Index.xml

  <collation name="utf8_arabic" id="100">
    <rules>
      <reset>\u0627</reset>
      <i>\u0622</i>
      <i>\u0623</i>
      <i>\u0625</i>
    </rules>
    <rules>
      <reset>\u0647</reset>
      <i>\u0629</i>
    </rules>
    <rules>
      <reset>\u0649</reset>
      <i>\u064a</i>
    </rules>
  </collation>

@mzeidhassan most likely you worked things out months ago, I am just adding the answer to your question in case someone comes here looking for a solution.

You need to add the collation to a file called 'Index.xml'. Its location varies from system to another, you can find it on your system by querying the 'information_schema' database with the following query:

SHOW VARIABLES LIKE 'character_sets_dir';

Backup the file, scroll to element <charset name="utf8"> and add the collation there. It will look like the following:

<charset name="utf8">
.
.
.
  <collation name="utf8_arabic_ci" id="1029">
   <rules>
     <reset>\u0627</reset> <!-- Alef 'ا' -->
     <i>\u0623</i>        <!-- Alef With Hamza Above 'أ' -->
     <i>\u0625</i>        <!-- Alef With Hamza Below 'إ' -->
     <i>\u0622</i>        <!-- Alef With Madda Above 'آ' -->
   </rules>
   <rules>
     <reset>\u0629</reset> <!-- Teh Marbuta 'ة' -->
     <i>\u0647</i>        <!-- Heh 'ه' -->
   </rules>
   <rules>
     <reset>\u0000</reset> <!-- Ignore Tashkil -->
     <i>\u064E</i>        <!-- Fatha 'َ' -->
     <i>\u064F</i>        <!-- Damma 'ُ' -->
     <i>\u0650</i>        <!-- Kasra 'ِ' -->
     <i>\u0651</i>        <!-- Shadda 'ّ' -->
     <i>\u064F</i>        <!-- Sukun 'ْ' -->
     <i>\u064B</i>        <!-- Fathatan 'ً' -->
     <i>\u064C</i>        <!-- Dammatan 'ٌ' -->
     <i>\u064D</i>        <!-- Kasratan 'ٍ' -->
   </rules>
 </collation>
</charset>

My collation here named 'utf8_arabic_ci' is the same as Ahmed Nasir, I just added the part to ignore tashkil. You will have to restart MySQL, and then change the collation of the column with a query like:

ALTER TABLE persons MODIFY name VARCHAR(50) CHARACTER SET 'utf8' COLLATE 'utf8_arabic_ci';

For more information you can check my blog post on this subject:
arabic-case-insensitive-in-database-systems
And the MySQL documentation about adding a new collation

thanks for this gist.
maybe you should add the rule for Ya2 as well
resetting ي and ى

 <rules>
      <reset>\u064A</reset>
      <i>\u0649</i>
    </rules>