Wealth plays an important role in human life.
It is the subject matter of trade and other business transactions such as sales.
Wealth can be in many forms. It can be in the form of money to some people and
to other it can be in the form of property like houses, cars and lands. In order
for men to obtain this wealth he has to work hard because it does not come like
that, even though some times it can be inherited.
In
Islam wealth is known as “mal”. In Islam something can be recognized as mal or
wealth only when it satisfies the following conditions that are only when you
possessed, secured it or stored it. For example, the birds in the sky, the
minerals underground and the fish in the river are not recognized as wealth in
the Islamic perspective. Only when you have possessed, secured and stored these
things can they be recognized as wealth. It is different from the conventional
point if view which wealth is recognized even if it has not been possessed
secured and stored.
In conventional perspective wealth is
totally owned by man. Man can use the wealth in any way he feels like using it.
They utilize their wealth only for this world purposes without concerning about
the Hereafter. This way of thinking is totally contrast with what Islam thought.
It is stated in the Holy Quran that wealth in all its forms is a thing created
by Almighty Allah as a trust for man. Thus, man only have right to uses the
wealth only according to the shariah. Allah s.w.t said in the Holy
Qur'an:
“Give to them from the property of Allah which he has bestowed
upon you” (24:33)
At
this point we can bring in the management. Wealth management is an important
aspect in Islam. Since we are not the absolute owners of the wealth in this
world, we have the duty or responsibility to manage it in the best way we can.
Absolute ownership is to the Almighty Allah. We have only been entrusted upon
this wealth. As I said above, our responsibility is to manage it accordance to
shariah. By managing wealth according to the shariah, we also can seek our
reward in hereafter, for example paying zakat.
Management of wealth is quite complicated because you have to look at
someone intentions, how the wealth is earned, how it’s grown, how it’s spent and
the right of the poor and needy. As we know, in Islam money is not an end in
itself, it is a means to higher values. These means that if it is earned,
invested and spend in the right way, it brings rewards or ‘barakah’ to not only
the individual but also his family and the ummah as a whole.
With that thinking
in mind, we now can safely say that in Islam, any human undertaking of which
wealth management is one is guided by certain beliefs. These beliefs are
described as philosophic foundations in an Islamic society. According to Kurshid
Ahmad they
include the following:
1.
Tawhid – belief in
the oneness of Allah
2.
Rubbubiyah – divine
guidelines for striving towards all is good
3.
Khalifah – the role
of man as the vicegerent of God
4.
Tazkiyah – achieving
purity and growth
5.
Accountability – the
belief that man will be answerable for his actions in this world on the
Judgments Day.
From the above beliefs, an economics agent in
Islam learns that the existence in this world is not from without, and thus, he
has to conduct himself and administer his wealth in line with divine
arrangement. Being God’s vicegerent on earth is an opportunity to function
normally – and direct his activities for the betterment of his life and of those
around him.
Wealth management in
Islam can be looked from different perspectives. These include the zakat
management, inheritance, wills and testaments, estate planning, managing cash
and saving, managing of tax and state duty, and different business transactions.
In this paper we will discuss some of the above scope of Islamic wealth
management.
CENTRAL IDEA
This
project is centered upon gaining an understanding of how wealth is managed from
an Islamic frame, work together with the worldview of Islam. While the former
looks at the human behavior actions undertaken in dealing with the problem
choose, the latter looks at the different stages of human existence in Islamic
in addition to the concept of God, religion and prophet hood.
The
consideration of the worldview in Islamic in our discussion helped outline a
clear distinction between managing wealth from Islamic perspective and a
conventional perspective. Take a capabilities notion for instance, ownership of
resources is absolute, and can be utilized in any manner deemed right in one’s
own good and best interest in this world. This is not so in Islamic perspective
where ownership is regarded as a trust from God, and thus, can be used with the
intention of obtaining the pleasure of God. Knowing that the concept of
ownership is limited in Islam, human behavior thus directed at seeking
prosperity in this world and in the Hereafter. This entails the maximum
utilization of natural resources and human capabilities leading to higher
productivity, which in turn brings about success, happiness and growth to the
individual and the society at large.
