Paper Title: Re-Examination of Selected Waqf and Western University Endowments

Author:        Adam Abdullah

Publisher:    Journal of King Abdul Aziz University: Islamic Economics, 36 (1), 3 – 26.

This paper discusses the concept of Waqf and university endowments. The author highlights that contemporary university endowments take their inspiration from the concept of Waqf.

In Islamic economics, Waqf is a perpetual endowment of property or asset dedicated permanently by a Waqif for some specific beneficiaries. Even Western scholars like Benedikt Koehler had acknowledged that the Western seats of higher learning like Oxford and Cambridge had taken inspiration from Islamic endowment structure of Waqf. 

The author notes that the oldest university established as a Waqf is Zaytuna University, which was established as a Madrasah in the year 737 (becoming a public university in 1956). It was a highly successful academic institution, and Ibn Khuldun was one of its more notable students.

Other Waqf institutions followed, such as the University of Al-Qarawiyyin in Fez, Morocco that was established in 859, and of course Al-Azhar University in Cairo, Egypt (in 970), and these three universities still exist today.

In the paper, the author highlights that contemporary university endowments in West are managed professionally, actively and with a motive to enhance the sustainability of funds for future needs through generating investment incomes.

Unlike in past, the institution of Waqf is now either replaced by the structure of trust or the existing Awqaf are not managed professionally and actively. It is indeed necessary to achieve preservation. But, the aim of preservation could still be achieved through effective governance, risk management and strategic allocation of funds in low-risk investments to generate stable stream of returns.

The author notes that Western university endowments engage professional investment management committees and incorporate effective governance and risk management frameworks to achieve the goal of sustainability and growth of endowment funds.

Universities in Muslim countries also need to explore ways of engaging private Mutawalli in managing Waqf investments in a professional way under Shari’ah framework along with incorporating effective governance and risk management framework. This can allow growth of funds as well as meet the growing future needs of universities which government grants alone cannot simply continue to fund sustainably.

Appreciably, there is already realization in countries like Malaysia to revitalize Waqf and enhance its effectiveness. There are examples of private Mutawalli and professional investment management to accelerate the growth of funds overtime in a sound governance and risk management framework. Doing this can enable better utilization of the institution of Waqf and make it a more attractive way of managing endowments as compared to trust.

Waqf, being an Islamic social finance institution, would have more support for funding from general public as it would avoid Shari’ah non-compliant investments while also ensuring that the Waqf remains perpetual and its specified beneficial use should not change overtime on arbitrary basis.

Therefore, by incorporating professional management and investment functionality, Waqf can become a dynamic and sustainable institution to fund the needs for which it is devised.

Waqf is an important institution to de-financialize the economy, reduce wealth concentration, fund social needs having positive externalities and reduce the burden of government to enhance tax collection. This, in turn, also reduces the burden of taxation on people if the resourceful people come forward and establish Waqf to share their excess endowments in a sustainable and perpetual way with wider segments of the society now and in future. This can also enhance distributive justice both now and in future.