The definition of Islamic banking is a banking system that adheres to Islamic ethos, principles, and values and is governed by Islamic law or Shariah. A limited definition of interest-free banking is the set of financial products or services that do not charge interest. Islamic banking, the more generic term, is predicated on avoiding unethical and unsocial practices in addition to interest-based transactions, which are forbidden by Islamic law or Shariah. Islamic banking, in a practical sense, is the conversion of traditional financing into transactions based on actual goods and services. The Islamic banking system’s design points in the direction of a system that promotes economic development.
Islamic law or Shariah serves as the foundation for Islamic financial philosophy. Islamic banking is prohibited from engaging in transactions containing interest or riba by Islamic law (an increase stipulated or sought over the principal of a loan or debt). Additionally, Islamic banks are prohibited from engaging in Gharar (uncertainty) or Maiser (gambling) trades. Also, they are prohibited from engaging in any transactions whose subject matter is void (haram practices or industries). Islamic banks place a strong emphasis on making money through investments that adhere to Shariah. According to Islamic law or Shariah, capital gains are correlated with performance. The operations of Islamic banking, which operate within the bounds of Shariah, are centered on sharing potential risk through trading and investment activities using contracts of various kinds and different modes of finance.
Correctly interpreted according to Shariah terminology the word “Riba” means excess, increase, or addition, which, implies any excess compensation without due consideration (the consideration does not include the time value of money). This definition of Riba is derived from the Quran and is unanimously accepted by all Islamic scholars.
The meaning of Riba has been clarified in the following verses of the Quran (Surah Al Baqarah 2:278-9)
“O those who believe; fear Allah and give up what remains of the Riba if you are believers. But if you do not do so, then be warned of war from Allah and His Messenger. If you repent even now, you have the right of the return of your principal; neither will you do wrong nor will you be wronged.”
The global banking system first began to develop in the 17th century, which is when the term interest first appeared. Interest refers to the providing and/or receiving of any extra money in return for a loan or debt. As a result, it has the same significance as Riba, as described in the preceding question “what is meant by Riba”. The narration continues, “The loan that draws interest is Riba.”
There are two kinds of Riba
- Riba-An-Nasiyah/Riba-Al-Quran
- Riba-Al-Fadl
- Riba An Nasiyah/Riba Al-Quran:
In the Holy Quran, Allah (SWT) says in Sura Al-Baqarah (2-279): “ …..And if you repent, yours is your principal”
It is reported by Harith ibn Abi Usamah in his Musnad that Sayyidna Ali Radi-Allahu Anhu reportedly referred that the Holy Prophet said:
“Every loan that derives a benefit (to the lender) is riba”.
Example of Riba-al-Nasiyah/Interest: If Mr. A gives Mr. B (a borrower) R100 on the understanding that Mr. B will pay him back R110 in one month, then Mr. The additional R10 in this instance is known as interest, or riba.
- Riba-al-Fadl:
“Gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates and salt for salt, like for like, payment made hand by hand. If anyone gives more or asks for more, he has dealt in riba. The receiver and giver are equally guilty”
Based on the aforementioned description, it should be emphasized that exchanging one kilogram of wheat for one and a half kilograms of wheat in a spot trade would be economically illogical. Because of this, some fuqaha have noted that Riba-al-Fadl has been forbidden because, if left unprohibited, it might be used as a ruse to obtain Riba-al-Nasiyah. Two (gold and silver) of the six items mentioned in the hadith definitely depict the commodity money in circulation at the time. The fact that gold and silver are monetary commodities is one of their fundamental qualities.
In actuality, at some point or another, each of the six commodities named in the hadith has been employed as a medium of exchange.
Only the first version (Riba An Nasiyah) was regarded as Riba during the dark ages. However, Riba-al-Fadl, the second kind, was likewise categorized as Riba by the Holy Prophet (peace be upon him).
There are four sets of revelations about Riba which were revealed on different occasions.
First Revelation: In Surah-Ar-Rum, verse 39 , dealing in riba has been discouraged in the following words:
“And whatever riba you give so that it may increase in the wealth of the people, it does not increase with Allah.” [Surah Ar-Rum 30:39]
Second Revelation: Muslims have been informed about the practice of taking riba by Jews in Surah An-Nisaa:
“And because of their charging riba while they were prohibited from it.” [Surah An- Nisaa 4-161]
Third Revelation: Riba/Interest has been abolished in the third verse of Surah Al- i-‘Imran. The prohibition of riba is laid down in the following words:
“O those who believe do not eat up riba doubled and redoubled.” [Surah Al-e-Imran 3- 130]
Fourth Revelation: In the fourth revelation, Riba has categorically been prohibited in all its forms. The following set of verses is found in the Surah Al-Baqarah, verse 275-281 in the following words:
“Those who take interest will not stand but as stands whom the demon has driven crazy by his touch. That is because they have said: ‘Trading is but like riba’. And Allah has permitted trading and prohibited riba. So, whoever receives an advice from his Lord and stops, he is allowed what has passed, and his matter is up to Allah. And the ones who revert back, those are the people of Fire. There they remain for ever. Allah destroys riba and nourishes charities. And Allah does not like any sinful disbeliever. Surely those who believe and do good deeds, establish Salah and pay Zakah, have their reward with their Lord, and there is no fear for them, nor shall they grieve. O those who believe, fear Allah and give up what still remains of the riba if you are believers. But if you do not, then listen to the declaration of war from Allah and His Messenger. And if you repent, yours is your principal. Neither you wrong, nor be wronged. And if there be one in misery, then deferment till ease. And that you leave it as alms is far better for you, if you really know. And be fearful of a day when you shall be returned to Allah, then everybody shall be paid, in full, what he has earned. And they shall not be wronged.” [Surah Al-Baqarah 2:275-281]
When carrying out any Islamic financial transaction, at least six fundamental principles are taken into account
These guidelines set apart an interest- or riba-based financial transaction from an Islamic banking transaction
1) Sanctity of the agreement:
The counterparties must determine whether the transaction is halal (legal) in the perspective of Islamic Shariah before carrying out any Islamic financial transaction
This means that a transaction made by an Islamic bank cannot be void or voidable
A contract that violates Shariah law is one that does so by virtue of its very nature
On the other hand, a voidable contract is one that is legitimate in and of itself but has some illegitimate elements added
The legitimate contract will continue to be voidable unless these unlawful provisions are removed
2) Risk sharing:
From the words of the prophet Muhammad(SAW), Islamic jurists have derived two principles.
