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Wednesday, 20 April 2011

Financial planning key to Islamic banking growth

The Islamic banking community needs to focus on financial planning, according a report launched by Bank Sarasin in Bahrain.

It also calls for the industry to move forward by developing the Sharia framework, diversifying products and differentiating its offerings.

Bank Sarasin's Islamic Wealth Report 2011 provides investors with an in-depth overview of developments in the Islamic wealth arena in 2010 and explains how best to manage assets according to religious requirements.

'This approach exemplifies Bank Sarasin's aim to minimise risk and maximise opportunities for its clients, a key objective in today's volatile markets,' a spokesman for the bank said.

'This year's report opens by explaining the required approach to Islamic financial planning before focusing on the key areas of philanthropy, the family office service, mutual funds and sukuk, before concluding with an insight into Bank Sarasin's current economic outlook for 2011.
'Islamic financial planning is largely neglected by the Islamic banking industry,' said head of Islamic finance Fares Mourad.

'It requires a detailed process, as well as structures and products to ensure Muslim investors are fully compliant with Sharia law.

'We are proud to have extended our holistic approach to offer a comprehensive Islamic wealth management service,' he said.

The key challenges and opportunities addressed in the report include managing the Islamic wealth cycle through the entire process of wealth acquisition, preservation and distribution and achieving the required balance between spiritual and worldly obligations.

It also addresses the challenges facing Islamic mutual funds to achieve growth and performance and recommends standardisation, education and diversification of sukuk in order to increase the supply of products and the liquidity of the market.


*Attend a conference on Islamic wealth management/financial planning in Kuala Lumpur on 14-15 June 2011 > follow this link

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What is Riba? The Prohibition of Interest and Usury in Islam

Islam provides guidelines for all aspects of life, including trade and economics. Of great importance to Muslims is the prohibition against interest and usury.

Muslims refer to the interest or usury applied to loans, credit purchases or other kinds of deferred payments as ribaRiba is regarded as unethical and unfair to the borrower, and is clearly forbidden in Islam.

Definition of Riba

The Arabic word riba linguistically means “an addition to, or an increase of, a thing over and above its original size or amount.” In the Qur’an, the term riba signifies an unlawful and forced addition to the payback value of money or goods lent from one person to another.
Riba falls under two main categories: Riba An-Nasia, which is interest on lent money; and Riba Al-Fadl, which is the exchange of the same commodity but of unequal quality and quantity. (For example, trading dates of superior quality for a larger quantity of dates of inferior quality)

Other Forms of Riba

Some scholars also consider all transactions which involve deception, penalize the buyer, or compromise a fair and free market as riba. In this broader sense, riba would include:
  • Monopolies that control pricing
  • False bidding on auction items to increase their price
  • Hoarding goods to create false scarcity and demand
  • Speculative transactions – such as the buying and selling of stocks, bonds and shares – particularly when there is privileged insider information
  • Increasing the prices of goods in consideration of a deferred payment
  • Concealing defects when selling an item
  • Charging a fee for deferred payment

Prohibition of Riba in the Qur’an and Sunnah

While capitalism promotes interest as fair profit in a needs-driven market, Islam views usury and other forms of riba as practices which unfairly consume others’ wealth. The Qur'an explicitly states that riba is a major sin:
"Those who eat Riba (usury) will not stand (on the Day of Resurrection) except like the standing of a person beaten by Satan leading him to insanity. That is because they say: 'Trading is only like Riba,' whereas Allah has permitted trading and forbidden Riba. So whosoever receives an admonition from his Lord and stops eating Riba shall not be punished for the past; his case is for Allah (to judge); but whoever returns (to Riba ), such are the dwellers of the Fire - they will abide therein. "(Qur’an 2:275)
The Prophet Muhammad (peace be upon him)* also warned of the gravity of riba when he said: "A dirham which a man knowingly receives in usury is more serious than thirty-six acts of fornication." (Al-Tirmidhi 2825)

But the warning extends beyond the lender. Abdullah ibn Mas'ud narrated: “The Apostle of Allah (peace be upon him) cursed the one who accepted usury, the one who paid it, the witness to it, and the one who recorded it.” (Sunan of Abu-Dawood 3327)

