Back to Basics: Why Waqf Holds the Key to Unlocking Muslim Institution Building

I did not arrive at waqf through theory. I arrived at it through frustration. For years I worked across Islamic capital markets, structuring transactions, advising governments and family offices across Malaysia, the Gulf, and further afield. The work was serious and the Shari‘ah screens were real. But somewhere in the middle of it, I started asking a question I could not shake: who, exactly, was this industry for?

Go to a Muslim neighbourhood—not the financial district, the neighbourhood—in London, Detroit, Cairo, Karachi, or the interior of East Malaysia, and you find the same things: housing people cannot afford, schools that are underfunded, mosques that are crumbling, and young people who cannot access credit without compromising their faith. The industry had grown. The communities had not. That gap is what eventually pulled me towards waqf.

So, when people ask why I spend my time on waqf rather than on the more glamorous end of Islamic capital markets, this is the answer. It is not sentiment. The question I keep returning to is a practical one: can we build institutions that actually serve our communities? And if the answer is yes—which I believe it is—then waqf is not a detour from that work. It is the work.

The Industry We Built and Its Blind Spot

Let me be clear about what I am not saying. The growth of Islamic finance from a marginal experiment in the 1970s into an industry worth more than USD 3.5 trillion is a serious achievement. Across Southeast Asia, the Gulf, and increasingly in the United Kingdom and Europe, the industry has built regulatory frameworks, capital market instruments, and institutional capacity that would have looked fantastical forty years ago. None of that should be waved away.

But size is not the same as purpose. When you set the industry against the standard it was actually conceived to meet—the Maqasid al-Shari‘ah, the higher objectives of Islamic law—the picture shifts considerably.

The maqasid are not theological abstractions. The classical scholars who articulated them were describing something closer to a set of social obligations—the conditions without which human life cannot properly flourish. Five of these conditions were identified: the protection of faith (hifz al-din), life (hifz al-nafs), intellect (hifz al-aql), lineage (hifz al-nasl), and wealth (hifz al-mal). What matters is that these are collective, not just individual. A community—and its financial institutions—bear responsibility for whether these conditions are actually met, not merely aspired to.

Five Maqasid Al-Shari‘ah: A Social Finance Lens

1. Protection of Faith (Hifz al-Din): Demands institutions that nurture spiritual life—mosques, madrasahs, scholars, and the endowments that sustain them. Waqf historically funded all of these.
2. Protection of Life (Hifz al-Nafs): Requires affordable healthcare, dignified housing and food security—not as charity but as structural provisions. Social finance vehicles, including waqf, are uniquely suited to deliver them.
3. Protection of Intellect (Hifz al-Aql): Calls for sustained investment in education, scholarship and knowledge institutions. The great Islamic universities—Al-Azhar, the Qarawiyyin—were waqf-endowed.
4. Protection of Lineage (Hifz al-Nasl): Encompasses family welfare, social cohesion, and the conditions in which future generations can thrive—including affordable family housing and community support.
5. Protection of Wealth (Hifz al-Mal): Requires not just accumulation but ethical circulation—ensuring wealth serves the community, not merely its holders. Zakat, sadaqah and waqf are its primary instruments.

Hold these five obligations up against what Islamic finance actually does, and the gap becomes hard to ignore. Protecting faith means funding the institutions that sustain it—mosques, schools, scholars. Protecting life means ensuring that healthcare and housing are structurally accessible, not only to those with money. Protecting intellect means investment in education, serious education, not just credentialing. Protecting lineage means that the most vulnerable families have the support they need to hold together. And protecting wealth means ensuring that it moves—that it circulates through a community rather than accumulating at its top. Most of these sit outside the industry’s field of vision. They have no Bloomberg terminal, no investor deck, no yield curve.

We became very good at Shari‘ah-compliant wealth management. We became far less effective at Shari‘ah-aligned wealth distribution.

The industry has poured its energy into the fifth maqasid almost exclusively. Islamic banks compete hard in premium retail and corporate lending. The sukuk market has, in good years, outpaced conventional bond issuance in several Muslim-majority countries. These are genuine accomplishments. But ask how a young Muslim family in Sabah gets affordable housing finance, or how a mosque in Birmingham sustains its community work without constant fundraising, or how a waqf estate in Java that has been sitting idle for sixty years gets turned into something productive—and the conversation goes quiet. These problems have not lacked urgency. They have lacked the institutional will.

