It’s well known that Arab philanthropy is inspired by the region’s religious and spiritual traditions. Rooted in local societies, Christian and Islamic charity have adopted various ad hoc mechanisms and institutional forms for giving, depending on the goals and population in question.

Historically, endowment (called waqf in Arabic) was one of the most common institutional forms of religious-based charity. For centuries, they have significantly contributed to the flourishing of Islamic civilization in the region, before they deteriorated due to internal corruption and external undermining first by foreign colonialists and later from some national regimes.

Yet recently, endowments are being revived with a considerable revamp of their governance and goals to secure a sustainable fund for modern Arab philanthropic foundations and civil society organisations. What is the future of this mode of giving, why is it well-suited to Arab giving, what are the changes in the way it is practised now, and what are the challenges?

Why, what and who

Understanding endowments requires answering three main questions:

• What are the financial sources of endowments?
• Why is the endowment an acceptable institutional formula?
• And who are the beneficiaries of these endowments?

Endowments get their funds from sadaqat, the voluntary element in Islamic giving. Unlike zakat, which is governed by fixed rules, individuals are free to determine the amount the beneficiaries, and the form of their sadaqat.

Endowments offer an institutionalised form for investing in charity and donations, or sadaqat jariyya. The institution administers the gifts and spends the revenue according to givers’ conditions and preferences provided these don’t contradict any Islamic rule. Donors might be individuals or families from varying backgrounds and degrees of assets. Legitimate, sustainable, affordable and protected by Shariah and national laws, the form has been favoured by many Arab donors.

Historically, endowment (called waqf in Arabic) was one of the most common institutional forms of religious-based charity.

Historically, endowments’ charitable and developmental activities covered a very wide range of beneficiaries. Guided by the juristic concept of interest, or maslaha, endowments usually accommodate their philanthropic contributions to the changeable realities. Among other things, they provided education, health care and assistance to needy people. Several schools, hospitals, shelters, and orphanages have offered free services thanks to being funded by philanthropic endowments. Female endowers established prestigious universities at various Muslim societies, such as the Moroccan Qarawiyyin mosque and university by Fatima Al-Fihriya in the 9th century, and Cairo University by Princess Fatima Ismail in Egypt in the early 20th century. Religious education and missionary activities have also been generously funded by endowments, like Al Azhar Mosque and university in Egypt. Endowments have supported women’s education and empowering their civil rights^[1].

Revival

The endowment model in the region thus has a long history as a religiously motivated and regulated institution which has provided benefits to the region for centuries. Endowments also offer a sustainable institutional form which secures long-term use of donated funds. During the 19th and early 20th centuries, endowments’ religious legitimacy and regulation hindered French and British colonial attempts to confiscate charity assets, however, these attempts significantly weakened the endowments’ societal role and paved the way for later confiscation by post-independence national governments, especially in the Northern African Arab countries. Endowments’ assets were integrated in the public assets and administered by the official Ministries of Endowments (Awqaf) or similar governmental entities.

In the Gulf states, however, endowments have maintained their assets and independent administration while being reorganised by national governments. This relative independence has allowed Gulf endowments to revamp the endowment model since the mid-1990s and the establishment of the Kuwaiti Awqaf Public Foundation in 1993 was a remarkable milestone in reviving endowments in the region. This semi-governmental entity aims to promote the culture of endowments, develop creative investment tools, and initiate innovative spending channels. With many research papers and Fatwas published in the Foundation’s semi-annual journal ‘Awqaf’ (Endowments), the concept and practice of endowments have both been renewed.

This revival of the endowment model coincided with two economic changes in the Arab region. In the Gulf states, the flow of oil revenues encouraged the establishment of endowments to fund charitable activities, aimed less at the domestic sphere, but rather globally. Local governments endorsed these activities until 2001 when that work was severely restricted due to Western suspicions about endowments funding terrorism. Since then, most Gulf endowments target domestic humanitarian and developmental work. The case was different in the North African Arab countries. In the early 1990s, they suffered huge budget deficits and severe financial crises. As a result, they sought funding from the International Monetary Fund (IMF) and had to apply its Structural Adjustment Policies. With the consequent strict austerity procedures in the provision of social services, local governments were obliged to contemplate an increasing role for civil society organisations and philanthropic foundations. With this increase in civil society activity, most Arab governments have proposed new laws regulating charitable and civic organisations, including religiously-inspired endowments. These laws slightly relax the requirements for establishing such organisations, while maintaining close state supervision of administrative and fiscal issues. A considerable expansion of donated endowments can be traced to this development. Endowments’ flexible spending channels also encouraged Arab philanthropists to explore innovative institutional structures, address contemporary issues, and apply creative governance mechanisms.

Emerging models and their development

While some endowments get their assets from a single individual or family donor, others have started to raise funds from e-donation campaigns. This form tends to address a specific activity or project. Religiously inspired endowments are also beginning to welcome new forms of assets, such as stocks in businesses. Furthermore, some emerging endowments are diversifying their investment mechanisms, seeking to overcome the shortage of Shariah-based mechanisms either by exporting tools from successful Malaysian or Indonesian cases, developing creative ones of their own, or seeking Fatwas to accommodate themselves existing investment environment. Sometimes, endowments do not embrace religious aims affiliations to give themselves more freedom of manoeuvre in their financial affairs.