The
project paper is designed to discuss shariah rulings and the framework that
governs wealth management in Islam. Among other issues, these rulings touch on
the utilization and administration in different circumstances pertaining to the
question of ‘how to utilize the wealth?’ and ‘who is capable of administrating
the wealth?’ These shariah rulings act as a benchmark against which efforts at
managing wealth are measured, and thus, ascertain that those involved in
managing wealth do so in line with the Quran and Sunnah.
In
order to have a clear picture of the topic, we have included practical assertion
applicable in different situations of wealth management in Islam. Following thus
is a plan to provide room for further improvement through research on the
practicalities of managing wealth, and recommendations. We hope that this paper
is beneficial to all of us and that it is an avenue towards a better tomorrow
where wealth management is concerned.
SHARI'AH
RULINGS
Shari'ah rulings provide a basic upon
which guidelines and instructions of a course of action or undertaking are
formulated and implemented. Despite cleat rulings on the use and management of
wealth, the Quran is not devoid of hypotheses in general about wealth and its
consequences, how man views wealth, and words of wisdoms for man with regards to
wealth. The following are some of the example:
“Fair in the
eyes of men is the love of things they covet: woman and sons; heaped – up hoards
of gold and silver; horses branded (for blood and excellence); and (wealth of)
cattle and well – tilled land. Such are the possessions of this world’s life;
bit in nearness to Allah is the best of the goals (to return to)” (3:14)
“And violent is he in his
love of wealth” (100:8)
The
above verses indicate man’s desire for wealth in different forms – gold and
silver, horses, cattle and lands, which vary, includes all kinds of machines in
our contemporary world.
“If I had knowledge of the unseen, I should have multiplied all
goods, and no evil should have touch me” (7:188)
“Nor does
anyone know what it is that he will earn on the morrow.” (31:34)
These two verses indicate among other things,
the uncertainty in the future pertaining to out present doings. ‘No man knows
what the morrow may bring forth’. This is another distinction between the
conventional and Islamic point of view in the sense that the former answer
‘perfect foresight’ in some theories.
“If Allah were to
enlarge the provisions for His Servants, they would transgress beyond all bounds
through the earth. But He sends (it) down in due measures as the please. For He
is with His servants well – acquainted, watchful” (42:27)
“Nay, but man does transgress all bounds, in the looks upon
himself as self – sufficient” (96: 6 – 7)
In the above verse God
indicates the consequences of increased wealth on man. This verses as a warning
to those with bestowed with wealth looking beyond the riches of the
world.
While God has subjected all that is in the
earth for the use of man as His vicegerent on earth, He has bestowed His favors
more freely on some, than on others. In these are tests from God. In the Quran
man is advised to seek his sustenance and remember God so that he attains
success in this world and in the Hereafter. Allah s.w.t
says:
“And when the prayer is finished,
then may ye disperse through the land, and seek the bounty of Allah: and
celebrate the Praise of God often (and without stint): that ye may
prosper.”
(62:10)
One of the ways by which wealth is managed in
Islam is trade. This helps transfer of goods and services from one to another to
satisfy different wants. In addition, it helps minimize, if not eliminate the
possibility of excessive wealth remaining in the hands of selected few. In the
regards, the Quran says:
“In order that it may not (merely) make a circuit between wealthy
among you” (59:7)
Moderation in expenditures is commended in Islam, and excesses, waste
and extravagances denounced. The Quran equates such doings to the works of the
devil, as in the following:
“Verily spendthrifts are brothers of
the Evil Ones and the Evil Ones to his Lord (Himself) ungrateful” (17:27)
“… eat and drinks: but waste not by
excess, for Allah loves not the wasters” (7:31)
Aside prohibiting extravagance and spendthrift
ness, Islam too has no place for meanness and stinginess. If recommends striking
a balance, and to this effect, the Quran says:
“Make not thy hand tied (like a
niggard’s) to they neck, nor stretch it forth to its utmost reach, so that thou
become blameworthy and distillate”
(17:29)
“Those who, when they spend, are not
extravagant and not niggardly, but hold a just (balance) between those
(extreme)”
(25:67)
“For Allah loves not arrogant, the vainglorious; - (nor) those
who are niggardly, or enjoin niggardliness on others, or hide the bounties which
Allah has bestowed on them….”
