, or the state for masājid, shrines, or preaching Islamic values
(Da’awah awqāf). The objective would be removing the lacuna and loopholes
enabling the institution to play an effective role in serving the cause of Islam.

Figure 7.2 Awqāf Structure to Be Covered in the Legal Framework.

Source: Authors’ own.
 Waqf-​Based Legal and Organizational Frameworks 159

The second part will be for the creation, registration and operations of
the philanthropic/​charitable waqfs that will include such waqf that could be
created for the general welfare of the public or any specific groups, or specific
sectors, and sectors like health, education, capacity building, and areas, and
also waqf alʿawāriz, and family/​posterity/​lineage awqāf.

7.5.1 Providing Constitutional Provision for Revival of Awqāf

The institution of waqf having the potential of eradicating poverty and

enhancing the welfare of the society that would lessen the burden on the
public sector for providing necessary civic facilities and social infrastructure
would require a mandate from the Constitution of the Islamic Republic of
Pakistan. A proviso could be added to Article 38 that requires the State to
take policy measures for the promotion of the social and economic well-​
being of the people of Pakistan (Article 38). Currently, Article 38 mandates
the following:

The State shall —​(a) secure the well-​being of the people, irrespective of
sex, caste, creed or race, by raising their standard of living, by preventing
the concentration of wealth and means of production and distribution in
the hands of a few to the detriment of general interest and by ensuring
equitable adjustment of rights between employers and employees, and
landlords and tenants; … .. (e) reduce disparity in the income and earnings
of individuals, including persons in the various classes of the service of
Pakistan; (f) eliminate ribā as early as possible.

After the proviso (g) that was added earlier, the following proviso (h) needs
to be added:

(h) encourage and promote the establishment of religious and philan-

thropic awqāf [of fixed assets /​landed properties, or Cash /​liquid assets]
and/​or foundations by the resident individuals, the oversees Pakistanis,
entities and corporate bodies, or the foreign philanthropists, or the State
of Pakistan, for the welfare of the community and socio-​economic devel-
opment of the economy.

Welfare and broad-​based growth of any society require all rich and well-​
off citizens to play their role in serving mankind. Hence, rich non-​Muslims,
individuals and entities, from within the country or abroad, would also be
enabled and encouraged to establish charitable, foundations for community
centers and any kind of social services in line with the culture and social
values of the local society.
As awqāf fall under the provincial portfolio, the promotion of awqāf and
revival of the role that it played in Islamic history for social and economic
development would become an agenda item of the meetings of “The Council
160 Waqf-​Based Legal and Organizational Frameworks

of Common Interest” (CCI). The CCI may make and implement plans for
promoting awqāf through the Waqf Board Pakistan and the Waqf boards
of the Provinces and AJ&K, or any other Federal units. A Parliamentary
Committee would be playing role in the preparation of the waqf-​related legal
framework and the law.
The legal framework to be provided for the Federation of Pakistan and
its units would also suggest an organizational framework containing a Waqf
Board Pakistan (WBP) and the provincial waqf boards (PWB), policies and
mechanisms for making any endowments, use of endowed resources as per
the respective waqf/​trust deeds, accounting, auditing, and accountability at
different levels –​from WBP to all personnel involved in the collection, use,
and disbursement of the waqf funds.
The legal framework would also include sections on the organizational
and administrative structure of the awqāf system at the federal and provin-
cial levels. Of course, the role of the Federal Government will be to give
an overall structure and framework for making endowments and possible
uses of funds for different categories of waqfs and procedures for resolving
Sharīʿah-​related issues in awqāf and disputes regarding the use of waqf assets.
Therefore, the framework would also provide the procedure for resolving
the Sharīʿah and procedural issues and their resolution by the Council of
Islamic Ideology (CII) and the Federal Sharī’aht Court (FSC) for the Sharīʿah
issues, and civil courts for resolving the procedural issues in management and
use of waqf properties. Such a detailed framework to be provided by the State
is a prerequisite for creating harmony and ensuring that all operations of the
waqf institutions play a positive role in creating religious harmony in the
country and maximizing the benefits without wastage of endowed resources.

7.5.2 Legal and Organizational Framework for Waqf

For the preparation of the legal and organizational framework of awqāf in

Pakistan, or any other OIC member country, guidance can be taken from
the AAOIFI’s waqf standards (Sharī’ah (SS No. 33), Financial Accounting
Standard FAS (37) and Governance (GSIFI-​ 13); and the Core Waqf
Principles (IWG, 2018) suggested by the International Working Group on
Waqf. Malaysia and Indonesia have done a lot of work in providing a con-
ducive environment for awqāf creation and management. The waqf law of
Singapore is almost similar to that of waqf law in Malaysia. Hence, the legal
framework operating in these countries can also be helpful in providing a
legal framework effective for promoting awqāf. The Legal & Organizational
Framework for Waqf (LOFW) may be provided having some parts, sections/​
provisions as suggested in the following.

7.5.3 Organizational Framework

The suggested framework for promoting waqf system to play an active role
in the welfare of society and the development of the economy on a sustained
 Waqf-​Based Legal and Organizational Frameworks 161

basis also suggests an organizational framework for waqf that can be depicted
as given in Figure 7.3.
The organizational framework suggests the Parliament through its
Committee on Waqf, the Council of Common Interest (CCI), and the Waqf
Board Pakistan at the federal level as the policymaking and implementing
institutions for promoting waqf to realize the objective of broad based wel-
fare in the country.
All provinces and administrative units shall be independent in creating and
operations of waqfs through Provincial Waqf Boards (PWBs) as any individ-
uals, entities, corporate bodies, government, and State institutions may like
to establish under the law. PWBs will have offices at the district level or could
be at Tehsil level, if so required. The authors suggest that the officials/​staff of
the WBP and the PWBs and their area offices should be of special cadre with
a defined gap between the lowest and the highest paid personnel.
All philanthropic waqfs may be established under the Companies Act,
2017 and supervised by the Waqf Department to be created in the SECP.
Religious or da’wa waqfs could be created under the Societies Act, or the
Companies Act as the creator may like. Any waqfs of landed properties
shall be registered with the related land record office in the provinces/​capital
territory.
The waqf creators or their nominees may generally be serving as nazirs
(managers) of different waqfs. The respective waqf boards may be serving
as wakil of the waqfs and their creators for efficient and fair management
of the system for maximizing the benefits of the beneficiaries and the society
at large.

Figure 7.3 Suggested Organizational Framework for Waqf System in Pakistan.

Source: Authors’ own.
162 Waqf-​Based Legal and Organizational Frameworks

While Finance Committee of the respective waqf boards will be playing a

strategic role, under directions of the waqf boards, in receipt and investment
of waqf funds, lease or use of waqf properties, and use of investment returns
and waqf fund, the Discipline Committee would ensure that all personnel
involved in waqf affairs fulfill their responsibilities taking it as a sacred duty.
Going forward, when the new waqf law is promulgated and the system
starts functioning, the WBP may create the Pakistan Audit Foundation (PAF)
that will undertake external audit of all waqfs and the waqf boards in the
country. The PAF might give a rating to the waqfs after the audit based
on performance, transparency, reporting, and governance of the waqfs.
Different awqāf may also get a rating from any other recognized rating agency
approved by the WBP. Such ratings could be used by the respective awqāf for
getting waqf funds from the rich and philanthropies within the country or
abroad. The Federal Board of Revenue or other taxation authorities in the
country must not ask the waqf managers to provide them with information
about those who make endowments or donate for the waqf. Tax authorities
have to manage any wrongdoings, if any, at the income source level.
For getting donations/​waqf funds from foreign countries, the respective
waqfs would be required to get themselves registered with the “Economic
Affairs Division” (EAD), Government of Pakistan. Different waqfs may
register donors of small amounts, may be up to $10,000 per month, and
issue them web-​based cards through mobile Apps. Their scrutiny would be
easy as in the case of Roshan Digital Accounts allowed over the last couple of
years for the nonresidents. For the creation of new awqāf or foundations by
overseas Pakistanis or foreign donors/​institutions, a proposal for the estab-
lishment of waqf/​foundation in any province or area has to be submitted to
the EAD that would allow within a specified period of 3 months, and also
inform the respective waqf board.
The WBP may also create a “Pakistan Waqf Takaful Foundation” (PWTF)
that will provide takaful services to all waqfs and waqf boards as a loss miti-
gation measure in the case of any calamity, accident, or any other sources of
damage/​harm.
As the cash waqfs will be serving as financial intermediaries as well, the
State Bank will also be involved in regulating such waqf entities, particu-
larly in their financing operations as discussed in various chapters of this
book. Pakistan Banks Association (PBA) and the Federation of Pakistan’s
Chambers of Commerce and Industry (FPCCI) may establish “PBA Waqf
Committee” and “FPCCI Waqf Committee” to facilitate the banks and cor-
porate bodies/​businesses to create waqf as part of their CSR activities.