Practitioners and scholars have raised these concerns for years. Some institutions, in Malaysia and in the Gulf, have begun to respond. But the gap between what Islamic finance was designed to do and what it mostly does remains wide. It is not a secret. It is just one of those things the industry has learned to live with.

Waqf: The Blueprint in Our Hands

Waqf is not a new idea. It predates Islamic finance by about twelve centuries. For most of Islamic civilisation’s productive history, it was the primary mechanism through which Muslim communities funded everything that mattered: universities, hospitals, libraries, soup kitchens, water systems, markets, and the physical fabric of cities. Al-Azhar was a waqf. The Qarawiyyin in Fez—founded by Fatima al-Fihri in 859 CE, and by most accounts the oldest university still in operation—was a waqf. The caravanserais that kept trade moving across Anatolia were waqf foundations. Timbuktu’s famous manuscript libraries, which held the scientific and philosophical memory of a civilization, were kept alive through waqf endowments.

The logic underneath all of it was the same. A donor sets aside an asset—land, a building, a farm, sometimes cash—and dedicates it permanently to a named purpose. The asset cannot be sold. It cannot be inherited away. What it generates—rent, produce, profit—goes to the community, indefinitely. It is a simple idea with a powerful consequence: it removes wealth from the churn of individual fortune and anchors it to something permanent. No government budget is required, no debt, just an irrevocable act of dedication and the institutional will to honour it.

Istanbul © IMAGO / Zoonar

By the eighteenth century, historians estimate that as much as a third of all cultivable land in the Ottoman Empire was held in waqf. In Istanbul, Cairo and Damascus, waqf ran the schools, the hospitals, the soup kitchens. It paid for water fountains in the streets and housing for the destitute. Governments rose and fell; endowments continued. That is the point. Waqf created social provision that was structurally immune to political instability because it did not depend on any government to sustain it.

So what went wrong? There were three things, mostly in sequence. Colonial administrations dismantled waqf institutions across the Muslim world, sometimes seizing the assets outright, sometimes wrapping them in legal frameworks designed to strangle them slowly. Post-colonial governments nationalized much of what remained, converting endowments into state assets and stripping them of their independence. And the institutions that survived, the religious councils, the awqaf authorities, often calcified into bureaucracies: holding land they were not developing; maintaining portfolios that had not grown in decades; insulated from accountability by the very permanence that was supposed to be waqf’s strength.

A third of all cultivable land in the Ottoman Empire was held in waqf by the 18th century. The community had endowed its own social safety net—permanently, structurally, and outside the reach of political instability

This leaves us with a strange situation. At the precise moment when impact investing and social finance have become serious disciplines attracting serious capital, when the world is hunting for mechanisms that can generate social benefit without depleting principal, the Muslim world is sitting on an instrument that did exactly that for a thousand years. In most jurisdictions it is either dormant or badly underperforming. The tradition is there. The assets are often there. What is missing is the will to put
them to work.

Re-imagining Waqf for the Twenty-First Century

Nobody seriously argues that waqf is irrelevant. History makes that case too well. The harder question is whether we can rebuild it as something functional rather than
ceremonial—not a reference to glorious precedent, but as an actual vehicle for moving capital towards the communities that need it.

There are signs that this is changing. Cash waqf—once a contested concept in classical fiqh—has gained broader scholarly acceptance, opening the endowment mechanism to donors who have money but not property to dedicate. Corporate waqf schemes are allowing companies to make structured contributions that go beyond the usual corporate charity. And, quietly, in offices across the Muslim world, family waqf is coming back. The waqf al-ahli (a family endowment) is increasingly the conversation that Muslim families of means are having when they sit down to think seriously about what happens to their wealth across generations. At Ihsan International Waqf Labuan Foundation (IIWF), this is much of what we do. What we find, consistently, is not a shortage of intention. Families want to build something that lasts. What they cannot find are the vehicles—properly governed, properly structured, compliant with modern standards—to put that intention into effect.