(4: 36 – 37)
Another example by which wealth is managed in
Islam is through zakat and sadaqat, commonly referred to as almsgiving. The
donor may give the latter directly to the recipient or through the state
government collectively. The former is usually administered through the
treasury, knows as Baitul Mal. Here is what the Quran says in this
regard:
“So give what is due to kindred, the
needy, and the wayfarer. That is the best for those who seek the countenance of
Allah, and it is they who will prosper” (30:38)
“And in their wealth and possessions
(was remembered) the right of the (needy), him who asked, and him who (some
reasons) was prevented (from asking)” (51:19)
In order to wind up the discussions in shariah
rulings – though we primarily looked at the Quran injunctions here, we will
consider both the Quran and the Sunnah as we talk about practical scenarios of
individual cases of wealth management – let us look at the following verse of
Quran:
“But seek, with the (wealth) which
Allah has bestowed on thee, the home of the Hereafter, nor forget thy portion in
this world: but do thou good, as Allah has been good to thee, and seek not
(occasions for) mischief in the land: fro Allah loves not those who
mischief” (28:77)
In the above verse are many implications
concerning wealth and its management in Islam. These can be outlined as in the
following sense:
- Wealth is entrusted upon
man by Allah
- The management of this
wealth should be directed at seeking the pleasure of God in other world
(Hereafter).
- Being a trust from God,
wealth need be used and exploited in accordance to God’s commandments.
- Being the owner of
wealth, God has the right command on man to use wealth for the good of other as
He has done well on him, and prohibit man using wealth in a manner that is
likely to cause harm on earth.
From these implications of the verse, we see a
distinction between the Islamic point of view and the socialist and capitalist
point of view. While capitalism propagates ‘an absolute and unconditional right
to private property and socialism totally denies the right to private property’,
Islam poses a balance by allowing the right to private property but from that
angle of it being a trust.
PRACTICAL SCENARIOS AND
APPLICATIONS
ZAKAT PLANNING
Another
important issue that can be brought about in the management of wealth in Islam
is the paying of Zakat. Every Muslim who has the ability to pay the Zakat is
obliged to do so. It is one of the five pillars of Islam. So now, you can see
the great importance of paying the Zakat. Mostly in Islam Zakat is paid by the
wealthy Muslims. Allah made the paying of Zakat compulsory for a reason. This
was in order to help the poor and the needy Muslims or the Muslims who are
completely unable to support themselves. I say paying the Zakat is a form of
wealth management because the wealthy Muslims will be able to deliver some of
there wealth to other needy Muslims. Therefore, in doing so the wealthier will
not become more and more wealthy, but moderate. This is why God (Allah) made
some people in this world rich and some poor. Wealth can be a very dangerous
element because once a human being becomes possessed with this wealth. He will
forget about his religion and God altogether. In order to get rid of this, Allah
made compulsory for every Muslim to pay the Zakat.
However if you look at the conventional or the capitalist advocates,
you will discover that most people have became inclined to their wealth that
they do not have or follow any religion. In short they have become pagans. They
also do not believe in the hereafter. This is so, because there is no form of
wealth management such as paying the Zakat to the needy people around the world.
This is why, the capitalist always concentrate on material satisfaction and not
spiritual. They only seek material satisfaction and think of maximizing there
wealth through all the means available, weather the right or wrong way. They
also have this misconception of saying that their scarce resources and unlimited
needs in the world. It is like saying that God did not know what he was doing.
