Islamic Finance 101: Types of Waqf
Waqf is an institution of charity which provides a never-ending flow of benefits to a specific group of beneficiaries or the community. Because of this, Waqf is sometimes called Sadaqah Jariyah, which refers to the fact that even after someone has passed away, he or she will continue to be rewarded from the Waqf contribution. A traditional example of a Waqf is donating a plot of land for the development of a mosque. However, Waqf comes in many more forms, as listed below:
1. Direct Waqf — The Waqf donated may be directly utilised to fulfil the need of the community, such as a building donated to become a mosque or educational institution.
2. Investment Waqf — In this case, the donor will make a careful investment decision so that the earnings from the donations are maximised and later used to fulfil the needs of the community.
3. Religious Waqf — Awqaf like mosques and religious schools are confined to providing revenues to be spent on their development and maintenance, especially in countries that do not provide support for religious activities. A smaller part of the total Waqf resources is now available for financing the needs of the community.
4. Philanthropic Waqf — This type of Waqf is also called Waqf Khayri. The objective of this Waqf is to help in alleviating poverty. Any of the following areas, when used for the greater good of the people, can be accepted as a philanthropic Waqf, including education, healthcare, elderly care, environmental protection and microfinance.
5. Family Waqf — Family Waqf is defined as an Islamic charitable endowment dedicated to the family member of the waqif or founder. From the 17th to the 19th century, this was the most common form of Waqf in the Middle East. If there aren’t any family members, the revenues and benefits of the Waqf are given to the poor.
6. Physical Waqf — This Waqf is typically in the form of real estates, where it is endowed, invested and the profits are later used to help the community. In some cases, the real estate itself is used directly by the beneficiaries.
7. Cash Waqf — Like any other Waqf, cash Waqf aims to support the public by establishing Waqf using money. Even during the Ottoman empire, cash Waqf was used to finance entrepreneurs for their businesses, and then the return was used for public services such as hospitalization, education, infrastructure, etc. Cash Waqf played an important role in the economy but, due to mismanagement, colonisation and secularism, the utilization of cash Waqf faded away at the end of the 19th century. Recent years have seen an improvement in reviving the Waqf institution and the creation of cash Waqf as an alternative way to solve liquidity and mismanagement issues.
8. Corporate Waqf — Corporate Waqf is often viewed as a part of cash Waqf, although it is established as an independent Waqf concept. Corporate Waqf is a contemporary type of Waqf where Waqf are donated in the form of corporate shares that are issued and managed by a corporate body such as Islamic banks.
Although, most people perceive Waqf to be an immovable property or land donated for religious purposes, it is worth noting that this is a misconception. More and more people today are learning about the more dynamic types of Waqf like cash Waqf, as well as platforms like WAQF Chain, which is a blockchain-based platform reviving Waqf for the betterment of humankind. A final parting point is that Waqf can be done by anyone regardless of their status or position in society.
