Background on Awqaf
Awqaf (also spelled awkaf, singular waqf/wakf) is an Arabic word meaning assets that are donated, bequeathed, or purchased for being held in perpetual trust for general or specific charitable causes that are socially beneficial. In many ways, the concept of waqf is similar to the Western concept of endowment. The strong emphasis placed on the perpetuity of awqaf has led, over the years, to a considerable accumulation of societal wealth, such that awqaf has become an important economic sector dedicated to the improvement of the socio-economic welfare in Member and Non-Member Countries of IsDB with Muslim communities/populations.
Some of the causes supported through awqaf include poverty alleviation programs, disaster relief, free health services, religious and contemporary education, heritage, culture, and environment. Thus, in addition to being a religiously significant institution, the idea underlying awqaf can be of significance to the larger development community.
Indeed, historically, awqaf have played a major role in providing sustainable finance for many social services, including but not limited to education and health. In fact, it has been estimated that during the Umayyad and Abbasid Caliphates, more than 60 percent of public services were carried out via the institution of waqf. First, awqaf financed the basic social services (and infrastructure) of education and health as well as sustenance or social security for the needy. Second, beyond these basic needs, awqaf played an important role in the development of cultural and scientific life as they financed the production of books, the construction of libraries, as well as supporting scholars of various religious and secular sciences.
Operationalization of Awqaf Support within IsDB
APIF represents IsDB’s attempt to operationalize its support to the awqaf Sector. In fact, APIF promotes awqaf as a social-finance-based instrument of development while observing relevant principles of jurisprudence. With its mandate to finance the establishment and/or development of Islamic real estate endowments, APIF is a unique fund among MDBs with a strong focus on long-term, intergenerational financial sustainability.
APIF operates by financing (via Sharia-compliant modes of financing) the construction or purchase of physical real estate assets that would generate a return. These returns will then be used to make repayments to the fund, with residual amounts used to support the activities of the beneficiary during the repayment period. After this period, the asset is registered as a waqf and all income generated accrues to the beneficiary, helping to provide a sustainable source of income for the beneficiary’s socially desirable activities.
As a mechanism for operationalizing Awqaf to achieve their development impact, APIF has succeeded in providing a proof of concept, which is now ready to be scaled-up. Indeed, with a total paid-up capital of US$ 87.7million supplemented by a line of financing from IsDB of US$100 million, APIF’s portfolio includes 54 projects in 29 Member Countries (MCs) and Non-Member Countries (NMCs) of IsDB worth a total of US$ 1.19 Billion. These projects have proven that awqaf in general and the APIF model in particular can play a very significant development role.