Because God created this world and made sure that people would be satisfied with
whatever there is available.” The imposition of Zakat is to purify oneself as
well as one’s own property.”“Islam believes if a wealthy person is accustomed to
paying Zakat, his infatuation for wealth will be softened and it will be a
source of advantage to him and the society in the end.”
“Alms are for
the poor and the needy and those employed to administer the (funds); for those
whose hearts have been (recently) reconciled (to the truth); for those in
bandage and indebt; in the cause of Allah; and for the wayfarer: (thus is it)
ordained by Allah and Allah in full of knowledge and wisdom”. (9: 60)
Prophet Muhammad (PBUH) is reported to have
said, “Zakat is not permissible for someone who is not in need except in five
cases; someone fighting in the way of Allah, someone who collects Zakat, someone
who has suffered (financial) loss (at the hands of debtors), someone who buys it
with his own money, and someone who has a poor neighbor who receives some Zakat
and gives some as a present to the one who is not in need.”
Zakat
is obligatory on all Muslims capable of paying it. Capability is referred to as
nisab, a taxable minimum. It is used for specific purpose and paid to specific
groups of people or individuals. The Quran lists eight (8) recipients as in the
above verse. The role that Zakat plays in the distribution of wealth and income
is, without doubt, very important. It reduces the gap between the haves and the
have-nots, and induces saving and consumption behaviors in addition to the fact
that it helps mobilize income for redistribution.
Islam
discourages funds to remain idle, simply because there is no interest, as
compared to the conventional system which makes up for earned income with no
effort involved. If we look at the saving decision, we notice that idle savings
in Islam are penalized because a Muslim is expected to pay Zakat. At the end of
the day he remains worse off because for every RM100 that he saves, he loses
RM2.50 (2.5% Zakat ratio). Hence, his rational option would be to incorporate
investment expectations into his savings decisions. Assuming he sees no light in
the direction of investment expectations, he might cut savings and increase
consumption in the process, which does not go along with the poor investment
expectations. Thus, inclusion of these expectations in the savings decision
paves way for a balanced system. Zakat allows a minimum living standard for all
residents in an Islamic society, unlike in the capitalist system where the
savings of the haves double and multiply through interest, and the have-nots
have no social insurance because there is no Zakat.
In a
capitalist system an individual might give out part of his wealth if and only
when he denies to do so with out clear guidelines as to what, how, and how much
he should give, because there is a possession kind of ownership. In an Islamic
framework, Zakat illustrates a utilization kind of ownership and not that of a
possession kind. The former kind of ownership accrues when wealth is utilized
for its purpose and benefits derived from that wealth, else, the right of
ownership is withdrawn, more especially in the case of land
ownership.
Islam on the other hand, has clear guidelines as to what should be
given out as Zakat, who should give out Zakat and how much he should give out
(see Zakat at a glance). Zakat is obligatory on every eligible Muslim male or
female, and is given for the pleasure of god and to earn his grace. On the
things liable for Zakat, the prophet (PBUH) is reported to have
said,
“There is no Zakat on less than
five Awsaq of dates, there is no Zakat on less than five awsaq’ of
silver and there is no Zakat on less than five camels.”
And in another Hadith, the prophet (PBUH) is
reported to have said,
“On’ land that is watered by
rain or springs or any natural means there is (Zakat to pay of) a tenth. On
irrigated land, there is (Zakat of) a twentieth (to
pay).”
ZAKAT IN CASE TWO PERIODS ARE ASSESSED
TOGETHER
Assuming one capable of
paying Zakat does not pay in one period until the next period when the
calculation of Zakat will involve two periods, it is a procedure that the
assessment of Zakat is based on what the person is currently capable of paying
regardless of his previous condition of wealth. If, for example, after the
assessment of Zakat on his wealth he is unable to pay in the event his wealth is
reduced below nisab (the minimum requirement), he is not liable to pay Zakat for
the period that has passed.
