Iwm 6

• Wealth Accumulation


  The process of the generation of wealth or income
• Components of Islamic Wealth Management (IWM)

  • Wealth Creation
  • Wealth Accumulation
  • Wealth Protection
  • Wealth Distribution
  • Wealth Purification
• Savings


  Putting aside a portion of one's income for future financial needs
• Investment


  Risking the amount saved to earn profit
• By the process of savings and investment, one would be able to attain financial independence
• Investment


  (in economics) Real investment such as a machine or a house<|>(in finance) Financial asset such as money that is put into a bank or the market, which may then be used to buy a real asset
• Financial assets


  • Marketable securities such as stock (equity investment)
  • Bond/sukuk (debt investment)
• Why investment is necessary


  • To get more money in the future
  • To meet future obligations
  • To meet future needs
  • To transfer to next generation
• Investors should be aware of the risk that they take in order to gain return
• The return is expected to hedge against inflation which erodes the purchasing power drastically
• Shariah concepts relevant to investment


  • Time Value of Money
  • Liquidity Planning
  • Risk Management
  • Risk Return Trade-off
• Time Value of Money (TVM) - Western concept

  The result of the application of interest system<|>Money deposited into the banking system earns interest<|>A sum of money is worth more now than the same sum will be at a future date due to its earnings potential in the interim
• Time Value of Money (TVM) - Islamic concept


  The practice of charging interest is forbidden (riba)<|>Money does not grow on its own by time<|>Muslims must appreciate time and optimise the use of time<|>Money has no intrinsic value, it has value only because individuals agree on its value<|>Muslims should spend money wisely and invest them in productive manner<|>Islam recognizes the legitimacy of the time value of money emanating from deferral (ajal) and acceleration ('ajal) in Islamic financial transactions but its application must be in conformity with Shariah
• Liquidity


  The ease with which an asset, or security, can be converted into ready cash without affecting its market price
• Islam encourages Muslims to do risk management
• Examples of risk management in Islamic history


  • The Prophet applying risk management strategies in spreading Islam such as the case of migration from Makkah to Madinah
• Risk management


  The process of identification, analysis, and acceptance or mitigation of uncertainty in investment decisions
• Risk Return Trade-off


  The higher the return, the higher the risk<|>In Islam, the concept of profit or return is related to the requirement of counter value or compensation ('iwad)<|>No reward without risk (ُُمْنُغلاُ مْرُغلاَب)<|>In any benefit lies a liability (ُُجاَرَخلاناَمَضلا ب)
• Shariah compliant investment products

  • Shares
  • Unit Trust
  • ETF
  • REIT
  • Derivatives
  • Sukuk
  • General Investment Account
• The Islamic Financial Services Act (IFSA) was enacted in 2013 to consolidate all existing Islamic banking and takaful regulations in Malaysia
• Islamic Capital Market (ICM)


  Fundamental aspects:<|>Shariah screening methodology<|>Quantitative assessment<|>Qualitative assessment
• Business Activity Benchmarks

  • 5% benchmark for activities like conventional banking, gambling, liquor, pork, non-halal food, interest income
  • 20% benchmark for activities like hotel, share trading, rental from Shariah non-compliant activities
• Financial Ratio Benchmarks

  Cash over Total Assets ratio<|>Debt over Total Assets ratio<|>Both ratios must be lower than 33%
• A sound Shariah framework is fundamental for ICM development
• The Shariah Advisory Council (SAC) contributes significantly to the development of ICM in Malaysia
• Malaysian ICM offers a comprehensive array of Shariah compliant products & services