Funding is the key requirement for endowments to support a more sustainable civil society.

Regardless of their financial structure, current endowments share an interest in establishing a professional administration and implementing good governance practices. One of the reasons behind the Arab endowments’ historical deterioration was administrative and financial corruption and their emerging counterparts would not like to repeat same mistakes. Professional administrative models inspired either by business administration or governance models from successful Western philanthropic foundations are being adopted. Cornerstones of good governance include a well-informed strategic plan, visionary leadership, qualified staff, a complex institutional structure, and transparent and accountable decision-making processes. Large and middle-sized endowments regularly issue annual reports and financial statements declaring their assets and activities^[2]. Gulf philanthropists continually consider best global practices in managing endowments and charitable organisations and adapt them to local circumstances^[3], while corporations exchange administrative and investment experiences with endowments.

Historically, women were prominent among the founders of top endowments. Furthermore, they often managed their endowments themselves or were asked to run others’ endowments. The current revival recalls women’s contributions in this regard. Many women philanthropists and entrepreneurs are well qualified to re-adopt this practice of overseeing endowments. Muslim scholars call for the management of endowments to be rotated based on their performance, which allows women to come forward and occupy leading positions in endowments’ administration. Women’s constructive contributions in the public sphere also qualifies them to monitor endowments’ performance and governance officially or voluntarily^[4].

Relations with government

Moreover, partnerships between government, business and endowments significantly shape emerging societal plans. The gradual state withdrawal from the provision of social services increases the role of civil society and philanthropic sector in these areas. In the Arab North African and Levant countries, they try to replace the states’ declining financial capabilities, while in the Gulf states, the trend is towards empowering and integrating the developmental work of the third sector into national strategic plans, rather than looking to it as a substitute for state provision. The Saudi 2030 Vision officially seeks to empower the non-profit sector to coordinate with government in implementing national projects. Thus, endowments attract special attention due to their financial independence and sustainability. Predictions in the mid-1990s suggested that Corporate Social Responsibility from business would secure third-sector funding. However, the global financial crisis in 2007-9 severely hit many local corporations and significantly weakened their ability to fund third-sector organisations. This financial uncertainty continued with the later outbreak of Covid-19.

As a result, Arab governments are increasingly looking to endowments for developmental and charitable contributions. Practically, endowments’ influence correlates with the size of their assets and the level of creativity in the issues they address. It is the Gulf endowments’ moment in terms of the funding and innovation they can deploy. Currently, the biggest Arab endowment is Muhammed bin Rashid Al-Maktoum Knowledge Foundation. The Emirati Prime minister and Dubai’s Ruler Sheikh Muhammed Bin Rashid Al-Maktoum provided an endowment of US$10 billion in 2007 to establish the foundation, which is ‘committed to creating knowledge-based societies throughout the region by funding research projects, activities, and initiatives. It nurtures ideas and innovation while focusing on its main pillars which are education, entrepreneurship, and research & development.’ The foundation holds conferences and issues various publications to trace the knowledge status in the region and seeks its development.

Another Arab leading endowment is Suliman Bin Abdulaziz Al Rajhi Charitable Foundation. It was established in 2000 and named after its founder, the Saudi businessman Suliman Al Rajhi, with an estimated assets of 15 billion Saudi Riyal (US$4 billion) and an annual expenditure of 40 million Saudi Riyal. The foundation awards annually about 1,200 grants in five programmes: empowering the non-profit sector; empowering women and family; enhancing Islamic values and national identity; providing basic needs; and maintaining mosques^[5]. Many other endowments are active in Kuwait and Saudi Arabia.

Not surprisingly, the presence of revamped models of endowments are still relatively limited in the North Africa and Levant sub-regions. Since the mid-20th century, governments have controlled or strictly supervised most domestic endowments, though there has been a recent relaxation of laws in many countries. The Moroccan endowment sector is a well-organized one, but predominantly managed by the government, so the emerging endowment models are mostly absent. Wealthy Egyptian and Lebanese businessmen have established and run philanthropic foundations as part of their Corporation Social Responsibility giving, such as those the Egyptian Naguib Sawiris and the late Lebanese Prime Minister Rafik Hariri. However, they are not endowed foundations, which raises questions about the possible sustainability of these foundations.

Challenges

The emerging models of endowments seek to address several administrative, financial and functional challenges which faced the old model. However, both still struggle with shared obstacles due to structural internal and external challenges. Arab endowments have difficulties in setting a long-term strategic plan because of financial and legal uncertainty. Continual changes in the money and investment market and the sudden review of regulation confound their planning process. Large endowments can partially overcome this obstacle because of the size and stability of their financial assets. However, they still struggle with legal ambiguity and the lack of specialised data required to inform the planning process. Additionally, many endowments adjust their plans to governmental ones and executive tracks, instead of setting their own goals. For instance, Saudi endowments should follow the developmental steps of the national 2030 vision, which has already integrated the non-profit sector among its executive tools. Endowments might not be well-informed about the motives and details of their national visions, but must still adopt them.