1. “Al-kharaj bil daman”
The right to use the property for one’s advantage in exchange for taking up the property’s upkeep
It outlines the Islamic jurisprudential principle that the yield from an asset belongs to the person who is responsible for that asset, and that anybody who does not bear that responsibility has no right to the income
For instance, if a person purchases a property and rents it out, but later discovers a flaw and returns the house to the seller, the seller has no right to the rent paid while the house was under the buyer’s ownership
2. “Al-ghunm bi al-ghurm”
If a person is willing to take responsibility for the loss, they are entitled to a gain. The idea behind the no profit-sharing without risk-sharing rule is that making a profit is only justifiable if you are actively involved in the economy and contributing to it
3) No Riba/Interest:
Transactions involving riba/interest are not permitted by Islamic banks
They are unable to lend money in order to profit more from it
However, it makes money by assuming risk with regard to real property, genuine services, or capital and transfers this profit or loss to its deposit holders who likewise assume risk with regard to their own capital
Every Islamic banking transaction serves a specific economic goal or activity. Islamic banking transactions are also supported by real services or movable assets
4) Economic purpose/activity:
Every Islamic banking transaction serves a specific economic goal or activity
Islamic banking transactions are also supported by real services or movable assets
5) Fairness:
Through its practices, Islamic banking promotes fairness. Islamic banking prohibits the inclusion of transactions based on questionable terms and conditions.
The contract or agreement contains a complete disclosure of all terms and conditions included in the transactions
6) No invalid subject matter:
It is ensured that no invalid subject matter or activity is sponsored by an Islamic financial transaction when one is carried out
Even if some topics or actions may be legal under local law, an Islamic bank cannot finance them if they are against Shariah
The gain comes with a loss of liability
Only by assuming some risk and engaging in economic activity is making a profit justified.
An Islamic principle is the belief in the free market. Islam views tangible goods with intrinsic value as money. Here are some examples of goods that can be exchanged for money: Dates, wheat, barley, salt, silver (as Silver Dirham), gold (as Gold Dinar), and silver. The six items—gold, silver, dates, wheat, barley, and salt—are taken from a hadith and were used as currency in the barter system. As a result, Sunnah money is sometimes referred to as the items described in hadith.
You can use paper money or electronic money as long as it is backed by one of these goods at a set exchange rate (in other words, the paper is essentially a contract stating that the bearer can redeem the paper for a set amount (weight) of that specific good). Most national currencies throughout the world were backed by gold until 1971. Paper could only be redeemed by governments; the regular person could not.
As long as paper money (fiat currency) is not used, the market determines the price of a commodity. The makers of fiat money, on the other hand, have the power to influence or change the price or value of goods (by virtue of the market law of supply and demand).
Islamic banks offer products for current and savings banking accounts, structure to comply with the principles of Shariah.
There are two prominent views based on the Shariah principles that applied for the current accounts. One is to treat it as ‘wadi‘ah-wad-damanah’1 (trust).
The other one Savings with guarantee. Refers to goods or deposits, which have been deposited with another person, who is not the owner, for safekeeping. As wadi‘ah is a trust, the depository becomes the guarantor and therefore guarantees repayment of the whole amount of the deposits, or any part thereof, outstanding in the account of the depositors when demanded. The depositors are not authorizing to any share of the profits but the depository may provide returns to the depositors as a symbol of appreciation.
An Al-Wasiyya, commonly referred to as an Islamic Will, is a legally binding document that specifies a person’s final intentions, the assets they intend to leave behind, and the distribution of those assets in accordance with Sharia law.
An Islamic will, in contrast to other wills, states who is qualified to inherit property.
The first verses of Surah an Nisa (chapter four) of the Holy Qur’an give instructions on this.
Islamic wills are flexible in that you can modify which beneficiaries will receive which assets, despite the fact that under Islam the beneficiaries of assets are fixed. A specified percentage of the estate may be inherited by each qualified person, but this percentage is liable to vary.
For instance, If the percentage given to a person, such as your wife, is problematic for you, you can apply for written permission to remove provisions from someone with a larger percentage, such as your parents, in order to provide your wife extra provisions. You must revise your will once you get written approval.
Investments in specific industries are prohibited by Islamic law. These include:
- alcohol
- adult entertainment
- gambling
- traditional finance (e.g., Banks)
- pork products
Many Islamic scholars also advise against investing in the tobacco and the weapon industry.
Islamic bank savings and term deposits are banking products. They are often referred to as investments in South Africa. It is important to distinguish between a bank product and a market related investment product.
Islamic bank products stay on the Islamic banks’ balance sheet, and this allows the Islamic bank to use these funds for lending (e.g., mortgage loans, vehicle financing etc.) to other customers of the Islamic bank or Islamic bank window.
Shariah Compliant investments on the other hand are exposed to global investment markets (i.e. Johannesburg Stock Exchange (JSE), New York Stock Exchange (NYSE), London Stock Exchange (LSE)). These exchanges allow investors to purchase various investment solutions either directly or through an intermediary (bank investment platforms, financial institutions’ investment platforms etc.).
The most common product and easiest to purchase would be individual shares or ETF portfolios. This could be managed either by yourself or you may receive advice for a fee. The fee would usually depend on the product you are purchasing and the amount you are investing.
An easy way to get access to a diversified set of investments based on your risk profile (attitude to risk), time horizon and goals would be to invest in a single manager unit trust fund or a multi manager fund. A multi manager fund is a fund that consists of two or more funds. Again, here you could buy the fund directly or pay an advice fee for someone proposing a solution that best suits you.
The concept of insurance is not haram in Islam when undertaken in the framework of Takaful or mutual co-operation and solidarity. Contrary to conventional insurance, Takaful does not consist non-permissible elements such as gharar (uncertainty), gambling and investing in interest bearing instruments .Islam encourages mutual co-operation as Allah says in the Quran :
” وتعاونوا على البر و التقوى ” سورة المائدة.”
“ And help you one another in righteousness and piety “
Surah Al Maidah 5:2
Takaful is a type of Islamic insurance wherein members contribute money into a pool system to guarantee each other against loss or damage. Takaful-branded insurance is based on Shariah or Islamic religious law, which explains how individuals are responsible to cooperate and protect one another. Takaful policies cover health, life, and general insurance needs.
Takaful insurance companies were introduced as an alternative to those in the commercial insurance industry, which are believed to go against Islamic restrictions on riba (interest), al-maisir (gambling), and al-gharar (uncertainty) principles—all of which are outlawed in Shariah.
Takaful means “guaranteeing each other” in Arabic. It is an Islamic system of mutual insurance built around the concept of ‘tabarru’ (donation, gift).
‘Tabarru’ contributions are made with the intention to help other participants faced with difficulties and to eliminate the resemblance of Takaful to gambling and exploitation. Each participant contributes to a fund to cover any claims, while also benefiting from a share of any surplus declared.
The Takaful Company’s role is to manage the Takaful operations and invest Takaful contributions in line with the Shariah principles. Participants share in profits of the fund with the understanding that these may be forfeited to cover losses. When there is surplus, it is jointly shared.
Your coverage payment is combined into a single fund, the participant’s Takaful Fund, which is used to cover any unforeseen expenses in the event that one of the scheme’s participants experiences a catastrophic loss, whether it be to their property or their life. In other words, by promising payment from the Takaful Fund for the specified losses suffered by any member of the system, each member of the program essentially covers the others.
Takaful mitigates the problematic elements of gharar, maysir, and riba and is Shariah compatible because it is founded on the principle of collaboration rather than sale or exchange. In contrast, traditional insurance requires policyholders to pay premiums in exchange for protection from disaster. In the event of a catastrophe, the insured will be covered. If such a catastrophe does not materialize, the policyholder will forfeit the premium to the insurance provider.
