Monem Salam:  
Welcome to Halal Money Matters, sponsored by Saturna Capital. I'm Monem Salam, and in today's episode, we're going to be talking about endowments and the importance of them as nonprofits in America begin to mature. We started off really trying to raise money for mosques and Islamic schools, and now that we have a steady stream of donations, the community has grown. It's really more about our sustainability. How can we make these institutions last, not only the next 10 years, but the next 100 years, and even maybe even the next 1000 years? So today, we have one of our very own, Owaiz Dadabhoy, and he's going to be talking a little more about endowments. And it's basically, we call it the five pillars of a nonprofit, financial health investment account, brokerage account, retirement account and an endowment and a bank account. Really excited to have Owaiz. He has a tremendous amount of knowledge on the subject. He used to be the president of our Saturna Trust Corporation, and now acts as senior vice president and national sales manager. So let's get started.

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All right Owaiz. Thanks for joining us again on the show.

Owaiz Dadabhoy:  
It's my pleasure. I'm glad to be back.

Monem Salam:  
Yeah, you know when we when we've recorded the first one. It was really interesting, because I think we went over the steps that a charitable organization needs to take when it comes to their finances. And one of the ones that I really wanted to do a deeper dive on, and it had so many questions on, I'm sure our listeners do as well, was the one on endowments. I'm really glad and honored that you were able to join us.

Owaiz Dadabhoy:  
Yeah, no, I'm glad to be able to do it. I remember you had said at the end of that one, which we were talking about the five different things that a nonprofit should do, and one of them was an endowment, correct? So glad to follow up on that today.

Monem Salam:  
That's great. So let's kind of, kind of briefly, if you don't mind, let's start off and maybe do a quick couple of minutes refresher, maybe just a list of all the five that were there, and then we'll just get right into the into the endowments part.

Owaiz Dadabhoy:  
Okay, yeah, that's a good idea. So one of them is very simple, any nonprofit should have a bank account at a bank that is serving all of their needs. So that's one very simple, and I think most nonprofits, that's probably one of the first things they go and do. It's important to select a bank that's going to help you to grow and be able to do other things with them, right? For example, payment processing and so forth. Number two, I would say, would be an investment account for the nonprofit to help you grow the funds that you have that are in excess of what you need. So something that could be invested for three years plus, you might as well grow the money and not lose value based on inflation. And the third one, and this is becoming more commonplace now. For the last few years or so, I mean, we've been talking a lot about it with our clients and with nonprofits as well. There's really a movement in the Muslim community now to get on track with this, with the greater community out there, which is to start up a brokerage account and accept donated stocks and mutual funds. And there's many benefits of that, which we can talk about later. If you'd like. Number four would be a retirement account for your employees. In many states, in dozens of states. Now it's a requirement to have a retirement account of some type. And there's various types 401(k), SAP, IRAs, SIMPLE IRAs, but you have to do something.

Monem Salam:  
Yeah, that's becoming a more of a more like, you said, a state requirement. I think some of the larger states have it, like California and I think some couple of them on east coast. So definitely getting ahead of that curve is probably a good idea.

Owaiz Dadabhoy:  
Yeah, and it just makes sense to do it. And you know, even if you're doing some type of match, it's not going to break the bank. Many organizations will have a 3% match on it's not a bad idea to do that. It's 3% of your total payroll if every single employee actually contributes. So it's, you know, really it's going to be less than 3% of your payroll, because not everyone's going to sign up for that.

Monem Salam:  
And also, I mean, not to harp on this, because I know we're trying to go to weekly. But also, it's a, it's a competitive thing, right? If you're, if you're a charity or organization that offers it while others don't, and that might be a reason to be able to track some really good talent.

Owaiz Dadabhoy:  
That definitely comes into play. It's kind of like, you know, an organization or a business has a good health care plan. You can go to a dentist, you have vision plan, and then if the person is looking to go somewhere else, and that business doesn't have those things, they're going to take a second look and maybe go to another business that they want to go work for instead. And it's the same thing with a retirement program. So if, let's say, a non profit, in this case, because we're really focusing in on nonprofits today, a nonprofit has 5% match or a 3% match, and the next one has no match. Well, it might be okay, but you know, if you really want to attract the best talent, you want to at least be able to compete.

Monem Salam:  
Yeah, good point.

Owaiz Dadabhoy:  
And the fifth one is our topic today, which is endowments, or in Islamic terminology, waqf, and we'll use the term probably. We'll probably use both terms along the way, but I'll start with endowment. And an endowment is a beautiful concept, and it really is an Islamic concept as well. We can talk in great detail about that based on your questions.

Monem Salam:  
Yeah, why don't you start off in this to kind of briefly explain what you mean by an endowment, and maybe some historical background of you know, like where they've been used in the past, maybe during the time of the Prophet Sallallahu alaihi wasallam, or something like that.

