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Islamic Wealth Planning and Management

By Md. Shahedur Rahaman Chowdhury

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Topic One:Wealth Creation And Mobilisation From

Conventional And Islamic Perspectives

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Differentiate Between Wealth and Income .

Wealth is how much assets one has accumulated over a period of time.

Income is how much assets one currently has coming in.

So, Wealth is a stock as opposed to Income which represents a flow.

Example???

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Differentiate the concepts of wealth between the Islamic and conventional perspectives. Are there any points of similarities? How

do you reconcile the two concepts in reality?

– In Islam• All wealth belongs to Allah. • Man is a trustee and needs to use it in accordance with Islamic teachings

• Wealth is in abundance• Everyone has been allocated what is due to him. It is up to him to work on it.

– From conventional perspective• Wealth is generated by individual and hence he is the rightful owner

• Wealth is scarce• It is man who generates wealth and not apportioned to him.

• He has complete freedom to use it– Efforts are needed to generate wealth under both perspectives

– To reconcile: Man’s effort can only be successful with the permission of Allah

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Describe the nature of goods that Islam distinguishes for public

consumption.

– Two kinds of assets for public consumption:•First is public utilities such as large streams, bridges, land for common use and river banks.

•Second, natural resources: water, herbage fire and salt

– However, jurists are of the opinion that those goods with the same attributes should be included as well

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Why do you think Islam distinguishes them from those that could rightfully

be privately owned?• The rationale is that those goods whose production are too costly and burdensome to individuals yet are very much needed by the public at large should belong to public. Otherwise the good can be privately owned.

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Explain why wealth is considered as a two-edged sword? How could one

protect oneself from going beyond the bounds permitted by the Shariah

and why?–It is useful when one uses it in accordance with Shariah. It helps man to perform his obligations and he should get the blessings of Allah

–On the other hand he will suffer in the hereafter especially when asked to account how he has attained and spent it.

–If he has used them for things forbidden it will be worst for him

–Some examples?

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Is wealth planning permissible in Islam? How much different will it

be done from the conventional approach?– Define wealth planning

– What are the components of wealth planning in Islam and in conventional practice

– Why is it permissible in Islam? Wealth planning is permissible in Islam in order to ensure that man is able to live comfortably in his old age. Islam does not want Muslims to suffer in this world

– It will be very different because •a Muslim needs to cleanse (pay zakat, voluntary sadaqah and spending on others) his property.

•He must not indulge in un-Islamic activities while generating, accumulating, preserving, protecting and spending his wealth.

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The three prohibitive elements that would make a commercial transaction non-shariah

compliant are riba (usury), maisir (gambling) and gharar (uncertainty; ambiguity). Why are they considered

prohibitive to Shariah?

–They obstruct justice and equity–The players are not in the same playing fields–Information is incomplete (gharar)

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Spending one’s wealth on others is strongly encouraged by Islam • “They ask you what they should spend (in

charity). Say: Whatever you spend that is good, is for parents and relatives and orphans and those in want and for wayfarers. And whatever ye do that is good, -(Allah) knows it well” [Quran: Chapter 2 (Al-Baqarah): Verse 215]Spending one’s wealth on others is strongly encouraged by Islam as is mentioned in the above verse of the Holy Quran.

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Briefly explain the importance of spending in the context of wealth purification in Islamic wealth

planning. • Purification is of two kinds, the physical and the spiritual

• Wealth purification is manifested by sharing with others what we have and better still what we love most (physical, purifying from non-Shariah compliant income that may be earned unknowingly or within tolerable limits)

• It is in the spirit of searching for the blessings of Allah that we give away what we have (spiritual)

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Briefly explain each of the different Islamic wealth purification

processes.• The main distinction between the conventional and Islamic wealth planning is the Shariah requirement of wealth purification.

-Spending (infaq)– Voluntary charity (sadaqah)– Compulsory wealth tax (Zakat)– Endowment (Waqf)

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End

Q & A