However, by making a contribution to the Takaful fund, you and the other members (participants) of the fund have agreed to support one another financially in the event that one of the fund’s members experiences a catastrophe or disaster. Furthermore, Takaful Fund does not use any interest-based instruments when investing your donation in accordance with Shariah. Additionally, any surplus will be redistributed to the Participants.
The Takaful Company therefore only manages this pool (for a fee) for the benefit of the members/participants.
Conventional insurance is based on a contract of exchange (sale) between the insurance company and the covered person. This contract is void because it has one or all of the following elements, which is not permissible from Shariah’s perspective:
- Gharar:(Uncertainties) Conventional insurance has an element of Gharar due to the promise to pay a sum of money upon the occurrence of unsuspected events
- Maysir: (Gambling) Existence of gharar (uncertainties) leads to maysir (gambling) in conventional insurance. The insured may either lose all the premiums he has paid or be compensated for the losses he incurs for the insured event
- Riba: (Usury/Interest) The investments of insurance funds in interest bearing securities such bonds and stocks, which do not comply with Shariah principles, pose a major problem for Muslims who purchase the conventional insurance.
5 Steps to Organize Estate Documents for Your Executor
Step 1: Create a checklist of important documents (and their locations)
Step 2: List the names and contact information of key associates.
Step 3: Catalog your digital asset inventory.
Step 4: Ensure all documents are organized and accessible.
Step 5: Regularly update your estate documents.
The 6 Steps to a Successful Estate Plan
Step 1: Define your Estate Planning Goals. (Understand what you want to happen)
Step 2: Gather and Organize your Financial Data. (Gather the correct documentation)
Step 3: Analyze & Discuss.
Step 4: Develop your Estate Strategies.
Step 5: Implement your Estate Plan.
Step 6: Track & Monitor your Progress.
EXECUTOR FEES
This is the industry standard fee the Executor or other experts helping to wind up your estate will charge you. You will only be charged a maximum of 3.5% of your estate plus VAT. For instance, a R 2 million estate will pay R 80, 750 in fees.
CONVEYANCING ATTORNEY FEES
When a property needs to be transferred, the conveyancing attorney will charge this fee. A house valued at R 200, 000 that is transferred to a Beneficiary will cost the Estate R 30, 000 in fees.
TESTAMENTARY TRUST FEES
This is the fee that the Trustees charge to manage the Trust that you establish in your Will, which is typically used to manage the funds you leave to your minor children. The Trust is established for an average fee of 1.15% of the net asset value, and the yearly fee for Trust administration is 1.6%. Example: With assets worth R1.5 million over a 15-year period, the whole cost is R 377, 250.
MASTERS FEES
The cost associated with the High Court Master performing their duties in relation to your estate’s administration.
CORRESPONDENCE FEES
Costs for communicating with the Master of the High Court.
CLEARANCE FEES
Getting a clearance certificate from the local council or municipality is one of the criteria for transferring ownership of a property. Only if the rates and taxes are paid in full in advance will this be given. Some places demand payments made up to six months in advance.
ADVERTISEMENT COSTS
Both a local newspaper and the Government Gazette must publish two adverts. The cost can vary from R1, 000 to R 1, 500 depending on the publication selected.
INHERITANCE TAX
The Executor must decide if Capital Gains Tax (CGT) or Estate Duty is due at death in addition to paying any unpaid taxes from the Estate before it may be closed.
ONGOING SHORT-TERM BILLS
Despite the fact that bank accounts are frozen, payments must still be made for expenses including medical assistance, school fees, auto insurance, water, lights, and rates.
OTHER IMMEDIATE EXPENSES
Funeral planning fees, such as catering, travel, and other outlays. The legacy you want to leave behind will be diminished by these costs. Spare your family the burden. Keep your legacy safe.
A living trust becomes active once it is established and funded. Other types of trusts can be established. A trust can protect you and manage your assets in the event of your incapacitation.
A will takes effect after your death.
Islamic Inheritance and Wills, Estates, and Trusts – Shariah law’s inheritance regulations are an essential component. Muslims must have a Last Will and Testament to ensure that their estate is distributed in accordance with Shariah Law.
A Shariah Will is a legal document created in line with the Islamic Law of Inheritance, which is set forth in the Qur’an and establishes the manner in which a Muslim’s inheritance shall be divided upon death.
Estate planning involves determining how an individual’s assets will be preserved, managed, and distributed after death. It also considers the management of an individual’s properties and financial obligations in the event they become incapacitated.
This is the compulsory alms-giving which Allah has given the order for in the Qur’an. Its status is Fardh. Zakah is only eligible upon mature, sane men and women who meet Nisab threshold. 2.5% of their wealth must then be given. Zakah must only be given to the specific eight categories mentioned in the Qur’an. If it is not given to any of them, then it will be void and necessary to re-pay. So donate to charity Zakat and fulfill the right of your wealth that Allah has bestowed upon you. –
- The poor
- The hungry
- Those responsible for distributing zakat
- Those in captivity and slavery
- Those living with unmanageable debt
- Those who fight in the name of Allah
- Stranded or struggling travellers
- New Muslims and friends of Muslim communities
Zakat is intended to strengthen the Muslim community, the Ummah, by means of redistributing wealth to the poorest of our society and ensuring they get the resources they need to live.
This is the general term used for giving charity in Islam. All acts of worship through financial expenditure are, by broader definition, classified as Sadaqah. Due to there being many types, they have been divided into the following two categories both of which have separate rulings:
Sadaqah Wajibah
This is charity which is binding in nature. This includes Sadaqah al-Fitr, etc. This form of Sadaqah is similar to Zakah in that it must be spent on the same categories as defined by the Qur’an, except that it is not a condition for the beneficiary to be Muslim.
This type of Sadaqah includes:
a.Sadaqatul Fitr
b. Nadhr
c. Fidyah
d. Kaffarah
e. Udhiyyah, Dam and Badanah
Sadaqatul Fitr
This is a charity which is a duty upon every sane Muslim, who possesses the value of Nisab beyond the basic necessities. Fathers are instructed to give Sadaqah al-Fitr on behalf of those children who have not reached their age.
The amount that must be given is equal to 1.6 kg of wheat or 3.2 kg of barley or its like. This does not mean that a person must distribute wheat or barley, one may give its equivalent value. (Because this fluctuates it is improper to specify a price, although it is usually between one and three pounds.)
Sadaqah al-Fitr is a very emphasized Sunnah (which according to many is the status of Wajib) which becomes due before ‘Eid Salah, although it is preferable to give it a few days before ‘Eid so that the poor actually receive it and are able to spend it on `Eid day. If one does not give the Sadaqah al-Fitr, it will remain due no matter how much time passes after ‘Eid.