7.6 Summary and Conclusion

Revival of waqf enabling it to play its historic role in the welfare of Muslim
societies must be backed by the legislation having an appeal for all, and the
 Waqf-​Based Legal and Organizational Frameworks 163

ability to provide a basis for the institutionalization of this unique “beyond

market” segment of Islamic economics. Compared to the traditional awqāf,
the waqfs being established currently also comprise waqfs of cash, stocks,
securities, intellectual property rights, and other liquid and illiquid finan-
cial instruments by individual, institutional, and corporate wāqifs (Suhaimi,
Rahman, & Marican, 2014; Hamad, 2015).
The inability of the state institutions to provide necessary civic, health,
and education facilities to the public is causing serious harm to the balance
of society that could be devastating in the long run to all groups including
the rich. Development of waqfs on the emerging trends for broad-​based
social and economic development would lessen the burden on the govern-
ment which is facing increasing debt servicing obligations, and budgetary
and trade deficits. Therefore, waqf-​related legislation must not only make
philanthropy easy but also involve all members in society by wealth sharing
for financial and social inclusion.
As indicated by the participants of the Focus Group Meeting (FGM)
held at IBA Karachi, all Muslims wish to contribute for the sake of their
World Hereafter. But the problem is that rules and regulations are too
many and discouraging. “People have stopped making waqf due to fear of
confiscation by the government”, indicated Dr. Usman of IOBM Karachi
in the FGM. It was strongly suggested that the legal and organizational
frameworks must be facilitators to encourage contributions to the wel-
fare of society. “Any property endowed in the name of Allah SWT for the
poor, needy, etc. as waqf cannot be confiscated by the government”, the
participants added.
The nonresidents must be legally allowed to create a waqf in the native
country like Pakistan through Roshan Digital Account, as one is allowed to
purchase a house while sitting abroad. It can be done by adding a provision
under Section 42 of the Companies Act, 2017. Similarly, SECP may set up a
facilitation desk for creating cash and ṣukūk waqfs and work on providing
facilitation for waqf ṣukūk to be taken by overseas Pakistanis and foreign
philanthropists.
Waqfs, in the long run, will accumulate assets to the tune of multiple
billions of rupees and so will require very professional administration while
extremely careful legal provisions to encourage longer term charity for the
formalized institution of public welfare. It would require highly technical
legal and managerial frameworks akin to the ones promulgated for central
banking and the banking and nonbanking financial sectors. It is because
huge money will find the way out for the special welfare-​oriented role for
generations. Any disruption in the matters of independent and efficient
functioning of this unique institution having a divine foundation would have
serious economic, social, and political implications. Hence, waqfs cannot be
left at the mercy of the bureaucratic culture, or the tribal structure prevalent
in society.
164 Waqf-​Based Legal and Organizational Frameworks

Notes
1 https://​isl​amic​mark​ets.com/​educat​ion/​waqfs-​in-​pakis​tan-​ban​glad​esh
2 Similar Bills were prepared by the provinces, but the same could not be passed by
the respective provincial assemblies mainly due to severe criticism by the Sharī’ah
scholars and many politicians on the federal territory waqf properties act (2020)
that had many loopholes and rules against the waqf principles and the Constitution
of Pakistan.
3 https://​pun​jabc​ode.pun​jab.gov.pk/​uplo​ads/​artic​les/​the-​pun​jab-​waqf-​pro​pert​ies- ​
adm​inis​trat​ion-​rules-​2002-​pdf.pdf
4 Juristically, in historical perspective waqf funds, if there is a provision for general
welfare, could be used for survival at the State level. In Ache Indonesia, waqf took
a central point in providing funds for its struggle against the Dutch Colonial power,
when it was used to purchase an aircraft for the national defense and facilitate
interisland transportation (Nasir et al., 2019).
8 Summary Recommendations
for Realizing the Potential of Waqf
for Shared Growth and Sustainable
Socioeconomic Development

8.1 Introduction
Economic behavior in any value-​based system is based on ethical and belief-​
based social norms to ensure the well-​ being of individuals and mutual
survival in society as per its own standards. Islam enjoins justice and fair
dealings in business, and balance in the production of goods and services,
consumption, savings, investments, and socioeconomic activities. Many per-
sons and groups in any society might remain behind others due to the lack
of opportunities, any inability, or functioning of the market economy forces,
and hence might be unable to fulfill their basic needs. For a healthy, and har-
monious society, therefore, a share of income and wealth must be passed on
to those who might not be able to get resources sufficient for their co-​survival
in the relative term. The objective is to maximize the welfare of society as a
whole and achieve success by gaining God’s pleasure (Mahmood & Suhaib,
2019). It would lead to increasing financial and social inclusion that would
help boost overall economic growth by promoting countercyclical economic
policy and by helping poor people maintain human capital for the future and
assist in the recovery of the economy (WB-​IDB Report, 2016).
As deliberated in detail in the book, waqf is a multipurpose tool for social
and economic development that played a role throughout Islamic history, of
course with some gaps due to colonialism and the commercial mindset emer-
ging from the Western capitalistic paradigm. The Prophet (PBUH) dedicated
waqfs for all welfare-​oriented purposes including, inter alia, the poor and
needy, disaster relief, travelers, migrants, etc. (Cajee, 2022). While educa­
tional institutions, hospitals, and travelers’ inns were included in the waqf
beneficiaries’ list soon after the Islamic state expanded in AD 8th and 9th
centuries, the Ottomans started financing the traders, craftsmen businesses,
and farmers from the awqāf funds. As contended by Hoexter (2002, p. 128),
the contribution of waqf “to the shaping of the urban space can hardly be
overestimated… . A major part of the public environment in (Islamic) towns
actually came into being as a result of endowments”.
While waqf, as an institution of social welfare, preceded the modern insti-
tution of “trust”, the nonprofit sector involving endowments, charities, and
DOI: 10.4324/9781003477549-8
166 Summary Recommendations for Realizing the Potential of Waqf

philanthropies in the West and also in the East are emerging increasingly. It
made the waqf studies in the 21st century more relevant for resolving socio-
economic problems like poverty, hunger, lack of education, and health and
civic facilities in developing Muslim societies (Omercic, 2018). The waqfs
being established currently are also of cash, stocks, securities, intellectual
property rights, and other financial instruments by individual, institutional,
and corporate wāqifs (Suhaimi, Rahman, & Marican, 2014).
Waqf played the role of development in the past and it is valid for
all times. “There is no justification for the assumption that the modern
Muslims would be less pious than their forefathers”. In case a suitable
framework is provided, Muslims today would be just as keen as their
forefathers to establish awqāf, as Çizakça (1998) indicated. The privately
accumulated capital may be endowed by the well-​to-​do voluntarily to
finance all sorts of social services to society. This way, waqf will help in
realizing the socioeconomic goal of a better distribution of income and
shared wealth in the economy.
Findings of this study, from the primary research as also interpretive ana-
lysis of the available material pertain to both theoretical/​conceptual aspects
as well as the practical/​operational aspects of any economy. The researchers
found that all activities of awqāf must be conforming to the tenets of Sharī’ah
with the intention to get Allah’s bounties through service to the cause of
Islam and the welfare of the community. Sadr (2017) establishes that the key
to the success of waqf is conformity with waqf operational practices with
established Islamic regulations. This aspect differentiates waqf from other
charities or endowments.
The main aspects of the findings are:

