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Islamic Finance

New UK waqf fund to start investing in real estate with eye on other asset classes


LONDON - The recently established UK-based National Waqf Fund (NWF) will start investing in real estate with an eye on other asset classes such as start-ups, according to CEO and co-founder Umer Suleman.

Whilst waqf funds exist in the UK, most are associated with specific organisations like Islamic Relief. There are few social waqf funds focused on capacity building in society. Recently however, this trend has started to change. For example, the new One Endowment Trust (OET) will combine commercial and social investments where a portion of the returns will be reinvested in or to fund social projects.

However unlike OET, NWF (which is not a government initiative) will be focused on the charity and social aspects of waqf. The three main aims of NWF are to establish a central fund, manage awqaf on behalf of other organisations as well as create a virtual centre of excellence for Islamic endowments.

“The vision of NWF is to uplift and benefit the Muslim community,” said Suleman.

NWF is registered with UK’s Companies House as a “Private Limited Company by guarantee without share capital use of 'Limited' exemption.” Suleman explained this was done for operational and administrative purposes. However, he stressed that NWF’s articles of association highlight that it is a not-for-profit entity and that its shareholders are trustees.

With regards to its charitable status, the NWF engaged with the Charity Commission for advice. The Commission advised that NWF apply with its own charitable objectives as opposed to supporting other charities and causes. At present all three objectives fall under one central organisation. Suleman said that whilst NWF is planning to apply as a whole for charitable status, it is looking at its operational model and considering whether or not to split the three operations.

Suleman said that depending on whether NWF splits the activities or not, its Centre of Excellence will have charity status because it has its own specific objectives.

“The objectives are to research different awqaf and endowments globally and provide education and research papers for helping develop this area of philanthropy, as well as research on impact giving,” he said. “It will be academic and faith based in nature.”

STARTING WITH REAL ESTATE

NWF will invest in real estate and through its investment committee decide on how and where to deploy the funds.

“Real estate is easy to understand and it’s a tangible profit,” said Suleman. “With real estate there is rent coming in and donors and investors are comfortable with it. It is also easier to manage and control it.”

The upcoming property portfolio will primarily focus on London, Birmingham and Manchester, without the exclusion of other areas, Suleman noted.

Initially, the waqf will focus on residential properties but it will also consider commercial properties in the longer term. NWF will look at a range of new developments and existing properties.

It will focus on monthly, annual and capital appreciation, according to Suleman. The aim is for a blended rental return of 5% to 6% and capital appreciation of 2% a year.

In the longer term, Suleman envisions that NWF will invest in other classes like start-ups.

“Over the next 1 to 2 years we are conservative in terms of the returns on investments,” he said. “We want to have the ability to influence investments like start-ups and projects. We also may look at Islamic equities via indices.”

NWF aims to raise £10 million ($12.37 million) within the next 1 to 2 years. Within the next decade, Suleman hopes NWF will have around £150 million of assets under management.

GRASSROOTS INVESTMENTS

To fund the NWF’s investment into real estate, individuals can contribute from as little as £1 to £10,000.

Although it will take sadaqah donations, the waqf will not take zakat because of specific categorisation of zakat recipients, explained Suleman.

The investment committee will then decide where and how to invest the funds.

NWF will split the donations into different buckets like grant schemes.

“Proceeds will be deployed in areas like health, education, deprived areas and medical centre,” said Suelman. “Projects will be for the benefit of the community, both Muslim and non-Muslim.”

He said NWF will invest on the agreement of their investment committee and is looking to deploy its first investment within the next 3 to 6 months with an active eye on the economic outlook.

Adding to this, Suleman said he hopes NWF’s investments are not just halal but that they also meet the higher objectives of the Shariah and align to SDGs. He added that the organisation will be engaging with experts in this area for advice.

Different charities and causes can apply to the NWF and request grants.

“Our waqf also covers small causes that don’t get coverage or don’t have treasury solutions and have to rely on loans or mosque donations,” he said. “Waqf funds are available to these charities.”

He added that NWF aims to provide grant schemes for 2 years as well as Treasury solutions like Qard Hasan.

In terms of personnel, the NWF team consists of people from areas of expertise like ratings, investment, Shariah, technology and social impact. Suleman said NWF is planning to recruit more people to be part of the team.

USING TECHNOLOGY

NWF will seek to utilise technology in the investing, deploying and reporting stages, Suleman explained.

“By using technology, it enables us to do things in a better way through reporting and payment,” he said.

He argues that technology increases accountability of charities and that NWF will provide updates and key performance indicators to donors.

“We will have a robust due diligence process when it comes to reporting, position with Charities Commission, bad press and accounts,” he said.

NWF is live and taking donations. Although it is currently web-based, it is working on an app with an API to integrate with banking providers, said Suleman. The plan is to have the app ready within the next 12 to 18 months.

Technology will also play an important role in the promotion of NWF during the coronavirus pandemic and lockdown, according to the CEO and co-founder.

“During COVID, we will host webinars and have small pitches. We aim to invite people and use social media and through word of mouth.”

EUROPE

While NWF will be focused on the UK, it plans to enter Europe and help other organisations set up local waqf funds in the future.

“We have connections there [Europe],” said Suleman.

“We want to ensure that awqaf are run professionally and values are upheld. Islamic principles like justice and providing equity will be embedded in the system.”

(Reporting by Hassan Jivraj; Editing by Emmy Abdul Alim [email protected])

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Awqaf
Waqf
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Hassan Jivraj