Endowment( Waqf) in Islam:

Endowment in Islam, known as Waqt, refers to the permanent dedication of property or assets for religious, pious or charitable purposes, with no intention of reclaiming the assets. It is a forms of sadaqah, Jariyah that provides continuous rewards to the donor even after death, as the benefits of the asset continue to serve the community.

Key aspects of endowment in Islam:

Definition and concept:

The word Waqt literally means "stop", "stand" or "detain". In Islamic law, ht means holding a property ( preventing it from being sold, inherited or gifted) and dedicating its profits or benefits to specific beneficiaries.

Significance and origin:

While the word Waqf is not mentioned directly in the Quran Kareem, it is rooted in the Sunnah. A example is when the Uthman bought the well of Rumah in Madina and dedicated it to the public. It is considered a cornerstone of Muslim philanthropy that helped build social infrastructure, such as schools, hospitals, and mosques throughout history.

Key elements:

Waqif:

The endower ( must be a mature, sane, free).

Mawquf:

The physical asset( must be permanent e.g land, building).

Mawquf Alayhi:

The beneficiaries ( e.g poor, family, specific institution).

Types of Waqt:

Public:

Proceeds are dedicated to the general public or charitable causes.

Private/ family:

Proceeds are designated for the donor's children, family or children.

Joint:

A combination of both public and family purposes.

Key rules:

Compliance:

The purpose must be lawful and cannot be used for sinful purposes.

Eternity:

The endowment must be intended to be permanent, not temporary.

Irrevocability:

Once a waqf is declared, it cannot be sold, gifted or inherited.

Administration:

A custodian is usually appointed to manage the property and ensure the income reaches the beneficiaries.

Modern context:

While traditionally, endowments were real estate, modern jurists have validated " Cash Waqt", where money is invested and the returns are used for charity.

Role in society:

Waqf played a vital role in social welfare, allowing for the funding of education, healthcare, and infrastructure without direct government intercession. In modern times, they are viewed as a " third sector" that can help reduce poverty and provide sustainable financial support to community institutions.

Why it's important:

Ongoing charity:

Waqf is considered an " ongoing charity" , meaning it's benefits continue even after the donor's death, earning them continuous reward.

Community welfare:

It provides a sustainable financial structure fir public goods and services, integral to Islamic societal development.

Distinction from Western endowments:

Traditional endowment policies are often forbidden in Islam because they involve interest and uncertain elements.
Waqf, however, focuses on the preservation of the principals and the use of profit, aligning with Islamic principles of charity and avoiding impermissible financial practices.

Concept of endowment in Islam:

An endowment is money or property donated to an institution for a specific purpose. It typically refers to the total of a nonprofit institution's investable asset's, often in the form of cash, stocks, bonds or similar instruments. These assets are also known as its principal or collection.

Types of endowment:

Unrestricted endowments. Unrestricted endowments are donated to an organization without any specific purpose or restrictions.
Restricted endowments.
Quasi- endowments.
Term endowments.

“Endowment” can mean a few different things depending on the field, so I’ll give you the main types, grouped by context 👇

1. Types of (General / Education / Institutions)

These are common in universities, charities, trusts, and foundations:

1. Permanent (True) Endowment

Principal must be kept forever

Only the income or returns can be used

Donor sets this restriction

2. Quasi-Endowment

Funds set aside by the institution itself

Principal can be used if the board approves

More flexible than a permanent endowment

3. Term Endowment

Funds are invested for a fixed period

After the term ends, the principal can be spent

4. Restricted Endowment

Use of income is limited to a specific purpose

Example: scholarships, research, library funds

5. Unrestricted Endowment

Income can be used for any institutional purpose

Least restrictive type

2. Types of Endowment (Insurance)

In life insurance, an endowment is a savings-plus-insurance product:

1. Pure Endowment Policy

Pays only if the insured survives the policy term

2. Endowment Assurance Policy

Pays either on death during the term or survival at maturity

3. Unit-Linked Endowment Policy

Benefits depend on market-linked investments

4. With-Profit endowment:

Includes bonuses based on insurer performance

3. Types of Endowment (Economics / Development)

1. Factor Endowment

Resources a country or region possesses

Example: land, labor, capital, entrepreneurship

2. Human Endowment

Skills, education, and health of people.