As reported by Yahya, Malik
said, “The position with us concerning a man who has Zakat to pay on one hundred
camels but then the Zakat collector does not come to him until Zakat is due for
a second time and by that time all his camels have died except five, is that the
Zakat collector assesses the two amounts of Zakat that are due from the owner of
the animals from the five camels, which in this case is only two sheep, one for
each year. This is because the only Zakat which an owner of livestock has to pay
is what is due from him on the day that the Zakat is (actually) assessed. His
livestock may have died or it may have increased, and the Zakat collector only
assesses the Zakat on what he (actually) finds in his possession, and if his
livestock has died, or several payments of Zakat are due from him and nothing is
taken until all his livestock has died, or has been reduced to an amount below
that on which he has to pay Zakat, then he does not have to pay any zakat, and
there is no liability (on him) for what has died or for the years that have
passed.”
ZAKAT ON SEEDS AND OLIVES
This
presents a scenario of the application of Zakat as to what are the Zakatable
items, how much is Zakatable and when it is Zakatable. This clearly illustrates
the management of wealth in Islam not prevalent in the conventional approach.
Malik said,” The tenth that is taken from olives is taken after they have been
pressed and the olives must come to a minimum amount of five awsaq and there
must be at least five awsaq of olives. If there are less than five awsaq of
olives, no Zakat has to be paid. Olive trees are like date palms in so far as
there is a tenth on whatever is watered by rain or springs or any natural means,
and a twentieth on whatever is irrigated. However, olives are not estimated
while on the tree. The sunna with us as far as grains and seeds which people
store and eat is concerned is that a tenth is taken from whatever has been
watered by rain or springs or any natural means, and a twentieth from whatever
has been irrigated, that is, as long as the amount comes from five awsaq or more
using the aforementioned Sa’, that is the Sa’ of the prophet, may Allah bless
him and grant him peace. Zakat must be paid on anything above five awsaq
according to the amount involved.”
BUSINESS TRANSACTIONS
Business transactions in an Islamic framework come in various ways
and cater to different parties or groups of people in various circumstances and
situations. This might involve a Mudarabah agreement, where one party, say a
bank, provides capital and another entrepreneurship; a Mudarabah transaction,
which briefly can be described as a partnership between investors and borrowers
in a profit-sharing agreement involving re-sales; Al-ijarah contract, which is
literally, a contract of letting; and Qirad, which is wealth entrusted upon an
agent by an investor for commercial use. All of these transactions indicate how
wealth in its various forms is used or managed from an Islamic point of view.
Here is a look at the application of some of the above.
MUDARABAH AND MUSHARAKAH
MODE OF FINANCING
Banking institutions
have a unique way of managing wealth. Banks manage wealth through their various
modes of financing such as Mudarabah, Musharakah, and Murabaha
e.t.c.
Let
as for example the Mudarabah mode of financing. As we know Mudarabah involves
two or more parties coming together and agreeing upon, one party contributing
labor and the party contributing the wealth (capital) to carry out a business.
So through this definition you will discover or find out that there is sharing
of wealth, effort and responsibility. If one party or person has the effort but
not the means, he can go to the bank and obtain Al-qard-hasanah and start a
business, which at the end of the day will involve the sharing of
profits.
Therefore, banks indirectly manage wealth by giving Al-qard-hasanah
to the needy people who have the ability but not the means to carry out the
business without funds.
Unlike the conventional banks, were they give loans and charge
interest (Riba) upon the borrower. This is not called managing wealth or helping
the needy, but it is called exploiting the borrower. The borrower has to pay on
top of the money that he/she has got a fixed amount of interest, in which Islam
has forbid this. That’s why is Islam it is stated that absolute ownership of
wealth is towards the almighty Allah and we are merely entrusted upon it.