Owaiz Dadabhoy:  
Sure. Yeah. No, that's a good place to start. So an endowment allows an organization to have financial stability and sustainability. So if it's a nonprofit, like a relief organization or a local Masjid somewhere, it can serve your community for generations, right? And that's really what it's meant to be. In Islamic terms, a waqf is supposed to be there perpetually for 1000s of years. And we have some examples of that. One example is an amazing one of the Khalifa Uthman Radi Allahu Anhu. And he started one because Prophet Muhammad, peace be upon him, was talking to the people in Medina and said, Look, we have this well here that's providing clean, fresh water and abundant amount of it, but the owner of it is charging a lot of money. So can somebody from the community buy that well? And so Uthman actually bought the well, and the waqf that he started at the time still remains to this day.

Monem Salam:  
Wow. Mashallah. So really interesting? You know, I'm not sure if the well is in existence today, but I'm sure even if it's not, there's some kind of a historical site for it, right?

Owaiz Dadabhoy:  
Yes, it is a historical site I visited there many years ago, and they had it cordoned off because they didn't want people to, you know, take the sand from around it and do different things there. So it is as far as I recall then, and I'm not sure today whether it's actually in use. But when Uthman actually bought the well, he eventually bought the land around it. And today, today, what is like in modern day terms? There's a hotel there, and it's an ongoing charity. You know, in the name of Uthman, there's actually a bank account in his name as well in one of the Saudi banks. So what they use the hotel for is for orphans. So orphans can go live there with without any cost, and they can, you know, go to school and whatnot. And it's still being used over 1400 years later.

Monem Salam:  
Yeah, and there's, there's a lot of examples of that throughout the Muslim world, I think, with the with the waqf system, and I think what's happened over the years, especially after colonial colonialism, is that, you know, the basically, the state or the colonial powers, came in and basically nationalized all of these waqf, and they basically said there's only going to be one, one waqf for endowment administrator. But generally speaking, they were basically independent, and they used to have their own, you know, charitable entities that used to run these, these, these large endowments, right?

Owaiz Dadabhoy:  
Yeah, exactly. And I want to give one more example, because I just came to mind right now. When I was I went to India in 2004 and for a wedding. And so 2004, 2005 and I was there with my family, my wife was there, my parents, my brother and we went to different parts. In one part that we went to in Surat, had the last name of my mother on or her, her, you know, her name before marriage, on different buildings and stores. And so I found out. I asked her, like, what is this all about? And she said her ancestors from about 70, 80, maybe over that years ago, had decided that they would buy these storefronts and buy different pieces of land and make an endowment out of it. And so the endowment was still running when I was there, and I believe it still is today, and they benefit the widows of the family of the same name, and then maybe they're doing some other things right now still as well, but that's a real life example that I can.

Monem Salam:  
That's an amazing story. Alhamdulillah, I mean. And so as we're now beginning to talk a little bit more about endowments, what do you think are some differences between just giving outright charity like Sadaqah and doing an endowment?

Owaiz Dadabhoy:  
Yeah, so a lot of us give sadaqah as extra donations and then zakat as our mandatory obligation. Creation of charity, and the sadaqah typically is going to go to a mosque, or it could go anywhere. People give sadaqah to help somebody as well, but zakat is there for that as well, right? So the sadaqah is extra charity, and with a waqf or endowment, it is also sadaqah. But is sadaqah jariyah, meaning that it's going to be perpetual. And again, in Islamic terms, when you look at an endowment, it is meant to be perpetual. It is meant to be something like the well and land of Uthman, right? 1400 years and still going. And that's not the only example. There's other examples out there as well, sure. So if we, if we do that, then it's going to give stability to an organization for hundreds of years to come, and your mosque that you started, or your nonprofit in your local area, if you really want to make that sadaqah jariyah for yourself, you're going to consider starting an endowment. And once you start that endowment, it can live forever. That entity can become something greater and bigger, and it can really be a sadaqah jariyah for yourself and for all those that are donating to it.

Monem Salam:  
Mashallah, okay, so now, now I'm excited. So let's, you know, let me get if you're listening to this podcast, take out your pen and paper or write down some notes, because we're now going to get a little bit more into the nitty gritty of it. And first question I had for you on that, on that, is, how does an organization get started with an endowment. I mean and we can, we can talk about the setup of it also, but I think some of it has to do with, it has to be right time as well.

Owaiz Dadabhoy:  
Yeah, I agree with that. It does have to be the right timing. There's examples of organizations or leaders wanting to start an endowment, but they don't really have much going for them at the time. They don't have a team around them. They're not great fundraisers, and so maybe they should wait, right? They just started the organization a couple years ago, and they don't have clear direction. They don't have enough manpower or energy. But if you're an organization or leader that has that vision, and you're going to put some energy around this, to go raise funds and tell the story of your organization, to get people behind it, then this is something you really should do. So I think it comes down to the number of people that will be part of this. If you're a one man show, it's going to be difficult. But having said that, some of the best and largest endowments that we have in the Muslim community in America. They're successful because of one or two really inspiring people, but they have a team around them, and that's what I'm talking about.

