Awakening the Waqaf

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Islamic endowments represent a sleeping giant within the Islamic finance sector and the broader Islamic economy

Whilst there are no accurate figures for the value of assets controlled by Awqaf across the globe, it is believed Islamic endowments, or Waqf, amount to tens of billions of dollars, donated either in cash, or in the form of other assets such as land, for charitable purposes.

Historically, these endowments have been minimally managed, with money tied up in fixed assets, such as real estate, earning low or zero returns, or left to languish in bank accounts, the value of which are gradually eroded by inflation. But as the world continues to struggle with the aftermath of the global financial crisis, it is legitimate to ask why Awqafs are not more proactive in managing their assets for the long-term benefit of society rather than being utilised in traditional ways, such as building mosques?

Waqf extend globally in the form of either large, private Waqf, or government managed Waqf. In India, for example, there are about 500,000 registered Waqfs, with 600,000 acres of land and $19.3 billion (Dh70.88 billion) in book value, according to India’s Central Waqf Council. Elsewhere large Waqf infrastructures exist in every major Muslim country, including Turkey, Indonesia, Egypt, Pakistan and the GCC countries. And there are smaller Waqf in countries with Muslim minorities, such as South Africa, New Zealand and the United States.

The management of this large but highly fragmented segment of Islamic finance has been often criticised as ineffective. The vast majority of Waqf have a religious and spiritual focus, rather than being operated along commercial lines that could generate recurring assets from Sharia compliant investments. And, whilst there can be no doubt that Waqf have helped millions of people, the lack of financial literacy among those who administer them results in lost opportunities to create sustainable revenues.

Financial sustainability
The first Waqf were created centuries ago as a form of cooperative, or mutual, social fund, providing community support by building schools and hospitals, and extending a helping hand to those in need. Over time, most Waqf have been absorbed into the Islamic affairs universe, shifting the focus from social welfare to religious projects, such as building mosques. The global financial crisis, however, has led to questions being asked about the sustainability of these types of investments, with an increasing focus on Awqafs’ duty to maximise the value of the assets at their disposal.

Financial sustainability is important for Waqf. The recession, that followed the global financial crisis, led to a drop in overall donations, which resulted in hardship for many who depended on the support of a Waqf. As is often the case, when funding dries up, the impact was felt most by those least able to help themselves. This places a special responsibility on Awqaf to ensure the Waqf they manage are protected from the winds that buffet the global financial system.

Waqf represent a sleeping giant, within the Islamic finance sector and the broader Islamic economy. If they were managed and invested properly, billions of dollars, in recurring, sustainable income, could be generated, ensuring projects are more self-financing and reducing the Awqafs’ reliance on donations and international aid. And donors would be assured their generosity not only delivers benefits today but also for many generations to come.

A prime example of this is the Family Village, a modern orphanage administered by Dubai’s Awqaf and Minors Affairs Foundation. Paid for by donations, the running costs are met by the recurring income from investments. Another innovative example is the Dubai government’s Salma initiative managed by the Awqaf, Minors Affairs Foundation in Dubai and Noor Endowments — a body created to support the development of Awqaf all over the world — in collaboration with the UN Food Programme.

Salma is a Waqf aimed at making emergency food-related donations more accessible and efficient. It achieves this through the provision of long-life meals of 100 per cent certified halal food to victims of man-made or natural disasters.

How to unlock the potential of Awqaf to ensure their long-term sustainability will be discussed at the forthcoming Global Islamic Economy Summit, to be held in Dubai from October 5-6. It is the latest initiative supporting the declaration, by His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, that Dubai would take the lead in developing the Islamic economy. For those working in Awqafs the summit provides a timely opportunity to exchange ideas and knowledge on the many innovative ways they can manage and grow sustainable assets for the benefit of the communities they serve.

As with many other aspects of the Islamic economy, the key to putting Waqf to work efficiently lies with changing people’s perceptions, in this instance about how best to help the under privileged in society. As well as our spiritual and religious responsibilities, Muslims have a duty to ensure the social welfare of others.

I am not proposing that people stop donating money to build mosques in favour of orphanages, or schools, or hospitals. But what if a proportion of the donation was set aside and invested wisely for the future? Effective asset management, through sound, Sharia compliant financial practices, is a liberating concept which offers Awqaf a more impactful means of improving people’s lives, and an alternative to letting money devalue while gathering dust in a bank vault, or locked up in bricks and mortar.

— Abdulla Mohammed Al Awar is the CEO, Dubai Islamic Economy Development Centre

source: http://gulfnews.com/business/sectors/banking/awakening-the-awqaf-1.1595663

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