Islamic Capitalism and Finance
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Islamic Capitalism and Finance

Origins, Evolution and the Future

Murat Çizakça

This illuminating and thought-provoking book questions whether classical Islamic capitalism, which has served Muslims so well for centuries, can provide a viable alternative world economic system. In the current recession – the worst since 1929 – this is surely a provocative question. But if Islamic capitalism is to emerge as a viable alternative, its nature and systems must be well understood.
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Chapter 8: Waqfs of Stocks

Murat Çizakça


In some Muslim countries considerable advances in modernizing the classical waqfs have been achieved. It is important that these achievements are fully explained so as to facilitate their dissemination all over the Islamic world. There is no doubt that, just as observed throughout European history, first identifying the best practice and then borrowing it, if necessary, with further improvements, constitutes a crucial element of economic development.1 The modus operandi The Islamic world borrowed the concept of joint-stock corporations from the West during the nineteenth century, and this led to a synthesis of this Western invention and the traditional cash waqfs. The outcome of this synthesis, approved in the early twentieth century, is the waqf of stocks. Full details of this approval were presented in the previous chapter. The modus operandi of these waqfs can be summarized as follows. A waqf of stocks is established when a wealthy individual endows his shares for a charity. These shares belong to a multitude of incorporated joint-stock companies so as to form a portfolio and diversify risks. When these shares are endowed in the form of a waqf, the latter becomes a recipient of the profits generated by the companies. The exact amount of profits (or losses) to be distributed to the waqf depends on the number of shares endowed. It is generally expected that the losses that are made by some of the companies are compensated by the profits of the others. In any case, since the companies are managed professionally, a loss-making...

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