After Muhammad's death, this institution was adapted by the Umayyad dynasty to incorporate new converts to Islam into Arab-Muslim society and the word mawali gained currency as an appellation for converted non-Arab Muslims in the early Islamic caliphates.
The word mawla is derived from the root w-l-y (Arabic: ولي), meaning "to be close to", "to be friends with", or "to have power over". Mawla can have reciprocal meanings, depending on whether it is used in the active or passive voice: "master" or "slave/freedman", "patron" or "client", "uncle" or "nephew", or simply friend. Originally, mawāli were clients of an Arab tribe, but with the advent of Islam, the term came to refer to non-Arab Muslims and other client allies of the Muslim community.
Also derived from the word Mawla is the term Mawlāʾī, which is the name by which a Central Asian community of Nizari Ismaili Muslims refers to itself, with their Mawla being the descendant of Ali, the Shia Imami Nizari Ismaili Muslim Imam of their time. 
The term originated in the days before Muhammad to refer to a politically-active class of slaves and freedmen, but it gained prominence during the Umayyad Caliphate, as many non-Arab subjects converted to Islam. The influx of non-Arab converts to Islam created a new difficulty in incorporating them into tribal Arab society. The solution appeared to be the creation of a contract, a wala', through which the non-Arab Muslims acquired an Arab patron (mawla). They continued to pay a similar tax that was required from the people of the book and were generally excluded from government and the military until the end of the Umayyad Caliphate. In Khorasan and Persia, the Arabs held most of the higher positions in the armed forces and in the upper echelons of government.
The Abbasid Revolution in 750 CE challenged the political and social privileges held so far by the Arabs. The key figure in this revolution was Abu Muslim Khorasani. He was a Persian, born in Isfahan and therefore had impeccable credentials of birth with the exploited Persian majority. The legacy of Umayyad excesses had created extreme bitterness among the local population. Unfair taxation had fostered dislike of the Arabs among the Persians. Under the Abbasid rulers of the 9th century, the non-Arab converts comprised an important part of the army. The institution of wala' as a requirement to enter Muslim society ceased to exist after the fall of the Umayyads, as the Abbasids favoured a universal interpretation of Islam that was not the exclusive religion of the Arab elite. However, the rise to political power of non-Arab ethnic groups eventually restricted the power of the Abbasid caliph in Baghdad, as Persian, Turkic and Berber Muslims began to form independent sultanates.
Abu Hanifa was the founder of the Hanafi school of jurisprudence within Sunni Islam and lived through the Abbasid Revolution. He famously stated in one of his dictums: "The belief of a newly converted Turk is the same as that of an Arab from Hejaz."
However, this institution continued in the Abbasid period on a much smaller scale with the formation of armies entirely composed of non-Muslim slaves in the service of the Caliph. These slaves were considered to be the mawali of the Caliph and were thus in theory more loyal to the Caliph than free Muslim troops. This practice persisted throughout Islamic history through to the Ottoman period, who formed their own corps of non-Muslim slave troops known as the Janissaries.
The word "Mawla" is regarded as a considerable word in Ghadir Khumm event (regarding the sentence which was declared by the Islamic prophet Muhammad about Ali, that he said: "For whoever I am his mawla, 'Ali is his mawla."). There have been mentioned meanings for this word "mawla", amongst: "leader", administrator, friend, Lord, owner, master, slave, follower, helper, one who has more right in something, wali, an ally, etc. Shia Muslims argue that in the context of the sermon (Ghadir Khumm), Muhammad intended that the word "mawla" to be taken as "leader". They therefore see this to be the official designation of Ali as Muhammad's successor.