Endowments are one of the outcomes focused on in Saudi Vision 2030, through which it seeks to increase its contribution to the gross domestic product from 1% to 5%. In recent days, media platforms, including Al-Eqtisadiah newspaper, have discussed the issue of establishing an endowment bank, as there are discussions in this regard. There is no doubt that this is a positive step in the process of growth and sustainability of endowment projects, as these projects, although originally funded by the owner of the endowment, At some stage, it may lack funding to sustain its activities, or this will affect its activity in general. The presence of specialized funding bodies to meet this need may be important for the sustainability of the work of many endowment activities.
Funding sources for endowments are initially from the owner of the endowment, by locking up an asset to benefit from it as long as it remains, such as a farm that is benefited from through its fruits while the asset remains unchanged, or a property that is rented and benefited from its returns, and so on. This may be the general concept of the endowment, and therefore in this simple form it may not be in great need of financing in the short term, but certainly the sustainability of these projects requires financial resources for their continued performance, given that any asset is susceptible to wear and tear and therefore needs a financial resource to deal with that.
In the current period, we are witnessing multiple types of endowments that are not limited to specific activities, such as education, treatment, roads, services for visitors to the Holy House of God, and multiple community activities in each of these types. For example, in treatment, there are multiple types of treatment such as cancer and washing. Kidneys, various types of surgeries, medications, etc. These services undoubtedly require large resources to cover their costs, and this can be from multiple sources, including the endowment, the expansion of which has become widespread in general in Saudi Arabia.
Funding sources for endowments can be through direct donations or through investing resources in specialized investment funds, but this is not enough to meet the funding needs of a group of huge endowments, or at least the presence of diversity in funding sources will have a more effective impact on the sustainability of endowment projects, and therefore The presence of endowment banks will increase the diversity of financing sources.
The problem with endowments is that they are a legal entity and not a deal with an individual. The other matter is that the assets of the endowment cannot be mortgaged, leading to their sale in the event of a default, which requires that dealing with them be different compared to dealing with individuals and companies with regard to financing, such that there be a different type of Guarantees in the event of obtaining financing, and from here comes the need for there to be other types of guarantees that can facilitate the issue of a group of endowment projects obtaining financing. Therefore, the form of endowment banks and some of their characteristics may be relatively different, and this is what makes the existence of specialized endowment banks Something that is beneficial to the development of this sector, and these banks may originally be endowments whose goal is to finance endowment projects and achieve returns, even if they are limited, with the aim of continuing their work.
In conclusion, endowment banks may be good options in diversifying the sources of financing for endowment projects in order to achieve growth and sustainability. They also enhance the endowment’s contribution to the domestic product to achieve the goals of Saudi Vision 2030 regarding endowments.
*Quoted from newspaperEconomic” Saudi Arabia.
Disclaimer: All published articles represent the opinion of their authors only.
