Cash Waqf

A waqf (perpetual charitable endowment) whose capital is money rather than land or buildings. The principal is preserved and invested in Shariah-compliant assets, and only the returns are spent on the designated cause, such as a mosque, school, scholarship fund, or community loan fund.

Classical scholars debated whether money could be endowed since it is consumed by use; the Hanafi school permitted it on the condition that the capital be invested and preserved, and contemporary bodies have accepted it. Cash waqf is the model behind many modern Islamic community foundations and donor-advised endowments.

Cash waqf is the Islamic vehicle for what American philanthropy calls an endowment, and it fits cleanly into U.S. law as a restricted fund held by a 501(c)(3) organization or a donor-advised fund with a halal investment option. The founder gives a sum, directs that the principal be preserved and invested in compliant assets, and names the purpose the income will serve forever. Three conditions distinguish it from an ordinary donation.

Perpetuity: the capital is not to be spent, which is why the investment policy matters as much as the gift; a cash waqf invested in a conventional bond fund has broken its own terms. Specified purpose: the founder names the beneficiaries or cause, and the manager (nazir) is bound by it. Independent management: the nazir owes fiduciary duties and should report on both the investments and the distributions.

In the United States, cash waqf is how several Islamic centers fund operations and scholarships, how community interest-free loan funds (qard hasan funds) are capitalized, and how families establish sadaqah jariyah for a deceased relative, since the ongoing income is continuing charity in the deceased's name. A donor considering one should confirm the receiving organization's tax status (gifts to a 501(c)(3) are deductible if you itemize), read the fund's investment policy for a Shariah screen, and ask who the nazir is and how distributions are reported. Zakat may not be used to establish a waqf under most views, because zakat must be transferred to eligible recipients; voluntary sadaqah is the proper source.