- Nadhr
This is an action which becomes necessary due to one imposing it upon oneself. This can be done if one wishes to express gratitude, and the action can take on a number of forms, including Sadaqah. If a person makes such an oath of giving charity, that then becomes Sadaqah Wajibah. If they are unable to uphold the oath, they will have to give Kaffarah, and may be sinful. - Fidyah
This is compensation for missing Salah or Sawm for a person who cannot perform them due to being in terminal illness or being deceased (in which case it is given out of a third of the wealth) or in the event of a person making a minor mistake in Hajj. The amount for each missed Salah or Sawm, or each minor mistake in Hajj is to give 1.6kg of wheat or its value (i.e. the same amount given for Sadaqah al-Fitr) to the poor. Fidyah is generally Sadaqah Wajibah. Sadaqah Nafilah may be given in addition either from the deceased’s estate or on their behalf in which case both the giver and the deceased are rewarded. - Kaffarah
This is major compensation and like Fidyah it is also Sadaqah Wajibah. It applies in various situations such as if a person breaks a fast intentionally, breaks an oath, or kills someone, Kaffarah would then be binding as the form of redemption. There are five actions for which kaffarah will be necessary, however, they fall under two types.
Greater Kaffarah
For redemption of this a person may free a slave (if feasible) or fast for sixty consecutive days (If a person breaks a fast intentionaly they would need to fast for sixty consecutive days, unless they can’t fast due to poor health or old age, there are no exceptions to this). Failing that one may feed sixty poor people for a day (i.e. give them the amount equivalent to fidya/sadaqatul fitr or give them two meals for the day). This Kaffarah applies to:
- Intentionally breaking Sawm (fast)
- Breaking Zihar (To consider one’s wife as Haram for oneself by comparing her to a Mahram – anyone too closely related to be marriageable)
- Being the direct cause of someone’s death (this is coupled with the set punishments).
Note: In the instance of not being able to feed sixty people in a single day then he may feed one person for sixty days, but in this case if he were to try to quicken payment of this by giving all the money in one day to one person, kaffarah would not be fulfilled, and his offering would only be equal to one days feeding.
Lesser Kaffarah
For redemption of this a person may free a slave (which is no longer applicable) or feed ten poor people for two meals in one day, or give each one of them clothing. Failing this, he may fast for three consecutive days (The order is also different from the greater Kaffarah). This Kaffarah applies to:
- Breaking/violating Yamin (an oath)
- Breaking Ila’ (To take an oath on not having conjugal relationships with one’s wife)
Udhiyyah
This is also known as Qurbani or sacrifice. It is Wajib upon all mature Muslims who, on the day of `Eid al-Azha, possess Nisab. Whoever qualifies for this is required to purchase a sheep or goat of more than one year in age, and slaughter that in the name of Allah after the ‘Eid prayer preferably on the same day. The sacrifice can also be done on the two days after Eid. If one fails to make the sacrifice in these three days he will still have to donate the value of the animal (this remains Wajib).
From the meat he may eat himself and feed his family and also distribute meat amongst the poor Muslims. One is not responsible to give Zakah or any necessary Sadaqah for one’s spouse nor one’s mature children – they are responsible for themselves. One is however, responsible for only giving sadaqah al-fitr for one’s minor children, however, neither Zakah is given from their wealth, nor Udhiyyah given on their behalf.
Note: One may slaughter goats or sheep, which constitute one sacrifice each, or one may slaughter a larger animal (i.e. cow or buffalo) which will be counted as seven sacrifices each. In the event of living in a wealthy country, it is better that one sacrifices one part locally to fulfil the Sunnah of sacrificing oneself; and to arrange for the remaining sacrifices to be performed in a poorer country, where the poor may also partake of it.
Dam is of two types. one is like Udhiyyah in the sense that it is a religious requirement on adult Muslims. The only difference is that it is specific to people who are performing Hajj. This Dam is called Dam ash-Shukr.
The second type of Dam, like fidyah, is a means of compensation for mistakes in Hajj, but the difference is the magnitude of the mistake. Fidyah is given in lieu of minor mistakes while Dam is in lieu of major mistakes. Dam, like Udhiyyah, is the sacrifice of a sheep or goat. It can also be made a part (i.e. 1/7) of a larger sacrifice.
Badanah is like Dam, but while Dam is the sacrifice of a sheep or goat, Badanah is the sacrifice of a large animal, i.e. a cow or camel. This is the largest penalty in Hajj, and is specific to three acts.
Sadaqah Nafilah
This is charity which is not binding in nature but is optional. This type includes alms given for the removal of difficulties, philanthropic (to give out of mercy to the less fortunate), the general giving of any Halal item to any one etc. This type does not need to be spent on the specified categories to be rewarding nor does it have to be spent on Muslims, although if spent on poor Muslims it would be more rewarding. This can also be bequeathed in one’s will (in which case it would be only up to a third of the deceased person’s entire estate).
The following are types of Sadaqah Nafilah:
- Lillah
This is Sadaqah Nafilah but is a type that does not have the condition of having to be passed into the possession of a person, as it can be given to institutes (e.g. Masajid, hospitals, schools, orphanages, etc). - Waqf
This is to allot something as a trust for a certain cause. This can be during one’s lifetime or bequeathed in one’s will (up to the value of a third of one’s estate). When executed, the donation becomes the property of Allah (and thus has specific rules regarding it), and its beneficiaries are to remain those named as the cause (e.g. the poor, orphans, students, the people of a certain locality, etc.) The difference between this and Lillah is that with Waqf ownership is not given to people or institutes but only the benefits are ascribed. Like today’s trusts, Waqf also requires the care of trustees over it. - Aqeeqah
This is the sacrifice of an animal or two as thanks to Allah for the birth of a child. With this too can members of the locality be fed, preference again is for the poor and close family members. - Sadaqah for Removing Difficulties
One, at the time of donating, should ask Allah to make easy one’s deliverance. This can be understood from the Hadith: ‘Sadaqah soothes the Lord’s anger and protects against a bad death.’ (al-Tirmidhi, al Bayhaqi) This type of Sadaqah can also be given as ‘Lillah’.
- Sadaqah for Expiating Sins
One, at the time of donating, should ask Allah to forgive one’s shortcomings. This can be understood from the verse: ‘Indeed good deeds take away bad deeds.’ [Qur’an, 11:114] This type of Sadaqah can also be given as ‘Lillah’.
- Charity above the amount of Zakat and Sadaqah Wajibah
This type of Sadaqah is the essence of Lillah. Although not categorised as necessary, this type of charity, as long as from pure means and with pure intentions, is always accepted by Allah. It is also this type that Allah I has described as a beautiful debt, as He treats this charity as a loan which He will repay in the hereafter. ‘Who is he that will loan to Allah a beautiful loan? For (Allah) will increase it manifold to his credit, and he will have (besides) a liberal reward.’ [Qur’an, al Hadid, 57:11]
Zakat and Sadaqah have many similarities. For one, both involve giving something that belongs to you, to anybody who has a want for it. However, they are a few key differences which we will go over in element in today’s post.
The first component to recognize about Zakat and Sadaqah is that below no circumstances can both terms be used interchangeably. If a Muslim is paying Zakat, he or she is no longer paying Sadaqah. If a character is paying Sadaqah, he or she is not paying Zakat. Even even though each duties entail supplying financial, material, economic assist for these who can’t provide for themselves, they are two absolutely different Islamic concepts.
It can be the entirety from an act of kindness to a monetary donation. For example, Sadaqah can be a voluntary donation. It can be helping anybody in need, giving a smile, or it can even be eliminating a detrimental object from your path. Aqiqah, Fidya and Kaffarah are additionally examples of Sadaqah.