Monem Salam:  
Okay. So now then let's talk about the steps like, now I'm an organization, I'm a mosque, and you know, we have this idea that we really should build an endowment. So what's like, the steps one, two and three for that?

Owaiz Dadabhoy:  
Yeah, and I think the first thing that you want to do is you want to come together as an organization and decide, what are we trying to accomplish here? Are we trying to accomplish an endowment for the long term, where we put capital into it and we don't take it out until the future, when we've built it to the amount that we want to get it to, right, we get to our goal, and then we're taking out a percentage of that return every year to fund whatever operations or scholarships or whatnot. Is that what we're looking to do, or are we just trying to put some money aside and we want to use that later, because you could actually have both. You could have an investment account, a nonprofit investment account, and you can have an endowment account, an endowment investment. So we're going to talk about the endowment investment specifically, even though you can do both at the same time. And so when you're coming up with this, you want to come up with your goals, some policies around it. What you're going to make this, for example, is this endowment going to be, you know, saved up for the next 10 years? Is this endowment going to be an account that you're going to save up for the next 10 years and try to get it to, you know, a million dollars or $5 million and what are you going to be using the money for, and what percentage of your operating revenue are going to be using this for? So you can actually back into your goal. If you figure out what your goals are, you can back into your financial goal the amount that you want to raise.

Monem Salam:  
Yeah, and I think it's important to be to realize that you have to be bold, right? I mean, you can be, yeah, I just want a small little endowment, that type of thing. I mean, there's a huge potential out there for this, for this at all. So, you know, think big. And even if you never, never really get there, you're, you're, it's a journey along the way, because, again, it's perpetual. It'll last forever.

Owaiz Dadabhoy:  
Yeah. And then there's two ways to get it started. One of the easy ways to do it is just to make it part of your organization, and you don't need to do anything else, just create a board resolution that states that any money that we raise for this endowment is going to be used to invest and get a return from it, and that the board promises to use only the return from the capital given. To be able to give scholarships or run operations, or whatever it happens to be. So you can do it that way. It takes a lot of the complexity out of it, versus, if you would like to start a true endowment, which many organizations have, but many of them will start off with this quasi endowment, where you're just doing it through your existing nonprofit, and then you, once you have it, you know, some amount in there, and you're ready to move forward with a true endowment, you can start up a separate nonprofit organization altogether, which will be in support of the main organization that you're raising funds for.

Monem Salam:  
Yeah, is there a, do you think there's a cut off as to, I mean, when, when a charity should, like, obviously, you know, starting that that kind of, what, let's call it, a quasi endowment, whether it's just basically bulk board authorized, is there an amount that that charity should keep in mind when they say, You know what? Now the endowment is big enough that we should really move it over from a quasi to a true endowment.

Owaiz Dadabhoy:  
What ends up happening is a nonprofit, or, yeah, let's say a mosque. We're going to use a mosque for right now. So a mosque starts up an endowment account, and they notice that they're not really able to raise funds yet. So once they're able to start raising money for it, and they have some momentum behind them, and they have enough time to start up the true endowment. That's what I think they should do it so it's not necessarily getting to a specific dollar amount. I would say it's about momentum and being able to continually raise money after you've been able to start doing that, it does take time, right? You're going to start the new account, the new nonprofit, you're going to have to file paperwork. You're going to have taxes every year on that, or filing taxes. You may not pay any taxes because a nonprofit, but there's certain things that you have to do. And so once you're ready to do that, and you have the time to do it, that's when I believe you'd be ready to start it.

Monem Salam:  
And the manpower too, I guess, because there, there is going to be more board members that you're putting on that separate endowment, right?

Owaiz Dadabhoy:  
Yeah, and that's actually one of the major benefits that I point to, is that if you have a board of five or seven people on your current mosque or nonprofit, and you start up a true endowment, which is a another organization, so the organization is only trying to benefit that mosque or nonprofit, but you can start up and have five or seven board members there as well. Now you've doubled the number of people working for your cause and your vision.

Monem Salam:  
That's a really good point. And that's true, but then, but you guys, guess the organization has to have that, that kind of, you know, the human power to be able to do it, I guess I should say people willing to be able to sit on the board that are not on the organizational side of it, which is, which is really good. You know, we talked about it from a quasi to a true endowment. But is there any minimum requirements? You think that that should be there, either financial, legal or organizational? We did talk about minimum as far as manpower or human power. What about the other ones?

