Islamic Philanthropy (waqf)

Distinguishing Between Waqfs and Trusts

While there are similarities between the Islamic waqf and the (English) Trust, panoramic analyses suggests that there are obvious and far reaching differences between the two institutions which does not make trust laws or the availability of trust laws an effective substitute to run a waqf especially in a majority Muslim country like Nigeria. To start with the assets which are the “corpus” of the Trusts are (legally) owned by the trustees with the beneficiaries being equitable owners, as such, the trustees may do whatever they deem permissible with the assets, whereas, for a waqf, the mutawalli is only the “administrare” of the assets and will not normally be able to take some decisions e.g. Istibdal or sale of the assets without a clearance from an Islamic court. Another difference is that the rule against perpetuities which is a protruding feature of Trust laws has no place in the waqf establishment (Cizakca and Tunku, 2014). In other words, by default a waqf will normally continue to exist in continuum while a trust and its assets are vested for certain specified time periods in the deeds^[1]. This point is somewhat technically linked with the first point of difference. Expectedly, the administrator of the waqf i.e. the mutawalli as well as the endower i.e. the waqif does not have the imprimatur to revoke a waqf. This waqif/mutawalli “powerlessness” is however not a feature of the Trust, as under the Trust law, the settlor is permitted to revoke a Trust if he or she so wishes. Furthermore, there are restrictions for/on a waqf on the nature of assets that can be endowed to it. For example usufruct cannot be endowed to waqfs according to the orthodox or traditional jurists, whereas there are virtually no restrictions on “endowable” Trust assets and it known that usufructs can be bona fide trust assets.

A very important difference and in the author’s view the most important between a waqf and a Trust is the intention of the settlor/waqif. A waqif’s action of establishing a waqf should normally by default be governed by a prime religious motive which is the requirement for all Muslims to do acts of worship which invariably includes waqfs solely for the sake of ALLAH, the Creator. This requirement is evident in the Hadith contained in Sunan an-Nasa'i 3140: Book 25, Hadith 56 where the Prophet is reported to have said; “…ALLAH does not accept any deed, except that which is purely for Him, and seeking His Face.” This message is further reinforced in the Hadith narrated by Abu Hurairah (may ALLAH be pleased with him) wherein the Messenger of ALLAH (PBUH) said: “ALLAH, may He be blessed and exalted, says: ‘I am so self-sufficient that I am in no need of having an associate. Thus he who does an action for someone else’s sake as well as Mine will have that action renounced by Me to him whom he associated with Me.”^[2] (Sunan Ibn Majah Vol. 5, Book 37, Hadith 4202). On the contrary, a settlor is normally primarily driven by other considerations distinct from the sake of ALLAH motive such as public benefit or altruism, pure private benefit that accrue to him i.e. the settlor or mixed benefits which includes both public and private benefits (Saidu, 2015). Such motives includes; the insulation of family wealth from state taxes as well as other perceived diminishers thus “preserving” the wealth for future use cum payments to family members. This obviously relates to family trust; the wholistic preservation of family business by making such a trust and dedicating income from such business to specific family beneficiaries so that wealth fragmentation via sale of inherited family business by the heirs which could culminate into liquidation is forestalled; a “legal” means to effectively sidetrack or circumvent the law of inheritance and particularly if one wishes that some heirs are left out or get their inheritance piecemeal of one’s wealth; to protect one’s property from state usurpation; ensure discreteness in appropriation or the bequeathing of properties capitalizing on the fact that the beneficiaries of a Trust in most cases are not registered in overseas trust establishment; to specifically protect some groups of persons who may be physically challenged, minors, unborn children whom the settlor feels the need to provide for; lending helping hands to charities by way of creating a charitable Trust with a charity as joint or sole beneficial owner; used as tax avoidance technique by way of setting up a trust in one country with its beneficial owners in another and by so doing inheritance tax, income tax, capital gains tax, estate tax may be reduced or even eliminated. Similarly exchange controls could be avoided and a multitude of other “benefits” through innovative Trust structures can also be garnered.

It could be argued that some of this motives that motivate Trust establishment also applies to waqf^[3], while this might be true, the normative motive for a waqf is to please ALLAH and for his sake alone^[4]. The fact that some persons in the past and present have declared their primary motives to be other than^[5] the Islamic normative motive one does not change the Islamic dictates and does not make such persons or endowers correct or necessarily on the right path . In fact such persons will have to purify their intention(s) if they have to be rewarded for such noble acts by their Creator.

Therefore there is a constant need for Muslims to purify their intentions when doing charitable deeds. This is one of the reasons why waqfs is a best choice for a Muslim seeking to engage in (perpetual) charity and not trust because at the very thought of a waqf, the Muslim should immediately become conscious of its rationale being an Islamic institution and as such intentions might be purified if such potential waqif is a sincere Muslim. More so, since intentions are normally not known except if declared, it is safer for Muslims to pursue establishing waqfs if he or she intends to do recurring charity and has the means considering its Islamic ideological basis as well as Islamic rules guiding it so that intentions might in this way become purified.

[1] Rules on duration might not apply to some (charitable) trust.

[2] This hadith is also reported by Imam Muslim. Also resonating the intention requirement is the widely known Hadith of Umar ibn Khattab wherein he reported that he “…heard ALLAH's Messenger (PBUH) saying;" The reward of deeds depends upon the intentions and every person will get the reward according to what he has intended. So whoever emigrated for worldly benefits or for a woman to marry, his emigration was for what he emigrated for." (Sahih Bukhari Book 1 Volume 1).

[3] Professor Murat Cizakca and other economic historians have attested to this.

[4] Other motives might be acceptable as secondary motives but should not and cannot be primary, otherwise the divine reward that should emanate from such charitable gestures will be far-fetched (as the words of the Prophet affirms).

[5] Some might even dedicate waqfs to reap the benefits that accrue from the society by being seen as charitable or religious. Becker (1974) shed light on such type of philanthropy in his “pioneering” work on philanthropy in the (neoclassical) economics discipline.