Establishment of The First WAQF Bank in Bahrain: Exploratory Study

Abstract

This paper surveys awqaf over a historical and geographical trajectory as a backdrop to exploring the lineaments of a new waqf bank. The Kingdom of Bahrain is on the cusp of founding a new waqf bank but many issues with respect to creation of a waqf bank need to be threshed out and limned in detail. To this end, a survey was designed and distributed to key decision-makers in the Islamic Financial Institutions (IFIs) in Bahrain to obtain their feedback about the possibility to establish the first Waqf (Endowment) Bank of Bahrain along three axes; .1) proposed structure; 2) sources of capital and 3) recommended modes of financial transactions. 67% of IFIs responded and questionnaires filled out by 12 IFIs were analyzed in terms of descriptive statistics. The result of the survey indicate substantial support among IFIs for the creation in Bahrain of a waqf bank, organized as a domestic and international investment and development bank, with financings drawn primarily from Muslim sources and public banks (CBB) and secondarily from all corporations (be they Islamic or non-Islamic. Preferred legal status would be as an independent corporation. IFI informants suggest that the new waqf bank would be licensed to conduct a wide variety of Islamic transactions, with a strong preference in favor of direct investment with equity participation but, notably, exclusive of engaging in loans with service charges. This study should prove utile to the Central Bank of Bahrain (CBB) in determining how to set up a new waqf bank in line with a need to craft new guidelines and regulatory measures covering operations of such new Islamic financial entities. In addition, this study should be particularly relevant to central banking authorities considering in Islamic economies of whether, and how to, go about formation of waqf banks in their jurisdictions in Bahrain for strategizing and encouraging the establishment of the Waqf Bank.