Early Islamic Charities as Catalysts of Institutional Innovation

Islamic societies may appear unsuitable catalysts for fostering individual enterprise and institutional innovation. This view is challenged by examination of the evolution of charities in early Islam, the so-called waqf. Mohammed’s prescription of providing alms engendered an extensive and varied range of charitable institutions. One example is the creation of Islam’s earliest centres of higher learning, madrasahs. Key concepts of Common Law, such as trusts, may have copied Islamic legal concepts; the constitutions of the earliest colleges of Oxford and Cambridge universities replicated the design of charitable madrasahs.


The tenets of Islam as interpreted by fundamentalists appear to foster stagnant societies that stymie institutional innovation. However, early Islamic society fostered social dynamism through institutional innovations instigated by Mohammed. One example is the evolution of the charitable sector in Islam, which adapts Mosaic precedents and in turn anticipates the establishment of trusts under Common Law by several centuries.

The birth of Islamic charities

In 622 Mohammed fled Mecca and sought refuge in Medina, where he and his followers were welcomed by the resident community of Jewish tribes. Relations between Medinan residents and new arrivals during Mohammed’s tenure, in their early phase, were amicable and marked by mutual respect. For example, Mohammed is known to have paid visits to Medina’s synagogue; moreover, a member of the Jewish community,Muqairiq, joined Mohammed’s troops in earlyMuslim military campaigns.

The closeness of the Muslim and Jewish communities in Medina during this time may have contributed to a porous interchange and exchange of religiously defined monetary concepts. Indeed, one such concept, the Mosaic sadaka, may have contributed to one of the principal obligations imposed by Mohammed upon his followers: zakat, a levy on a Muslim’s wealth to fund alms.

The overlap between zakat and sadaka may explain why the earliest charitable donation of nascent Islam was endowed not by a Muslim, but by a Jewish follower of Mohammed. Muqairiq, a comrade in arms of Mohammed, was a casualty of early Muslim warfare who left his estate to endow a waqf, the Arabic term for a charity. His selflessness and generosity compelled Mohammed to mark his gratitude and respect for Muqairiq by honouring him as ‘best of the Jews.’

Mohammed established the principle of charitable giving. Through his own actions he set precedents for giving zakat, by bequeathing most of his estate to charitable causes. However, Mohammed left considerable leeway for his followers to determine the rateable value of wealth, the application of alms and the structure of charities. Thus, in early Islam it soon became customary for wealthy Muslims to bequeath one-third of their estate to a waqf.

Muqairiq’s and Mohammed’s examples spawned a proliferation of charities. The private sector in Muslim countries came to fund provision of many basic public goods, such as health, food and education. The diversity of charitable purposes was as wide as the range of tastes of their donors. For example, endowments were made to support retired sailors, to provide fruit for children, or even to ensure cultivation of roses, to name but a few.(1)

Over the course of several centuries Islamic jurisprudence developed a rich body of judgments dealing with the interpretation of Mohammed’s will and how it was to be applied in changing circumstances. One reason for the extensive effort devoted to developing laws for Islamic charities was that from the outset they were the subject of litigation. The first case regarding a waqf was brought by Mohammed’s favourite daughter Fatima, whose inheritance was diminished by what she felt were her father’s overgenerous donations to charity. Mohammed had left his family only a fraction of the spoils accumulated in a lifetime’s military ventures, complying with far more exacting standards of charity than those he applied to ordinary Muslims. Fatima sued to be reinstated in claims over a larger portion of Mohammed’s estate to which she felt entitled as daughter of the deceased. The caliph Abu Bakr, the father of Mohammed’s widow Aisha heard the case. During the trial, Aisha (Fatima’s stepmother), endorsed the interpretation of her husband’s will and sided against Mohammed’s disconsolate daughter. The court rejected Fatima’s claim.