Prohibition of Interest in the Old and NewTestaments

Islam's prohibition of interest and usury was not unprecedented. The early Jewish and Christian traditions also forbade riba.
“Do not charge your brother interest, whether on money or food or anything else that may earn interest.” (Deuteronomy 23:19)
"He does not lend at usury or take excessive interest. He follows my decrees and faithfully keeps my laws. That man is righteous; he will surely live, declares the Sovereign LORD." (Ezekiel 18:8-9)
“Then Jesus went into the temple of God and drove out all those who bought and sold in the temple, and overturned the tables of the money changers and the seats of those who sold doves. And He said to them, 'It is written, 'My house shall be called a house of prayer,' but you have made it a 'den of thieves.'"(Matthew 21:12-13)

Islamic Economics and Trade

In Islamic economics, a free needs-driven market should be founded on Islamic principles and practices which don't harm consumers and borrowers. Shariah condemns riba, and Muslims should avoid riba in all financial transactions and trade, as well as in their personal banking.

* Muslims invoke Allah's blessings on the Prophet Muhammad whenever this name is mentioned.

Source: The Prohibition of Riba in the Qur'an and Sunnah by Imran N. Hosein, 1997, Masjid Darul Qur'an, Bayshore, NY
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Will Power and Self-Discipline

Sometimes, you wish to go for a walk, knowing how good it is for your health and how wonderful you feel afterwards, but you feel too lazy, and prefer to watch TV instead. You might be aware of the fact that you need to change your eating habits or stop smoking, but you don't have the inner power and persistence to change these habits.
Does this sound familiar? How many times have you said, "I wish I had will power and self discipline"? How many times have you started to do something, only to quit after a short while? We all have had experiences like these.
Everyone possesses some addictions or habits they wish they could overcome, such as smoking, excessive eating, laziness, procrastination or lack of assertiveness. To overcome these habits or addictions, one needs to have will power and self discipline. They make a great difference in everyone's life, and bring inner strength, self mastery and decisiveness.

Definitions of Will Power and Self Discipline
Will power is the ability to overcome laziness and procrastination. It is the ability to control or reject unnecessary or harmful impulses. It is the ability to arrive at a decision and follow it with perseverance until its successful accomplishment. It is the inner power that overcomes the desire to indulge in unnecessary and useless habits, and the inner strength that overcomes inner emotional and mental resistance for taking action. It is one of the corner stones of success, both spiritual and material.
Self-discipline is the companion of will power. It endows with the stamina to persevere in whatever one does. It bestows the ability to withstand hardships and difficulties, whether physical, emotional or mental. It grants the ability to reject immediate satisfaction, in order to gain something better, but, which requires effort and time.
Everyone has inner, unconscious, or partly conscious impulses, making them say or do things they later regret saying or doing. On many occasions people do not think before they talk or act. By developing these two powers, one becomes conscious of the inner, subconscious impulses, and gains the ability to reject them when they are not for his/her own good.
These two powers help us to choose our behavior and reactions, instead of being ruled by them. Their possession won't make life dull or boring. On the contrary, you will feel more powerful, in charge of yourself and your surroundings, happy and satisfied.
How many times have you felt too weak, lazy or shy to do something you wanted to do? You can gain inner strength, initiative and the ability to make decisions and follow them. Believe me, it is not difficult to develop these two powers. If you are earnest and are willing to become stronger, you will certainly succeed.
In this article, you will find some exercises and techniques for developing these abilities. These simple, but effective exercises, can be performed everywhere and at any time. Go slowly and gradually, and you will see how you get stronger and your life start improving.
There is a misconception in the public mind regarding will power. It is erroneously thought to be something strenuous and difficult, and that one has to exert and tense the body and mind when expressing it. It is a completely wrong concept. This is one of the reasons why people avoid using it, though they are conscious of its benefits. They acknowledge the fact that the employment of will power in their life and affairs will greatly help them, and that they need to strengthen it, yet they do nothing about it.
Will power gets stronger by holding back and not allowing the expression of unimportant, unnecessary and unhealthy thoughts, feelings, actions and reactions. If this saved energy is not allowed expression, it is stored inside you like a battery, and it becomes available at the time of need. By practicing appropriate exercises, you develop your powers the same way, as a person who trains his/her muscles in order to strengthen them.

