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Egypt Islamic finance plans include boosting waqf

By Reuters

The Freedom and Justice Party, the parliamentary arm of Egypt’s Muslim Brotherhood, aims to develop the practice of waqf or religious endowments as part of its plans to expand the use of Islamic finance, a party official said.

In waqf, people contribute a portion of their wealth, in cash or other assets, to sharia-compliant and charitable projects such as mosques and schools. But the management of such endowments in Egypt has been widely criticized as inefficient.

Ahmed al-Najjar, a member of the FJP’s economic committee, said in a telephone interview this week that waqf endowments (awqaf) in the country totaled about half a trillion Egyptian pounds ($82 billion), but the yield on them was very low – according to a report by the Ministry of Religious Endowments, it is about 1.5 billion pounds annually, he said.

One problem is that managers of a waqf often lack financial expertise, in contrast to countries such as Turkey and Malaysia. The solution may be to encourage the hiring of experienced financial managers for awqaf, Najjar said.

Another proposal under consideration by the FJP is to encourage the formation of awqaf not through a contribution from a single wealthy donor, but through multiple small subscriptions to a sukuk (Islamic bond) offered publicly.

The proceeds of the sukuk could then be used to purchase waqf assets. This would expand the number of people involved in awqaf and give managers more flexibility to invest endowment money, Najjar said.