Quarterly Market Outlook
Islamic finance is not new and has been around in Malaysia for more than three decades. While we can see that there are various products and services offered by banks, there is still lack of awareness on how to utilize them, particularly Islamic wealth management tools, which can help in growing and ultimately managing your wealth. What’s also great is that these tools are for everyone, regardless of your religious background or where you are in your financial journey.
Islamic wealth management should not be defined as merely those that avoid riba (interest). Rather, the focus should be centered on achieving maqasid shariah (objectives of shariah) in every aspect and each process of wealth management from wealth creation, accumulation, protection, purification and distribution. The impact of a comprehensive Islamic wealth management is not limited to individual but extends also to society by strengthening social solidarity and ethical behavior.
You will be guided to embrace this ready-made sustainability model of wealth management that you can apply to your own wealth journey and that gives it a unique value proposition for wealth management tools.
Here are some compelling reasons to consider Islamic wealth management tools as part of your financial journey.
The foundation of the Islamic banking model is based on the teachings of al-Quran and sunnah which promotes justice and equity between the customer and the bank. The transactions performed must be free from the elements of riba (interest), gharar (uncertainty) and maysir (gambling).This system of financial intermediation contributes to a more equitable distribution of income and wealth. Shariah-compliant products pay out a profit/hibah, rather than interest or riba.
Islamic Finance is always based on a contractual relationship with an underlying real asset between the customer and the bank. Transparency is a prerequisite in Islamic finance where all contractual variables and obligations must be made known and consented to by both parties upfront. With the element of gharar (uncertainty) being eliminated in any contract, risk can then be properly managed.
Business is conducted in a clear and transparent manner. The terms and conditions are made clear upfront before a contract can be signed.
Islamic finance does not permit investment in activities that are unethical, and as such deemed prohibited such as alcohol, gambling, tobacco, and the discouragement is also extended to any business activities that negatively impact the community and environment.
On a larger scale, this promotes better individual and corporate behaviour.
Now that you can see the differences between Islamic and conventional products, we’ll show you how you can fit them into your wealth management plan. In Islamic wealth management, your financial journey is holistically managed in five stages that form a long-term plan: creation, accumulation, protection, purification and distribution..
The first step is to build and look after your savings. This can be done through Islamic savings accounts, or Islamic term deposit accounts that offer profit instead of interest, such as RHB Commodity Murabahah Deposit-i. Depending on your goals, you can get flexible placement periods of between 1 and 60 months to help build your savings, with a competitive profit rate. And with no service fees, every cent of profit is yours to keep.
When it comes to accumulating wealth, it’s important to ensure that you build wealth in a way that is both Shariah-compliant and suitable for your risk appetite and financial goals.
Shariah law allows investment in company shares as long as these companies do not engage in activities that are prohibited and harm the people and planet.
There is a wide selection of Islamic stockbroking, as well as Islamic fund management products from RHB that allow you to grow your wealth according to your risk appetite and goal, and most importantly they have been approved as Shariah-compliant. Your Relationship Manager will be able to help you pick the best ones to suit your goals and needs.
No matter the amount in your savings or what assets you have, it is best to take the extra steps to protect your wealth. Manage your wealth holistically by not only protecting your finances, but also your lifestyle and your loved ones, which you can do by getting Takaful coverage.
Takaful mySmart Income Plus1 maximises the potential of your savings through yearly cash payments, while keeping you and your loved ones protected. With the option of a short contribution payment term of 3 or 5 years, you can enjoy peace of mind and financial security for a coverage term of 15 years.
This Takaful product allows you to distribute the benefits of your policy to your loved ones as beneficiaries under conditional hibah (gifts). This will surely let you find peace of mind should something happen to you.
In Islam, wealth purification is a fundamental act and normally performed via zakat (a tithe on wealth), sadaqah (donations/contribution) and wakaf (voluntary charitable endowment). It is believed that wealth should be shared to advance a community. The Prophet (peace be upon him) once said that “charity does not decrease wealth”, and this is true since the act of giving evokes gratitude and eventually will make you happier, and such effect does have sense to make you richer and healthier.
For zakat, a Muslim who meets the minimum amount of wealth or ‘nisab’ requirements is required to pay a certain proportion of wealth each year to charitable causes. There are specific amounts, depending on where the wealth came from, e.g. gold, cash savings, investment shares or business activities. Zakat is based on income and the value of possessions. The common minimum amount for those who qualify is 2.5%, or 1/40 of a Muslim's total savings and wealth.
Sadaqah means a voluntary charitable act, and it can be money, material items or even volunteering, and there are no restrictions on when sadaqah can be made. To this end, the RHB Islamic’s SyuQR program facilitates and promotes e-donations. Current beneficiaries include mosques, NGOs, charitable organisations and Tahfiz schools.
A simple definition of wakaf is an Islamic endowment of property to be held in trust and used for general or specific charitable causes that are socially beneficial. For example, a plot of land can be donated for the construction of a school, or a building can be used as a homeless shelter. Even smaller acts like building a small hut in a park to provide shade is considered wakaf, as it benefits others.
Legacy planning plays an important part in a holistic approach to Islamic wealth management to ensure your loved ones are taken care of in the most crucial times.
According to Islamic law, assets after you pass on will be distributed amongst your heirs in accordance with Faraid (Islamic inheritance law). What about those who are not regarded as heirs in Islam? This is where Wasiat, or Islamic will, comes in. It enables you to distribute one-third of your assets to non-Faraid heirs be they Muslims or non-Muslims, or even to charity. This is a faster, hassle-free way of estate distribution that can help your loved ones avoid any conflict or emotional distress.
A Wasi/Executor appointed in your Wasiat should be a qualified professional who has the knowledge, experience and commitment, a party whom you can trust to independently carry out your wishes upon your demise. RHB Trustees Berhad, for example, provides a competent Professional Wasi/Executor Services so you can be confident that your estate is adequately managed.
Islamic wealth management is a holistic and sustainable approach for all. Speak to your Relationship Manager about how you can make Islamic financial products a part of your journey to financial success.
Disclaimer:
RHB Commodity Murabahah Deposit-i is protected by PIDM up to RM250,000 for each depositor.
Terms & Conditions Apply.
1This product is underwritten by Syarikat Takaful Malaysia Keluarga Berhad 198401019089 (131646-K), a company licensed under Islamic Financial Services Act 2013 and regulated by Bank Negara Malaysia. The information contained herein are strictly meant to be as general information and reference only. It does not constitute as a contract of takaful. For further details on the benefits, exclusion and terms and conditions of the product, please refer to the Product Brochure, Sales Illustration, Product Disclosure Sheet (PDS) and certificate contract. Underwritten by Syarikat Takaful Malaysia Keluarga Berhad, RHB Bank and RHB Islamic Bank are merely acting as distributor.
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