Endowments Foster Strength

By Kadir, K. Rizwan | Islamic Horizons, March/April 2012 | Go to article overview

Endowments Foster Strength


Kadir, K. Rizwan, Islamic Horizons


Can Muslim Americans revive and enliven the institution of waqf?

CONQUERORS HAVE A WAY OF banishing even the best of works of the conquered. The British, after establishing themselves in the South Asian subcontinent in the 19th century, made two major changes to the educational system with long-lasting implications for Muslims. First, Arabic and Farsi were eliminated from the public curriculum in favor of English - causing an educated class to become illiterate overnight. Then, equally devastating was the takeover of the waqfs - lands endowed to Muslim educational institutions - starving them of their revenue streams.

Meanwhile, the U.S. adopted the Land Grant Act of 1 862 that endowed land grants to small colleges or established them with the grants. Today, some of our best public universities owe their existence and success to this piece of legislation. For example, the University of Texas system - with one of the largest endowments - was given tracts of land on which oil was later discovered, changing the system's fortune.

So, while one civilization floundered, another flourished, with endowments playing a critical role in each instance. The history of waqf (plural: awqaf) relates to the time of the Prophet Muhammad. The first waqf, the Quba Mosque in Madinah, built upon Prophet Muhammad's arrival in 622 CE, stands on the same lot with a new and enlarged structure. Shaykh Hamza Yusuf has noted that the 10 Companions who were promised Paradise are all said to have given endowments from their property.

Within the first three centuries of Islam (6th - 9th centuries CE), Muslim jurists developed the legal institution of the waqf as an unincorporated charitable trust. In classical Muslim societies, awqaf typically provided public goods, such as education, healthcare, water supply and highway facilities, and were considered a voluntary-based religious and charitable provision.

For centuries, a wqaf provided the only regular financial support for the madrasas - providers of higher education, mosques and bridges. There is growing academic evidence that the trust law developed in England at the time of the Crusades during the 12th and 13th centuries CE was introduced by Crusaders who may have been influenced by the waqfinstitutions they witnessed in the Middle East. For example, Oxford's Merton College (est. 1274 CE) was influenced by awqaf in Muslim societies. Imam Zaid Shakir famously noted: "Money has always underwritten intellectual power."

An endowment, a fund kept in perpetuity, provides income (from its investments) for the benefit of a cause (Islamic education, for example) and/or an institution. Such funds are permanent assets which are invested to support an organization's activities. These can exist in different forms, such as cash, securities, or property. Typically, only a small portion of income is utilized annually to fund authorized projects. This payout ratio, which is less than the investment gain, helps preserve the capital.

DISTINCTION BETWEEN ENDOWMENTS AND AWQAF

Traditionally, awqaf were meant to support both public interests (waqf khairi) and a donors family interests (waqfahli). The family interests were besides Islamic inheritance rules. However, in the U.S., trusts typically manage family interests, while endowments and foundations support public institutions.

REGULATION

In the U.S., endowments are independent of any firm or governmental group. Like pension funds, qualified endowments are exempt from taxation. The Uniform Prudent Management of Institutional Funds Act (UPMIFA), promulgated in 2006, provides a comprehensive set of guidelines. It requires that endowment funds be prudently managed to preserve the purchasing power of the corpus. Faith-based and religious endowments may follow UPMIFA, but are not required. Endowment assets are listed on Form 990 filings with the IRS.

RATIONALE FOR ENDOWMENTS

An endowment is a key element of longterm planning of an organization. …

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