Owaiz Dadabhoy:  
Yeah, manpower is one of the, the biggest ones. And if you can rally your group to come together and create a mission and a vision for this endowment, whether it's quasi or true, that's part of the first step, and whether you're able to continually raise money. If you're having trouble raising even enough money for your operations, it might be difficult to start an endowment. The other way to do it is if you're barely just making enough to cover your operational cost. And you know that you want to at least plant the seeds of the endowment today, and then at some point that this is going to take off, what you could do is say, look, 5% of every dollar that we receive as a donation, we're going to put it into this endowment. And that's how we're going to get it started and build some momentum. And then along the way, as you're telling your story, there will be some people that will be able to come in and help you. I can give you an example of a masjid in the East Coast that started their endowment five years ago, and they were raising roughly six figures, about $100,000 a year for their Masjid operations. That's all they needed. Beautiful building. Actually new, I toured it. Very nice. They bought, you know, parking lot right next to it. And so they have the wherewithal, financial wherewithal, but they run lean. And so they collect about 100,000 a year. And so they do that in their annual fundraiser. And so what they decided, once we got their endowment started, is we're going to make that annual fundraiser about the endowment. And the first year I was there, they we, you know, everyone we gave a talk, and, you know, they gave a talk, and we're talking about the endowment. And they raised a similar figure to what they raised. The year before 100,000 so I thought, well, it's going to take some time to build this up, but they made that decision. They're going to do that, and then operational costs they will figure out through Friday prayers and other times, maybe during Ramadan, where they'll raise money for the operations. And they were able to do that. So in five years, if you look at it today, it's almost exactly five years later, they don't have 500,000 they have over 800,000 there not only because of the investment return that they've received over the last five years, but also because they're starting to collect a little bit more people are really seeing the value of this. And so one of the board members I recently met at one of the conventions said that he's really floored by how fast this has grown and how the community has started to really support this, from the vision of two or three board members to an entire community getting behind it. And so if you fast forward and you say they're eventually going to going to get to $2 million and if you're pulling out 5% of $2 million that's 100,000 per year, and your $2 million will last forever. Will actually grow. The 2 million if you're getting an eight or 10% return on average, is going to grow and you're only pulling out, let's say 5% and that 5% $100,000 is going to cover your operational cost. You might need a little bit more if it's 10 years from now or five years from now, because 100,000 might not cut it. But you get my point right. Totally, you wouldn't have to raise another dollar.

Monem Salam:  
Yeah, no, no, but I wanted to also raise on the other side, maybe, maybe one of the pitfalls of like a quasi endowment, and I do remember again, on the east coast, there was a masjid that actually, the early founders in the 80s and 90s had this vision. They bought up a lot of houses that were all along the street next to them the mosque, and they were renting it and creating income from it, and they never made it into a true endowment. And so, you know, 10-15 years later, when the new border was there and they were a little bit short of funding. What they decided to do was sell all the properties and just put it into the masjid. And so what they started off as a concept of, one board started with a concept of an endowment. Another board, like, say, 15 years from now or later on, might decide, no, we're not going to do it and we're just going to spend it on whatever we want to in the masjid itself. And that's, that's one of the things that I think people need to be careful of.

Owaiz Dadabhoy:  
Yeah, I agree with that. And going back to the vision of a few of the leaders, right? So what you'll find, and you can think about your own mosque, in your in your local area, there's a heavy reliance on fundraising on a regular basis. That's how we're going to get to our annual cost is we have to have that money come in during Ramadan, or you're asking people every Friday to give you something, and that people don't want to hear that every Friday, right? In some cases it's very difficult to do. You're coming in for a prayer service, and the mosque feels compelled to raise funds. So what this will do is it'll help people not have to go through that, including the board members. It's very difficult to fundraise on a regular basis. It takes away that uncertainty and that annual fundraising, and that Friday fundraising takes all of that away. But the thing is, you have to think about the future. It's not going to be today. You're still going to be fundraising today, and then eventually it's going to become a lot easier.

Monem Salam:  
One of the things to also keep in mind is that, you know, like you said, you know, if you're  struggling as an organization, you don't want to stay self saving for the future when you can't even strive survive for tomorrow. So not that comes with the with the actual balance of it. But you raise a good point regarding that East Coast Masjid that started raising the fundraising, doing the fundraising for the endowment, and then those type of things. And that brings me to another point, which is the best practices when it comes to fundraising for an endowment. Because what you're talking about is the 100,000 that these masjids are raising, or these mosques are raising, that's an immediate cash influx that's coming in. But another way to look at it is basically do a whole campaign where you're asking people to write their will in such a way that a portion of it goes to the to the organization as well.

Owaiz Dadabhoy:  
Yeah. And if you look at the greater community, past the local Muslim community that anyone is part of, you'll see colleges, hospitals, churches, synagogues, funded heavily through this. You know strategy that you're just mentioning, which is bequest or giving upon death. And we know that in Islamic law, you can give up to 33% of your inheritance to anybody, including nonprofits. So a good way to do it is to have someone come into your local mosque or your charity, have a special session talking about how to give now and in the future and upon your death, and you'll find that some people will really see that as a positive thing to do that I've been giving my whole life, and even at my death, I would like to give, and that will be able to help a community grow for the future, and that could turn into much larger gifts. And we've seen that right like if you look at hospitals, they sometimes get 5 million, $10 million gifts, or colleges and universities get even larger gifts than that. And so we can, we can create that strategy in the Muslim community as well.

