Author: Mohamed Hamza Ghaouri, Intern at FINTERRA
Waqf (endowment) is a special type of philanthropic act in perpetuity. It consists of donating a fixed asset that can produce a financial return or provide a benefit. The income or benefit generated serves beneficiaries as outlined by the Waqf creator (i.e., Waqif). People who give Waqf usually donate a building, land or cash with no intention of getting back the value gained from them. However, there are no restrictions on non-Muslims contributing to the Waqf. The donor can participate in assisting society, while the benefits of the Waqf assets can be enjoyed by both Muslims and non-Muslims.
The permissibility of devoting an endowment to non-Muslims is based on the case when Safiyyah, mother of the believers, (may Allah be pleased with her) has dedicated an endowment fund to her Jewish brother. An endowment can function as a social institution that benefits both Muslims and non-Muslims. This is the case when the endowment is an educational institution that welcomes Muslim and non-Muslim children. Unlike Zakat, the Waqf system is not only a Islamic system but it has also appeared in other non-Muslim societies. We can take as example Harvard’s endowment.
Harvard’s endowment is a dedicated and permanent source of funding that maintains the teaching and research mission of the University. The endowment’s returns enabled pioneering financial assistance programs, leading discoveries in scientific research, and hundreds of professorships across a wide range of academic fields. Each year, a portion of the endowment is paid as an annual distribution to support the university’s budget, while any excess of this annual distribution is kept so that it can grow and support future generations. The endowment remains the most important source of income supporting the University’s budget. In 2020, the endowment distributed $ 2 billion, contributing more than a third (37%) of Harvard’s total operating revenue that year (Fig).
Regardless of religion, Waqf has great potential to support societies around the world. It is seen as an instrument for establishing well-being of individuals and the planet. In fact, as discussed in the previous blog, Waqf’s goals are aligned with the SDGs. However, the employment of Waqf could be maximised in a broader space, so that we can fight and eliminate poverty, reduce inequalities and achieve the SDGs. SDGs targeted by waqf are:
- No poverty (goal 1),
- Good health and well-being (goal 3),
- Quality education (4),
- Affordable and clean energy (goal 7),
- Decent work and economic growth (goal 8) and industry,
- Innovation and infrastructure (goal 9).
It should be noted that Waqf practices in Muslim minority communities (India, Philippines, Singapore, Thailand, etc) are very dynamic in responding to community needs. For this reason, we can consider Waqf as a hidden treasure for non-Muslims.
Waqf can be used as an Islamic social finance investment which, apart from its social involvement and alignment with the SDGs, can generate profit for investors. The main restriction of Cash-Waqf investment strategies is the preservation of capital. This restriction may attract non-Muslim ethical investors aiming to ensure sustainability. Similar to philanthropy, it can be argued that Waqf is linked to the philanthropic end of Sustainable investing (ESG). In fact, ESG investing refers to the consideration of environmental, social and governance factors in the investment decision-making process with the intention of improving performance and long-term competitiveness.
Waqf focuses on projects aiming at building infrastructure, alleviating poverty, promoting inclusive economic growth, achieving social welfare and economic empowerment by enhancing skills and providing decent work for the poor and to the needy. In this case, Waqf could help support social causes and attract ESG investors (looking to invest for social reasons) and / or Islamic investors (looking for Sharia compliant investments).
The environmental component is related to the sustainability issues with life on earth or underwater. This is one of the main concerns of sustainable investors that can be targeted through Waqf. As a result, there have been calls for the establishment of Awqaf dedicated to reforestation and to address other environmental challenges (green Awqaf). A common practice in the Islamic world is the agricultural Waqf Fund Which is a development of agricultural lands under Waqf. In addition, Waqf may also be oriented towards the conservation and sustainable use of marine resources, the protection and sustainable use of terrestrial ecosystems, forest management, the fight against desertification, land degradation and the preservation of biodiversity.
More information regarding the use of Waqf for environmental purposes can be found in the FINTERRA Global Plantation.
Mohamed Hamza Ghaouri
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