In Islam the taking and also giving of interest have been expressly forbidden. This presents problems in secular countries, wherein no loan or mortgage is ever done without it. In so far as taking loans which charge interest are concerned, it can only be said that unless it is a life-or-death situation one must stay away from such loans, to avoid the Wrath of Allah.
But what should one do about the interest accumulated in one’s own bank account? This issue is also something that unfortunately affects many of us. What is established is that it is not at all permissible for one to utilise this for one’s own benefit.
To avoid the anger of Allah, one should give the interest money accumulated to charity. This, whilst being the most practically beneficial way of disposing the money, is not going to be positively rewarding. But due to it being in accordance with Allah’s Will, in that this method of disposal saves one from further sin, it is still beneficial.
Haram Income
Included under this broad heading are earnings generated by not only the sales of Haram items, but also Halal items acquired though Haram methods (e.g. lying to get benefits, lying to increase the price of selling items etc).
Here the method of disposal is to return items to the rightful owners. If this is not possible because the owner is not known or for any other legitimate reason, then the method of disposal is the same as that of interest money.
If one has spent a great portion of one’s life in Haram earnings to the extent that the majority of one’s possessions are of Haram origin, then what is the way of redeeming oneself in front of Allah?
The answer to this is often very difficult to digest. In short, the entire possessions of Haram earnings must be disposed of in the same way that interest is disposed.
This presents the problem: how then are brothers/sisters in such a situation meant to live? For this the most accommodating way would be that they take into account how much of their wealth is of ill earnings, then turning to a Halal means of income, whatever immediate amount they can dispose of (in charity) they do. Then over as short a period of time as possible they try to pay off this debt they owe to Allah.
The term “estate” refers to the total amount of assets that a deceased individual had at the time of death.
The act of creating a detailed plan for the distribution and administration of a person’s estate both during their life and after death is known as estate planning. An estate plan can be as straightforward or intricate as the circumstances warrant for each person. The optimum way to handle your estate should be determined after consulting with a lawyer, who can assess your financial, family, and personal situations.
A trust is a way to hold title to an asset when the grantor gives the trustee instructions on how to hold, administer, and distribute the asset in addition to possession of the asset.
An heir is a person who is eligible to inherit a portion of an inheritance under intestacy laws when a person passes away. A legatee is a person who is named as the recipient of a gift in an estate plan. A beneficiary or legatee who receives benefits from a benefactor in accordance with an estate plan or another legal document is known as a beneficiary.
Someone who has recently passed away is a decedent. A person who passes away “intestate” — without a will — is referred to as a decedent. When a person passes away with a legal Will that bequeaths his estate’s assets, that person is said to have died “testate.”
An executor of an estate is a person chosen to manage the deceased person’s estate in accordance with their will. The testator of the will, who creates the will, or, in some circumstances, a court, appoints the executor.
A guardian is a person chosen to look after the minor children of the decedent. Most often, this is accomplished by a will, though in some circumstances a court may be used.
A trust’s assets are maintained and dispersed in line with the grantor’s instructions by the trustee, who also serves as the assets’ legal owner and manager.
If you don’t have an estate plan, your state’s Probate Act specifies your beneficiaries, and your assets will be distributed in accordance with the state’s intestacy laws and possibly under the supervision of the court. These distributions are in contravention of Islamic Shariah.
It varies. The simplest estate planning document is a will, but not everyone should use one. A simple will may not be an effective estate plan for you, and you may need to establish trust agreements to handle your assets, depending on your personal, family, and financial circumstances. In fact, if a basic will wasn’t drafted with adequate legal guidance, it can cause more harm than good.
It varies. The simplest estate planning document is a will, but not everyone should use one. A simple will may not be an effective estate plan for you, and you may need to establish trust agreements to handle your assets, depending on your personal, family, and financial circumstances. In fact, if a basic will wasn’t drafted with adequate legal guidance, it can cause more harm than good.
(1) It enables you to determine how your assets are distributed, as opposed to the default distributions rules outlined in your state’s probate law.
(2) It prevents family disputes over your estate.
(3) It enables your heirs to receive the assets more quickly than they would if they went through the probate courts.
(4) It can enable you to avoid probate court entirely, as well as the associated costs and attorney fees.
(5) It may help you protect your assets your or your beneficiaries’ creditors;
(6) It may assist you to avoid estate taxes (for higher-value assets); and
(7) It may help your heirs from paying taxes on their inheritance.
The Islamic laws of inheritance derive from four sources. In order of precedence, they are: (1) the Qur’an; (2) the Sunnah of the Prophet Muhammad (PBUH), (3) Ijma (i.e. a consensus of opinion amongst scholars); and (4) Qiyas (analogical reasoning based on the above sources).
The four Madhabs generally agree on the necessity of having an estate plan and the laws governing inheritance.
Islamic inheritance laws allow a person to designate a specific beneficiary to receive a third of their estate (after all debts have been settled). This beneficiary need not be a person who is already eligible to receive assets as a beneficiary under Islamic inheritance laws.
A Shariah Will adheres to the guidelines of the Islamic Law of Succession. For your heirs to inherit in accordance with these guidelines, you must have a will that complies with Shariah law. All Muslims are required by Islamic Law to have a Will.
A will may be created by any mentally competent individual (16 years and older).
If you pass away without a will, Intestate Laws take effect. In the absence of a Will, it is essentially up to the Master of the High Court’s Office to decide how your Estate will be distributed, and this will be done in accordance with South Africa’s Intestate Laws, which conflicts with Islamic Law. You won’t be able to control how your assets are dispersed, and it will take significantly longer for your assets, including bank accounts, to become available to your heirs.
A person or organization named in your will as the executor is responsible for managing your estate. They make sure that your will’s instructions are carried out and that your beneficiaries’ interests are safeguarded.
A beneficiary is someone you name in your will to receive a benefit from your estate. They can be an individual or a group of persons.
According to our Shariah Compliant Will, if a beneficiary is a minor, their inheritance will be placed in a Testamentary Children’s Trust, which will be managed by the Executor you designate. The Testamentary Children’s Trust’s assets will be used for the benefit of the minor. The trust will be dissolved and any remaining income and/or capital will be distributed to your heir directly once they turn 25.
You must sign every page of your will in order for it to be legally binding. It must also be signed, dated, and simultaneously attested to by two competent witnesses. To assist you in properly signing your will, an instruction sheet will be included with it.
Yes, as long as it is signed properly, this Shariah-compliant Will is legitimate and enforceable. You might want to have a Shariah Law Expert verify your completion of the Will once you have signed it.
The ORIGINAL WILL should be kept in a secure location once you have obtained all necessary signatures since the Master of the High Court will require it. Another option is to scan the document and store a copy on your computer as well as a hard copy in a secure location. Finally, inform the appropriate parties of the whereabouts of the original.