Purpose of endowment:

Most endowments are designed to keep the principal corpus intact so it can grow over time, but allow the nonprofit to use the annual investment income for programs, operations, or purposes specified by the donor to the endowment or the board of directors.

Benefits of an endowment:

Endowments offer financial independence and create a steady, ongoing of income.
Endowments offer financial independence.
Endowments enhance prestige and provide a direct channel for future giving.

Theory of endowment :

Endowment theory holds the mere ownership of a thing causes people to assign greater value to it than they otherwise would. The theory entered legal scholarship in the early 1990's and quickly eclipsed other accounts of how ownership affects valuation.

The Theory of Endowment usually refers to the Endowment Effect in behavioral economics.

Endowment Effect (Theory of Endowment)

It says that people value things more once they own them, simply because they own them.

In short:

Ownership increases perceived value.

Key idea

People tend to demand more money to give something up than they would be willing to pay to acquire it in the first place.

Classic example

You’re given a coffee mug for free.

If you didn’t own it, you might pay $5 for it.

Once it’s yours, you might refuse to sell it for less than $10.

Nothing about the mug changed — only ownership did.

Why it happens

Loss aversion (from Prospect Theory): losing something feels worse than gaining something of equal value feels good.

Emotional attachment forms quickly.

Ownership makes items feel part of our identity.

Where it shows up

Marketing & pricing (free trials, samples)

Negotiations (sellers overvalue what they’re selling)

Finance (investors hold losing stocks too long)

Law & policy (property rights, compensation)

Contrast with traditional economics

Traditional theory assumes people are rational and value items objectively.

The endowment effect shows we’re predictably irrational.

If you want, I can also:

explain it with a diagram

compare it to Prospect Theory

give exam-ready notes

or show real-world business examples.

Key features of an endowment:

Endowments are usually awarded by trusts, private foundations, or public charities. They benefit non profit educational institutions, cultural institutions, and service oriented organizations. Most endowments come with restrictions that limit their use to the investment income of the fund, not the principal.

An endowment (especially in economics or public finance) has a few core, defining features:

1.Permanent capital:

The principal amount is meant to be preserved indefinitely. Only the income or returns are typically used.

2.Income-generating:

Funds are invested (stocks, bonds, real estate, etc.) to generate regular income or growth over time.

3. Specific purpose:

Endowments are usually established to support a defined objective—like education, research, scholarships, healthcare, or religious activities.

4. Long-term orientation:

They’re designed to provide sustainable support over many years, even across generations.

5. Restricted or unrestricted use:

Restricted endowment: income must be used only for purposes set by the donor.
Unrestricted endowment: the institution has flexibility in how returns are used.

6.Professional management:

Managed by trustees or investment committees to balance growth, risk, and stability.

7. Spending rules:

Typically follow a fixed spending rate (e.g., 4–5% annually) to protect the fund from depletion.

8.Legal and ethical oversight:

Governed by laws, donor agreements, and fiduciary responsibilities to ensure proper use.

Are endowment is Halal:

A Halal endowment is a never ending charitable trust established under Islamic law. The endowment consists of assets or property dedicated to serving a specific cause, with the income generated from these assets used for ongoing support.

Characteristics of the endowment effect:

People's tendency to prefer things they do not own over things they already have. People's tendency to value items they own more than equivalent times they do not own. People's tendency to buy more expensive items for better quality.

Endowment means dedicating something that can give benefit, while retaining ownership of it, in order to gain reward from Allah SWT. This means that the principal is retained, but the yield is given freely. For example, a person or to maintain a mosque, or to publish religious books etc .

Creating an endowment is highly encouraged, and this is illustrated by what is reported about Hazrat Umar R.A.

" He obtained some agricultural land at Khaybar. He went to the Prophet Muhammad SAW and asked him: " O Messenger of Allah SWT. I have this land at Khaybar, which is the most valuable property I have ever hadowned. What do you order me to do with it? " The Prophet Muhammad SAW said: " You may wish you retain the principal and dedicate the yield for charity ". ( Hazrat Umar R.A did that, stipulating that the land itself would never be sold, given as a gift, or possessed by inheritance".

Hazrat Abu Huraira reports that the Prophet Muhammad SAW said:

" When a human being dies, all his deeds come to an end expect in three ways: a continuous act of charity, a useful contribution to knowledge or a dutiful child who prays for him".