The legal structure of Islamic charities

Legal prescriptions accorded autonomy to Islamic charities that provided ample protection from government control. Such prescriptions of legal autonomy became increasingly important with the advent of wealthy Muslims’ realisation that they could evade the grasp of tax officials through the practice of ring fencing prospective bequests. A typical waqf would have served to achieve two distinct, but at times complementary, purposes: the first was to ensure that a donor could determine what happened to his worldly goods after he died; the second ensured protection against interference or abuse by third parties.

The third party in question could be competing legatees, but another was political despots. Muslim rulers on the whole respected the inviolable character of a waqf, and where there were exceptions these were met with determined civic resistance. For example, Sultan Mehmed II expropriated numerous waqif; however, his son and successor Bayezid II, upon accession to the throne, thought it prudent to reverse his father’s decision and to pay compensation (Kuran, 2001, p. 855). Medieval Islam thus acted as a catalyst for social institutions that thwarted co-option by government authorities.

Recognition of charitable status under Islamic law depended on compliance with certain requirements; the bequest had to be irrevocable, perpetual and inalienable (Gaudiosi, 1988, p. 1234). Moreover, provisions were drafted to allow for circumstances where the original intention of the donor could no longer be met: in such cases, by default, residual proceeds would be reserved for poor relief (Kuran, 2001, p. 863).

Further provisions safeguarded against possible conflicts of interest amongst principals, donors and beneficiaries on the one hand, and agents on the other. Agents serving a waqf were the mutawalli and the qadi. The mutawalli was charged with the management of assets, the qadi was appointed to resolve disputes. A waqf thus had a system of corporate checks and balances to ensure compliance with the donor’s intentions.

Legal complications would ensue when a waqf outlived not only its donor but also its original purpose. Circumstances not envisaged at the time of donation created a challenge for the mutawalli who needed to adapt the donor’s intention to circumstances not envisaged by the waqf’s statutes. Decisions regarding a waqf’s business plan were especially sensitive, as mutawallis needed to balance the books within constraints imposed by the donor. Courts frequently heard cases to determine whether a particular business plan was in keeping with the charity’s remit. One such case took place in Fez.

The mutawalli of a mosque in Fez was approached by the neighbouring Jewish community asking for the right to channel water from a well in the mosque’s courtyard to their homes. Prima facie the terms of the waqf precluded any tampering with fixed assets. However, the mutawalli weighed the benefit of a prospective cash flow from rental payments against the cost of repairs from the unavoidable damage to the mosque’s enclosure and took the issue for arbitration to the qadi. The transaction was approved on condition of a surcharge to rental payments to defray capital investment for construction of the canal as well as repair to the courtyard’s wall. In this way, the transaction could proceed without infringing the original provisions requiring maintenance of the mosque’s structure (Shatzmiller, 2001, pp. 65–66).

Charities proliferated throughout the realm of Islam over the course of several centuries. They proved a malleable, yet robust, means of satisfying a donor’s desire to comply with a Muslim’s obligation to demonstrate active concern for worthy causes, whilst achieving social prestige and insulating wealth from political interference. The parallels with modern-day philanthropy are apparent. Mohammed could not have envisaged the eventual scale of assets under management by a waqf. The wife of Suleyman the Magnificent, Roxelana, sponsored a waqf in Jerusalem that ‘possessed twenty six entire villages, several shops, a covered bazaar, two soap plants, eleven flour mills, and two bathhouses, all in Palestine and Lebanon’ (Kuran, 2001, p. 849).

Western copies of Islamic charities

Western visitors to Palestine before and during the Crusades, had exposure to the working of Islamic charities in Jerusalem and in Muslim countries. Pilgrims to Jerusalem would have made use of the hospitality of hostels open to foreigners. Crusaders administering conquered cities, such as the Knights Templar, would have come to appreciate the benefits of endowed hospitals. Pious orders, such as Franciscan Friars, would have taken note of educational charities, madrasahs, which advanced higher learning and conferred degrees entitling graduates to practise as qadi or in other areas of the legal profession. No institutional equivalent was extant in contemporary Europe.