It is best to update your Last Will and Testament regularity, we suggest doing so at least once every five years. The following life events should urge you to amend your Will:
- Newly married
- Divorce
- Newborn child a new house or other new resources
- Change to your health
- A beneficiary named in your will passes away
- A change in commercial partnerships/relationships
Takaful is an Arabic word that originally meant “taking care of one’s requirements” or “self-guaranteed duty.” As a result, the term “takaful” denotes shared accountability, shared guarantee, group assurance, and/or joint promises by a group.
Takaful works on the basis of an agreement established by the Participants of the Takaful program. By purchasing an insurance, each Member certifies that they are one of the insured. Each pays a premium to the program, which is invested in recognized instruments and utilized to pay out claims. A Takaful corporation, for instance, cannot invest in ventures involving interest, alcohol, gambling, or unpredictability. The scheme’s participants share in the earnings from the approved investments.
In a traditional insurance plan, the insured individual first sells his risk to a third party for a fee, adding a component of “gharar” (uncertainty) to the contract. In accordance with Shariah, a contract of uncertainty exists when the nature of the countervalue being exchanged between the two parties is unknown. The insured person may have paid a premium and received nothing in return if a house does not burn down, in which case the insurer will incur significant financial losses. Third, traditional insurance does not provide reciprocal benefits since some people — like stockholders, for instance — benefit at the expense of others. Second, traditional insurers make investments in projects that pay interest or include other forms of activity, which is against Shariah rules. In other words, commercial insurance firms are in business to protect their shareholders, not their clients. Finally, the guiding idea underlying business insurance is that it is based mostly on commercial concerns. On the other side, takaful is governed by the ideas of greater welfare for everybody, which strives to create a social structure built on universal brotherhood.
The Takaful contract is founded on the Islamic principle of Tabarru, which is a contract of self-insurance or self-guaranteeing among members of a group, as opposed to the typical insurance contract, which involves the insured transferring risk to the insurer for a premium.
There will always be uncertainty. The Takaful contract still contains it. However, as the Takaful contract is a Tabarru (donation) contract, the uncertainty (gharar) is regarded as being within permissible bounds per Shariah. Conventional insurance is a risk-exchange transaction that incorporates “excessive gharar,” it is therefore unlawful.
There are two types of risk or uncertainty: Pure Risk and Speculative Risk. There is always a chance of losing money or not. For instance, fire damage to property. Takaful and insurance risk protection both deal with pure risks. Conversely, speculative risk entails the potential for loss, no loss, or gain. For instance, starting a new business or partaking in horse racing gambling. It is not possible to insure speculative risks that have a possibility for profit or gain. Takaful schemes use the indemnification principle to make up for losses suffered by Takaful Participants. Takaful only covers pure risks, and claims are only paid out in the case of a loss to pay for property replacement, repairs, or an agreed-upon set amount.
Although the “term” Takaful is a contemporary invention, the Takaful notion has very ancient roots. There are numerous instances in pre-Islamic history where families, tribes, or connected individuals from the Arabian Peninsula pooled their resources to provide free and unrequited aid to the poor. Around 650 CE, the Prophet Muhammad (PBUH) endorsed their customs and incorporated them into the framework of the early Islamic state in Arabia. So, the first Islamic community in Medina is where Takaful initially appeared.
Health, life, and general insurance requirements are covered by takaful-branded insurance, which is based on sharia, or Islamic religious law. Participants’ claims are reimbursed out of the takaful fund.
Given the added value delivered by Takaful products, which cannot be matched by traditional insurance products, Takaful products are competitively priced and are generally less expensive than conventional policies.
Zakat is obligatory upon each Muslim. Whereas Sadaqah is an encouraged, voluntary deed. Most importantly, each earn the pleasure and reward of Allah (SWT), in spite of the distinction between them. Islam considers both an act of charity.
Zakat and Sadaqah are types of worship carried out by using Muslims. The two are distinct in their personal respects.
The word Sadaqah is derived from the Arabic phrase Sidq (truth). All moves of righteousness in Islam is viewed as Sadaqah. Zakat on the other hand, is one of 5 essential foundations of Islam. This makes it a compulsory act, and therefore, all Muslims need to provide Zakat, provided they meet positive conditions, whilst Sadaqah is an intended and non-stop act of uprightness, which all people has to elevate out no depend what their ability.
Here are 10 key differences between Zakat and Sadaqah, perception them is indispensable as every has its own purpose.Zakat is compulsory once a yr whilst Sadaqah is by no means obligatoryZakat is paid on specific property such as: gold, silver, cash, business assets, agricultural produce, livestock, treasure troves whereas Sadaqah has no such specification in terms of assets.Certain liabilities can be deducted from a Zakat calculation whereas Sadaqah has no calculation in which liabilities are deducted.Zakat used to be accrued and distributed through the Islamic authorities whereas Sadaqah is continually a private act of kindness.According to some faculties of law, Zakat can be forcefully taken. The nation can take punitive measures on the non-payers of Zakat. Whereas, Sadaqah is by no means enforced upon people.Abandoning Zakat repayments is tantamount to a type of treason whereas no longer giving Sadaqah is now not sinful.Zakat has thresholds and bands (Nisab) whereas Sadaqah has no thresholds.Zakat used to be usually disbursed the place it was accumulated whereas Sadaqah can be spent anywhere.Zakat has unique areas and classes for spend whereas Sadaqah does no longer have described recipients.Zakat is financial whereas Sadaqah can be non-monetary too.
The first aspect to recognize about Zakat and Sadaqah is that underneath no occasions can both phrases be used interchangeably. If a Muslim is paying Zakat, he or she is now not paying Sadaqah. If a character is paying Sadaqah, he or she is not paying Zakat. Even even though both duties entail presenting financial, material, financial assist for these who can’t supply for themselves, they are two absolutely distinctive Islamic concepts.
Draw a customized financial roadmap.
Before making any investment decision, sit down and take a sincere look at your entire financial situation, especially if you’ve never made a financial plan before.
The first step to profitable investing is figuring out your goals and risk tolerance – either on your own or with the help of a financial professional. There is no assurance that you’ll make money from your investments. But if you get the facts about saving and investing and follow through with a sensible plan, you should be able to obtain financial protection over the years and enjoy the benefits of managing your money.
Establish and keep an emergency fund.
Most wise investors save enough money in a savings plan to handle an unexpected expense, like being suddenly laid off. Some people make sure they have up to six months’ worth of money saved so they will have it when they need it. It is recommended to have 2 years’ worth of emergency funds, but it may not always be possible.
Pay your credit card debt.
Paying down any high maintenance debt you may have, is the only investing approach that pays off as well as it does with less risk. In whatever market environment, paying off a credit card bill in full as soon as you can is the smartest course of action if you have a balance.
Avoid situations that could result in fraud.
The headlines are also read by con artists. They frequently use a widely reported news story to entice potential investors and give their “opportunity” a more believable one. Before investing, examine the information with an impartial source and ask questions. Before investing, take your time and consult with close friends and family.
Goals are what you want to achieve with your investments i.e.,
- to travel overseas once per year,
- buy a new car every five years,
- to have sufficient funds for your kids’ education
- to generate enough income during retirement
To understand your needs, ask your financial adviser to do a financial needs analysis.
Here you want to:
- consider your will, estate, and other structures (e.g., family trust, endowments, etc.)