Monem Salam:  
That actually takes a lot more effort for some kind of a future event, right? It's not, it's not an immediate like, I can go out and say, Hey, Owaiz, you know, I'm building an endowment, you know, can you, can you donate some money? Like, okay, I'll give you 100,000 but this is more like, hey, Owaiz, we're building endowment, you know, please put us in your in your request, and then we might not see the money for another 20 years. But it's building a foundation for the money to really kind of pour in later on down the road, which and then the second part of it is it that it takes, you know, money to be able to maybe have a position of somebody who does this regularly, so that it's consistent, right? It can't be, you can't wish for it to happen. And it just does, people have to really spend time and effort, if you want to call it, you know, in the, in the in the conventional world, wine and dine, these large donors and to leave, to leave their to the their bequest, I would say maybe a kebab and Diet Coke would be doing.

Owaiz Dadabhoy:  
You know, if you think about this from your personal side, so many people out there, they have a retirement account. And if you ask them, Hey, where's your biggest pool of money, almost all of them will say it's my retirement account. Why is that? I started a long time ago, and I just continue to put money into it, and I'm getting this return. And you know, return is one thing, but time is one of the largest factors in saving and growing your money. And so what we want to do here is we don't want to waste time. I tell young people, look, as soon as you start working, you should open up an investment account, open up a Roth or traditional IRA or 401(k) if you have a good plan there, because that time is going to be the largest factor in your overall return. I started putting money into my retirement account when I was 19 years old, and I looked back on some of my early statements, and I hardly put any money into it, but that money has grown to a much larger amount because of the number of years that have gone by the compounding. So I would say that if you have a thought as a nonprofit organization or a mosque, and especially if you're a founder, you know what you've done, right? So you've started that organization with a thought, or that mosque, with an idea that this area needs this mosque, and you just decided, I'm going to get this started, and you need to do the same thing with an endowment, because we're going to be looking back on this like that East Coast Masjid five years only a short five years later, raising $100,000 a year.  

Monem Salam:  
Maybe it's not a matter of, like, you know, using that endowment for all of your operational expenses that you never have to fundraise again, because at the end of the day, you know, there has to be avenues for Muslims to give, because that's a form of worship for us. So I want to give them. We should always have it so the Muslims give to the masjid or give to different organizations. But maybe there's other projects that the masjid can start with the extra cash flow from the endowments that they probably would have never thought about, and just kind of building services into your organization, be based on the fact that you have financial health around you because of that endowment.

Owaiz Dadabhoy:  
And you know, we've talked a lot about different parts of this and history, and you know, some of like how to get started and how to become a visionary and get an endowment started. What I would say is. Look. Don't think of this as complicated. If you can open an investment account for yourself, you can open an investment account for your nonprofit. You can open up an endowment account for your nonprofit. You're going to need your 501(3), paperwork. You're going to need some other, you know, other paperwork that you would use just open up a bank account. It's the same thing here. You're just going to establish an investment account and start off with a minimal amount of money, even if you haven't gone out there and fundraise, you can start off with a small amount of money and get the account started and build the team around it, and come up with your goals. And I think that's the thing that I would want everyone to do, is, don't get stuck on this. Talk to somebody. Figure out what the steps are. It's more simple in terms of getting started than one might think.

Monem Salam:  
Yeah, I appreciate that now. So now, now that we've come to the point where, if you know the charity is now based on your advice always, has now created that account, quasi, quasi endowment, and they're looking now to say, Okay, what do I do with the money? So how do you basically decide you know what, where to put the money and do it, obviously, because your Islamic charity in a Shariah compliant way, yeah.

Owaiz Dadabhoy:  
And I think you know this goes back to just think about yourself as your regular accounts and your personal investments as well. If you want to eventually buy a $10 million office complex, and that's your vision, and you don't have any money to begin with, you can't go buy that office complex. What you're going to do is you're going to save and invest to grow to some dollar amount that's going to give you a down payment. And it's the same thing here. So if you're putting money into an investment account, and you try to raise a million dollars to buy that 10 million  dollar property. Think of this in the same way. So you start off your endowment. You're buying mutual funds, which is the easiest way to do it, instead of trying to buy stocks on your own. You let a professional do that, because they know what kinds of risks to take and what kind of companies to own, and it takes the guesswork out of it for yourself. And then once you've built it to a large enough amount, and you have these aspirations to buy a building that you can use for your nonprofit and rent out the rest of it as income, you can go buy it with that money that you've saved up, but you can't go buy that before you've saved up the money. So that's why I say mutual fund investing is the easiest way to get started for nonprofit in an endowment account.

Monem Salam:  
Like, you can make it as complicated as you want. The problem is, is that, look, you're there as a board members to run the charity, or we have oversight over the charity. You're not there to be able to pick stocks or do real estate transactions, or, you know, collect rent on your landlord, you know, as landlord, those type of things. So, you know, keep it simple, is my, is my in, especially in the beginning, and really kind of do it on more of a hands off approach, so that you're not getting bogged down with, you know, having more to do with the endowment, or the quasi endowment, rather than running the charity that you're actually supposed to be running.