Therefore man cannot do whatever pleases him
As you can see the above manner in which
wealth is distributed is a form of wealth of management. This is because the
needy or the have-nots are assisted by providing them with the needed funds to
start a business. Firstly, money or wealth is not left lying idle and secondly
the wealthier people do not become more and more wealth. They share their wealth
with the have-nots. The same goes with the other form or mode of financing which
is Musharakah. Where two or more people come together to carry out a business
and the profits are shared in equal proportions at the end of the
day.
Let me provide with an example, so that you
can get a clear picture of how Musharakah is a form of wealth management
element.
For
example a person is interested in starting a business of selling books. That
business needs a capital of RM 200,000. This person interested in that business
has not that kind of money. He has RM 100,000 which not sufficient enough to
start that business. So he goes and sees his fellow friend asks him if he is
interested in that type of business. Let’s say the friend’s response to the
request is positive. So he tells the friend that he has only RM 100,000 and
needs another RM 100,000 to get started with the business. So the other friend
would provide the other hundred to start the business. In this way they of
formed what we call a partnership in conventional terms and Musharakah in Islam.
But in Islam Musharakah can be made between Banks, institutions and other normal
businessmen.
Unlike in the conventional were it can be done between institutions
only and between businessmen and not a mixture of both. This is a mode of
financing and a form of wealth management.
AL-IJARAH FACILITY
Al-ijarah, also known as Al-kira’ refers to rent, lease or usage. In
an Islamic financial system, Al-ijarah is a contract of selling of benefits or
use or service for a fixed price or rent. Technically, Al-ijarah in fiqh is used
“to express the sale (Bay’) of a known benefit in return for its known
equivalent” (The Majelle Art.405). Being a contract like that of sale, Al-ijarah
is concluded with offer and acceptance.
CONCEPT
With
the Ijarah facility, the main idea behind the contract is the transfer of usage
or benefit and not ownership. For this contract to be legally operational, the
following guiding principles are required:
1)
The usage/benefit must be clarified with regards to the period of lease and the
types of usage.
2) The lessee is capable of utilizing the
benefit of the lease fully.
CONDITIONS
Al-ijarah facility can only be valid if it meets the following
conditions from an Islamic perspective.
1)
The owner of the
asset or lesser
2)
The user or holder of
the asset or lessee
3)
The
asset/equipment
4)
Benefit/service
5)
The
rent/price
6)
Offer and
acceptance
Have all been stated clearly in the contract
of Al-ijarah.
EARTURES
1)
Al-ijarah financing
extends from short to medium financing in equipment, motor vehicles, machines,
computers, and consumer goods among other things.
2)
The usage of the
asset should not contain any elements of Haram
(forbidden).
3)
A consideration of
the used industrial equipment markets, second hand value and capital allowance
when extending Al-ijarah financing to the customer
MODE OF
OPERATION
The
banks manner of financing Al-ijarah contract generally follows the following
procedures:
1)
Determination of the
needs of the customer where the equipment and the lease period is concerned
under the shariah principles.
2)
Purchasing the
required equipment by the Bank.
3)
Leasing the equipment
to the customer at an agreed price and period. The total lease rental of the
Bank is a combination of the cost of the equipment and the margins of profit for
the Banks.
As
mentioned earlier, the purpose of this kind of contract is the transfer of usage
or benefit, but the bank retains the ownership of the asset. In the event the
customer dishonors the agreement, the Bank can repossess the equipment
immediately. For instance, if a horse is hired to be ridden by someone and it
happens that someone else other than the person who hired the horse rides it,
this can invalidate the contract. However, the lesser can also not rescind the
contract anytime he wishes to. The Mejelle (Art. 441) says, “After a contract
has been completed which is a lawful letting, if another person offers
additional rent, however much it may be, the lesser cannot for this alone annul
the letting.”
