Transcript Introduction : Definition

FINANCIAL
PLANNING IN ISLAM
Definition
The development and implementation of a systematic and
comprehensive financial plan with the objective of achieving one’s
personal & financial goals
Generally, financial planning involves taking a broad view of one’s
financial affairs covering many areas of wealth management, and
then going through a step-by-step process to solve financial
problems and achieve financial goals
Sources : Developing IFP
1. Conventional financial planning model
2. Primary sources
 Al-Quran
 Sunnah /Hadith
3. Secondary sources
 Ijtihad – evaluation of existing financial instruments
 Ijma - consensus of the Muslim scholars on Islamic laws
 Qiyas - analogical deduction
 Uruf – custom or usages that are not contradicting with
Syariah
Why Financial Planning? – Islamic View
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Islam as a comprehensive religion – emphasizes worldly life and
hereafter.
Concept of Allah’s bounty – very important in Islam as a good
Muslim is required to have a proper balance between the fulfillment
of his spiritual and worldly obligations.
Muslims are encouraged to plan their life and put effort to achieve
the goal setting before proceeding to “tawakal”.
A Muslim still has to commit to financial planning because either he
would leaves debt or children to the trusted one.
Financial Planning – Islamic View
The Prophet stated;
“A Muslim should prepare himself for the next world as if he is going
to die tomorrow, but at the same time work hard to improve all his
worldly comforts as if he is going to live forever”
(narrated by Al-Dailani)
~ As Muslims, we are not discourage from acquiring wealth, but we
must know how to earn and spend it in accordance with the Islamic
principles.
~ A Muslim should not forgo wealth, neither should he be greedy or
avaricious in the pursuit of wealth. Islam encourages reasonableness
and moderation.
Financial Planning – Islamic View
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In Islam, Muslims are discouraged to be in debt.
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Greatest sin is to die in a state of debt and no asset to pay it off.
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Therefore in Islam, financial planning can be used as a tool in
managing one’s wealth.
In this perspective, financial planning is therefore a must and is not
only for the high-income earner and rich but applies to all.
Pillars of Financial Planning
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Wealth protection
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Wealth accumulation
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Wealth preservation
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Wealth distribution
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Wealth Purification
Wealth Protection
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Concept of protection in Islam – TAKAFUL
Takaful means joint guarantee, whereby a group of participants
agree to jointly guarantee among themselves against a defined loss.
Based on the principle of “Ta-awun” (mutual assistance) and
Tabarru (donation, gift or contribution) where the risk is shared
collectively by the group voluntarily.
Takaful provides guarantee against loss or damage & with Takaful,
Muslims can plan ahead for any unwanted/unfortunate events.
E.g. – General Takaful & Family Takaful
Accumulation of Wealth
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Achieving a reasonable capital growth with the objective of preserving
accumulated wealth.
Involves asset allocation strategies, investment policy and others.
Channels of investment must be Syariah compliant – free from
elements of gharar (uncertainty), Riba (usury), maisir (gambling) and
free from haram products such as pork, alcohol etc.
Can be done through - Family Takaful plans, Shares, Sukuks, Property,
Wadiah & Mudarabah Saving Plans etc.
Wealth Preservation
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Protecting wealth against every conceivable financial risks and treats
through sound wealth management – quality investment etc.
No one should suffer unnecessary losses due to the quality of
investment advice they receive or to a failure to protect one’s assets.
Islamic view – wealth as a trial and man are responsible as the
trustee to the wealth that ALLAH has given to him. Man are required
to work hard if he wants to acquire wealth.
Examples of Islamic products that can help to preserve wealth :
Family Takaful, Wadiah & Mudarabah Savings, Islamic shares.
Wealth Distribution
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Important discipline in IFP – proper wealth distribution after death.
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Death is inevitable, but many tend to ignore.
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Danger of leaving a mess to family members –disputes etc.
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Instruments of estate distribution - Faraid, Wasiyah and Hibah.
Faraid, Wasiyah & Hibah
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Faraid - Distribution of estate after one’s death according to the
Quran. Guidelines of estate distribution can be referred in verses 12
and 176 surah An-Nisa.
Wasiyah - basically means giving a gift to others in term of wealth,
debt and beneficence of one’s property after his death. However, not
for legal heirs & allowable at maximum of 1/3 of total assets.
Hibah - Giving one’s wealth to others without the expectation of any
replacement or exchange with the transferring effect on the
ownership during lifetime or executed upon death. Applicable either to
family members (legal heirs) or members who are not entitled to
inheritance.
Wealth Purification
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Fundamental concept in IFP.
Spending on those in need is a highly commendable form of ibada or
worship. The Prophet declared:
“A generous person is close to Allah, close to Paradise, close to
people, and far from Hell. However, a miserly person is far from
Allah, far from Paradise, far from people, but close to Hell. Allah loves
more an ignorant man who is generous than a worshipper who is
miserly. (Narrated by At Tarmizi)”
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Sadaqa (almsgiving) and Infaq (spending in the service of God) are
voluntary wheras Zakat is obligatory.
Zakat
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The third pillar of Islam.
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Compulsory in Islamic jurisprudence.
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Have the capability to purify our wealth, protects our soul from
miserliness, selfishness and greed.
Acts as an instrument to clean poverty in the society.
Can be performed easily through most Islamic Banks’ counters or at
Zakat counters.
Islamic Products & Services For IFP
Protection
Family Takaful
Accumulation & Preservation
Takaful Plans for:
Haji & Umrah
Takaful Plans for:
Education
Medical needs
Marriage
Motor Vehicle
Housing
Fire
Family Takaful
Financing /
Mortgage plan
Etc.
Shares
Sukuks
Al-Wadiah
Savings
Distribution
Purification
Refer to
Unit Kutipan &
Agihan Zakat Majlis
Ugama Islam Brunei
BBA Investment
Property
Etc.
Amil-amil
nominated by MUIB
Counters at all
Islamic Banks
Waqaf plan offered
by Islamic
Insurance
companies
THANK YOU