(a) As per the consensus view of the jurists, cash or liquid assets waqfs are also
allowed. Spending for others’ welfare, being a virtuous/​noncommutative
act, it cannot be limited to landed properties or assets.
(b) Waqfs could be created for instant and long-​term help of the poor, and
the needy in any society, as also for general welfare schemes in social and
economic sectors like health, education, civic amenities, providing abode
of certain minimum level to the poor, and creating reserves or buffer for
rehabilitation measures at the time of any calamities.
(c) As provided by AAOIFI in its Sharī’ah Standard No. 60, waqf-​based
endowments could be made for a given period as well. Accordingly,
time-​based deposits and ṣukūk certificates could be issued and taken.
Waqf ṣukūk may not differ from the structure of investment ṣukūk in the
form but in the purpose. The former are for any noble welfare cause like
helping others to please Allah SWT (Oubdi & Raghibi, 2018).
(d) Waqfs can also be created for setting up businesses at micro or com-
munity levels, capacity building and professional training, and even
for financing the public sector needs of a social service nature. In this
 Summary Recommendations for Realizing the Potential of Waqf 167

perspective, waqf could work as a direct and indirect financial inter-

mediary like investment banks, and fund managers, or like commercial
banks, special-​sector development banks, and microfinance institutions.
(e) In the operational perspective, a part, at least, of cash endowments may
be used for investments or building such assets the usufruct of which
could be leased out; the returns of investments and leases would be used
for any welfare purposes as per the respective waqf deeds.
(f) As developed in Islamic history, waqf is a civil institution with its legal
frameworks, objectives, beneficiaries, management, and regulations.
Any framework for waqf must provide the waqf founders freedom to
determine its objectives, management, usage, and distribution of income/​
produce, of course, within the confines of Shari’ah. Kahf (2012, p. 7)
indicates that “there is no room for the Imams, preachers, or other reli-
gious leaders to make any decision regarding a waqf property based on
their own preferences”.
(g) Contributing to waqfs, or charity making for formal welfare activities
must be made easy and hassle-​free.
(h) Awqāf must be managed and operated as autonomous charity/​welfare
institutions. The state should provide effective and efficient organiza-
tional, legal, and management frameworks. The objective would be to
formalize the welfare institution to maximize the benefits with transpar-
ency, as could be required for proper governance. However, no waqf can
be nationalized or controlled by the state’s bureaucracy. As suggested
in the previous chapter, for Pakistan, as a case study, waqf boards at
the center and the provincial levels will be supervising all autonomous
waqfs in the light of the law approved by the Parliament, and consult-
ation by involving the Council of Common Interest (CCI) and the fed-
eral and provincial institutions dealing with poverty alleviation, social
services, and welfare activities.
(i) Going forward, when the system is developed, the Waqf Board Pakistan
may like to establish the “Pakistan Audit Foundation” (PAF) by involving
the audit companies, and in consultation with its Finance Committee and
the Discipline Committee for ensuring proper governance.

Another finding of the research is that waqf is no doubt a crucial part

of the model of financial inclusion that Islam suggested. Dr. Usman of
IOBM, Karachi in the focus group meeting (FGM) held at IBA, Karachi,
exclaimed:

But in Pakistan, the government and common people think of waqf as

limited to masjid, madrasah, and mazār. Everyone talks of financial inclu-
sion, but no one thinks about the model of financial inclusion with the
crucial role of waqf that Islam suggested.
168 Summary Recommendations for Realizing the Potential of Waqf

Some details of the aforementioned findings are given in the following.

8.2 Promoting Charity at the Micro Level and Making Charity Giving
Hassle-​Free
Islam encourages the well-​off citizens in society to donate and cooperate for
overall development and welfare in terms of social and economic viability,
and moral and spiritual supremacy. Spending habits of society need to be
rationalized by avoiding extravagance, lavish spending for self-​pleasure and
miserliness, and encouraging spending for fulfilling the needs of others in the
society (Qur’an 17:26–​29; 25:67).
In addition to compulsory zakāh and other religious levies, Islam
encourages sadaqah as charity, and suggests waqf as an endowment for any
good cause involving the benefit and welfare of others. Thus, besides pur-
suing religious and philanthropic objectives it is also inherent for every waqf
institution to accomplish broader socioeconomic objectives. The extrava-
gance becomes irrelevant when one is purposefully spending for charity for
improvement of the community and the propagation of the message of Islam.
In the Western perspective, Bekkers and Wiepkings (2011) identified all
the core elements of the theoretical models of charity giving presented in the
classical as well as modern approaches. They summarized eight mechanisms
that influence giving behavior: (1) Awareness of needs, (2) Solicitation,
(3) Costs and benefits, (4) Altruism, (5) Reputation, (6) Psychological benefits,
(7) Values, and (8) Efficacy. All these factors may encourage Muslims to
make endowments for the welfare of others and success in this world and
the hereafter.
Humans are linked to one another through their obligations to God in the
Islamic concept of faith and community. Further, a charitable act is neither
simply an act of faith nor only an act of community; it is the building of com-
munity through faith, and the building of faith through the deepening of the
community (Alterman, Hunter, & Phillips, 2005). From the Islamic perspec­
tive, of course, charity/​sacrifice for others is considered one form of worship-
ping Allah by Muslims. Muslim donors get involved in charitable giving to
seek the pleasure of Allah, general welfare contribution for self-​purification
of the wealth and soul, and for self-​contentment.
Basically, the several types of charitable giving in Islam are mainly
sadaqāt. These sadaqāt include zakāt [compulsory sadaqah] and waqf [vol-
untary sadaqah]. While zakāt is one of the five pillars of Islam, waqf is an
act of specifying certain property and preserving it for the benefit of Muslim
community (Kahf, 1998).
Motivating the rich people to create waqf is necessary. Therefore, ulamā
including imams of mosques, and teachers of religious institutions should
take initiatives fast because people believe them, and they have an immense
influence on these people. So, if they consult with rich people and inform
 Summary Recommendations for Realizing the Potential of Waqf 169

Table 8.1 Theoretical Framework of Charity Giving in Islamic Perspective

Internal Mechanism Achieve human ultimate success (falāh)

• Self-​purification of the wealth and soul
• Self-​contentment
• Altruism
• Moderatism
• Proactivism
External Mechanism • Seek the pleasure of Allah SWT
• Inclusivity
• Purposefulness
• High standard of intention and quality
Social Impact General welfare
• Sufficiency
• Charity culture begins at home
Anonymity Secrecy: it is important, anonymity in giving as
part of spiritual development –​not to show off
Charitable Giving in Difficult Giving is encouraged even in difficult situations. It
Situations is a form of sacrifice.

Source: Mustafa Omar et al. (2016).

them about the divine benefits as well as earthly benefits of making waqf, it
can bring a strong boost for the creation of waqfs by the well-​off citizens in
society.
In the following, we illustrate the framework of charity giving in Islamic
perspective.