AL-IJARAH OPERATION
EXAMPLE
Assuming the Banks purchases equipment for RM
30,000 and leases it to a customer for a period of 5years at 8% rate of profit
per annum; we can calculate the following:
Total Lease Rentals (TLR) = CF + (CF * I * n),
where
CF = Cost of Financing
I = Rate of Return per Annum
(Flat)
n = Period of financing in years
Hence,
TLR = 30,000 + (30,000* 8% * 5)
= RM
42,000
Monthly Lease Rental = RM 42,000/ (5 * 12)
= RM 42,000/ 60
= RM
700
Amount of Profit = RM 42,000 – RM
30,000
= RM
12,000
TERMINATION
(1)
Being a finance
lease, Al-ijarah contract is non-cancelable. In the event this happens, say due
to the involuntary of the asset, the lesser will have to be
compensated.
(2)
According to the
Income Tax Act 1967 schedule 3 para 71 , there is no allowance for plant and
machinery if held for less than 2years.
(3)
Early termination of
the lease is classified into 2:
(a)
Within 24months from
the commencement of the lease date.
(b)
After 24 months from
the start of the lease date.
(4)
The Income Tax Act
1967 under para 71 provides indemnity for the lesser by the lessee against any
balancing charge incurred by the lesser if the lease contract is terminated
within 2 years.
(5)
The rate of tax
indemnity is at 33% per annum.
UNIT TRUST
Unit
trust is investment instruments in which many investors who share similar
investment objectives pool their resources together which are then invested by
specified fund managers in specified or authorized securities. There is no
profit sharing between the fund manager and the investors but a fee known as
ujrah is incurred by the investor for the professional services under Al-wakalah
contract.
In
the Islamic unit trust, there is usually a shariah panel (shariah supervisory
board) which decides which share to fund by using the Activity or Structure
Method. Aside al – Wakalah agreement, Islamic unit trust also involves on
indirect Musharakah system (equal to unequal share partnership) between investor
and companies trading stocks or bonds. Capital gains and dividends are for
investor but every purchase or sale of units, the company (fund manager)
receives a fee. Any losses incurred due to adverse market conditions do not
affect the shareholders wealth.
There
is a sharii and tabii dimension to the Islamic unit trust. The former inculcates
akhlaq (ethic) in the agreement following the concept of Tawhid. This helps
weigh actions from the reasoning point of view as well as spiritual values. The
latter is a brainchild of natural and common sense. For the fact that the
management receive a fee, if it is incumbent on the conduct research and use
fundamental and technical analysis in the stock selection; so that the element
of gharar (uncertainty) and maisir (gambling), among others are eliminated. Fund
managers are expected to follow price changes as caused by company performances
so that losses are minimized and capital gains achieved.
Another way or means by
which Islam manages wealth on a small scale is by inheritance. We say on a small
scale because this is done at the family level. As you know inheritance is the
acquiring of the wealth or property left by the deceased parent. This wealth is
to be divided among immediate family members in an appropriate manner stated in
the Quran and Sunnah. Allah s.w.t has already stated the shares that are to be
given to the immediate family members. Allah knows if He hadn’t done so there
would be lot problems that would have come up. Some people would have been
treated unfairly by giving or offering them a little or none of the wealth they
deserve to get.
In the conventional there is no
proper laid down manner in which the wealth is to be inherited. Although the
deceased leaves behind a will to who suppose the wealth goes, but it still some
weaknesses or injustice occurred. The
weakness is that it has no room for the distribution of income sometime. For
example, if the rich only marry the rich and the poor also marry the poor, the
wealth will just circulate among the rich and the poor will remain poorer.
Therefore it has no room for the distribution of income or wealth. But if this
looked into and across manages take place like the rich marry the poor then this
would be a better way to distribute wealth among the
people.