- understand what your expenses are
- create a monthly budget (spend within your budget)
- understand your tax situation (income tax rate, capital gains tax, etc.) and how it may be affected
- Once you understand your monthly expenses (e.g., R30, 000 per month) this allows you to develop a plan to understand how much money you will need to be able to retire comfortably after all your debt is paid. You can do this by asking your financial advisor to do a cash flow and financial needs analysis.
Setting goals and understanding your needs can be overwhelming and many people may feel that their situation does not allow them to invest and save. Creating a plan is free and understanding your needs and wants will provide you with guidance for you and your family.
The length of time over which one anticipates holding an investment to achieve a particular objective is known as the investment time horizon. Sukuks (less risky) and stocks (riskier), which carry higher risk, make up the two primary kinds of investments. The more aggressive or riskier a portfolio an investor can create, the longer the time horizon.
Usually, when we talk about risk in this context, we’re talking about stock market exposure through individual stocks or equity mutual funds. A longer time horizon gives the portfolio more time to recover if the stock market declines.
It is important when creating an investment plan or strategy that you consider your goals, attitude to risk, and how long it will take to achieve these goals. The more time to have the more risks you can take because should markets go down you will have time to allow your portfolio of investments to recover.
What are the different time horizons or terms?
- Short-term objectives are often ones that are fewer than five years away.
- Medium-term goals are five to ten years from now and are intermediate-term ambitions.
- Long-term goals with a time frame of more than 10 years are considered long-term.
Here are 14 of the most common types of investment risks.
1. Market Risk
The risk of investments declining in value because of economic developments or other events that affect the entire market.
2. Equity Risk
Equity risk is the risk of loss because of a drop in the market price of shares.
3. Interest Rate Risk
It is the risk of losing money because of a change in the interest rate.
4. Currency Risk
It is the risk of losing money because of a movement in the foreign exchange rate.
5. Liquidity Risk
With certain investments, it may not be possible to sell the investment at all or you may have to pay a hefty fee.
6. Concentration Risk
The risk of loss is due to the fact your money is focused on one investment or type of investment.
7. Correlation Risk
Is a term that describes two investments (variables) moving in the same direction either up or down.
8. Counterparty Risk
Counterparty risk is the probability that the other party in an investment, may default on the contractual obligations.
9. Credit Risk
The risk is that the government entity or company that issued the Sukuk will run into financial difficulties and won’t be able to pay the profit share or repay the principal at maturity. Credit risk applies to investments such as sukuks.
10. Reinvestment Risk
The risk of loss from reinvesting principal or income at a lower profit share.
11. Inflation Risk
The risk of a loss in your buying power because the value of your investments does not keep up with inflation (Consumer Price Index). Inflation erodes the buying power of money over time and the identical quantity of money will buy fewer goods and services.
12. Horizon Risk
The risk that your funding horizon might also be shortened because of an unforeseen event, for example, the loss of your job. This may additionally pressure you to sell investments that you were looking ahead to hold for the lengthy term. If you must sell at a time when the markets are down, you may lose money.
13. Longevity Risk
The risk of outliving your investments and savings. This risk is particularly relevant for people during retirement or who may be nearing retirement.
14. Foreign Investment Risk
The risk of loss when investing in foreign countries. Here you face political and economic situations that do not necessarily exist in South Africa.
Your risk profile deals with evaluating your attitude to risks.
All investments involve some degree of risk. If you intend to purchase securities – such as stocks, sukuks, or unit trust funds – it is necessary that you recognize before you invest that you could lose some or all your money. Unlike deposits at banks, the money you invest in securities normally is not insured. You could lose your principal, which is the quantity you’ve invested. That’s even if you purchase your investments via a bank.
The reward for taking on risk is the reward of an increased investment return. If you have a monetary goal with a long-time horizon, you are likely to make better returns by way of cautiously investing in asset categories with increased risk, like shares or sukuks, alternatively than restricting your investments to asset classes like property with less risk or cash equivalents.
On the other hand, investing entirely in money investments can also be terrific for momentary financial goals. The essential subject for individuals investing in cash equivalents is inflation risk, which is the risk that inflation will outpace and erode returns over time.
Here are the most common risk profiles for investors:
- Conservative / Stable / Low
- Moderately Conservative / Medium Low / Cautious
- Moderate / Medium / Balanced
- Moderately Aggressive / Medium High / Growth
- Aggressive / High
This information is for information only and does not have regard to the needs of any specific person who may receive this information.
A risk profile is a tool to understand an individual’s willingness and potential to take risks. A risk profile is vital for figuring out a suitable investment asset allocation for a portfolio. Organizations use a risk profile to mitigate various risks and threats.
Asset allocation models are a mix of investments i.e., stocks (growth investments), sukuks (defensive investments), etc. Rather than constructing your own portfolio, you simply choose the shariah-compliant asset allocation model that best matches your goals and objectives.
Strategic asset allocation is a portfolio strategy whereby the investor set goal allocations for certain asset classes and rebalances the portfolio periodically. The target allocations are primarily based on elements such as the investor’s risk tolerance, term or time horizon, funding, and investment objectives.
Shariah-compliant funds are investment funds that comply with Islamic law.
They are different from conventional investment funds because they have many requirements, such as the appointment of a Shariah board and prohibition from investing in companies that derive most of their income from the sale of alcohol, pork products, gambling, etc.
While Shariah-compliant funds have grown at a respectable pace, it is difficult to accurately estimate the industry’s size or valuation.
| Group/Investment | Inception Date |
| 27four Shari’ah Balanced FoF A1 | 5/9/2011 |
| Camissa Islamic Balanced A | 5/4/2011 |
| Element Islamic Balanced SCI A | 4/28/2010 |
| Oasis Crescent Balanced High Eq FoF B | 4/6/2010 |
| Sentio SCI HIKMA Shariah Balanced A1 | 3/1/2017 |
| STANLIB MM Shari’ah Balanced FoF B1 | 3/25/2015 |
| 27four Shari’ah Income A1 | 3/20/2017 |
| Camissa Islamic High Yield | 3/11/2019 |
| Oasis Crescent Income A | 4/1/2010 |
| Old Mutual Albaraka Income A | 3/31/2020 |
| 27four Shari’ah Active Equity A1 | 9/11/2008 |
| Camissa Islamic Equity A | 10/1/2010 |
| Element Islamic Equity SCI A | 2/1/2006 |
| Oasis Crescent Equity A | 7/31/1998 |
| Old Mutual Albaraka Equity A | 6/1/1992 |
| Sentio SCI HIKMA Shariah General Eq A1 | 3/1/2017 |
| Visio BCI Shari’ah Equity Fund C | 6/14/2018 |
| Oasis Crescent Balanced Stable FoF B | 4/6/2010 |
| FNB Islamic Balanced A | 1/6/2021 |
| Oasis Crescent Bal Progressive FoF A | 3/2/2005 |
| Old Mutual Albaraka Balanced A | 11/12/2010 |
| Camissa Islamic Global Equity FF A | 1/7/2019 |
| Element Islamic Global Equity SCI A | 10/26/2012 |
| Oasis Crescent International FF A | 9/28/2001 |
| Oasis Crescent Intl Balanced Low Eq FF B | 6/15/2016 |
| Visio BCI Shari’ah Wwd Flx Prprty C | 6/1/2021 |
Understand what the purpose of your investments is.
