The Freedom and Justice Party, the parliamentary arm of Egypt’s Muslim Brotherhood, aims to develop the practice of waqf or religious endowments as part of its plans to expand the use of Islamic finance, a party official said.
In waqf, people contribute a portion of their wealth, in cash or other assets, to sharia-compliant and charitable projects such as mosques and schools. But the management of such endowments in Egypt has been widely criticized as inefficient.
Ahmed al-Najjar, a member of the FJP’s economic committee, said in a telephone interview this week that waqf endowments (awqaf) in the country totaled about half a trillion Egyptian pounds ($82 billion), but the yield on them was very low - according to a report by the Ministry of Religious Endowments, it is about 1.5 billion pounds annually, he said.
One problem is that managers of a waqf often lack financial expertise, in contrast to countries such as Turkey and Malaysia. The solution may be to encourage the hiring of experienced financial managers for awqaf, Najjar said.
Another proposal under consideration by the FJP is to encourage the formation of awqaf not through a contribution from a single wealthy donor, but through multiple small subscriptions to a sukuk (Islamic bond) offered publicly.
The proceeds of the sukuk could then be used to purchase waqf assets. This would expand the number of people involved in awqaf and give managers more flexibility to invest endowment money, Najjar said.
Despite the election victory in June of Egypt’s President Mohamed Mursi, backed by the Brotherhood, a new cabinet has not yet been formed and there is no fully functioning parliament or constitution. This is likely to delay any administrative or legislative moves to boost Islamic finance.
But Najjar said the FJP would push for the creation of sharia-compliant financial instruments to be used in monetary policy. For example, Islamic instruments could be used by the central bank for short-term financing operations, allowing authorities to benefit from the liquidity held by Islamic banks, he said.
“We want the introduction of these tools along with traditional financing tools,” Najjar said.
FJP officials have previously said they aim to boost the market share of Islamic banks in Egypt to 35 percent in five years from roughly 5 percent now - but by increasing the total size of the banking sector, not by penalizing conventional banks.
Najjar said his party was also considering how Islamic investment funds could be launched to support the growth of small and medium-sized enterprises, which are crucial to create jobs.