Iwm chapter 2&10

• Wealth purification


  The process of purifying one's wealth
• Components of Integrated Wealth Management (IWM)

  • Wealth Creation
  • Wealth Accumulation
  • Wealth Protection
  • Wealth Distribution
  • Wealth Purification
• Wealth purification


  • It is not applied in conventional financial planning
  • It is about sharing Allah's bounties with others in need, through zakat, infaq, waqf, sadaqah, and other acts of charity
  • The purpose is the benefit of individuals and society both
• Wealth purification

  It can mean two things: 1) Purification of wealth - zakat, sadaqah & waqf, 2) Purifying a human being from his sins
• Zakat


  Literally means growth and increase<|>The amount of money or kind taken from specific types of wealth when they reach a specific amount at a specific time, which must be spent on specific categories in specific ways
• Zakat is one of the 5 pillars in Islam, the 3rd pillar which comes immediately after Solat and before siyam (fasting) and hajj (pilgrimage)
• The importance of zakat is highlighted in the Holy Quran where it is mentioned about seventy times
• In Islam, zakat is not a simple charity out of our own sweet will. It has its own mathematics, just like faraid (Islamic estate distribution law)
• There are some who underpay zakat because of not assessing their zakat correctly and there are others who do not pay zakat despite maintaining a lavish lifestyle
• It is the duty of an Islamic community not just to collect zakat but to distribute it fairly as well
• Philosophy of zakat


  1. To purify and cleanse the soul and wealth of the Muslims
  2. To take certain part of wealth from the rich Muslims and to be distributed to the poor among them
  3. To help certain groups as stated in Al Quran
• The Prophet Muhammad (PBUH) has said: "God has made zakat obligatory simply to purify your remaining property"
• Zakat is not a tax levied by a government, nor is it a voluntary contribution. It is first and foremost a duty enjoined by God and hence a form of worship
• One of the most important principles of Islam is that all things belong to God, and that wealth is therefore held by human beings in trust
• Our possessions are purified by setting aside a proportion for those in need, and, like the pruning of plants, this cutting back balances and encourages new growth
• Types of zakat

  • Zakat al-Fitr
  • Zakat al-Amwal
• Zakat al-Fitr

  The rate is a flat amount, imposed on every Muslim including new-borns, due only at the commencement of Ramadan and ends before the Eid al-Fitr prayers, each person is required to contribute a certain amount of staple food or pay an equivalent value in cash
• Zakat al-Amwal


  A religious levy on wealth which includes monetary assets such as gold, silver, financial assets, the zakat payable is based on a flat rate of 2.5% multiplied by the monetary assets, ownership of the assets must be for a period of not less than a year (hawl), the total value of the assets must exceed a certain threshold level termed nisab, other non-monetary assets such as agricultural produce and livestock are also subject to zakat
• Conditions to pay zakat

  • Islam
  • Business intention
  • Fulfills nisab (stand as threshold/ minimum zakatable value)
  • Fulfills hawl (completion of 1 year)
  • Halal & productive assets (growth)
  • Full ownership of assets
• Who is liable to pay zakat

  • Muslim individual regardless of age and mental condition
  • Muslim controlled business entities
  • Muslim minority business entities – back to Muslim shareholder
  • Companies belongs to the government
  • The guardian of the 'zakat liable' Muslim orphan
• Zakat recipients

  • Al-fuqara'
  • Al-masakin
  • Al-amilin 'alayha
  • Al-mu'allafah qulubuhum
  • Riqab & diyah
  • Gharimin
  • Fi sabil lillah
  • Ibn sabil
• Wealth purification: Non-Shariah compliance income


  Wealth purification may also refer to the process by which impure wealth is made clean and purified

  Practically, wealth is usually mixed up of both halal (permissible) and haram (impermissible) or mushtabih (dubious) portion

  The non-permissible and dubious portion is not necessarily made a part of the permissible portion willingly; rather the two may be mixed due to circumstances outside one's control

  In such case, the non-permissible or dubious portion is distinguished from the permissible portion and then treated accordingly
• Forms of wealth which is haram


  • Wealth that is solely haram can never be a source of salvation and it is not acceptable to Allah Almighty in any form of sadaqat

  Wealth that is a mixture of both halal and haram
• Imam al-Nawawee asserts that the hadith "Allah the Almighty is Good and accepts only that which is good/pure [halal]" is like a pillar of one of the most important principles in Islam; anything that is spent by a Muslim in the way of Allah must be halal and pure from impermissible mixture
• Muslim scholars argue that if entire wealth is earned from non-permissible sources and no portion of it is halal, zakat will not be paid from it
• This is because the purpose of zakat is the purification of one's self as well as the remaining wealth; but if the wealth itself is not clean, how can it be a source of cleanliness and purification for others?
• Islamic Wealth Management (IWM)


  A management strategy whereby a person uses financial or non-financial instruments to manage his wealth Islamically (based on Shariah rules and principles)
• IWM


  • Consists of Islamic financial planning and investment portfolio management
  • Financial planning applies to the unique needs and concerns of each respectively
• Components of Islamic financial planning

  • Wealth creation
  • Wealth accumulation
  • Wealth protection
  • Wealth distribution
  • Wealth purification
• Wealth creation

  Islam encourages Muslims to pursue wealth, which is in fact a struggle (jihad) espoused in Islam<|>The purpose of acquiring wealth is to create earnings to support one's family to enable them to maintain either a current lifestyle or a desired lifestyle<|>Acquisition of wealth can either be through employment, business or one's heritage<|>Wealth must be created in a manner approved by the Shariah
• Wealth accumulation


  Refers to the process of the generation of wealth or income<|>Can be done through savings and investment
• Wealth protection


  Refers to the process of preserving wealth in order to ensure the wealth owner does not suffer a total loss in the event of a risk or disaster<|>Risk management is an essential component<|>Can be done through takaful
• Wealth distribution


  Refers to the process of dividing a person's wealth after his death to the rightful recipients<|>Initial planning when the property's owner is still alive is essential<|>Can be done through estate planning, faraid, wasiat and hibah
• Wealth purification


  Refers to the process of purifying one's wealth<|>Covers the purification of wealth and the purifying of a human being from his sins<|>Can be done through zakat, infaq, waqf, sadaqah, and other acts of charity
• Goals of IWM

  • Investments and wealth accumulation
  • Retirement and retirement income
  • Wealth and lifestyle protection
  • Transferring wealth
• Principles of IWM

  • The use wealth to obtain the blessings of Allah and strengthens faith in Allah, also cleansing oneself from greed
  • Responsibility towards family
  • Mandatory social obligations such as tax
  • Productive role in stimulating economic growth, improving efficiency and productivity, spend on research and development
  • Voluntary social responsibility to eradicate poverty and ignorance
  • Leadership role in protecting Islam, fight against injustice and exploitation, improve morality and market economy