In a strategic move aimed at governing the non-profit sector and enhancing its contribution to economic and social development, the General Authority for Endowments a detailed guide that identifies the basic pillars of endowment and sets up modern regulatory frameworks that accommodate contemporary economic changes.
Vision context and development of the endowment sector
This regulatory move aligns with the goals of the Kingdom's Vision 2030, which aims to increase the non-profit sector's contribution to the GDP to 5%, with endowments (waqf) being the most important financial resource for the sustainability of this sector. Through these regulations, the Authority is working to shift the concept of endowments from traditional practices, often limited to real estate, to broader investment horizons that include modern financial instruments, thereby enhancing the efficiency of endowment assets and maximizing their social impact.
The four pillars of endowment: ensuring legitimacy and order
The new guidelines confirm that an endowment is not legally and religiously valid unless four essential elements are fulfilled, namely:
- The endower: He is the one who establishes the endowment, and it is required that he has full legal capacity and complete ownership of the money, and that he is acting of his own free will and not under duress.
- The beneficiary: This is the entity that benefits, whether it is a specific entity (such as the descendants) or a general charitable entity (such as the poor and students of knowledge).
- The formula: It is the word or action indicating the establishment of the endowment, and it is the cornerstone in proving the endowment.
- The endowed (original): The money that is held in trust, and it is required that it be known, owned, and capable of being used while its substance remains.
A qualitative leap: authorization to suspend cash and stock trading
In a remarkable development reflecting the flexibility of Islamic jurisprudence and its adaptation to modern economics, the evidence explicitly permits the endowment of cash, stocks, and shares in companies. This opens the door wide to the establishment of investment endowment funds, where the endowed cash is invested in secure portfolios, and its returns are distributed to designated banks, thus resolving the problem of stagnant real estate assets and the difficulty of liquidating them in some cases.
The difference between endowments and other entities
The guide clarified the fundamental differences between endowments (waqf), charitable organizations, and non-profit companies. Endowments are characterized by their permanence, achieved through the preservation of the principal and the dedication of its benefits, while charitable organizations and institutions focus on developmental and social programs under the supervision of the National Center for the Development of the Non-Profit Sector. This organizational distinction helps donors and endowers choose the most suitable legal framework to achieve their charitable goals.
Protecting and Governing Endowments
The guide addressed mechanisms for protecting endowments of unknown origin, emphasizing that endowments do not lapse with time. The General Authority for Endowments assumes guardianship over endowments whose trustees have ceased to exist or whose beneficiaries are unknown, to ensure the continued disbursement of their proceeds to charitable causes. The regulations also stressed the importance of officially documenting endowments with a notary public and registering them with the Authority to guarantee the legal protection of the endowed asset and prevent future encroachments or disputes among heirs or trustees.
This guide serves as a comprehensive reference for trustees, donors, and legal professionals, covering aspects of endowment management, investment, disposal, and dispute resolution mechanisms, thus establishing a new phase of transparency and institutionalization in the management of endowment wealth in the Kingdom.