You started working or you’ve been working your entire adult life. You could be running a business, or you may be a CEO of a major corporation. Depending on your situation, it is key that you first focus on growing and protecting your wealth for when you retire. How you go about achieving this goal will depend on your age, risk profile, and circumstances. Once you have sufficient funds to cover your needs during retirement you will then be able to consider yourself “financially free”. Once you are “financially free” you can then start looking into more ways to make your wealth work harder for you.
A small percentage (6% or less) of South Africans can afford to retire. This is a very worrying statistic.
Consider a strategic asset allocation for your portfolio of investments.
Combining asset categories with investment returns that pass up and down during distinct market conditions within a portfolio, an investor can assist in the protection against vast losses. Historically, the returns of the three important asset classes i.e., stocks, sukuks, and cash have very seldom moved up and down at the same time. Market events that cause one asset category to do nicely regularly may cause some other asset class to have bad returns. By diversifying asset categories, you may decrease the chance that you will lose money and your portfolio’s overall investment returns will have a smoother performance. If one asset category’s investment return falls, you’ll be able to counteract your losses in that asset class with potentially better returns in one or more of the other asset categories.
Strategic asset allocation is essential because it has an important effect on whether you will meet your monetary goal. If you don’t embrace enough risk in your portfolio, your investments may also not earn enough returns to meet your goal. For example, if you are saving or investing for a long-term goal, such as retirement, college, or travel, most financial experts agree that you will probably want to encompass at least some shares/stocks or unit trust funds in your portfolio.
Be careful if investing heavily in any individual stock.
One of the most important methods to lessen the potential risks of investing is to diversify your investments. The adage: don’t put all your eggs in one basket. By selecting the proper group of investments inside an asset category, you may be capable of restriction your losses and decreasing the fluctuations of investment returns without sacrificing that much of your potential gain.
You’ll be exposed to considerable investment risk if you make investments in shares of your employer’s stock or any one specific stock. If that share does poorly or the business goes bankrupt, you’ll possibly lose a lot of money and possibly your employment.
Consider investing your money in tranches
Through the investment strategy known as “rand cost averaging,” you can protect yourself from the risk of investing all your money at the wrong time. You can do this by following a consistent pattern of adding new money to your investment over a long period. Making regular investments with the same amount of money each time, you will buy more of an investment when its price is low and less of an investment when its price is high.
Individuals typically make a lump-sum contribution to an individual investment or retirement account either at the end of the calendar or financial year. Using “rand cost averaging” as an investment strategy, especially in a volatile market may be beneficial.
Take advantage of “free money” from an employer.
In many companies’ pension or preservation plans, the employer will match some or all your contributions. If your employer offers some type of a retirement plan and you do not take advantage by contributing enough to get your employer’s maximum match, you are passing up “free money” for your retirement savings.
Consider rebalancing your portfolio occasionally.
Rebalancing is bringing your portfolio back to your original asset allocation mix. By rebalancing, you’ll ensure that your portfolio does not overemphasize one or more asset categories, and you’ll return your portfolio to a comfortable level of risk.
You can rebalance your portfolio based either on the calendar or on your investments. Many financial experts recommend that investors rebalance their portfolios on a regular time interval, such as every six or twelve months. The advantage of this method is that the calendar is a reminder of when you should consider rebalancing. Others recommend rebalancing only when the relative weight of an asset class increases or decreases more than a certain percentage that you’ve identified in advance. The advantage of this method is that your investments tell you when to rebalance. In either case, rebalancing tends to work best when done on a relatively infrequent basis.
Rebalancing is returning your portfolio back to your original asset allocation percentages (weighting). Rebalancing ensures that your portfolio does not overexpose the portfolio to one or more asset categories. You are then able to return your portfolio to a satisfactory level of risk.
You can rebalance your portfolio on a normal time interval, such as every six or twelve months. The benefit of this technique is that the calendar is a reminder of when you need to consider rebalancing. It’s at this stage that you can also review the performance and strategy of your investments. You will be able to assess if the portfolio is still in line with your goals, needs, and any changes in your circumstances. Rebalancing tends to work nicely when executed on a relatively infrequent basis.
If you are retired when rebalancing, you can then also decide to top-up your regular income payments. Most Financial experts recommend enough to cover your needs for at least 6 months (preferably 2 years).
Investors must pay tax when they earn money on their investments, like stocks or unit trusts. For these types of investments (stocks or unit trust etc.), the investor will have to pay capital gains tax, if applicable. The main types of investment income that have income tax consequences are local and foreign profit shares. foreign dividends.
Islamic banking, also referred to as Islamic finance or Shariah-compliant finance, refers to monetary activities that adhere to Shariah (Islamic law). Two essential standards of Islamic banking are the sharing of profit and loss and the prohibition of the collection and payment of interest by lenders and investors.
The concepts of Islamic banking are derived from the Quran – the central spiritual text of Islam. In Islamic banking, all transactions need to comply with Shariah, the legal code of Islam (based on the teachings of the Quran). The regulations that govern commercial transactions in Islamic banking are referred to as fiqh al-muamalat.
Islam allows only one kind of loan and that is qard-el-hassan (literally good loan) whereby the lender does not charge any interest or extra amount over the money lent. The Bank must share in the profits or losses arising out of the organization for which the money was financed. Unlike the interest based on conventional banking system where all the pressure is on the borrower, Islamic finance is primarily based on the belief that the depositor, the bank and the borrower should all share the risks and the rewards of financing business ventures.
Islamic banking is different from conventional banking because interest (riba) is prohibited in Islam, i.e., banks are not allowed to offer a fixed rate of return on deposits and are not allowed to charge interest on loans.
Conventional Bank treats money as a commodity and lend it against interest as its compensation. Islamic banking products are usually asset backed and includes buying and selling of assets, renting of asset and participation on profit & loss basis.
Another essential notion that underpins Islamic finance is that it shouldn’t motive harm. For that reason, Islamic financial services should not invest in matters like alcohol, tobacco, and gambling.
Islamic finance also encourages partnership. This means that, where possible, each earnings and risks should be shared. This can be between two individuals, an individual and a business, or a business and a business.
Anyone can use Islamic finance products and offerings – you don’t have to be Muslim.
The significance of Islamic banking for the Muslim community lay in its potential to deliver them from the charging and paying of usury (interest), which is strongly forbidden in Islam.
Islamic banks are less risky and more resilient than conventional banking in terms of bank capital requirement and mobilisation of deposits.
Somewhat perversely, the global financial crisis presented a big opportunity to the Islamic banking and finance industry. In 2008-2009, the Islamic banking industry was estimated to have experienced asset growth of 31.8% compared to 12.6% in the conventional banking.
- Personal banking Accounts
- Islamic Business accounts
- Islamic Savings accounts
- Islamic Property finance
- Islamic Vehicle finance
- Islamic Foreign Exchange
- Takaful Insurance
- Islamic Wealth Management