Introduction : Definition

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FINANCIAL PLANNING IN ISLAM
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Definition
The development and implementation of a
systematic and comprehensive financial plan with
the objective of achieving ones personal
financial goals Generally, financial planning
involves taking a broad view of ones 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
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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

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Why Financial Planning? Islamic View

• Islam as a comprehensive religion emphasizes
  worldly life and hereafter.
• Concept of Allahs 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.

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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.

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Financial Planning Islamic View

• In Islam, Muslims are discouraged to be in debt.
• Greatest sin is to die in a state of debt and no
  asset to pay it off.
• Therefore in Islam, financial planning can be
  used as a tool in managing ones 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.

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Pillars of Financial Planning

• Wealth protection
• Wealth accumulation
• Wealth preservation
• Wealth distribution
• Wealth Purification

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Wealth Protection

• 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

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Accumulation of Wealth

• 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.

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Wealth Preservation

• 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 ones 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.

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Wealth Distribution

• Important discipline in IFP proper wealth
  distribution after death.
• Death is inevitable, but many tend to ignore.
• Danger of leaving a mess to family members
  disputes etc.
• Instruments of estate distribution - Faraid,
  Wasiyah and Hibah.

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Faraid, Wasiyah Hibah

• Faraid - Distribution of estate after ones 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 ones
  property after his death. However, not for legal
  heirs allowable at maximum of 1/3 of total
  assets.
• Hibah - Giving ones 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.

• Hibah can be used during lifetime for executed
  upon death.
• Therefore a very useful estate planning tool if
  faraid and wasiyyat do not allow some heirs to
  get the right of inheritance

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Wealth Purification

• 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)
• Sadaqa (almsgiving) and Infaq (spending in the
  service of God) are voluntary wheras Zakat is
  obligatory.

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Zakat

• The third pillar of Islam.
• Compulsory in Islamic jurisprudence.
• 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.

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Islamic Products Services For IFP
Protection
Distribution
Purification
Accumulation Preservation
Family Takaful Takaful Plans for Medical
needs Motor Vehicle Fire Financing / Mortgage
plan Etc.
Al-Wadiah Savings BBA Investment Property Etc.
Takaful Plans for Haji Umrah Education Marriage
Housing Family Takaful Shares Sukuks
Refer to
Unit Kutipan Agihan Zakat Majlis Ugama Islam
Brunei Amil-amil nominated by MUIB Counters at
all Islamic Banks Waqaf plan offered by Islamic
Insurance companies
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