Early Muslims, including the learned class, were motivated to develop some organization capable of indefinite existence. If nothing else, the huge start up costs of providing certain durable social services created a need, as it did elsewhere, for an organizational form able to spread those costs over a long horizon.

Mosques, fountains, and schools offer examples of structures that are both expensive to build and have an extended economically useful life. One possible organizational solution is the corporation. By virtue of its perpetuity, an incorporated town may build a fountain and then manage it indefinitely on behalf of its residents. That solution was adopted widely in western Europe.

But there existed alternatives. In the Islamic Middle East a wide variety of services, including ones with high startup costs, came to be provided by the waqf, a type of unincorporated trust. At one level, this institutional choice was stunningly successful. In the Middle Ages, waqfs contributed critically to the functioning of cities far larger than any town in the West; without direct state involvement, they financed the building and maintenance of innumerable urban services.

In the famous account of his journeys through the Islamic world, Ibn Battuta (1304-69) speaks of a dazzling variety of waqfs, including ones dedicated to providing drinking water, the paving of streets, assistance to travelers, the financing of pilgrimages, and wedding outfits to impoverished brides. Outside of cities, most of the caravanserai (fortified inns) used by traveling merchants were funded by a waqf. In Marshall Hodgson’s words, the waqf served as a “vehicle for financing Islam as a society.”

A waqf was established by an individual owner of immovable property to fulfill in perpetuity any function deemed legitimate under Islamic law, except state monopolized functions, such as warfare.

Like a corporation, it could be finetuned to specific needs. It shared with the corporation also the capacity to outlive its founder, employees, and beneficiaries. But there were also major differences. First, whereas an association could turn itself into a corporation through the collective will of its members, ordinarily the founder of a waqf had to be an individual.

Second, whereas a corporation was meant to be controlled by a changing membership, a waqf was supposed to be controlled forever by its founder, through directions enunciated in the founding deed (waqfiyya). Accordingly, a waqfs mission was irrevocable; not even its founder was authorized to alter its declared purpose retroactively.

A third difference concerned self governance. Unlike a corporation, which could remake its own rules, a waqfs rules of operation were meant to be fixed; the founder’s instructions were enforced through judges and, where the deed was silent, according to local custom.

~ The Absence of the Corporation in Islamic Law: Origins & Persistence by Timur Kuran.