On the regulatory side, AAOIFI’s Shari‘ah Standard No. 60 on Waqf is a genuine step forward. It gives waqf institutions a governance framework that capital markets can recognise and work with, which matters enormously if the goal is to connect endowment capital with professional investment management. Without a common language between waqf practitioners and the broader financial ecosystem, the integration remains theoretical.

The structural possibilities that flow from this integration are considerable. A waqf-linked sukuk, for example, allows a waqf institution to raise capital from the market to develop its endowed assets—say, land held by a State Islamic Religious Council—and then deploy the returns from that development to community social purposes, while retiring the sukuk obligation from the generated cashflows. This structure transforms a dormant waqf asset into a productive engine of social provision, while giving investors a Shari‘ah-compliant fixed-income instrument. Both capital and community benefit.

Once that language exists, the structures become possible. A waqf-linked sukuk allows an endowment body to raise capital against its idle assets—land that has been sitting undeveloped for decades—deploy those assets productively, fund community programmes from the returns, and retire the sukuk from the same cashflows. The land was always there. The instrument just unlocked it. Similarly, a family waqf structured through a recognized international jurisdiction lets a Muslim family scattered across several countries make a single, coherent, permanent dedication of their wealth—to a school, a medical clinic, housing for the poor, whatever they choose —with professional governance and clear accountability. The wealth was already there too. What was missing was the vehicle robust enough to hold it.

The Missing Bridges: Philanthropy Meets Capital Markets

Muslim communities are not poor in assets, and they are not stingy. Zakat flows every year. Ramadan campaigns routinely exceed their targets. Mosques get built. The problem is not generosity and it is not wealth. The problem is that none of these things connect to each other in any structured way. The money moves in isolated pulses rather than through a system. What is missing is not resources. It is architecture.

Zakat bodies in Malaysia manage hundreds of millions of ringgit a year. State Islamic Religious Councils hold waqf land worth, collectively, tens of billions. Islamic banks globally manage trillions. These figures sit alongside each other without touching. There is no structured pathway for zakat surpluses to flow into waqf endowments. There is no mechanism connecting Islamic bank liquidity to community development. Each institution reports to its own regulator, operates under its own mandate, and has no particular incentive to ask what the institution next door is doing. The fragmentation is not accidental. It has been designed in, piece by piece, over decades of separate regulatory histories.

For regulators—across Southeast Asia, the Gulf, and in the UK, where Islamic finance policy has been gathering momentum—the priority should be building the enabling conditions for waqf to operate at scale

The people working inside these institutions are not the problem. Most of them are serious and committed. The problem is the design of the system they are working inside: the absence, at the policy level, of any serious attempt to create the connective tissue that would let Islamic philanthropy, Islamic endowment, and Islamic banking function as parts of a single ecosystem rather than as parallel bureaucracies that happen to share a faith tradition.

Muslims at prayer in Madrid © IMAGO / ZUMA Press

Social finance—the practice of deploying private and philanthropic capital for social ends, using market discipline without abandoning social accountability—is the bridge the sector needs. And it is not a foreign idea being imported. Islamic finance and social finance share more than an overlap in principles. They share a foundational premise: that profit and social benefit are not opposites, and that well-designed financial mechanisms can serve communities rather than extract from them.

The classical Islamic economy had already worked this out. Zakat redistributed wealth with the force of religious obligation. Qard al-hasan gave people in need access to credit without interest. Sadaqah jariyyah—ongoing charity—gave donors a way to extend their giving beyond their own lifetimes. Waqf turned all of these impulses into permanent institutions. Together they formed something that modern finance is still trying to construct: a system that keeps wealth productive without letting it become extractive. We did not learn this from the impact investing literature. We built it, centuries before that literature existed. And then, through a combination of colonial disruption, post-colonial neglect, and institutional amnesia, we largely abandoned it.

A Call to Action: Back to Basics, Forward in Method

Rebuilding this means starting with a question that Islamic financial institutions rarely put to themselves honestly: which of the five maqasid do we actually serve? Profitability is not the enemy here. An institution that cannot sustain itself cannot serve anyone. But there is a difference between profitability as a means and profitability as the whole point. If the answer to the maqasid question is “the fifth, mostly”—wealth protection and management—then that is worth sitting with. It is worth asking what it would take to extend the answer to the other four.

