Professional Documents
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OPERATIONAL STRUCTURE
Date: 15th December 2011
Prof. Dr. Murat Cizakca
... Some argue that moral considerations can never guide business enterprise,
that the two can never be reconciled1. Can we envisage institutions that
accommodate profit motive and serving social goals within the same
framework? Does history offer any clue? Do we have contemporary
examples?2
Prof. Dr. Nejatullah Siddiqi
1Timur
Kuran, Islam and Mammon, the Economic Predicament of Islamism (Princeton: PUP, 2004).
2Mohammed
Nejatullah Siddiqi, Islamic Banking and Finance in Theory and Practice: A Survey of State of the
Art, Islamic Economic Studies,Vol. 13, No. 2, 2006, p. 23.
definitive yes!
are inseparable.
Once wealth is accumulated
G. S. Hodgson, The Venture of Islam, (Chicago: University of Chicago Press, 1974), vol. II: 124.
Whereas historians generally do not distinguish between charity and philanthropy, sociologists refer to charity
for local and ephemeral social responsibility and to philanthropy for long lasting, definitive and even global,
eradication of human problems
Origins
Although some pre-Islamic civilizations were
aware of waqf like structures,
the origins of Islamic waqfs as we know them today
are traced back to a statement by Prophet Muhammad (pbuh)
known as Thawab bad al Wafah (reward after death):
Muslim, Sahih Muslim; Al-Kutub al-Sittah wa Shuruhuha (Istanbul: ar, 1992): bab 3, hadith 14.
death.
Waqf is the best instrument for this, because it can
combine all these three acts.
Indeed, a waqf established as a kulliyah,
a complete system,
can combine all these three acts.
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A UNIVERSAL INSTITUTION
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Gaudiosi, The Influence of the Islamic Law of Waqf on the Development of the Trust in England: The
Case of Merton College, University of Pennsylvania Law Review, vol. 136, no. 4, 1988: 1231-1261.
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Daniel Crecelius, Introduction, Journal of the Economic and Social History of the Orient, vol. 38,
1995, no. 3.
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Consequently,
throughout Islamic history waqf-state relations
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CATEGORIES OF WAQFS
charity/philanthropy,
such a waqf would be known as waqf khayri.
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founder,
this would be waqf ahli or khas.
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In rural areas,
the waqf land would be managed through sharecropping, muzaraa,
with a certain share of the produce going to the land
owning waqf
and the rest to the peasant.
In Malaysia,
Palm oil plantations endowed as waqf land,
Can be cultivated this way.
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L. Barkan and E. H. Ayverdi, Istanbul Vakflar Tahrir Defteri (Istanbul: Fetih Cemiyeti, 1970), p. XXX and M.
izaka, Comparative Evolution, p. 132.
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10Mandaville,
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MODUS OPERANDI
A wealthy person (founder) goes to the court and
declares his intention to establish a cash waqf.
Once permitted,
he makes a cash endowment and then the cash waqf is
established.
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11The
maximum number of borrowers observed in the Bursa Ottoman court registers was 20. See;
izaka, Cash Waqfs of Bursa.
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12Main
points of the opposition led by Imam Birgevi were the following: 1) cash waqfs impede the application of
the law of inheritance 2) If the founder changed his mind and wanted to revoke his waqfs, he would not be
permitted 3) The endowed cash is invested through bay al-ainah, which has been considered as makruh by the
Prophet. See; Hamdi Dndren, Gnmzde Vakf Meseleleri (stanbul: Erkam, 1998), p. 94.
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WAQF OF STOCKS
Co. 1
Shares
Property Investment
Emergency fund
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In any case,
since the companies are managed professionally,
a loss making manager cannot stay on and
would be replaced by another.
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First,
Imam Zufer's original 8th century ruling that
the corpus of a cash waqf
should be invested through mudaraba
(a condition which could not be applied in the past)
became a reality.
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This is because,
mudaraba is practically identical to equity investment.
Second,
the new waqf is not obliged to
invest its corpus to generate revenue
but becomes a passive recipient of
the profits generated by the associated companies.
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Consequently,
the problem of riba completely disappears.
This is because,
the waqf of stocks earns its revenue not
by lending its capital through
sale/ lease/ repurchase, but
by the profits generated by the firms whose stocks it
owns.
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In this way,
the waqf begins to benefit from the
dynamism of the companies it partially owns.
It is no longer governed by the
decisions of the founders taken centuries ago.13
13This
constitutes a definitive reply to the nineteenth century orientalists accusations that waqfs
are nothing but a dead hand, a mortmain.
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Put differently,
the waqf of stocks is governed
not by the investment but by
the charity decisions of the long deceased founder.
The investment decisions are taken by the
modern managers of the associated companies.
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In this way,
modern waqfs become dynamic and flexible
organizations able to
respond to the ever changing circumstances.
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14This
situation emerged as a response by the Turkish philanthropists to the government rule that
the minimum paid in capital of a new waqf should not be less than USD 500.000. This rule made
capital pooling the conditio sine qua non of waqf establishment.
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In Turkey,
Based upon the Waqf Law of 1967,
some powerful waqfs have been established
with shares of joint-stock corporations.
These waqfs of stocks organize and finance
some of the top universities and hospitals in the country.
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Finally,
waqfs are emerging as indispensable institutions
in modern Islamic finance, without, however,
most financial engineers realizing it.
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THANK YOU !