8.2.1 Using Fintech for Waqf-​Based Donations and Financing the

Micro Businesses
While many rich people are already working for social welfare, charity giving
must be promoted at the micro level so that all members of society might take
part in the formalized system of philanthropy and welfare. Digitalization
of finance and fintech can play a role in this regard. Islamic fintech follows
Sharī’ah-​based principles and is hence a type of technology that is ethical and
religiously acceptable. Through its very nature, it cares for the elements of
the environment, social values, and corporate governance (ESG) as well. The
alignment of certain Islamic financial products and environmental, social,
and governance factors along with recent strides in digitalization may allow
Islamic fintech to make a strong foothold in the market.
Islamic institutions and tools of social finance like waqf-​based charity
giving, qarḍ hassan and business financing could certainly be helpful in the
redistribution of wealth leading to the common welfare. The fact that Islamic
fintech and finance are Sharī’ah compliant does not just mean that they are
acceptable to Muslims across the globe, but they also offer a different choice
by avoiding ribā and gharar in terms of the ethical and moral implications
that come with investment choices.
170 Summary Recommendations for Realizing the Potential of Waqf

8.3 Promoting Waqfs –​A Vital Requirement for Economies Like That of
Pakistan
The second major finding of the study is need for reviving the system of
awqāf in Pakistan to play its historical role in socioeconomic development
for broad-​based welfare. Waqf has been institutionalized in Islamic culture as
a civic charity organization to serve society, to fulfill its numerous social and
economic needs sustainably. Historically, it contributed with an expanded
scope by covering education, health, civic facilities and public utility services,
and other areas of social services (Kahf, 2012a).
The West learned about waqf-​based charitable endowments during the
Crusades. However, only the 20th-​century welfare states popularized this
trend of waqf-​like institutions in their quest for development (Salamon &
Anheier, 1997). Accordingly, many charitable institutions like foundations
and endowments are running universities and other educational institutions.
Hence, the potential of waqf in the 21st century has been recognized as
a social sector institution that can be used to realize social and economic
objectives (Omercic, 2018).
The list of the top 10 Wealthiest Foundations1 in the world shows that
huge amounts have been made available for welfare-​related activities in the
West. It contained only one Muslim foundation (Mohammed bin Rashid Al
Maktoum, Dubai, UAE with an endowment of $10 billion). Although most
of the OIC member states are facing serious financial problems due to debt-​
servicing obligations, hundreds of thousands of rich individuals and corporate
entities must come forward for financing welfare activities for the public.
Recently, the GlobalSadaqah, an award-​winning global platform for wel-
fare activities, has established a crowdfunding platform (EduSadaqah), spe-
cifically for Islamic finance educational providers to raise funds to support
their causes and activities. It aims at providing a secure and reliable way for
Islamic finance education providers to raise funds for various causes including
scholarships to deserving students, research grants, upgrade facilities, and
purchase of new equipment or technology. The platform allows educa-
tional institutions to connect with donors, alumni, and community members
who are looking to support their endeavors. They encourage educational
institutions offering Islamic finance programs to join EduSadaqah to further
publicize their needs and initiatives to potential donors and supporters.2
As far as Pakistan is concerned, there are ample opportunities for better
use of the waqf properties –​farmland can be utilized for olive farming, fish
farming, moringa (sohanjna) farming, citric farming, vegetable farming,
eucalyptus tree farming for timbre, cattle farming, etc. Islamic Financial
Institutions (IFIs) can be involved in the utilization of waqf properties for
development, and welfare projects can be involved in waqf projects. The
joint venture, public-​private partnership projects, and similar schemes are
available for utilization of awqāf properties and assets by banks and finan-
cial institutions on commercial basis. In towns and urban areas, hundreds
of acres are available for new commercial projects. The existing commercial
 Summary Recommendations for Realizing the Potential of Waqf 171

waqf properties can also be upgraded. For community development, awqāf

can offer qarḍ hassan for small farmers, micro businesses and cottage indus-
tries. Scholarships may also be provided for students on a need cum merit
basis. Other possible welfare related steps are financial help for widows, and
the establishment of orphanages, vocational schools and medical centers, etc.

8.3.1 Categories of Waqfs

In terms of general categories, we discussed in detail that a waqf could be of

three categories, namely, religious, philanthropic, and family. All such awqāf
may lead to socioeconomic welfare as any endowments for the cause of Allah
(SWT), His creatures, and the welfare of human beings are covered under waqf.
It may, inter alia, include feeding the poor and hungry, providing healthcare ser-
vices, civic facilities, and public utilities for the betterment of society, facilitating
education and research, financing small businesses and entrepreneurs, and
taking care of wild animals. Family or posterity waqf that started in the time
of the second Caliph of Islam to ensure that children and descendants of the
waqf founder are not in problem in the future.3 In terms of the objectives, waqf
is divided into four categories, namely, awqāf for religious objectives, social
objectives, cultural objectives, and economic objectives (Khan et al., 2019).

8.3.2 Sources and Use of Waqf Funds

Historically, private funds and capital had been the main source of institu-
tional development of waqf. Waqf resources and funds were spent on mosques
and attached madāris, that is, construction and renovation, payment of sal-
aries for imams and teachers, lighting, carpeting, cleaning, water supply, etc.
Subsequently, community assets were built from waqf funds. Many hospitals,
universities, astronomical observatories, orphanages, water wells, ships, trans-
portation infrastructure, etc. had been provided through the system of waqf
by the Muslims individually or as a group (Omercic, 2018). It may imply that
the usage of waqf funds depends upon the intention of the wāqifs as indicated
in any waqf deeds. As Kahf (2012) observed, “This independent source of
financing enabled religious leaders and preachers to take positions in various
social and political issues independent of that of the ruling class…”.
Uses of waqf funds include a large list depending upon the waqf founder’s
wish and cover generally the necessities of the poor, needy, sick, widows,
orphans, students, those who are not able to pay their debts, travelers, etc.
In addition to fulfilling the instant needs of people, waqf funds could be
used for generating employment opportunities by providing finance, and
capacity-​building services. In the field of Shari’ah-​approved embellishments
(Al-​Tahsiniyyat), waqf has good access to playing successful roles in man-
aging and organizing waqf-​ based concerns, particularly those that are
business oriented. In this manner, the waqf activities can promote develop-
ment in various sectors, such as the local economy, industrial sector, and
other commodity-​producing and business sectors.
172 Summary Recommendations for Realizing the Potential of Waqf

Cash waqf which initially emerged to fulfill the needs of some specific low-​
income groups in the religious-​social sphere consequently answered the needs
of entrepreneurs and investors in the shape of trade and partnership based
financial structures (Bulut, 2021). To serve the purpose of shared growth, it
proliferated in Ottoman geography, from Anatolia to West Asia and Africa,
and to some extent in the Malay region to play a broader role of enabling
and financing.
The resolution of the Jeddah-​based International Islamic Fiqh Academy
(IIFA) about the Sharīʿah permissibility of cash waqf [IIFA, Resolution No.
140 (6/​15), p. 297]4 has confirmed that the waqf has come of age by evolving
into a financial product. It enabled the community welfare programs to per-
meate at micro levels as it could be traced back to the 16th and 17th cen-
turies. For example, during the Ottoman era, Muslim communities widely
practiced waqf-​based financial services. The waqf pools comprising numerous
cash waqf donations from different individuals were employed through the
mechanism of istighlāl to finance various clients (Çizakça, 2000, pp. 47–​48).
Additionally, waqf pools were vital in providing seed capital to SMEs on a
mudārabah basis as well as for providing funds for consumption purposes
(Çizakça, 1998). The progress of evolution in waqf continued, and by the
early 20th century, precisely in 1907, waqf of company shares was permitted
by some leading scholars (Dafterdar & Çizakça, 2013, pp. 7–​8).
Further, in the Ottoman world, the waqf system was considered as the third
subsector of the financial system which carried out the health, education,
civic and social help functions, and religious and social work investments in
the country. As reported by Bulut (2021, p. 69), ban on luxurious consump­
tion and wasting, led to the channeling of resources to social welfare by
redistributing disposable incomes. Accordingly, waqf is among the leading
economic frameworks that prevent accumulated wealth from wastage or
remaining idle (Bulut, 2021).
Cash waqf funds may better be invested in diversified portfolios with proper
risk-​mitigation measures. The return thus generated would play a crucial role in
augmenting the incomes from immovable properties of awqāf. The investment
returns can be used for financing the entrepreneurs based on all valid modes like
qarḍ, with or without the feature of discretional donations by the loanees as in
the case of “Akhuwat”, trade-​and leased-​based and partnership modes, and
hybrid structures while ensuring that every financial contract has proper linkage
with the real sector activity or business based on Islamic law of contracts.