The continuous act of charity means the endowment.

Rulings:

The following rulings apply to endowments.

The person dedicating the endowment must be qualified to take such action, being a sane, free adult who can make appropriate decisions.
The endowed property should be of a type that can be used for a long time, while it must be clearly identified.
The endowment should be to serve a good purpose, such as the maintenance of mosques, helping poor people, education etc. It's aim is to earn Allah's SWT reward. Therefore, it is forbidden to make an endowment to maintain the temples of non- Muslims or to buy what is forbidden.
It what us endowed falls into a state that makes it of no benefit, it may be sold provided that its value is used for a person similar to that intended by the person who endowed it. For example, if it is a mosque the funds should go towards building a similar mosque, and it is a mosque and if it is a house the funds should be used towards buying a similar house. This is yo maintain the purpose for which it was originally endowed.
An endowment is a binding contract which is conformed by a mere verbal statement. An endowment cannot be revoked or sold.
The endowed property should be identified, endowing what is unidentified is void.
The conditions stipulated by the person creating the endowment must be abided, by, as long as they do not contravene Islamic law.
If the endowment is for the benefit of one's Children and grandchildren, it should be shared equally between males and females.

Waqf is a special kind philanthropic deed in perpetuity. It involves donating a fixed asset which can produce a financial return it provide a benefit.

The benefit generated then serves specific categories of beneficiaries. Muslims giving waqf typically donate a building, land or cash with no intention of reclaiming the value gained from them.

A charitable trust may hold the donated assets.

Waqf can also raise funds by creating a cash waqf. This means that a loan portfolio - based on Islamic principles is built from the value of the waqf fund.

Waqf's fundamental principle is that the asset remains whole. For example, communities may use a field given as waqf in a way that is beneficial - such as by by growing crops on it. The land itself is left intact, and so can go on helping the community for generations. For loan portfolios, tha loans must be recovered in full and loss- equalizing reserves created.

Islamic relief began offering waqf as a way to donate nearly 20 years ago. Find out more about how a simple donation achieves endless benefits with the international waqf fund.

History of Endowment in the islamic world:

Based on several Hadiths and with similar elements to practices from pre- Islamic cultures, ghr specific fully fledged Islamic legal form of endowment seems to date from the ninth century.

Supported Islamic waqf law, foundations for learning institutes and hospitals were by the tenth century firmly established throughout the Islamic world. By the next century, many Islamic cities has several waqf- funded hospitals.

Institutions funded various expenses such as salaries for doctors, ophthalmologists, surgeons, chemists, pharmacists, domestics and other staff. They also paid for food, medicine hospital equipment like beds, as well as repairs to buildings.

Waqf trusts also funded medical schools, with revenue used to cover expenses like maintaining buildings and students.

Islamic endowment in the light of the Quran Kareem and Sunnah and it's role in the development of scientific research: An analytical study:

The contemporary world suffers from multiple economic problems, which have had a significant impact on various aspects of life, including the scientific aspects, as they led to a lack of financial support scientific projects, hence the urgent need to revive the Islamic endowment system to support scientific institutions in a way that helps develop scientific research. The problem statement of this research lies in the lack of spending of Islamic countries on scientific research, due to the economic difficulties experienced by most of these countries, which necessitated the consideration of other alternatives to meet the needs of scientific institutions, so this research came to encourage scientific waqf, for the benefit of researchers and educational institutions. In this research, the inductive analytical method was used, by collecting the data related to the concept of scientific waqf. This research identifies that: 1. The scientific endowment is that you keep some assets with the intent of working to develop the scientific research, process in it's comprehensiveness in a way that benefits the community, and the ruling of the endowment is that; it is lawful according to Sunnah and consensus.

2. There are several means for the scientific endowment to achieve it's lawful purposes; including benefiting from the cash endowment in the development of scientific research, benefiting from money by lending it to students, buying real estate and it's proceeds from the scientific endowment in order to benefit from the proceeds to finance the scientific research.

3. There are several models and types of scientific endowments, for example, development of education in Malaysia through the scientific endowment. Finally it suggests further studies to shed light about the importance of educating the Ummah about the importance of the scientific endowment in Islam to solve the problems of the society, and to come up with the most important ways to invest in the scientific endowment in Islam.

