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Sunday, 11 May 2014

To Share is to Care

Wealth is viewed as an amanah, or trust, from Allah. Elsa Febiola Aryanti reminds us what it’s all about.
Allah is the ultimate owner of all our worldly possessions. Everything that we have is essentially just a big loan from Allah who has trusted us to use it accordingly. The responsibility of how we earn and spend it falls upon us, and the accountability lies directly between us and the Almighty.
Islam is a religion of balance and it gives us clear guidance on how to earn, manage and spend our wealth. Islam also acknowledges the rights of individuals to use their wealth within the tenets of the Sharia, in which the obligation to share with the needy exists in the form of zakat.
By definition of the word, zakat means ‘grow,’ ‘develop,’ ‘fertile’ and ‘keep on adding,’ as stated in an Imam At-Tirmidzi hadith. Further, according to verse 103 of surah At-Taubah, zakat means to cleanse or to purify. Zakat is one of the principles of Islam, and it is obligatory for all Muslims who fulfil certain conditions, as stated below. Zakat is on the same level with other pillars of Islam like the salat, the hajj, and fasting.
Regulations about zakat—such as its objectives and rightful recipients—are clearly stated in the Qur’an and its hadiths. Socially-speaking, zakat is directly influenced by the welfare of society and it continues to develop according to its progress.
As stated earlier, zakat is mandatory for those who fulfil certain conditions. These conditions require that they be Muslim, have reached puberty (baligh), are able-bodied (aqil) and have, in their possession, an amount of wealth that has already passed the minimum amount of zakatable wealth (nisab).
There are two kinds of zakats: zakat nafs (self), also known as zakat fitrah, and zakat maal (wealth).
Zakat fitrah is paid in the form of a common staple food amounting to 2.5kg. Some examples of zakat fitrah food items are rice, flour, corn, dates and grains. The head of the family should pay for all its members. If he or she can afford it, zakat fitrah may also be paid on behalf of his or her servants.
The payment of zakat fitrah can be done from the very first day of Ramadhan. However, it is a Sunnah—or as practised by Prophet Muhammad (pbuh)—and therefore is encouraged to be paid on the eve of Eid, during the window of time from when the breaking of fast happens on the last day of Ramadhan, signalling the end of Ramadhan, to when the Eid prayers begin the very next morning. After that, any contribution is considered sadaqah, or charity.
The second form of zakat, zakat maal, is applied to a wide array of items, as long as they meet two requirements: they can be possessed, gathered or fully owned; and they benefit their owner. Examples of zakat maal items are houses, vehicles, land, farm animals, gold, silver and cash.
After the above two factors have been established for the zakat maal item, the following conditions are then checked against it:
  • That the item was fully owned and gained according to the Sharia in the first place
  • That the item has either increased in value (like with gold and property) or provided a source of income (like with rents)
  • That the item passes the minimum amount of zakatable value, bearing the analogy of the equivalent of 85g of gold or 672g of silver (nisab)
  • That the wealth owned exceeds the basic needs required
  • That the owner is free from debt. If the owner owes any debt, the amount of debt should then be subtracted from the amount of his or her wealth to determine whether the residual wealth amount passes the minimum amount of zakatable wealth. If what is left does not pass the minimum amount of zakatable wealth, then he or she does not have to pay zakat maal
  • That the item has been in possession for one full Islamic year of 354 days (haul)
Assets that are compulsory zakat maal items include trade merchandise, farm products or produce, mining produce, minerals, buried treasures, income from savings, investments and wages. There are different rates of zakat for each asset class, stated according to its specific circumstances.
In general, a zakat maal contribution is 2.5 per cent of the value of the accumulated wealth, investments and/or annual savings, when both the minimum value (nisab) and a period of one Islamic year are due.
The author is a fund manager at a reputable state-owned pension fund institution in Indonesia as well as a Sharia-based financial planner, writer and trainer. She also volunteers at a zakat organisation in Indonesia.
(Shariah Finance / 19 April 2014)
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Three Omani firms plan sukuk issue

Muscat: At least three Omani companies are planning to float sukuk issues this year for raising funds for their expansion programmes. These companies are engaged in construction, property development, telecommunication and logistics services near port, Dr Mohd Daud Bakar, a prominent global Sharia scholar and chairman of Amanie Advisors, told Times of Oman on the sidelines of a seminar on sukuk. However, he declined to name the companies that are eying sukuk funds for their expansion programmes.

"Every one is looking at more than OMR100 million worth of sukuk issue. The second sukuk issue will be for more than OMR100 million," he added. Tilal Development started the first sukuk issue in Oman by raising OMR50 million.

Benefits of sukuk
"We have been speaking to a few potential corporate issuers in Oman. Some of them are very positive, some others are looking for government to take a lead, and few others are very new to understand the benefits of sukuk," noted Dr Bakar. He said Amanie Advisors, which was an advisor for Tilal Development, is trying to educate the potential Omani issues on the benefit of sukuk instrument.

"This is the good time to come out with a sukuk issue as investors are interested in parking their funds in sukuk instrument," he further added.

Dr Bakar said it takes another six months for these companies to float their issues, if the managements accept the cost of fund.

'Islamic banking emerges as fastest growing sector'
Dr Bakar said if Oman government comes out with a token sovereign sukuk issue, it will give a confidence and a benchmark for corporate issuers. A small amount issued by the government can be easily absorbed by Omani institutions. This will not require assets to be transferred to overseas markets since the buyers are Omani institutions. "Government can allocate assets like ports, airports, hospitals or designated land for construction. These are good assets for securitisation." 

In the case of Oman, within a short span of less than one-and-a-half years, Islamic banking and finance has emerged as one of the fastest growing segments within the financial services industry in Oman since the issuance of the Islamic Banking Regulatory Framework in December, 2012 and the establishment of two new dedicated Islamic banks and six Islamic banking windows. 

Since then, three Sharia funds had been launched, a corporate sukuk had been issued, the new MSM Sharia Index was launched for the Muscat Securities Market, two new takaful operators are currently operating in the market and the proposed issuance of first sovereign sukuk soon. 

Key role for Islamic banks
Based on what has been seen so far, Islamic banking and the Islamic capital market will play a key role in meeting the funding requirements of the country and growth in the economy, including for the small and medium enterprises.

Islamic finance, based on principles and values that are universally-accepted, offers a viable alternative to conventional finance, which has been widely affected by the recent global financial crisis and the current economic turmoil in some of the industrialised nations. 

The seminar, Capital Market Authority (CMA) in collaboration with Amanie Advisors, highlighted the rapid and continuing growth that has been seen in Islamic finance, the Islamic capital market and the Sukuk market over twenty years, from just a small and niche market, to becoming part of the mainstream global financial system. 

The expert speakers had also highlighted the advantages of issuing a sukuk versus conventional bonds due to the wider investor base, improved pricing dynamics and stable secondary market performance.

As more jurisdictions and players participate in the industry, the Islamic capital market is expected to contribute to a more efficient mobilisation and allocation of funds across regions, thus strengthening international financial and economic linkages between jurisdictions and bringing mutual benefits to all stakeholders.

(Times Of Oman / 10 May 2014)
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