8.4 Waqf for Various Socioeconomic and Cultural Functions

An important finding on the conceptual ground is that society must be
made to adopt ethical and balanced approaches for earnings, spending, and
investments. Extreme poverty hinders the satisfaction of basic needs, prevents
exercising human rights, and limits the horizon of people’s participation in
society, as an individual or as a social group. It must be eliminated through
social finance with a focus on waqf. Financial inclusion in an economy
 Summary Recommendations for Realizing the Potential of Waqf 173

without social inclusion will not serve the problem of hunger and poverty on
a sustained basis.
The slogan of financial inclusion must, therefore, be added up with social
inclusion to realize the full, easy, and fair access to national resources and
activities; the maintenance of social relationships with family, friends, and
acquaintances, and the development of a sense of group belongingness (Aparicio,
2013). It would also involve activating “beyond market” institutions of mutual
help and sacrifice for cooperative risk and reward and wealth sharing; and
waqf is the most effective institution for realizing social inclusion.
Waqf can provide the best economic and social welfare services in present-​
day economies where capitalism has divided human beings into two extremes.
It is through uplifting the members of a society in the spiritual, material, and
social spheres. It is a unique part of the beyond market or third sector in
an Islamic economy that permeates all facets of human life catering to both
worldly as also spiritual needs of the human being.
Waqf benefited Muslims by increasing their socioeconomic status through
the development of education. Such was the case in the past and prospects
for the future are becoming brighter contemporarily (Omercic, 2018). As
reported by Kahf (2012), the main beneficiaries of waqf included educa­­
tion, healthcare, the poor, needy, orphans, and prisoners. Healthcare services
included the construction of hospitals, as well as spending on physicians,
apprentices, patients, and medicines. The social environment in a system
with the aforementioned facets brings a sense of community, fellowship, cap-
acity building, and inclusive human relationships.
The waqf revenues were spent to help people go to Makkah and Madinah
to perform pilgrimage and to assist girls getting married, and numerous other
philanthropic causes. Zubaidah Harun al-​Rashid gave all her property to build
a road from Baghdad to Makkah. It played a strategic role in consolidating
Caliphate affairs in Balkan Peninsula where it was used to build bridges between
people of different religious denominations (Çizakça, 2000; Omercic, 2018).
Linking the globally emerging concept of “CSR” to the waqf institutions
could be instrumental in enhancing socioeconomic welfare. The funds
allocated by the corporate bodies, particularly, by the banking and finance
companies may relate CSR funds to the waqf-​based community develop-
ment programs. As such, the concept of waqf might lead to more careful and
responsible handling and use of funds. As we have suggested in Chapter 7 on
legal and organizational frameworks, the pay/​packages/​remuneration of the
managers of waqf shall have to be regulated with a defined gap between the
lowest and the highest paid in any waqf.

8.4.1 Waqf for Education and Human Capacity Building

OIC member countries’ aspiration to attain the status of a high-​ income

developed nation is very much dependent on an innovation-​based economy
founded on high-​level education, knowledge, and creativity. However, due to
budgetary restraints, a very meager part of GDP in countries like Pakistan is
174 Summary Recommendations for Realizing the Potential of Waqf

spent on education. Technical, higher, and innovative education is particu-

larly affected by financial restraints.
Sustainable funding for higher education requires alternative funding
sources other than public/​government funding. The institution of awqāf/​
endowments has the potential to be that alternative source. Among the alter-
native resources, the possible waqf funds could fill the gap while keeping the
status of universities as knowledge centers, not corporate entities maximizing
their own benefits under the so-​called trusts as of now.
It would require incentivizing the creation of waqf funds, as well as encour-
aging contributions to higher education, for example, through the provision of
matching grants for HLIs during the initial fund-​raising period. Of course, to
successfully develop and implement the waqf system for higher and technical
education and capacity building, political will, qualified people, and appropriate
policies are prerequisites. The parliament, Ministry of Law, the Ministry of
Education, and the provincial authorities need to develop waqf for this purpose.

8.5 Awqāf as Financial Intermediaries –​Promoting Entrepreneurship

Another major finding of this research project is the functioning of awqāf
as financial intermediaries. In the past, the waqf institutions financed the
households and merchants. The income thus earned was used to provide
public services like soup kitchens for the poor, inns for travelers, water
fountains, places for worship, educational services, and other basic infra-
structural facilities (Alias, 2012). There is evidence that in addition to the use
of the awqāf system and the waqf funds for health and education fields, waqf
funds were used in the establishment of cooperative housing, industrial com-
panies, libraries, laboratories, and research centers. From this perspective,
waqf can be a good vehicle for promoting entrepreneurship and the devel-
opment of business and production sectors in pursuit of general well-​being.
It thus has a direct effect on the promotion of economic growth and gross
domestic product of the country.
In the “beyond market” sector, social entrepreneurship, which comprises
both nonprofit and for-​profit enterprises, is one of the major forms of operations.
Social enterprises or organizations apply market-​based business approaches
to serve social needs and ensure economic sustainability. A social enterprise/​
business is a “cause-​driven” entrepreneurship that applies commercial strat-
egies to maximize improvements in human well-​being rather than maximizing
earnings (Huybrechts & Nicholls, 2012). The main philosophy of social entre­
preneurship may be interpreted as running any for-​profit or nonprofit organiza-
tion to achieve several social-​cum-​philanthropic goals by applying market-​based
principles. It is based on the principle that can be described as “doing charity
by doing trade” rather than “doing charity while doing trade” (Molla & Alam,
2013). Such social enterprises are business-​like operations but not for business.
Entrepreneurship from the Islamic perspective is based on divine ethics or
Islamic etiquette to best serve the cause of mankind. The motivating factor for
these entrepreneurs is the well-​being of mankind and pleasing Allah SWT. Such
 Summary Recommendations for Realizing the Potential of Waqf 175

an approach leads to community well-​being through an Islamic value-​centric

approach. The best tool for such a socioeconomic system is waqf which has to
be developed and promoted according to its essential features and principles.
Similar to the motives of social enterprises/​businesses, entrepreneurship in
Islamic perspective places the community as the primary stakeholder in the
output of any entrepreneurial action (Azid, Asutay, & Burki, 2007).
All banks can make a joint waqf, or many such waqfs, each for different
social and economic activities like education and capacity building, providing
renewable energy, or affording abode, and financing the entrepreneurs. It was
suggested in the FGM held at Karachi that the Pakistan Banks’ Association
(PBA) could play a role by establishing awqāf by different banks or by the PBA
with financing from different banks for various socioeconomic activities. “In
some countries, many companies, Islamic banks, and financial institutions
have earmarked certain margins in their profit for different waqfs. In their
AGM, our banks may also get approval and create liquid waqfs as part of
their TORs”, suggested a former central banker participating in the FGM,
Karachi. The banks’ clients both on assets and deposits sides may also be
encouraged to contribute by way of liquid endowments for such awqāf. The
State Bank of Pakistan has to ensure, as the regulator of the banking com-
panies, that the banks’ CSR money is integrated with the waqf system to
realize the socioeconomic objectives.
The proceeds of Charity Accounts with Islamic banking institutions (IBIs)
can also be allocated for different waqf funds to be spent for any welfare activ-
ities. Meezan Bank already has such three funds that currently are termed as
“trusts” due to some legal complications; these are: (1) for staff, wherein
Meezan bank adds an equivalent amount to the employees’ contribution;
(2) Meezan Foundation wherein Meezan Bank added Rs 200 million –​each
year they make Rs. 100 million (contribution); and (3) Ehsan Trust. Once
the new waqf law for facilitating awqāf is provided, such trusts could be
registered under waqf law that would create a sense of sanctity for doing
good with people with the intention of pleasing Allah SWT.