Developing Will Power and Self Discipline
An effective method for developing and improving these abilities is to perform certain actions or activities, which you would rather avoid doing due to laziness, procrastination, weakness, shyness, etc. Doing things that you usually do not like to do. or feel too lazy to do, you overcome your subconscious resistance, train your mind to obey you, strengthen your inner powers and gain inner strength. Muscles get stronger by resisting the power of the barbells. Inner strength is attained by overcoming inner resistance.
Remember, strengthening one of these abilities, automatically strengthens the other one.

Here are a few exercises:
1) You are sitting in a bus or train and an old man or woman, or a pregnant lady walks in. Stand up and give up your seat, even if you prefer to stay seated. Act so, not just because it is polite, but because you are doing something that you are reluctant to do. This is an exercise in overcoming the resistance of your body, mind and feelings.

2) There are dishes in the sink that need washing, and you postpone washing them for later. Get up and wash them now. Do not let your laziness overcome you. When you know that in this way you are developing your will power, and if you are convinced of the importance of will power in your life, it will be easier for you to do whatever you have to do.
3) You come home tired from work and sit in front of the T.V., because you feel too lazy and too tired to take a shower first. Do not succumb to the desire to sit in front of the T.V, and go and take a shower.
4) You may know your body needs some physical exercise, but instead you keep on sitting doing nothing or watching a movie. Get up and walk, run or do some other physical exercise.
5) Do you like your coffee with sugar? If you do, then for one whole week drink it without sugar. Do you drink three cups of coffee each day? If you do, then drink only two cups a day for one whole week.
6) Sometimes, when you want to say something that is not important, decide not to say it.
7) Don't read some unimportant gossip in the newspaper, even if you want to.
8) You have a desire to eat something not too healthy. For the sake of the exercise refuse the desire.
9) If you find yourself thinking unimportant, unnecessary, negative thoughts, try to develop a lack of interest in them, by thinking about their futility and uselessness.
10) Overcome your laziness. Convince yourself of the importance of what is to be done. Convince your mind that you gain inner strength when you act and do things, in spite of laziness, reluctance or senseless inner resistance.
Never say that you cannot follow the above exercises, because you certainly can. Be persistent no matter what. Motivate yourself by thinking about of the importance of performing the exercises, and the inner power and strength you will gain.
Trying to attempt too many exercises when you are still a beginner, might end in disappointment. It is better to start with a few easy exercises at first, and then gradually increase their number and move to the more difficult exercises.
Most of these exercises can be practiced anywhere and at anytime, and you don't have to devote special times for them. They will train and develop your inner strength, enabling you to use it whenever you need it.
If you practice weight lifting, running or aerobics, you strengthen your muscles, so that when you need to move or carry something heavy, for example, you have the strength for it. By studying French each day, you will be able to speak French when you travel to France. It is the same with will power and self-discipline; by strengthening them, they become available for your use whenever you need them.
If for the sake of an exercise, you stop doing something that you usually do, and overcome the inner resistance concerning it, you may resume doing it, if it is not harmful. For example, if you love drinking orange juice, and for the sake of an exercise you switch to drinking apple juice, after doing so for some time, and after it makes no great difference to you, you may go back to drinking orange juice, if you still like it. The point here is to develop inner strength, not making life difficult for you or continue doing things you don't like to do.

Benefits of Possessing Strong Will Power and Self Discipline
You need these skills to control your thoughts, improve your concentration, and to become the boss of your mind. The stronger these skills are, the more inner strength you possess.
Being the master of your mind you enjoy inner peace and happiness. External events do not sway you, and circumstances have no power over your peace of mind. This might sound too unreal for you, but experience will prove to you that all the above is true.
These skills are vital for achieving success. They give you more control over your life, help you change and improve habits, and are essential for self improvement, spiritual growth and meditation.
Practice the exercises presented here earnestly and persistently, and your life will start changing.

(By Remez Sasson)

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