Abstract
Bridging global economic inequalities calls for effective financial alternatives such as awqāf banks to better attend to the needs of the poor and underprivileged. This is expected to address the root causes of poverty and ensuing economic gaps, improving much of the living standards whether pertaining to education, health, shelter, employment or basic social services while reducing the state’s economic and financial burden. We envision awqāf banks as institutions which are established through cash awqāf and which operate multiple awqāf funds alongside an assortment of financial instruments. The main use of their awqāf funds are the issue of low-cost credit to the poor, economically disadvantaged and underprivileged, instead of focusing solely on generating and maximizing shareholder profits. This is to support the economy through of steady and sustainable growth, effectively raising the lower bar on per capita income and lifting multitudes out of poverty and need. This paper explores how low-cost credit can be provided to the poor or lower income demographics through awqāf banks, while addressing relevant issues such as Shari’ah compliance, services rendering, investment and awqāf distribution. This paper also examines current studies on awqāf in relation to finance and banking, the basic functions, and characteristics of the Shari’ah-compliant awqāf bank, as well as evaluations of awqāf banks. Current studies show that there is a legitimate need for Shari’ah-compliant awqāf banks which not only providing services for its beneficiaries but also manage investments and awqāf funds that contribute to overall national development and economic growth. This study would be of high relevance to experts, practitioners, financial managers, regulators, and policy makers in the fields of awqāf, banking and finance.
Highlights
Poverty has long been a major issue of concern among developing and underdeveloped countries
T55u–r6k2e)y. (Zarqa 1994,Wppit.h5r5e–g6a2r)d. s to the Islamic social banks making profits out of earnings of the services offered by the bWanikth, wrehgiachrdasretosetht etoIsfilnamanicessoocciaiallbwanelkfsarme acktiinvgitipersoafnitds oesupteocfiaelalyrnminigcrsoo-fif nthanecsienrgv,iicneds iogfefneroeuds baywqthafefibnaannkc,inwghinicshtitaurteionsestartoe bfainsaedncoenspouciraelchwaerliftayreoraocrtgivaintiiezsataionnds wesipthecniaollpyromspicercot-ofifnmanackiningg, indigenous awqāf financing institutions are based on pure charity or organizations with no prospect of making profits
This paper argues that such a transformation of awqaf funds to effective awqaf banks would better serve the socio-economic needs of communities and better enhance the awqaf revenues and sustain their future
Summary
Poverty has long been a major issue of concern among developing and underdeveloped countries. Despite the growing literature on the awqaf, finance and the economy, and on how the awqaf impacts socio-economic development, the discussion of the establishment of a awqaf bank that would effectively manage awqaf capital while microfinancing the poor segment and contributing to the overall development of society still needs more focus and attention. This study first provides some basic definitions of the awqaf and social banks It addresses questions of bank management and structures such as Shari’ah compliance, service rendering, investment and awqaf distribution, as well as how to provide interest-free and affordable loans to the poor and lower income demographics and empowerment of beneficiaries in need, poverty eradication, removing socio-economic inequalities while honoring the conditions and stipulations of endowers (waqifs) and contributing to overall national development and economic growth. It would remain critical to advancing our understanding of the ways and means of helping the poor, needy and underprivileged, and of the sustainable strategies that would secure and develop the awqaf capita while changing the lives of people and their environments for the better
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