8.5.1 Developing a Cash Waqf Financing Model

Lack of finance and avenues for capacity building for the younger popu-
lation are the major causes of low levels of entrepreneurship in countries
like Pakistan (of course, with some other infrastructure and policy-​related
factors) (Haneef et al., 2014). The improved capacity building and health
infrastructure developed with financing from the cash awqāf can enhance
the income-​ earning potential of waqf beneficiaries. Developing the cash
waqf financing model would improve the financial services for micro and
medium level entrepreneurs. Based on such financial infrastructure the
micro-​level businesses and production activities would overcome their finan-
cial challenges and obligation in business and commerce (Lahsasna, 2010).
Production of necessary goods and services at the most affordable prices
is the main indicator of any welfare state. Financing small farms, micro
176 Summary Recommendations for Realizing the Potential of Waqf

businesses, and innovative ventures leading to the production of goods and

services for human use could be a game-​changer in import substitution and
enhancing export proceeds. Cash waqf funds can play a vital role in this
direction. An organized waqf system supported by information technology
and compatible with other programs can be expected to serve as an add-
itional vehicle of fund mobilization to support and significantly contribute
to government economic development programs, particularly the programs
for poverty reduction and comprehensive human development (IWG, 2018).
Income/​employment-​generating projects, medical facilities, and infrastruc-
ture projects are essential in alleviating poverty. In this case, waqf certificates
can be helpful in financing primary and secondary poverty-​ alleviating
projects. The idea is that any “Waqf Administration Body” issues waqf
certificates of different denominations and puts them in the market for sale.
Individuals and institutions buy them. The waqf proceeds are then used to
establish the targeted poverty alleviation projects.” This idea was proposed
by Islamic Economist Prof. Dr. Abul Hasan M. Sadeq in his paper captioned,
“Waqf, Perpetual Charity and Poverty Alleviation” in July 2000.
Waqf-​based Islamic Microfinance Initiative (MFI) is widely acclaimed as
a new approach to alleviate poverty and bring about development. So waqf-​
based Islamic MFI should be the future policy agenda in all OIC member
countries (Ahmed, 2007). If we utilize waqf to finance MFI operations, it can
reduce financing costs and improve the viability of these institutions.

8.6 Waqf as an Institution of Public Policy

This research project also found that waqf can serve as an institution of
public policy. It played role in the building of and preserving the continuity
of almshouses, reservoirs, fountains, roads, bridges, highway inns, harbors,
libraries, lighthouses, mosques, schools, sidewalks, soup houses, waterways,
weirs, etc. This system had many fringe benefits as well –​it ensured the pre-
vention of violations of property rights against potential government and
state officials, in the preservation of rich Islamic architectural and cultural
heritage, and prevented the breakup of land due to inheritance law (Bulut &
Korkut, 2016). Waqf can also be used for providing pensions for the elderly
and disabled, the establishment of basic social security, and mutual indemni-
fication systems (takaful).
Oubdi and Raghibi (2018) contend that waqf ṣukūk provide an
Islamic solution for public finance deficits. Waqf played a tremendous role
throughout the history of Muslim civilization. It’s time that waqf should go
through innovative processes to maintain its viable role within Muslim soci-
eties. Indonesia and some other nations have adopted innovative ideas to
issue “Cash waqf Linked Sukuk” (CWLS) to encourage social investments by
the rich. It has been found that CWLS had a significant impact on the socio-
economic development of Indonesia. Hence, ṣukūk are suitable instruments
that could enhance the role of waqf and make it a common and familiar
 Summary Recommendations for Realizing the Potential of Waqf 177

Figure 8.1 Structure of Waqf Ṣukūk Operation.

Source: Oubdi and Raghibi (2018).

tool for Muslims who seek divine blessing and mercy. It combines the flexi-
bility of ṣukūk and the sustainability of waqf. Any other tool like qard al
hassan/​interest-​free loans can be used to merge other forms of financing in
the case of big projects. For that, takaful services can also be availed. Oubdi
and Raghibi (2018) suggested a sukuk structure by which public authorities
could raise funds for socioeconomic projects (Figure 8.1).

8.7 Management and Regulation of Waqfs

This research has specific findings regarding management, governance, and
regulation of awqāf enabling the awqāf system to play effective roles in socio-
economic development. As we have discussed in detail in Chapter 6, good
governance is the most crucial success factor for waqfs, and the nāzir of a
waqf occupies a focal position in this context. In recent decades, of course,
the board of trustees or the waqf board members also share many super-
visory responsibilities. Waqf being a social welfare and divine institution,
its management must revolve around efficiency, effectiveness, quality, and
accountability not only to the donors and the intended beneficiaries but also
to Allah SWT.
The waqf management must avoid bad governance and corruption and
maintain an image of serving the social cause. For sustainability as a system
of social welfare, it is crucial to maintain integrity and acceptability among
potential donors and the masses in general. It would also require close
178 Summary Recommendations for Realizing the Potential of Waqf

collaboration between the waqf management, supervisors, regulators, and

auditors. Concerted efforts are needed to develop, implement, monitor, and
enforce supervisory tools and policies on the optimal systems of management
and governance. The Waqf Board at the country level, as suggested, will need
to introduce a specific code of conduct for all personnel involved in waqf
operations, and other stakeholders of waqf.
Any waqf property must be used exclusively for the purpose for which
it was endowed. The purpose, revenue distribution, management struc-
ture, supervisory authority, and all other stipulations by the founders are
classified as the permanence of stipulations (Kahf, 2012a). Any government,
management, supervisory authority, or any court has no right to change the
conditions as provided in the waqf deed. Nationalization or taking into the
State’s control and management of awqāf by the bureaucrats is the recipe
for bad governance and total loss of integrity as a sacred institution of social
welfare. However, in the case a waqf becomes infeasible over time for any
reason, then istibdāl –​change of the waqf property –​is an option. In case
istibdāl is not feasible, the property, product, or income from the waqf prop-
erty has to be spent on a closer available avenue. If such avenues are not
available, the income and produce could be spent on the poor and needy as
by-​default beneficiaries of waqf.
There is a need to find an appropriate set of tools for the standardized
supervision of waqfs. These standards require a much deeper understanding
of the workings of institutions based on belief. So, every waqf will have its
condition and background with which it would be dealt with. AAOIFI has
provided the best such benchmarks for waqf as also Sharī’ah compliant and
feasible contract structures in the form of Sharī’ah, corporate, and ethics
standards.
The Waqf Core Principles (IWGWCPs, 2018) have been formulated to
provide a brief description of the position and roles of the waqf and manage-
ment and supervisory system in the economic development programs. They
address various vital aspects like the waqf board’s formation and its respon-
sibilities as well as strategies. As the WCPs are developed for Indonesia,
and the IsDB’s Institute (formerly known as IRTI) document, these are con-
text specific; so other countries may like to develop their own set of oper-
ational principles by getting guidance from AAOIFI’s guidelines and IRTI’s
document.