The Knights Templar and Franciscan Friars returning to their home countries would have been eager to replicate the institutions they had observed on their travels. The Knights Templar was a successful multinational corporation of the Middle Ages. They were established in Jerusalem in 1120 and founded a branch in London in 1128.

Around this time, London’s first schools of law were established, precursors to the Inns of Court. These law schools were affiliated with churches, analogous to the Islamic convention whereby schools of law were attached to a mosque (Gaudiosi, 1988, p. 1245).

The Franciscan Friars were another source of first-hand exposure to Islamic law. The order’s founder, St Francis of Assisi, spent the years 1219 and 1220 in Egypt and Palestine. His order introduced into English legal practice another innovation of Islamic jurisprudence: the fine distinction between ownership of an asset and entitlement to benefits from its use (ibid., p. 1240). This differentiation between owners and users of an asset created the condition to develop the law of trusts.

It is a plausible assumption that the structure of Islamic charities was the template for the earliest educational trusts devoted to higher learning in England. Legal historians have looked in vain amongst earlier Roman or Germanic precedents for clues to explain the origins of trusts. Islamic charities are the closest fit. An illustrative example is a medieval trust in England endowed by Walter de Merton, a Chancellor of England with links to one of London’s Inns of Court, New Temple, and who on several occasions conducted negotiations with the Knights Templar. The oldest college of Oxford University, Merton College, takes its name from him as donor of its endowment.

The constitution of Merton College

The statutes of Merton College were cast in 1264. Merton College’s constitution transposes almost verbatim the Islamic differentiation between the duties of mutawallis, the trustees, and those of the beneficiaries.(2) There are further analogies between Merton College’s endowment and the salient features of an Islamic charity. The endowment was granted in perpetuity, precluded beneficiaries from drawing income from extraneous sources, and permitted trustees to adjust the institution’s modus operandi if circumstances so required. Moreover, statutes expressly permitted preferential treatment of the donor’s descendants.

The legal distinction between a trustee and beneficiaries became a permanent concept in Common Law. Merton College’s constitution was an innovative template for institutional design in England and recognised as such at the time. Peterhouse, Cambridge University’s oldest college, expressly emulated Oxford University’s first-mover advantage. The statutes of Peterhouse recommend scholars live secundum regulam scolarium Oxonie qui de Merton cognominantur.(3) Founders of later Oxbridge colleges copied the template of Merton and Peterhouse colleges.


Early Christian communities were well known for their charitable activities. However, setting up legal charitable institutions is a somewhat different – and complementary venture. Islamic charities were instigated by Mohammed’s obligation on Muslims to donate zakat for charity. In the Middle Ages, Islamic charities proliferated into sources of decentralised, self-governing civic institutions beyond the reach of government control, leaving a rich legacy of legal precedents for the rights and duties of benefactors and claimants.

At that time, no institutional equivalent existed in Europe. The introduction of trusts in Common Law may be considered an application of the Islamic waqf. The migration of Islamic charities to Europe shows that cultural and political borders in the Middle Ages were permeable and that changing societal needs promoted progress through institutional competition. The foundation of Oxford University’s oldest college in the thirteenth century may owe its intellectual capital to institutional heritage originating in the Jewish and Muslim communities of seventh-century Medina.

Author: Benedikt Koehler (Economic Affairs, Vol. 30, Issue 3, pp. 6-8, October 2010)


  • Gaudiosi, M. (1988) ‘The Influence of the Islamic Law of Waqf on the Development of the Trust in England: The Case of Merton College’, University of Pennsylvania Law Review, 136, 1231–1261.
  • Kuran, T. (2001) ‘The Provision of Public Goods under Islamic Law: Origins, Impact, and Limitations of the Waqf System’, Law and Society Review, 35, 841–898.
  • Shatzmiller, M. (2001) ‘Islamic Institutions and Property Rights: The Case of the “Public Good” Waqf’, Journal of the Economic and Social History of the Orient, 44, 44–74.
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