Waqf (endowment): A Vehicle for Islamic Social Entrepreneurship – Don’t just dream…Just do it…Get continuous rewards

Waqf investment in Islamic Social Entrepreneurship (ISE) shifts the paradigm of social-benefit in investment strategies, particularly in terms of analysing the communal benefits of a project. The waqf investment strategy needs to be both market driven and communally focused led in order to create both social impact and profit. The aim is to circulate productive māl (wealth) in the form of waqf asset such as land, cash, and so forth by using business culture, mechanisms and tools that are not only focused on the financial returns but also on the communal well-being and common-good.

The goal of the waqf-ISE model is to provide a platform for an economy of earnings and provisioning whereby the profits or surpluses from ISE ventures are deployed for either distribution to the designated beneficiaries or for re-investment in other ISE investments.

The core components of the waqf-ISE model are the wāqif, mawqūf, waqfī’ah, the waqf institution, the waqf-SE investment strategies and the mawqūf ‘alayh, as exhibited in the figure below entitled ‘Modus operandi of the proposed waqf-SE model’.

  •  The wāqif (endower) endows an asset whereby creating a permanent donation that cannot be revoked.
  • The endowment needs to be held and kept safe, according to the terms and conditions documented in the waqfī’ah which is the contract deed.
  • The yellow box refers to the waqfī’ah or contract deed and documents the (endowed property), the mutawallis or trustees that will be responsible and entrusted for managing the waqf (including the investment strategies), the beneficiaries of the endowment and the proportions for distribution to the beneficiaries.
  • As waqf funds need to generate profit from the investment of the endowment fund, this model invests the endowment funds in ISE ventures which are Islamic economically based or ethically compliant, must have a social impact value creation activity in the investments itself and should generate financial returns for the waqf.
    The investment should align with the goals of ISE and create social impact in one or more of the following areas: Community Empowerment, Poverty Alleviation, Social Justice and Sustainability.
  • The waqf institution can either directly engage in the ISE ventures like a social enterprise or in a profit and loss agreement with other social entrepreneurs like a special purpose funding house. Instruments such as profit sharing ventures can be utilised.
  • The financial return is dependent on the investment but it needs to be kept in mind that the actual investment in ISE practices is of benefit to the community as it is creating some sort of social impact.
  • Referring to the purple box, the profits from the ISE ventures need to be channelled back to the waqf fund for either distribution to designated beneficiaries of the waqf in accordance with the proportions stated in the waqfī’ah or contract deed) or a certain proportion for re-investment in other ISE ventures.


  • This model can utilise crowd funding platforms to create the waqf fund.
  • Additionally, this model is compatible with the United Nations 17 Sustainable Development Goals, which member countries have to comply by.


Balancing Social Impact and Profit Making

Waqf needs to be productive and target social purposes. It is therefore argued that the investment of waqf needs to create social impact as it can be deduced from the waqf of Bi’r Rumah, which was designed to solve the societal challenge of not having clean drinking water in Madināh.

The foundation of investing waqf funds to create social impact was in fact laid by Prophet Muḥammad (SAW) when he directed `Uthmān ibn `Affān (RA) to purchase the well of Bi’r Rumah for 20,000 Dirhams. `Uthmān ibn `Affān (RA) purchased the well and gifted it to empower both the Muslim and non-Muslim communities of Madināh who were henceforth able to enjoy the communal drinking water. After centuries, the waqf of Bi’r Rumah is still serving humankind today. During the Ottoman era, date palms trees were cultivated around the well of Rumah which are sold in markets. The profits from selling the dates are used for the maintenance of the well and the land around the well. Part of the profits are distributed to designated beneficiaries and utilised in ventures.

The balancing act of creating social impact and profit is an issue to consider when investing in SE. Although Cizakca (2011) states that the objective of waqf institution is not for generating profit, the waqf-SE model is designed not to discount profit but to have a balance between profit and creation of social impact on the community. There are several verses in the Qur’ān on measuring and balancing operations that can be interpreted to mean that when considering the balance between the impact of social value creation and profit, it is recommended that the balance be inclined towards the creation of social impact.

However, profit generation is also a significant factor when considering the investment strategies to ensure the financial sustainability of the waqf. As ventures in SE compete in the same environment as commercial businesses, it is recommended that good business and management practices are deployed to ensure the sustainability of the waqf.

It is therefore proposed that when balancing between social impact and profit, the balance of scale should tilt towards the community needs in terms of social impact creation. Therefore, the aim of SE should be to maximise social impact creation for the community and at the same time generate profit in order to be financially sustainable and independent.

For more knowledge on this section, please refer chapter 6 of the book entitled: “Waqf (Endowment): A Vehicle for Islamic Social Entrepreneurship”. Please click here for details on the book.