8.7.1 Integrating Zakāh and Waqf for Rural and Urban Support Programs

While the Government might be making some efforts to alleviate poverty,

it never took serious note of the institutions of Zakāh as a policy tool for
fighting poverty as a national strategy. Waqf has also been the least explored
institution in Pakistan’s policy framework. As a lot of work has already
been initiated in many Islamic countries as we discussed in various chapters,
efforts must be initiated forthwith for the revival of waqf and integration of
 Summary Recommendations for Realizing the Potential of Waqf 179

the zakāh system with awqāf. The objective must be poverty alleviation with
socioeconomic development for enhancing social inclusion in society. In the
first stage, extreme poverty could be removed from society through a joint
operation of waqf and zakāh. It should lead to financial and social inclusion
in the latter stage.

8.8 Recommendations and Concluding Remarks

In any ethics-​based society, justice must be provided to all its members.
Efficiency and profit maximization must be associated with the fulfillment
of the basic needs of all, justice, common welfare, and sustainability. The
treasures of a few in the current capitalistic paradigm have marginalized and
impoverished the masses.
Greed, extravagance, and pride in one’s richness in societies with a cap-
italistic mindset needed to be replaced with the welfare of all human beings
through cooperation, responsible spending, benevolence, and sacrifice for
others. All these features constitute the cornerstone of Islam’s socioeconomic
system and social finance. In Islamic history, awqāf played a central role
in providing social goods, including education and civic amenities. Çizakça
(1998) indicates that waqf can not only reduce public expenditures but at the
same time cater to the social needs of a country. It can play a role in achieving
the SDGs about the welfare of the people at large, and realizing maqāsid al
Sharī’ah (Abdullah, 2018).
The inability of the state institutions in providing necessary civic, health,
and education facilities to the public is causing serious harm to the balance of
society that could be devastating in the long run to all groups also including
the rich. Development of waqf system on the emerging trends for broad
based social and economic development would reduce the burden on the
governments which might be facing huge budgetary and trade deficits as in
the case of Pakistan. Therefore, waqf-​related legislation must not only make
philanthropy easy but also involve all members of society at micro level by
way of wealth sharing for financial and social inclusion.
It implies that in economies like that of Pakistan, the system of awqāf must
be revived and promoted to play its role in a broader perspective as discussed
in the book. For shrines and masque-​based waqfs also, some innovative
projects must be initiated. These may include Geo Mapping and digitaliza-
tion of all waqf properties under shrines and masques, restoration of his-
torical waqf properties, installation of digital cash boxes, and development
of the welfare schemes. For the second stream of liquid awqāf and social
finance, the waqf system has to be revived and promoted as suggested by the
jurists for present-​day Islamic societies.
The overseas may be legally allowed to create a waqf in their native coun-
tries through Roshan Digital Account, as recently allowed in Pakistan to
purchase a house while sitting abroad. It can be done by adding a provision
under section 42 of the Companies Act, 2017. Similarly, SECP may set up a
180 Summary Recommendations for Realizing the Potential of Waqf

facilitation desk for creating cash and ṣukūk waqfs, and work on providing
facilitation for waqf ṣukūk to be taken by the rich and philanthropists with
a country and abroad.
Final recommendations for reviving the institutions of waqf in countries
like Pakistan with its expanded (socioeconomic) role (with some additions to
what was suggested by Khan et al., 2019):

(a) The ultimate objective of the waqf system must be helping society in the
upbringing and grooming of downtrodden and poor people of the com-
munity to contribute positively to society.
(b) The waqf-​related framework must be developed by such a team that
is well aware of the waqf rules in its historical perspective as well as
the facets of socioeconomic development for balanced growth. They
must also have some experience in philanthropic work and fulfill the
requirements of morality and piety.
(c) The Sharī’ah scholars, researchers, academicians, and opinion makers in
the electronic, social, and print media should highlight the need, signifi-
cance, and benefits of waqf for community development, shared growth,
and common welfare of the people.
(d) Awareness may be created among the public regarding the need for and
the role of waqf-​based endowments, preparation of the waqf deeds with
operational details according to the needs of intended groups in the
community so that the system could be improved to play its historical
role with further reforms and innovations.
(e) There should be an anti-​encroachment mechanism in the waqf organiza-
tion to save the waqf properties from illegal occupation.
(f) The use of fintech for cash donations, financing, and other financial
matters is needed. The installation of Cash Deposit Machines (CDMs)
for cash deposits replacing traditional manual cash boxes for waqf
donations will increase the trust of the people.
(g) In the case of shrines based awqāf, the teachings of the saints about reli-
gious harmony, interfaith peace, religious pluralism, and peace should
be assimilated for the creation of a tolerant society.
(h) The commencement of any shrine based microfinance program, for
example, “Ali Hajveri Microfinance Waqf” (AHMW) for entrepreneurs
from the rural and urban poor, with the technical help of “Akhuwat
Islamic Microfinance” is the need of the time. The devotees of the Shrine
of Ali Hajveri (R) would be eager to contribute to the noble cause.
(i) There should be human resource development training on the use of
Islamic fintech with a focus on the latest technical expertise involving
e-​platform for the collection and disbursement of funds, artificial intelli-
gence, asset management, and other relevant fields
(j) The waqf board at the central levels, and the provincial awqāf
organizations should overcome the issue of trust deficit and improve
 Summary Recommendations for Realizing the Potential of Waqf 181

image for gaining more trust of the people regarding the handling and
usefulness of awqāf in the country.
(k) Ministries of planning, development and social initiatives may have a
special division for preparing and implementing plans for community
development through awqāf. Ministry of Religious Affairs, in collabor-
ation with the Ministry of Law, may prepare conceptual, organizational,
legal, and operational frameworks for approval by the State institutions
and implementation by different ministries/​institutions including also
planning commission, central bank/​ monetary authorities and banks,
NBFIs’ entities working for poverty alleviation, and the corporate
entities through the Securities Commission.
(l) The frameworks as suggested in the book may comprise two main
segregated tiers, namely: (i) awqāf for masājid, attached madāris,
shrines, and cemeteries, and (ii) for social and economic avenues like
education, health, civic facilities, and financing micro enterprises and
SMEs for promoting entrepreneurship. It must be free from sectarian
issues and aspects to avoid any confusion that may harm the integrity of
this sacred social system.
(m) Provision may be made in the framework for establishing and developing
special waqfs to provide benefits to deserving groups like the extremely
poor (to eliminate hunger), shelterless, widows, orphans, and the aged
who might not get proper care and support.
(n) It is crucial to note in the context of the orphans and the old that might
be in the problem, the Islamic paradigm does not deem it appropriate to
establish special orphan and old-​age houses because in such a situation
they lose the family support that an Islamic society is supposed to pro-
vide. (This aspect was particularly highlighted by the renowned scholar
Prof. Dr. Anis Ahmad during the interview with him for the research
project.) Rather, the kin of the orphans, and the children of such old
people must be obliged to take care of them. Of course, the awqāf could
provide a stipend to such kin who are poor and unable to bear related
expenses.
(o) For facilitating cash waqfs, the framework may include a “Cash Waqf
Form” as suggested in the chapters on awqāf as financial intermediaries,
and the legal and organizational framework, to guide and facilitate the
contributors to indicate the purposes and the groups of beneficiaries of
the funds being endowed by them. The waqf creators may also be given
the option to indicate the investment options of the endowed money, the
return from which would be used for the given purpose.
(p) Regarding the cultural and social aspects, it is crucial to fund such
programs under awqāf so that the young generation is equipped with
insightful understandings of the sociocultural values of Islam with the
development of the intellect while avoiding the impurity of ideas and
intellectual dirt.
182 Summary Recommendations for Realizing the Potential of Waqf

(q) Education, knowledge creation, and capacity building are historically

the topmost objectives of awqāf. It is for all sorts of education, namely,
religious, scientific, technical, and social, as per widely accepted Islamic
norms. The current system of creating trusts for running universities and
professional education institutions may be changed to bring all such
trusts under the waqf framework. It can be provided, as in Türkiye, that
70% of students at such universities would be getting free education on a
need cum performance basis. It may also be provided that waqf manage-
ment would be separate from the management of the University/​training
institutions, or any other institution run by the waqf as per the respective
“Waqf Deed”.