For regulators—across Southeast Asia, the Gulf, and in the UK, where Islamic finance policy has been gathering momentum—the priority should be building the enabling conditions for waqf to operate at scale. AAOIFI’s Standard No. 60 is a foundation, but foundations need walls. Harmonized tax treatment, cross-border recognition, and governance standards that allow waqf bodies to attract professional management: these are the details that turn a good idea into a functioning market. The family waqf deserves particular attention here. It is the most accessible entry point for the Muslim professional and entrepreneurial classes, and in most jurisdictions the regulatory framework around it remains thin.

© IMAGO

Perhaps the deepest change needed is in how we train people. INCEIF University in Malaysia has already made maqasid al- Shari‘ah a core part of its curriculum—that matters, and other institutions should follow. But the broader challenge is producing practitioners who can hold two things at once: a serious grasp of classical Islamic social finance; and a working fluency in how modern capital markets actually operate. The field has plenty of people who know one or the other. It needs people who know both, and who are not embarrassed to use that knowledge to ask whether the structures they are building are actually serving anyone outside the transaction.

At the precise moment when impact investing and social finance have become serious disciplines attracting serious capital, when the world is hunting for mechanisms that can generate social benefit without deple-ting principal, the Muslim world is sitting on an instrument that did exactly that for a thousand years

And for the philanthropic community—the Muslim families who have built wealth and are beginning to ask what happens to it—the family waqf deserves to be taken seriously as an option rather than treated as an afterthought. At IIWF, much of our advisory work is with precisely these families. The waqf al-ahli allows a family to dedicate assets—property, equity, business interests—to a permanent endowment: one that can provide for family members across generations while also serving a wider social purpose they choose. A school. A clinic. Housing. A scholarship fund. The endowment continues after them. The assets do not get carved up by inheritance. What we hear, again and again in these conversations, is not reluctance. It is readiness. Families know they want to build something lasting. What stops them is not intention but infrastructure—the absence of properly governed, properly structured vehicles that can hold their commitment without eroding it. That gap is what institutions like IIWF exist to close. It is slow work and it is necessary work, and it matters more than most of what passes for Islamic finance innovation today.

© IMAGO

The problems are real and they are not small: housing that people cannot afford, schools that are stretched, waqf estates diminished by decades of poor stewardship, diaspora communities held together more by goodwill than by institutions. But these are not new problems and they are not unsolvable. They were solved before, with instruments that still exist, in communities that had far fewer resources than we do now.

Islamica’s readers are also the people this matters most to—the professionals, the practitioners, the policymakers, the people with both the knowledge and the position to actually change something. Governments will not lead this. Regulators will not lead this. It will be led by people who understand what is at stake and decide to do something about it. That is a description of most of the people reading this sentence.

The blueprint exists. It has existed for a long time. What has been missing is the decision to use it.

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REFERENCES & FURTHER READING
1. Islamic Financial Services Board (IFSB), Islamic Financial Services Industry Stability Report 2024, IFSB, Kuala Lumpur, 2024.
2. Al-Ghazali, Abu Hamid Muhammad, Al-Mustasfa min “ilm al-Usul, Trans. by Wael B. Hallaq, University of Chicago Press, Chicago, 1997.
3. Timur Kuran, “The Provision of Public Goods Under Islamic Law: Origins, Impact, and Limitations of the Waqf System”, Law & Society Review, Vol. 35, No. 4, 2001.
4. Monzer Kahf, “Waqf: A Quick Overview”, paper presented at the Harvard Forum on Islamic Finance, 1999.
5. Securities Commission Malaysia, Guidelines on Islamic Real Estate Investment Trusts and Waqf-Linked Products, Kuala Lumpur, 2022.
6. AAOIFI Shari‘ah Standard No. 60: Waqf, AAOIFI, Bahrain, 2019.
7. Miriam Hoexter, “Waqf Studies in the Twentieth Century: The State of the Art”, Journal of the Economic and Social History of the Orient, Vol. 41, No. 4, 1998.
8. World Bank & IsDB, “Leveraging Islamic Finance for Development: Zakat, Sadaqah, and Waqf”, World Bank Group, Washington DC, 2023.