Definition of Waqf in Arabic language:

As for the terminology, the endowment is the upholding of the original part of the fruit. In other Words: " Locking up money and spending it's benefits for the sake of Allah SWT".

Conditions for the validity of the endowment:

The validity of the endowment shall be subjects to the following conditions:

To have benefited from the some parts while keeping the.
To be on land such as mosques, archways, relatives, and the poor.
To stand on a certain side such as a mosque, or a person such as Zayd, for example or a category such as the poor.
The endowment shall be perpetual, completed and not temporary ana suspended unless suspended by his death.

Islamic endowment is known in Arabic as waqf. The literal meaning of the word is to stop, contain or preserve. In Islamic jurisprudence or in the shariah an endowment is a voluntary, permanent, irrevocable dedication of a portion of one's wealth either in cash or in kind to Allah SWT. Once this portion is an endowment, it can never be withdrawn, inherited or sold. It belongs to Allah SWT. The body of Endowment always remain intact, but the produce or profits can be utilized for any shariah compliant purpose. It is a very important part of Islamic law because it is woven into the structure of Muslim society.

The many verses in the Quran Kareem that urge believers to be charitable pave the way for endowments.

" And give glad tidings to those who believe and do righteous deeds"..

" By no means will you attain righteousness unless you spend in Allah's SWT cause giving freely from what you love. And whatever you give, Allah SWT knows it well".

Moreover, the traditions of Prophet Muhammad SAW, may the mercy and blessings of Allah SWT be upon him, make endowments a popular form of charity because they constitute an ongoing charity. Prophet Muhammad SAW said, " When a human being dies, good deeds come to an end, except for three: ongoing charity knowledge which benefits others, and a righteous child who prays for him or her".

In order to please Allah SWT and to assure that their rewards in the hereafter continue long past their death, Muslims across the globe donate their property and possessions in the form of righteous child who prays for him on her".

In order to please Allah SWT to assure that their rewards in the Hereafter continue long past their death, Muslims across the glove their property and possessions in the form of endowments. They build places of worship and centers of education, provide health care, facilitate trade to fund and maintain structures that provide free water to the public, and provide a range of institutions for the protection of the weak and needy.

The practice of endowment developed with the Islamic society. At first, endowments were simple assets such as farmlands, wells and orchards. A famous example of an endowment property is the well of Usman in Madina, founded in the first year after migration. This well originally belonged to someone who was selling water to the poor at an exorbitant price. Prophet Muhammad SAW promised Paradise to the one who would buy the well and endow it to the city. When Usman heard this, he purchased the well in two installments, at a high price. The well was registered as an endowment and all the people of Madina, Muslim and non- Muslim alike, were allowed to draw water water from it for free. This well still exists and is used till today.

Hazrat Umar ibn Al Khattab also founded a noteworthy endowment. Umar acquired a valuable piece of land and asked Prophet Muhammad SAW to advise him on what he should do with it. Prophet Muhammad SAW said, " if you wish you can keep it as an endowment to be used for charitable purposes". So, Hazrat Umar gave the land as an endowment. Thus the land could not be sold nor given away either as a present or a bequest, but its yield would, in perpetuity be used for lawful Islamic charitable purposes, for example feeding the poor using the profits to free slaves, or other charitable acts necessary at the time.

Throughout Islamic history, endowments have been used to support hospitals and schools, to provide relief for the poor, to provide relief for the poor to maintain mosques and other religious centers and even to endow astronomical observatories and other facilities for scientific research. Many of the historical endowment documents stipulated that the beneficiaries could be rich or poor and belong to any religion, race or ethnicity.

Types of endowment:

Generally there are two kinds of endowments: public and private. In a private endowment, the proceeds from the endowment are designated for the offspring and descendants of the endowment's founder. In a public endowment the proceeds are dedicated to charity and philanthropy.

Public endowments are not subject to the obligatory charity known in Islam as zakah.

Imam al- Nawawi said if something is endowed for the public interest, such as for the poor, mosques, orphans and so on, their is no zakah on it, and there is no difference of scholarly opinion concerning that because it does not have a specific owner.

Essential conditions for making a valid endowment:

1. The person making the endowment must be competent. This means mind the person must be of sound mind and have reached the age of legal maturity.

