ISLAMIC FINANCIAL ADVISOR – alwiadam.

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AN OVERVIEW OF ISLAMIC WEALTH MANAGEMENT

The Primary Concept

The objective of a Muslim living in this world as a khalifah, is to prosper the world
according to the teaching of Islam. The ultimate goal is to achieve the pleasure and
mercy of Allah. The mean of achieving the pleasure and mercy of Allah is through the
good governance and utilization of the worldly life.

And there are men who say: "Our Lord! Give us good in this world and good in the
Hereafter, and defend us from the torment of the Fire!" (al-Baqarah – 201)

Whoever works righteousness, man or woman, and has Faith, verily, to him will We give
a new Life, a life that is good and pure and We will bestow on such their reward
according to the best of their actions.(An-Nahl:97)

Thus, the good and pure life (Hayatan Tayyibah) is the mean of achieving the pleasure
of Allah and the duty of ‘khalifah’.

To practically achieving the good life (hayatan tayyibah), the financial aspect is indeed a
great factor to ensure its success. Through good financial and wealth management
bounded by Syariah (Islamic) principles, the strength of Muslim individual, community,
states and countries are built and optimized.

Against them make ready your strength to the utmost of your power, including steeds of
war, to strike terror into (the hearts of) the enemies, of Allah and your enemies, and
others besides, whom ye may not know, but whom Allah doth know. Whatever ye shall
spend in the cause of Allah, shall be repaid unto you, and ye shall not be treated
unjustly. (Al-Anfaal: 60)

The wealth, the finance, the economy are part of the strength of Muslim Ummah.

The 5 elements of Islamic (Syariah) Wealth Management are given as:

1) Wealth Creation
2) Wealth Accumulation
3) Wealth Protection
4) Wealth Distribution
5) Wealth Cleansing/Purification

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Wealth  Wealth  Wealth  Wealth  Wealth 

Creation Accumulation Protection Distribution Purification

Figure 1 The Elements of Islamic Wealth Management

1) Wealth Creation (Penghasilan Harta)

It is an obligation for an able Muslim to find his own income for living and avoid from
begging from others. It is definitely ordained by Allah SWT, with the reminder that
the obligation to Allah SWT surpasses every worldly activity.

In Surah Jumaah, verses 10, Allah has said;

“And when the Prayer is finished, then may ye disperse through the land, and seek
of the Bounty of Allah. And celebrate the Praises of Allah often (and without stint):
that ye may prosper.”

In this verse, it is clearly stated that the result of creating wealth is to achieve
success and prosperity, in which, aligned to the Hayatan Tayyibah objective.

2) Wealth Accumulation (Pengumpulan Harta)

The wealth that has been generated can be further expanded and compounded
through various means of transaction. One major activity is done through business.
In Surah al-Baqarah verse 275;

“While God has made buying and selling lawful and usury unlawful”

Thus, the Syariah-compliant business is a mean to expand and accumulate the

readily created wealth. As such, the concept of Mudharabah, Musyarakah, al ‘Ijarah
were used extensively in the Islamic finance and banking system.

Derived from this concept, the individual wealth can be further compounded through
Islamic (Syariah-compliant) investment vehicle. This vehicle or instrument varies,
such as unit trust, gold, stocks, investment-linked takaful products and others.

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The investment and saving concept has been described in Surah Yusuf verses 47-
48:

[Yusuf] replied: "You shall sow for seven years as usual; but let all [the grain] that
you harvest remain [untouched] in its ear, excepting only a little, whereof you may
eat: for, after that [period of seven good years] there will come seven hard [years]
which will devour all that you shall have laid up for them, excepting only a little of
that which you shall have kept in store.

3) Wealth Protection (Perlindungan Harta)

A responsible Muslim/Muslimah individual has significant obligation to the Deen

Islam, Muslim community, family, and himself. It is indeed a great urgency and
importance that a Muslim protects his wealth from the uncertainties and
unpredictable occurrences in life, such as death, losing ability to work, chronic
diseases, and golden age years.

Financial products such as takaful and wasiyyah (will writing) are meant to cater for
these protection purposes.

With good management of wealth protection, a Muslim individual will not become a
liability to the Muslim Ummah and his/her family as backup financial plan is already
prepared way ahead. Thus, a strong and stable Muslim Ummah can be built
through good financial planning.

4) Wealth Distribution (Pembahagian Harta)

In Islam, there are several ways that the one’s wealth can be distributed, before and
after his death. The wealth distribution instruments are as follows:

• Waqaf (Harta wakaf)

• Wasiyyah (Wasiat)
• Hibah (hadiah)
• Shared wealth (harta sepencarian)
• Estate planning

The understanding of primary concept of wealth in Islam, that is, the wealth is
entrusted by Allah and the resource is not scarce, is fundamental in understanding
and practicing the distribution of wealth. A Muslim (or non Muslim) will not find it
practical and rational that their wealth distributed to others without first realizing that
they are not the sole owner of the wealth.

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In Surah al-Hasyr verse 7 regarding the fa’i (the spoils obtained without a war);

What Allah has bestowed on His Messenger (and taken away) from the people of
the townships,- belongs to Allah,- to His Messenger and to kindred and orphans,
the needy and the wayfarer; In order that it may not (merely) make a circuit
between the wealthy among you. So take what the Messenger assigns to you, and
deny yourselves that which he withholds from you. And fear Allah. for Allah is strict
in Punishment.

5) Wealth Purification/Cleansing (Penyucian Harta)

The man has no absolute right to the wealth that he possesses, because in Islam,
the wealth is entrusted to human as amanah. Thus, some portion he may used for
himself, and another portion could belong to others. It happens throughout the
process of wealth generation, accumulation, distribution and so on. Most probably
in the processes, some portion or rights of others is neglected by the individual.

In short, the wealth possesses by us has the rights of Allah SWT as the ultimate
owner of everything (hablu min Allah); and the mankind as the beneficiary of Allah’s
bounty (hablu min an-nas).

And in their wealth and possessions (was remembered) the right of the (needy,)
him who asked, and him who (for some reason) was prevented (from asking) (al-
Ma’arij:19).

To purify the wealth, one must fulfill these two rights by paying Zakah (Zakat), infaq
fi sabilillah, giving charity (sedekah) etc. Paying Zakah is obligatory to Muslim, while
giving charity and infaq are highly recommended deeds.

And spend [freely] in God's cause, and let not your own hands throw you into
destruction (by being stingy); and persevere in doing good: behold, God loves the
doers of good. (Al-Baqarah: 195)

Conclusion

The Islamic way of managing wealth has demonstrated the comprehensiveness of the
Deen Islam. In the global market trend, the international communities are looking for an
alternative, which is Islamic finance, to save and replace the conventional, be it
capitalism or socialism. The balanced yet objective concept to prosper and achieve
success in the worldly life and hereafter in Islamic finance is being accepted as the
best remedy to the current economic instability.

Wallahu a’lam.

Alwi Adam – Islamic Financial Advisor, Hijrah Wealth Management.

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