The permissibility of endowing money in Saudi Arabia: Promoting sustainability and development
The General Authority for Endowments in Saudi Arabia announced the legality of "cash endowments" under Islamic law and regulations, a significant development in the endowments sector that keeps pace with modern economic changes. The Authority emphasized that this permissibility is conditional upon the investment of these endowed funds to protect the principal from inflation and to foster its growth. The returns on these investments must be directed to the banks designated by the endower, thus strengthening the principle of financial sustainability and enhancing the developmental impact of endowments.
The historical context and jurisprudential development of the endowment of money
Historically, the concept of waqf (endowment) was primarily associated with fixed assets such as real estate and agricultural land, which formed the backbone of the economy in earlier Islamic eras. This type of waqf played a pivotal role in financing public services such as hospitals, schools, and libraries. With the development of financial systems and the emergence of new investment instruments, the need arose to adapt the concept of waqf to include movable and monetary assets. While the endowment of money has been the subject of lengthy jurisprudential debate, many contemporary Islamic legal bodies and councils, including the Saudi General Authority for Endowments, have permitted it based on the objectives of Sharia in achieving public benefit and facilitating charitable acts for people. The endowment of money allows a wider segment of society to participate in waqf activities with any amount, however small.
The importance of the decision and its expected impact
This decision is of paramount strategic importance on several levels. Locally, it aligns with the goals of Saudi Vision 2030, which aims to increase the contribution of the non-profit sector to the GDP. It also opens new avenues for individuals and institutions to contribute to community development through a flexible and easily implemented endowment mechanism. This decision is expected to increase the size of endowment assets in the Kingdom and direct them towards vital sectors that require sustainable funding.
At the regional and international levels, the decision by an organization of the size and stature of the General Authority for Endowments in Saudi Arabia sets a regulatory and legislative model that other countries seeking to develop their endowment sector can benefit from. This decision also reinforces the Kingdom's position as a leading center in Islamic economics and finance, and offers the world a practical example of how to activate Islamic social finance tools to address contemporary development challenges.
Endowment funds: A modern tool for activating cash endowments
The Authority indicated that “endowment funds” are among the most prominent forms of cash endowment. These funds pool cash donations from multiple donors and then invest them professionally in diverse and legitimate sectors under specialized management. This mechanism allows for maximizing returns and distributing risks, thus ensuring a continuous flow of income to charitable projects. The Authority emphasized that this framework guarantees the protection of the rights of donors and beneficiaries through precise governance mechanisms that prevent any infringement upon the endowment's principal and ensure that its proceeds are directed to their designated purposes with complete transparency and efficiency.