2. The person making the endowment must be the legal owner of the property.

3. A family endowment cannot come into clash with rules of inheritance.

4. The person making the endowment must be free from debt.

5. The endowment must be voluntary. The person making the endowment must not be coerced in anyway.

Essential condition of the endowment:

1. The endowment must be permanent. If cannot be made for a limited period.

2. The endowment should be intended for a good purpose. The result of the endowment cannot harm individuals or the community.

3. The endowment assets should be Islamically lawfully. For instance, it would not be lawful to create an endowment from a factory producing alcohol.

4. The endowment must be unconditional with no hidden aspects.

A waqt endowment entailed both private and public aspects. In private law, any property owner possessed the ability to create a waqf as a private individual. This rule accounted for social and commercial structures formed at Islamic law's founding, which was designed to govern a society of merchants, and therefore took the concept of private property quite seriously. The waqf instrument accordingly rejected a deep legal respect for private ownership. In public law, a waqf endowment was also meant to contribute to the public good of society, not with standing the right of a private individual to create it.

The concepts of private benefit and public good involved in waqf creation led to some distinctive views among early jurists when determining the types of permissible endowment beneficiaries. While Muslim jurists respected the right of dhimmis, non- Muslims living in medieval Muslim societies, to create waqf's to benefit individuals, these same jurists struggled with the question whether to allow non- Muslims to promote their religion publicity. In the jurists estimation, if the aim of their medieval Muslim polity was to establish Islam as a state religion while accommodating non Muslims minorities, using waqf's to further other religions was arguably contrary to the public good. At the same time, using waqfs established by non- Muslims trips to the Hajj pilgrimage might also be impermissible. Doing so would be contrary to the non- Muslim dhimmis faith, which the Islamic polity had a responsibility to also protect.

Significance about endowment in Islam:

Islam, endowment—known as Waqf (وقف)—has deep religious, social, and spiritual significance. It’s more than charity; it’s a lasting legacy.

Here’s why waqf is so important:

1. Continuous Reward (Ṣadaqah Jāriyah)

One of the greatest virtues of waqf is that its reward continues even after death. The Prophet Muhammad ﷺ said:

“When a person dies, all their deeds end except three: ongoing charity (ṣadaqah jāriyah), beneficial knowledge, or a righteous child who prays for them.”

(Muslim)

Waqf falls directly under ṣadaqah jāriyah, meaning the donor keeps earning rewards as long as people benefit from it.

2. Strengthening the Ummah

Historically, waqf funded:

Mosques

Schools and universities

Hospitals and clinics

Orphan care

Water wells and roads

This made Muslim societies self-sustaining, reducing dependence on rulers or the state.

3. Encourages Social Justice & Welfare

Waqf ensures long-term support for the poor, travelers, students, widows, and the needy. It institutionalizes compassion and fairness in society.

4. Protection of Property for Good Causes

Once property is declared waqf:

It cannot be sold, inherited, or gifted

Its benefits are dedicated permanently to Allah

This safeguards assets from misuse and keeps them serving the community.

5. Promotes Long-Term Thinking

Unlike one-time charity, waqf is about sustainable benefit. It teaches Muslims to think beyond their lifetime and invest in the hereafter.

6. Established by the Prophet ﷺ and the Companions

English Translation:

And gives wealth, in spite of love for it, to relatives, orphans, the needy…

Urdu Translation:

اور اللہ کی محبت میں اپنا مال رشتہ داروں، یتیموں اور محتاجوں کو دیتا ہے۔

Conclusion:

Endowment (Waqf) in Islam represents a powerful system of lasting charity, social welfare, and spiritual investment. Rooted in the Qur’ānic principles of spending in the way of Allah and seeking enduring good deeds, waqf transforms personal wealth into a permanent source of benefit for humanity.

Through waqf, a Muslim dedicates property or resources solely for the pleasure of Allah, ensuring that its benefits continue for generations. It reflects key Islamic values such as selflessness, responsibility, justice, and care for the community. Historically, waqf played a central role in supporting mosques, education, healthcare, and the poor, making Muslim societies resilient and compassionate.Most importantly, waqf is a form of Ṣadaqah Jāriyah, providing continuous reward even after death. It encourages Muslims to think beyond temporary worldly gains and invest in the hereafter, turning finite wealth into infinite reward.In essence, endowment in Islam is not merely a financial act—it is an act of worship, a legacy of الخير (goodness), and a means of ongoing closeness to Allah.