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Islamic institutions in Bahrain and Malaysia said on Thursday they would develop a ratings scheme for Islamic endowments, or awqaf, as part of efforts to modernise the sector and unlock large pools of capital.
The Manama-based Islamic International Rating Agency and the Malaysia-based International Institute of Islamic Waqf (IIIW) hope that greater accountability in the management of awqaf can help integrate them into Islamic financial markets.
This could mobilize largely idle assets which are estimated to be valued anywhere between $100 billion and $1 trillion across the globe, the two bodies said in a joint statement.
A ratings scheme would allow financial, regulatory and international organisations to better understand the industry, said Anas Al Dowayan, chief executive of IIIW.
“We expect that we can help to unlock the great untapped value that exists within distressed Awqaf assets.”
This would include putting in place sharia-compliant financial products to help awqaf beneficiaries and Islamic finance markets, he added.
Awqaf operate social projects such as hospitals, mosques and schools with donations received from Muslims in the form of land, cash or other valuables.
Their operation, however, has often failed to keep up with their expansion. Many are poorly managed and earn low to zero returns, sometimes requiring further donations to keep them running.
Most Awqaf do not disclose financial figures, but their underperformance is believed to be considerable since they have traditionally been run by administrators rather than investment managers.
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