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.