The Holy Quran has given
a line out on how the wealth should be managed in the verse 10 – 12 surah An –
Nisa. Allah s.w.t says:
“Those who unjustly
eat up the property of orphans, eat up a fire into their own bodies: They will
soon be enduring a blazing fire. (10)
God (thus) directs you as
regard your children’s (inheritance): to the male, a portion equal to that of
two females: if only daughters, two or more, their share is two-thirds of the
inheritance; if only one, her share is a half. For parents, a sixth share of the
inheritance to each, if deceased left children; if no children, and the parents
are (only) heirs, the mother has a third; if the deceased left brothers (or
sister) the mother has sixth. (The distribution in all cases) after the payment
of legacies and debts. You know not whether your parents or your children are
nearest to you in benefit. These are settled portions ordained by God; and God
is All – Knowing and All – Wise. (11)
In what your wines leave, your share is half, if they left a
child, you got fourth; after payment of legacies and debts. In what you leave,
its share is a fourth, if you leave no child; but if you leave a child, they get
an eighth; after payment of legacies and debts. If the man or woman whose
inheritance is in question, has left neither ascendants nor descendants, but has
left a brother or a sister, each one of the two gets sixth; but if more that
two, they share in a third; after payment of legacies and debts; so that no loss
is caused (to any one). Thus is it ordained by God; and God is All – Knowing,
Most Forbearing. (12)”
RECOMMENDATIONS
If goes beyond the reasonable doubt that
zakat clearly illustrates the manner of wealth managements in Islamic framework.
What is required then is proper vehicle through which zakat funds can be
channeled. This involves knowing not only by the nature of zakat, the criteria
of zakat, but also the zakatable items in our modern day Muslim societies,
minding the changing circumstances. Kahf (1989) suggest a reconsideration of the
fiqh views where the actual implementation of zakat is concerned. He however
places much emphasis on the social and economics justice together with its
impact on development. Hence, we are tempted to suggest further research on the
administration of zakat and what actually constitutes the elements of zakat in
our contemporary Muslim societies, which may not have been suggested in the
period of Prophet Muhammad s.a.w.
Since
Malaysian’s system of government is secular in nature, the zakat system has not
been seriously taken into consideration. In short it has fallen on deft ears and
got no response. As paying zakat is one of the five pillars of Islam, it is of
great important that the government Malaysia has to look into it. It is
not only an individual responsibility but also a nationwide responsibility to
see to it that zakat is paid by the able Muslim.
Therefore, here is some recommendation that
could put in place an effect zakat system in Malaysia:
1.
Is to educate the
massage of people in Malaysia both publicly and privately
about the important of paying zakat. In order for this effective, we should
start from those people who are at the top. This can be done holding seminars
and regular talks on zakat.
2.
They should also try
to incorporate the zakat system into the countries fiscal policy. If the paying
of government taxes by the people to the federal and state government is
effectively working, why can’t the payment of zakat be imposed as a law by the
government? Through this, we think that more people will be well informed of the
zakat payment.
3.
The government should
also put in place a centralized zakat institution where people can get
information and pay zakat. Try to avoid any differences among the states in
terms of implementation of zakat. By this, we can prevent any misunderstanding
and confusion between people.
CONCLUSION
Wealth management from an Islamic perspective follows proper guidance
principle of shariah, which, to a large extent, take a different route from the
conventional point of view. Throughout the paper, there was an intention to show
that distinction. Any shortcomings on that purposes is owing to the technical
know – how on the part of authors. However, the paper sought to convey that
owning wealth in Islam does not make anybody the absolute owner of that wealth.
Wealth is merely entrusted upon us by God and thus, it has to be used and
arranged in accordance with God’s approval as stated in shariah rulings.
Ownership can be acquired through many ways as in a sale contract or gift;
making someone the successor of another as in inheritance, and the acquiring of
a thing which free for the public use. In all of these circumstances, Islam has
a way in managing wealth.
Man
as the vicegerent on this world is expected to seek this wealth and use it in
manner that will help him obtain the pleasure of God in this world and
hereafter. With that, the paper provided some practical scenarios as to how
wealth can be used in Islam for this purposes. It was therefore illustrated in
zakat planning, al – Ijarah financing and Islamic unit trust. The main purpose
is to show the approach to wealth management in Islam not prevalent in the
conventional way. Then the paper looked at some recommendations as a vehicle for
further improvement, particularly on zakat activities.
