Islamic Philanthropy: Origin of the Waqf
Property rights were taken very seriously at the beginning of Islam, and the provision of alms was a central obligation for Muslims and early Islamic societies, resulting from a combination of Koranic injunctions.
In the beginning, awqafs operated on a small scale, for example by giving up an orchard to grow food for the poor, but the objectives of the awqaf multiplied and their endowments reached substantial dimensions. In the 16th century, awqaf were able to finance a full range of social services. In 1552, Suleyman the Magnificent’s wife, Roxelana, endowed a waqf in Jerusalem with “26 whole villages, several shops, a covered bazaar, 2 soap factories, 11 flour mills and 2 public baths, all located in Palestine and in Lebanon  “.
Islamic society did not invent philanthropy, but innovated in the way philanthropy was delivered. Before the advent of Islam, the families of the poor were generally taken care of. But alternatives existed. In ancient Rome, the state took care of the poor; after the fall of the Roman state, Christian churches succeeded this mandate. However, charitable donations were usually voluntary and ad hoc. The precedents closest to awqaf existed in Jewish communities. During their exile in Babylon, Jews commissioned their temples to administer charitable giving, hence the practice may have spread to Jewish communities. Samhudi reported that Othman ibn Affan had paid 40,000 dirhams for the purchase of a well in Medina, owned by a Jewish neighbor, and that it had been used for free by Muslims .
The purpose of a waqf and a zakat is the same, but they differ in the way they are funded. Zakat was levied on annual income; a waqf, on the other hand, consisted in selling a fixed asset – for example an orchard – and setting aside its future income – its fruit – to predetermined beneficiaries. This difference had serious consequences, because once a waqf had an independent source of income, he could commit to paying for recurring needs, he could even, as in the case of the legacy of Roxelana, pay the infrastructure public. It was a momentous institutional innovation, since social protection in the early days of Islam had two sources of funding: the government paid for pensions and the privately financed endowments were used for charitable purposes outside of his attributions. The Awqaf encouraged social welfare in the broadest sense: its origins went back to the actions of the Prophet Muhammad (Prayer and blessing upon him).
 Gil, “The Earliest Waqf Foundations  Kuran,” The Provision of Public Goods under Islamic Law, “849
MUQAIRIQ AND MOHAMED (PRAYERS AND BLESSING ON HIM)
Prophet Muhammad (Prayer and Blessing) laid the foundation for the charitable sector of Islam with Judaic practices before his eyes.  Muqairiq, a Jewish recruit of Muhammad’s army (Prayers and blessing upon him) mortally wounded in the Battle of Uhud, bequeathed seven properties to Muhammad (Prayer and blessing upon him) with the last vow to use them for the promotion of Islam. Thus the goods in the possession of Muhammad (Prayer and blessing upon him) were subjected to predetermined constraints by the donor. Mohamed (Prayers and blessing on him), grateful to him, praised Muqairiq as “the best of the Jews”. Muqairiq had exposed to Mohamed (Prayer and blessing on him) a new concept, which he quickly apprehended and which was quickly adapted to the use of Muslims.
The Prophet applied this principle of gifts after the conquest of Khaybar when he gave land concessions to his companions – but stipulated how the crops would be distributed. Omar (and others) (may God be pleased with them) thus came to own vast tracts of land, but with limited property rights, so that in practice he was a trustee rather than an owner. According to some traditions, Omar (may Allah be pleased with him) took the initiative to endow a waqf and was given the express permission of Prophet Muhammad (Prayer and blessing on him).
Anyway, the endowments granted by Mohamed after the conquests of Khaybar were awqaf and the decisive moment for the evolution of the awqaf took place during the settlement of the succession of the Prophet Mohamed (Prayers and blessing on him) when his successors perfected the concept. The executor of Mohammed (Prayers and Blessing), Abu Bakr (may Allah be pleased with them), faced with the decision to do anything with the properties of Muhammad (Prayers and Blessing Him) in Medina, Khaybar and Fadak was looking for indications in the Bible. Muhammad (Prayer and blessing upon him) being a prophet, he concluded that his succession should be regulated in the same way as that of all the other prophets, and as no prophet had ever left his family a remarkable wealth, he As a result, the next of kin of the Prophet could not claim anything. Abu Bakr (may Allah be pleased with him) thought that Muhammad being a messenger of God implied that his goods belonged to his “office” rather than to his person. Thus, the property established by Abu Bakr could be held either personally or on behalf of a third party, and this subtle distinction applied not only to the transfer of power, but also to the transfer of property. At that time, Islamic legal thought introduced a subtle but crucial legal distinction between personal property and fiduciary property.