Owaiz Dadabhoy:  
Yeah, I agree with that, and I think have some fun with it in the beginning, right? Just get your team together. Come up with a game plan. Brainstorm, what do we want to communicate? What's our what's our vision? Not what are, what are our goals, but what's our vision as well for this. And get excited and think about how you can communicate this with your community, and think about the types of investments people can give you. They can give you a check to start with, or they can transfer some of their assets, like their stocks and mutual funds, and they'll benefit as well by not having to pay taxes on the gains on that. They can also give you one of their homes, right? And we've seen that with one of the nonprofits that we manage. There was just a few years ago. This organization got started, and about two years into it, they were gifted a home. And so you receive a home, you might receive cars, and when you're receiving that in endowment, you want to ask for flexibility. Donor, can we sell this property? If we want to, can we sell this car? Because you're giving us an endowment, so we want to be respectful of that, because if they say, Well, we're going to give you this car and we want you to use it to make money, that's going to be very difficult for you to do. So you want to ask for that flexibility that we'd like to sell this car and be able to go buy some investments, some mutual funds or something else with it, and be able to use this in the way that we want. But the idea here is to get excited about what you can ask your community to do, and also talk about the sadaqah jariyah aspect of this, and talk about how you might have a deceased loved one who you want to give some money for to have this ongoing charity. Because, again, if you were at the time of Uthman, as we talked about, 1400 years ago, and let's say you also gave some money as part of that land. You'd be benefiting 1400 years later. So put in something to be able to get that benefit for the long term.

Monem Salam:  
Yeah, and I think, just to remind me of just one more thing, which is, you know, make sure you have a gift policy and be in that policy. You know, don't be afraid to say, No, I don't want to accept that gift, right? Because you can end up on assets that are they're going to cost you more money to basically get rid of or to maintain than to actually be able to use as an investment.

Owaiz Dadabhoy:  
Yeah, and that is definitely the case. I have an example of a local charity that I'm part of here, and sometimes people will want to give vehicles, but they're not running, and it takes a lot of time and effort. You're having to tow that vehicle different places to get it fixed. And so, yeah, definitely have a policy about what you will accept and what you will not accept. The final one, other thing that I'll mention Monem, is that any nonprofit, once they become of a decent size, should have not only their, you know, 990 completed and whatnot, if you're, let's say, a relief agency, but also have audited financials. And so you can do that with your endowment as well, get your endowment audited, so that way, you can provide that information to your donors and be very transparent about what you're doing with the money, what you're doing with the money, how you're collecting the money, and how you're spending the money as well.

Monem Salam:  
That's a really good point. Let's talk a little bit about governance and maybe oversight. You know, now we're getting into the phase of maybe in a quasi endowment, having a separate Investment Committee, or, if you have a true endowment, the board itself, right? What's the ideal structure, if you, if you can, if you can, share with us on how the oversight of the of that endowment should be, should it be in a completely separate organization? Should it be something that's called a supporting organization? What do you think are some best practices there?

Owaiz Dadabhoy:  
Because I don't want people to get stuck on this part where it's going to take them a very long time to get a true endowment or separate organization established. I would say, get started with the quasi endowment through your existing organization, and concurrently you can work on starting up that separate organization. I would say that's, that's the way to initially get started here.

Monem Salam:  
Okay, and that separate organization will have similar board members. I mean, how do you, how do you make sure that that organization that you're creating doesn't go off and do something on their own?

Owaiz Dadabhoy:  
Right, and there's different ways to look at this. You can say we want completely new set of board members that we're going to explain the vision to, and they're going to take it from here. Or you can have one or more of the existing board members join that board as well and be part of both boards. Or you can have the existing board members be the only ones on that new board. And I think the that final one is probably not the best way to go, because you're not expanding your team at all, and you're going to need to expand your team and bring in people that can help you to fundraise and hold everyone accountable, and also to be transparent with this and monitor it. And you know, there's something called the uniform prudent management of institutional funds, which is recognized and adopted by, I think, all, well, 49 states. So there's just one state that doesn't adopt that. And so you have to follow those rules for an endowment as well. It's, it's not difficult to do, but it is, you know, making sure to have good governance. That's the reason it's there.

Monem Salam:  
So just out of curiosity, then, like for let's supposing, you know, I'm a mosque, we decided to create that endowment. It's a separate organization. We help raise money for it now, 10-15 years to go down the road, and now there's a completely different board, obviously, right? And so what if that endowment decides they're going to go out and rather than fund my mosque or our mosque, they're going to go and find somebody else a mosque, or they change the nature of the endowment, how do you, how do you prevent that from happening in the future? Because obviously, you're talking about, like, 100 years, 500 years down the road, right? What's, what's a good way to be able to protect that? Is it in the bylaws, it is a, is there, I know there's something called a supporting organization, is that? Is that the way to go?

Owaiz Dadabhoy:  
Yeah, so it you would write this into the bylaws and talk about what you're trying to accomplish. And so many of the mosques that have started endowments in the new endowment bylaws, it's going to say that this foundation or this endowment is strictly here to benefit the mosque that basically started it right. So it talks about that explicitly. What organizations should consider is not to change all of their board members at one time.

