Cash Waqfs: Process of Revenue Generation

For the origins of the process of revenue generation in modern sukuk, we need to go back to the Ottoman cash waqfs. This special waqf form has a long history and goes back at least to the fifteenth century. What made these waqfs special was the fact that they were established with cash capital and had to invest this capital in order to finance the charity for which they had been established. [1] If we carefully examine the process of investing the endowed capital of an Ottoman cash waqf, we discover the very essence of the modern sukuk al-ijarah.

A typical Ottoman cash waqf invested its endowed capital by a process called istiglal. This involved a sale-lease back-repurchase transaction and worked as follows: a borrower requesting to borrow a certain amount, offered t...