Implementing good governance practices is a chronic challenge for endowments in the Arab region. Many of them lack institutional sophistication, which results in ad hoc treatment of issues and overlapping of tasks that burden a few departments with a wide range of specialisations. Managing family endowments is often seen as a task for close relatives, rather than being assigned to professional cadres. Also, with the lack of relevant educational and training programmes, attracting qualified human resources is not an easy task. Not surprisingly, therefore, endowments can suffer from an absence of institutional values, such as professionalism, accountability, or transparency. Ironically, historic Islamic endowments were strict about institutional practices and imposed laws and regulations to monitor internal governance in order to guarantee their societal impacts and financial sustainability.

The endowment model in the region thus has a long history as a religiously motivated and regulated institution which has provided benefits to the region for centuries.

Another challenge for Arab endowments is developing appropriate investment tools, which are Shariah-compliant, financially profitable, and socially influential. Malaysian and Indonesian endowments have forged ahead in this regard and, in some cases, Arab endowments export Malaysian or Indonesian investment tools or adjust business mechanisms but regional endowments still lack tailored indigenous tools, considering the already unstable investment eco-system. Most Arab countries face economic crises and are seeking to attract foreign investment through various financial incentives. Local investors do not enjoy similar incentives and are still faced with a restrictive legal framework. The Gulf states have ample financial assets to establish endowments but have also yet to develop innovative investment tools. Finally, measuring the social impact is a serious challenge for Arab endowments. With few research centres or toolkits, the social influence and significance of the considerable efforts of philanthropists around the region remained largely unaccounted for. As a result, Arab endowments cannot evaluate their success or failure to improve their work and maximize their roles.

Restrictive legal frameworks and financial scarcity might be the most significant external factors generally for building endowments in the Arab region. However, the influence of these factors differs from one sub-region to another, depending on the endowments’ historical and current societal influence and their financial power. In the Maghrib region, French colonisation severely weakened domestic endowments in order to undermine their support for national resistance. The post-independence authorities adopted different approaches towards local endowments. Tunisian former president Bourguiba banned endowments in 1957 and nationalised their assets. While not banning them, the Algerian governments were less interested in restoring endowments which were abused by the French colonial authorities. Not until the early 1990s did the Algerian authorities start to issue regulations and laws organising the endowments’ sector under close governmental supervision. The first law regulating Moroccan endowments was issued in 1914. The second was as late as 2010. Both gave special attention to government-managed endowments, although they still allowed private ones. The historically influential role of Egyptian endowments was revoked by the Nasser regime, which between 1956 and 1972, gradually confiscated most endowments’ assets and controlled their administration. Less restrictive laws were issued in the Gulf region to freely endorse the establishment of local endowments, while keeping them under strict supervision. Private endowments’ societal influence and their financial power, not to mention the structure of tribal system maintained their status and link with the state.

The recent laws regulating endowments in North African countries, especially the Maghrib and Egypt have continued the state-centric approach in managing endowments and have not restored previously confiscated endowments assets. This, together with financial crises, has significantly reduced current attempts by individuals to establish new independent endowments. The break in the tradition of endowments and in their historic social roles has weakened them and their roles have been taken up by states in the last few decades.

The Gulf endowments’ powerful and continuous societal role has protected them from nationalisation and secured their sustainability. Following 2001, their international activities were significantly reduced in favour of a domestic focus. With this expanding domestic role, national governments seized the opportunity to integrate them into their own strategic plans at the same time as exercising closer control. Including the non-profit sector in the Saudi 2030 vision, for example, has meant the launch of a series of regulations to reorganise the sector. This has meant, among other things, the establishment of a National Center for the Non-Profit Sector to promote the sector, organise its collective efforts, oversee its units, coordinate relevant procedures with other governmental entities, create a comprehensive database for philanthropic foundations, and develop financial and administrative transparency criteria. In 2019, Saudi foundations and endowments established the Council of Foundations, a semi-governmental entity and is the responsible body for foundations as far as the state is concerned. The Council funded a series of workshops in the Kingdom to investigate ‘The Saudi Foundations’ Priority Needs’ in June 2023. Most of the attendees stressed that establishing an independent endowment for each foundation is one of the top priorities to their institutions

Funding is the key requirement for endowments to support a more sustainable civil society. One of the main challenges of civil society organisations, not to mention philanthropic foundations, is securing sufficient funding for their activities. Sustainable financial sources provide independence for CSOs and means they are not submissive to donors’ agendas and interests. Emerging endowment models seem promising in securing such necessary funds by their innovative trends. Hopefully, they can also overcome internal governance challenges and external investment and legislative barriers.

Riham Ahmed Khafagy is an Assistant Professor at the College of Humanities and Social Science at Zayed University in the UAE.