Monem Salam:  
A staggered board I guess.

Owaiz Dadabhoy:  
Yes. And in some cases, that does happen where they have elections, and unfortunately, the election is of all people at the same time, and so you can have a completely new group of people coming in, and so you don't have that institutional knowledge. Things get lost in the shuffle. Like, think about where you work if you didn't have someone telling you, you know, this is, this is some of the rules of the game. It would be difficult, right? I mean, you could come up with some new rules of the game, but then you might be taking away from what you were actually trying to get accomplished. And so what I think is a good idea is for existing board member, if you're selecting board members, try to find people that will buy into that same vision. If people are getting elected onto a board,r the existing board members should have a thorough conversation about not only everything about the existing organization, but also about the endowment and about the investment and why it's there, and let's go through all of this, what the vision is. And, you know, you got to get buy in, yeah. So a training period, I think, is, is a good idea for these new board members.

Monem Salam:  
That's great. I think this has been really, really good. I want to wrap up, but I want to put you on the spot a bit if I, if you don't mind, sure, and that is that, you know, I'm in a Masha Allah in the in the Southern California community. You've done a lot of good work, right? You've been chairman of the Southern the shore Council Southern California. You helped start up a charity called Uplift. Now you're, I think, president of your local mosque. So, you know, may Allah reward you for all that. But what I wanted to ask you was, is that can you, as a wrap up kind of talk about in each any, any one of these or organizations, just pick one and say, just from A to Z, like, how you got started, what, where, what stage are you at now, and what are you thinking about for the future?

Owaiz Dadabhoy:  
Sure.Okay, I'll use Uplift Charity. So it's called Uplift Charity, because uplift is used in a lot of different organizations. So we made it very specific. We started that in 2006 and we started with a group of friends, right? So myself, my brother, a cousin, and one of my friends, and we sat down and we said, what do we want to do with this organization? How do we want to make it work, make it run. What are our goals? And the goals for this particular organization is zakat based helping people locally, because that is the Sunnah of the Prophet (Sallallahu alayhi wa sallam) says, start with the people around you, help them and make them strong before you go outward from there. And so we decided we want to use our time and our money to do that, and it's not taking away from international assistance. We at the same time we were if there was a crisis somewhere, an earthquake, a fire, war, anything like that, we would still assist, but we wanted to make sure people locally would get assistance that they need, because that's what we're supposed to do. And what we found right away was that there were refugees coming in that were about to be evicted. Some had been evicted. There were, there were people living on the streets, Muslims living on the street, across street from the mosque. And it became kind of like commonplace, right? You might have one or two people in that situation, and, you know, we don't really know how to help them. So what are we going to do? So our organization was able to put time into it, and eventually, when a mosque would see someone living on the street or in their car, it would become an emergency situation, where, before, it was just commonplace. And so we created this kind of like mini universe in Southern California to not have that be acceptable anymore. So what we did was we came out with some initial goals, and this is the part of the financial part. We did come up with an initial budget for the next four years. You know, when we started and we rput in what we thought we could do, and we just were able to blow away the numbers. And what we found was that every time we would strategize and come up with new goals, because the goals were based on how many people we could help and whatever goals we came up with, we were able to exceed those every single time. And it just tells you that having a strategy session and putting numbers down is a smart thing to do. Eventually, some of the board members. Actually, all of the other three board members that started with me moved on to other things. They moved or, you know, something else came up, and we were able to bring in other board members to continue this, the vision of this particular charity, which is to help people locally.

Monem Salam:  
So talking now about the endowment aspect of it, like, what, how do you have one How do you How did you get started with it? Did you have to do a lot of convincing, you know? And then, what path did you take? Was it a quasi now, it's true, or are you still on the road those type of things?

Owaiz Dadabhoy:  
So what we did is similar to what a lot of organizations do, except that we started with the brokerage account many years ago, and we told our donors about it, and some of the donors that were giving 20,000 25,000 in zakat started to give six figures once we started the brokerage account, because they saw the value of it. And so ostensibly, they were taking money that they were giving to other organizations, and they started to give us more money. What we also started to do was an investment account, a brokerage account that has stocks in it, but also Amana Mutual Funds. And so we were able to build that up to a sizable amount, and we decided we should start an endowment account, and we brought in a few of the former board members of Uplift charity that helped to found it in the past, and they are now part of the Uplift Foundation. And so the some of the money that we've collected in Uplift charity is going to go and become that endowment. We haven't pulled the trigger on transferring those assets yet, they are starting to fundraise and, you know, do a better job of getting money together for the endowment, but it is nowhere near where we want it to be. But the good thing is, we've, you know, put the seeds in the ground and said that we're going to do this. We started a few years ago, and it's starting to pick up the momentum that we wanted to, you know, see it have eventually.

