Shariah Based Financial Services

The Shariah is based on the Quran, the sacred text of Islam and it governs all aspects of personal and collective life of Muslims. An exceptional element of Islamic finance is the restriction on investments in Interest bearing Assets. Investors interested in Shariah compliant investments should ensure the income they earn adheres to strict dictates of the Shariah.

Shariah Financial Services is the process of meeting a person’s financial and non-financial goals through a comprehensive plan and management of his property and finance based on Shariah rules and guidelines. In Shariah, a person’s wealth is not his own but held in trust for Allah. How one uses the property endowed to him determines his life in the hereafter. In Financial Services, the financial goals are typically well understood; the non-financial goals are meant to fulfill one’s desire and obligation to comply with Shariah, nevertheless, they are achieved through finance, such as waqfand sadaqah (donation). As for the financial planner, he is a person who carries on the business of analysing the financial data of his customer in order to provide a financial plan to meet the various objectives of his client. The objectives of the person can be financial or non-financial; they can be related to this world or related to the hereafter. From the planner’s perspective, performing his tasks as a financial planner and advising the client is a form of ibadah (worship) as it enjoins the Muslim clients to achieve their goals in compliance with Shariah. In carrying such noble exercise there are few aspects to be considered to ensure a comprehensive financial plan meets the client’s requirement, business requirement and Shariah requirement as well.

Steps:

1. Screening and filtering securities that are Shariah compliant

2. Portfolio creation and revision providing Due diligence

3. Proxy voting and shareholder advocacy

4. Purification of income that has roots in some forbidden activities.

5. Zakah - It implies calculating the portion of clients assets that Islam prescribes to be given to charity.

6. All investments are to be governed with principles of Halal,Haram,Riba,Gharar & Maisir.

The above aspects mentioned on the process of the Shariah based Financial Services are by no means exhaustive and should be practiced in the market within a high level of professionalism. Honesty, transparency and trust must always be upheld, where the planner-advisor is always demonstrating a good code of ethics and business conduct with high quality in performance.