8.8.1 Contribution of This Research

The research culminating to the Book has given a compact review of

contributions of waqfs in the past and a trend of awqāf and waqf-​like
institutions development. In other words, it has pointed out the growing
attention given to the third sector of the economy, that is, “beyond market”
economy. Some new categories of waqf and the relation of waqf institutions
to the banks and education sector have been presented as a globally accepted
juristic and practice related phenomenon. This research-​based project will
assist Islamic value-​centric entrepreneurs, regulatory authorities, investors,
and researchers to gain an overall insight into the potential of waqf as a
tool for rendering social welfare services and developing economies of OIC
member countries on a strong footing.
The suggested legal, organizational, and management frameworks would
enable the State institutions including the ministries of planning, develop-
ment, social initiatives, finance, religious affairs, law, lawmakers and judi-
ciary, and the central bank and the Securities Commissions to introduce and
implement the waqf system. It would enable individuals, corporate entities
and different institutions to establish awqāf to which the well-​to-​do persons
at micro level will also be contributing. The system could thus be evolved on
sustainable bases. Regulators of financial system may like to announce some
targets and/​or encouraging measures enabling the banking and other com-
panies to contribute to establishing awqāf for community development and
shared growth, as also desired in the UN’s SDGs.
The use of waqf or other social finance institutions for business entre-
preneurial financing has not been a priority area mainly due to the impact
of colonization and crony capitalism. Even at an academic level, there is a
lack of comprehensive studies in the case of the application of waqf as a
welfare institution in the context of Pakistan and many Islamic countries.
Researchers should focus on the issue to uphold the divine role of waqf in
poverty alleviation and peaceful co-​survival.
The findings of this book would be helpful in improving the management
of awqāf. The report recommends how the awqāf system can potentially
 Summary Recommendations for Realizing the Potential of Waqf 183

spearhead the initiative of Islamic charities in realizing the maqāsid-​oriented

SDGs among Muslim-​majority countries (Abdullah, 2018). As this study
focuses on accountability, which, among other things, encompasses
accounting and performance, the mutawallis are expected to improve their
accountability and transparency in administering waqf. This is crucial as the
demand for accountability and transparency has increased tremendously.
Thus, the waqf regulators might come together with state authorities to
improve waqf-​related accountability.

Notes
1 Namely (i) the Bill & Melinda Gates Foundation ($42.3 billion); (ii) Stichting
INGKA Foundation ($36.0 billion); (iii) Welcome Trust ($25.9 billion); (iv)
Howard Hughes Medical Institute ($16.9 billion); … . and (ix) William and Flora
Hewlett Foundation ($8.7 billion) (Omercic, 2018; p. 142).
2 https://​global​sada​qah.com/​edu-​sada​qah
3 To reach a higher level of piety, many Companions of the Prophet assigned several
portions of their properties as waqf. A few of them included a condition that a cer-
tain portion of their fruits and revenues must be assigned to their own children and
descendants and the remaining portion should be spent as waqf.
4 https://​iifa-​aifi.org/​wp-​cont​ent/​uplo​ads/​2021/​12/​Reso​luti​ons-​Reco​mmen​dati​ons-​
of-​the-​IIFA-​Offic​ial-​Edit​ion-​Oct-​2021.pdf
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Index

agency endowment 82 financing contracts 60

al-​khair 9, 21, 39, 44, 49, 59, 73, 94, firm behavior 74, 77
98, 99, 103
al-​khair ṣukūk 9, 39, 44, 73 gharar 27, 63, 90, 104, 169
al-​nahad 26
al-​waqf al nuqud 6 habus 12
animal fountains 34 hājiyyāt 12
artisan guild funds 55, 125 Haseki Sultan charitable complex 35
‘asb 13 hubous 24, 26
awqāf administrator 20, 97
awqāf funds 18, 62, 111, 165 ibādah 31, 39
‘ayn 13 ijārah 19, 57, 58, 60, 62
infāq 2, 5, 8, 11, 14, 20, 67, 75,
Bank of Awqāf 92 76, 156; infāq-​fi-​Sabeelillah 5;
barakah 10 sadaqah jāriyah 46; sadaqāt 5, 33, 52,
bathhouses 35 67, 71, 168
infāq-​fi-​Sabeelillah 5
cash boxes 145, 179, 180 infrastructural deficit 10, 14, 79
cash management 96, 101, 125, intellectual property 38, 41, 109,
126 163, 166
charitable institutions 145, 170 irsād 12, 155
common law 141, 143
consumer behavior 71, 77 janissary funds 55, 125
contributors 32, 99, 107, 181 jināyat 12
corporate awqāf 38, 44; Bank
of Awqaf 92; direct waqf 37; open madrasa 10, 54, 56
cash waqf 99; waqf community maqasid 87, 88, 179
bank 96 maqāṣid al sharī’ah 68, 85, 87;
ḍarūriyyāt 12; hājiyyāt 12; jināyat 12;
ḍarūriyyāt 12 maqasid 87, 88, 179; taḥsiniyyāt 12
devaluation risk 125 masjid 10, 12, 68, 87, 104, 167
direct waqf 37 mazār 10, 15, 167; sajjadah-​nashins
20
entrepreneurial finance 57, 64 micro and medium enterprises
(MMEs) 36; small and medium
famine relief centers 34 enterprises 26, 45, 60, 110; small
financial reporting 129, 130, 134 enterprises 17, 37, 51; social
financial stability 24, 61 enterprises 51, 52, 54, 73, 174, 175
 Index 207

mudarabah 32, 53, 81, 83, 94, 106, social entrepreneurship 52, 174; agency
108, 121, 172 endowment 82; artisan guild funds
mustahab 2 55, 125; janissary funds 55, 125;
muttaqi 5 public development bank 92; social
support system 78
nationalization 34, 40, 56, 82, 87, 88, social enterprises 51, 52, 54, 73, 174, 175
124, 147, 152, 178 social initiatives 5, 181, 182
nonbanking financial institutions 2, 3, social obligation 5, 12, 31, 89
53, 64, 72, 91, 94 social support system 78
non banking institutions 6, 45, 111 socioeconomic institution 56, 45
soup kitchens 25, 34, 174
open cash waqf 99 sunnah 9, 10, 20, 23, 24, 27, 85
operational framework 89, 181 syndicate finance 36

philanthropic waqf 14, 37, 140, taḥsiniyyāt 12

162 theory of Institutions 25
public baths 34 travelers’ inns 34, 64, 165
public development bank 92 Trust Companies Act 144
trust deficit 149, 180
Qādi 21, 61, 62, 118, 125, 127
qard hasan 9, 95 veterinary services 34

rationality 74 waqf-​ahlī 140

waqf al-​awāridh 140
sadaqah jāriyah 46 waqf ʿām 140
sadaqāt 5, 33, 52, 67, 71, 168 waqf community bank 96
sajjadah-​nashins 20 waqf deposit 36, 38, 39, 61, 97, 99–​101
salāt 10 waqf-​istithmārī 140
Sharīʿah-​compliant 53, 106, waqf khayrī 140
107 waqf mubāshar 140
small and medium enterprises 26, 45, waqf ṣukūk 78, 103, 106, 164, 166,
60, 110 176, 177, 180
small enterprises 17, 37, 51 World War I 33, 34