Monem Salam:  
And what kind of goals do you have for this thing? Like, how do you set the goals? Like, I know in that charity would be, like you said, the number of in Uplift, the number of people that you're serving. So what, how did you decide on what the goals were going to be for this foundation?

Owaiz Dadabhoy:  
Yeah, so the goals are based on what's achievable, but also what we eventually need, right? So it's not the final goal. The first goal is to get to a million dollars, and the next goal is going to be maybe, let's say, two and a half, right? You're trying to come up with something that's achievable and get everyone to be able to have some wins along the way. But the eventual goal is going to be 5 million or $10 million and the reason is that you want to take the operational cost of the organization and try to wipe that away with the endowment. So for example, if we need $200,000 a year to run, then how much do we need to have as a goal? And so if you have a, if you have a $5 million endowment, and you're able to take out 5% per year, you're going to be able to take out 250,000 if you want to take out more, you could in certain years, right? Especially if, if you have a greater return, and you're going to be able to take care of those operational costs, and what we see is that if we can continue to grow this, eventually we'll be able to do different types of work, for example, not only take care of some of the operational costs, but also to start giving scholarships, which we've never done. So we'd want to give local young people, perhaps, starting with the children of refugees, for example, that's just an example. Or the children of the people we've assisted with zakat, we could offer them a scholarship to a college, and so that could be possible through the endowment.

Monem Salam:  
That's great. I mean, that's the kind of the social venture capital that was talking about, that you come up with newer ideas and experiment with them, make sure, you know, to make sure that you're not using operational capital or, you know, the Zakat money to be able to do it. So I think as we're talking about operational, operational costs, I mean, I think it's initially having all volunteer staff or board is going to be very is fine, but as you get bigger and bigger, let's supposing you get to that 5 million or 10 million, there are going to be operational costs involved, whether it be hiring an investment manager, hiring a full time fundraiser, all those things. So you know what? How do you think about operational costs, and is there, is there like a cap, or is it something that best practices for that?

Owaiz Dadabhoy:  
Well, the good news is that if you are already a mosque board or nonprofit board, what you've done is v you've been running an organization, and you know how to hire people and what the costs are, right? Whereas, if you're starting a new nonprofit altogether, you're not really going to be aware of that. So what I'll give you an example, because we were talking about uplift charity for the first five or six years, we only had volunteers, board members going out, interviewing people that needed assistance. And one of the local, you know, people that's been around for a long time, served on a lot of boards, respected people. I was talking to him, he was asking about uplift charity, and I said, Yeah, we run it as a nonprofit. I was really proud of that, right as without any cost, we're not really paying anyone anything, no one's there's no employees, and we're just doing it out of the love in our hearts to try to help people. And he said, Oh, that's great. That's great, but you need to hire somebody. And I said, why? Like, we're doing the work. And he said, once you hire somebody, you're going to see your work increase tremendously. And about six months after that, we did hire our first employee, and he was right, we were able to do so much more work. So the leverage you get from hiring people is phenomenal. So for this endowment, initially, you have that new group of people, a new board that's helping you. And you know you could have some existing board members join that board as well, but you have new people joining you, and they're going to put in the time and effort. Eventually you're going to want to hire a fund development person, and that person can just exclusively talk to your donors about the endowment and raise money that way. And then, of course, there's going to be cost along the way. For example, if you're filing a 990 right? You're doing you're getting your taxes done. You're getting the audited financials. That might cost you several 1000 per year, but you can use the returns from the from the endowment itself to fund that, or collect some money specifically to run the operations.

Monem Salam:  
So I really appreciate your time, Owaiz. I mean, I think we've, I think we've kind of covered pretty much, you know, all that I wanted to cover regarding endowments, from the initial stages to what you look for in the middle to as you grow. You know what? What type of what type of endowment Do you want? Is a true quasi those type of things? Is there anything finally that you do want to wrap up with before we before we close?

Owaiz Dadabhoy:  
Yeah, I'll just say the final piece would be something that I've already talked about before, which is, put the stake in the ground, plant the seeds and get started sooner rather than later. You don't need to wait. You don't have to come up with a massive plan. Come up with a mini plan, if you have to, and build up to the massive plan. Brainstorm with people that are like minded. Share your story, share your vision, see who will join you and get started. And the process of actually starting an endowment bank account and endowment investment account is not as difficult as you might think. It's actually quite simple to do. And, you know, we can help you with that, certainly. And I'm here to give advice and, you know, input anywhere I can, not looking to, you know, charge for that. I just want to see more organizations in America. And I know this is the same thing for you, Monem, you're in in you're also part of nonprofits across the country, and you know, you've helped a number of them, including international relief agencies and other organizations. So you know, what we want to do is we, we want to assist you with some of the education, right? And happy to help you with that. Because what I, what I look at that is, is that that can also be part of our sadaqah jariyah, is to help other organizations to get to where they want to get.

Monem Salam:  
Yeah, that's, that's great. So thank you so much for your time.

Owaiz Dadabhoy:  
My pleasure. Thank you. Monem.

Monem Salam:  
Take care. Have a good one.

[music]

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