Crony Trustafarians: The Role of Landed Trusts in Iran’s Economic Underperformance

The landed trust, waqf, has historically been the chief, indeed the only, institution in Islamic law protecting accumulated wealth from encroachment by arbitrary state power and to ensure inter-generational unity of purpose. We can compare this largely static instrument with the dynamic development of the landed trust in Western law, from whence the modern ideas of legal personality, the corporation and corporate governance standards evolved. These ideas were subsequently imported wholesale into Muslim societies through legal transplants, here in the form of the trust. In Iran, both instruments –waqf and bonyad– thus came to coexist and became centrepieces of the economic transformation after the Islamic revolution. What remained underdeveloped in both, however, was the implementation of accountable corporate governance. These shortcomings have vastly facilitated corrupt capture and led to chronic underperformance in an economy based on ostensibly charitable foundational holdings.