Abu Bakr put this approach into practice to settle his own heritage. As a caliph, he never took advantage of his official position to get rich, but his personal belongings, on the other hand, were invested in a waqf where he designated the members of his family as beneficiaries. In other words, Abu Bakr (may Allah be pleased with him) created a family trust fund, and anyone who wanted to keep their wealth in the family would copy that example. His successor, Omar (God blessed him), applied the concept of loyal property to almost all the booty he possessed as a caliph. In Egypt, recently conquered, Omar invested in a waqf and designated as beneficiary the Ummah. Othman refused to respect the distinction between personal property and trustees (and therefore precipitated its overthrow), but he also knew the concept of ownership of public goods. When Othman defended himself against accusations of misappropriation of public funds, he reminded his accusers of the Medina well he had bought and used for free. Ali (God bless him), succeeding Othman, imitated Omar’s precedent and yielded most of his personal property to the support of the poor.
 Gil, “The Earliest Waqf Foundations.
Awqaf was a hybrid form of social institution, beyond the control of government or private interests. The legal structure of awqaf has been refined over time. They were embryonic charities and then became full entities with their own legal framework, governance structure and endowments.
To qualify as waqf, a legacy had to meet three criteria: first, it had to be irrevocable, perpetual and inalienable; secondly, the residual assets were to be donated to charitable works; and third, a lawyer and witnesses had to certify that the acquisition process was conducted in accordance with the law. 
Corporate governance has been designed to avoid conflicts of interest. A benefactor was forbidden to derive personal benefits from his endowment and had to appoint a mutawalli manager who balanced the accounts and managed the waqf. The donor determined the objectives of a waqf and, if unforeseen circumstances rendered the original statutes of waqf obsolete, the clarification of discretion should be approved by a qadi. Trials involving awqaf were common. Maya Shatzmiller highlighted a court case in Fez where Islamic courts have discerned the subtle distinction between the asset base of a waqf and its cash flow . On this occasion, a benefactor from Fez had a waqf to maintain a local mosque before allowing changes to the structure of the mosque. A legal dilemma arose when a Jewish community in neighborhoods adjacent to the mosque asked Mutawalli for permission to bring water to their homes from a well in the courtyard of the mosque. This proposal put the mutawalli in a dilemma: firstly, he would have liked to win an annual subscription, but on the other hand, to build a canal would break the wall of the court and thus contravene the statutes of waqf. A qadi to whom they asked for a decision approved the transaction provided that the tenants agree not only to pay an annual rent, but also to cover the costs of building the canal and repairing the wall. By allocating capital costs to the tenants, the waqf asset base has not been reduced and the mutawalli has remained in compliance with the waqf bylaws.
Economist Timur Kuran stressed that awqaf are not immune to corporate abuse . Mutawallis could be overpaying their services, or worse, diverting funds. In another case dating back to medieval times in Fez, a mutawalli had speculated on cereal markets and squandered the entire endowment when the market had attacked it. The biggest risk, however, was expropriation. Judges had to show determination and honesty to the same extent in order to protect the integrity of awqaf against abuses by officials and governments. Author Tanukhi from Baghdad provided insight into the tensions involved in several stories about a fictitious judge, Abu Hazim. In one of these stories, Abu Hazim confronts a mutawalli about a missing account in the accounts of a waqf. It turned out that the mutawalli had a debtor and he was too shy to sue: He was none other than the Mutadid caliph. At this point, the reader easily understands the mutawalli’s hesitation: who would dare to risk the anger of a caliph by insisting that he settle his debts? But Abu Hazim remained firm: he reprimanded the Mutawalli and threatened to fire him if he did not press his claim. Mutawalli, faced with the prospect of losing his job, had no choice but to face Mutadid. Tanukhi informs his readers of the seriousness of the situation in his book. Abu Hazim had forced the mutawalli to venture because the caliph, after hearing the demand for money, remained silent for a moment, lost in thought. Fortunately, the tensions were resolved and the story ended well: Mutadid settled his arrears; the waqf respected its commitments; and mutawalli kept his job. Tanukhi sums up the moral of the story that “there was general gratitude to Abu Hazim for his audacity and to Mutadid for his justice.” 
In another story, Abu Hazim forced Mutadid to respect the benefits for the orphans, because there is God’s law for those who are of age; so how much more must we observe in the case of infants?  Tanukhi’s stories sound like personal observations; indeed, Tanukhi was a judge by profession.
 Kuran, “The Provision of Public Goods under Islamic Law: Origins, Impact and Limitations of the Waqf System,” 863.  Shatzmiller, “Islamic Institutions and Property Rights: The Case of the ‘Public Good’ Waqf, “65-66.  Kur
ASSETS UNDER MANAGEMENT
The donation of a waqf made it possible to satisfy a donor’s desire for social prestige, to protect his property from the government and to respond to Islam’s demand to support the poor. Awqaf had legacies; often a third of the estate was reserved for a waqf. Awqaf financed wells, roads, hospitals and schools (and thus all forms of study and professional research). Some schools could be luxurious. In Cairo, a 14th century madrasa had marble floors and Lebanese cedars for the ceiling. Because awqaf controlled substantial wealth, they implicitly limited the tax base and state power.
In 14th-century Egypt most of the agricultural land in the Nile Valley was devoted to awqaf.
EXTRACT FROM THE BOOK : Benedikt Koehler’s Early Islam and the Birth of Capitalism