Why does the board read the study before approving it?
When a non-profit association moves towards an investment project that supports its sustainability, the feasibility study is not a file to attach and forget. In the "Fundraising Licences User Guide 2023" issued by the National Center for Non-Profit Sector Development (NCNP), the attachments for the "investment marketing campaigns licence service" include an explicit item: "attaching a feasibility study for the project approved by the board of directors", alongside board minutes approving the purchase or construction of the investment and fundraising for it, including the cost. This means that board approval of the feasibility study is a step in which the board takes responsibility for the decision, so its members need to read the study carefully rather than as a formality.
For awqaf specifically, the "Regulation on Establishing or Funding Awqaf through Fundraising" issued by the General Authority for Awqaf requires the licence application to include "a feasibility study for establishing the waqf or funding the existing waqf". For the full picture of these requirements, see our guide: Feasibility Studies Guide for Charities and Awqaf.
The study components the board focuses on
A good study starts with the market before the numbers: who demands the product or property? What is the competition? What are the prevailing prices? It then moves to the technical study (location, areas, construction or purchase costs), and then the financial study, which turns all of this into cash flows and indicators. The most important thing for the board to check is that every figure in the financial part has a clear source in the two preceding parts.
Cash flows
An annual table showing cash in (rents or revenues) and cash out (operation, maintenance, and taxes and fees where applicable) over the life of the project. Net cash flow is the basis of all other indicators; if the assumptions behind it are weak, all the results are weak.
Operating and maintenance costs
Many studies overstate revenue and neglect periodic maintenance, replacement, property management and vacancy periods. The board should ask: are costs itemised line by line? Do they increase as the asset ages?
Payback period
The time it takes the project to recover its investment cost from its net cash flows. A purely illustrative hypothetical example: if a real-estate waqf costs SAR 10 million and its annual net cash flow is SAR 800,000, the simple payback period is about 12.5 years. This indicator is easy to understand, but it ignores the time value of money and anything after the payback year.
Net present value (NPV)
It discounts future cash flows at a discount rate reflecting opportunity cost and risk, then subtracts the investment cost. A positive value means the project exceeds the minimum required return under the study's assumptions. The key question here: how was the discount rate chosen?
Internal rate of return (IRR)
The discount rate at which NPV equals zero. The board compares it with the return the association accepts or with returns on investment alternatives of similar risk. It should not be read alone, because two projects with the same rate may differ greatly in size and risk.
Sensitivity analysis
It changes one variable at a time, such as occupancy, rent or construction cost, to show its effect on the indicators. If NPV turns negative with a small drop in occupancy, the project is fragile and needs review before approval.
Reading the indicators together, not separately
One good indicator is not enough to approve a project. The payback period may look acceptable while NPV is weak because of rising maintenance costs in later years, and IRR may look high because the occupancy assumption is optimistic. The board therefore reads the indicators as one system: it starts with the assumptions, then the cash flows, then the indicators, then tests their resilience in the sensitivity analysis. If the indicators conflict, the board should request a written explanation from the study's author before voting on approval, rather than relying on the executive summary alone.
Questions the board puts to the study
- What is the source of the revenue assumptions? Are they based on market comparisons or accredited valuations?
- Does the cost in the study match the valuations and the consultant's or contractor's report attached to the application?
- What is the conservative scenario, and how do the indicators look in it?
- Have operating, maintenance, replacement costs and vacancy periods been estimated realistically?
- How was the discount rate chosen, and why?
- What are the main risks (regulatory, market, execution), and what is the plan to address them?
- Is the project consistent with the association's mission and the investment rules approved by the general assembly?
It is advisable for the board minutes to document this discussion, and for the approval resolution to refer clearly to the approved version of the study and its date, so that it is consistent with the other application attachments.
Approval does not guarantee a licence
Board approval of the study is one of the requirements of the application file, but it does not guarantee that a licence will be issued or that the expected returns will be achieved; the decision rests with the competent authority under its regulations, and actual results depend on the market and execution. The study's role is to base the decision on clear assumptions that can be reviewed.
How Googan can help
Googan Business Services Company works in feasibility studies for the Saudi market with experience dating back to 1996, has had an investment presence in the Kingdom since 2013, and holds ISO 9001:2015 certification (commercial registration 7036270002, based in Al-Masif district, Riyadh). We prepare the study with a clear methodology that shows the assumptions, indicators and sensitivity analysis in a format that makes it easy for the board to discuss and approve, with a special discount for non-profit associations of up to 25%, stated in the quotation.
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Frequently asked questions
What financial indicators does an association's feasibility study include?
It usually includes an annual cash-flow table, investment, operating and maintenance costs, the payback period, net present value and internal rate of return, plus sensitivity analysis for the key variables such as occupancy, rent and cost. The picture is completed by conservative and expected scenarios and a clear statement of the source of each assumption, so the board can discuss and approve the results with full awareness.
How are the expected revenues of a real-estate waqf estimated?
It starts with studying prevailing rents for similar properties in the same location, then applying realistic assumptions for occupancy, vacancy periods and rent growth, and deducting operating, maintenance and property-management costs to reach net income. The results are compared with the accredited property valuations attached to the application, and the effect of changes is tested through sensitivity analysis.
Does a feasibility study guarantee that a licence will be issued?
No. The feasibility study is one of the licence application attachments, and board approval of it is a requirement for some licence types, but the decision to grant or refuse the licence rests with the competent authority under its regulations and its assessment of the application's completeness. Nor does the study guarantee the expected returns; its role is to clarify assumptions and risks to support an informed decision.
What data does Googan need from the association to start the study?
We need the project type and location, the target licence type, the property deed, available property valuations, the engineering consultant's or contractor's report where construction is involved, and the association's financial statements if any. The earlier this data is complete, the more accurate the assumptions that can be built consistently with the other licence application attachments.
