Islamic Wealth Management As A Way Of Life

By Murni Mat Nasri

JOHOR BAHARU (Bernama) — Being rich is the goal of most people earning a living by working for others or working on their own.

The dream of becoming rich is fuelled by the perception that when one is rich, life is more fulfilling.

Islam itself encourages its adherents to be wealthy so that they can use their wealth to help others. A wealthy society has the means to make others wealthy too.

The process of accumulating wealth starts as soon as one is able to earn an income, and continues even after the person has amassed vast amount of movable and immovable assets exceeding their every day needs.

This wealth gathering should continue not only for those who are still struggling to be rich, but also for people who are already wealthy because it is a prerequisite for a holistic success in this life and the hereafter.


This process is called “wealth management”, according to Norsa’adah Ahmad, Islamic financial planner and the author of “Mudahnya Mengurus Kekayaan Dalam Islam” (It Is Easy To Manage Wealth In Islam), published by TrueWealth Sdn Bhd.

The person who takes steps to ensure his income and assets are used prudently is one who knows how to manage wealth, she told Bernama in an interview.

Norsa’adah, who has more than five years’ experience in the financial planning industry, is an Islamic Financial Planner certified by the Financial Planning Association of Malaysia (FPAM) and the Islamic Banking and Finance Institute Malaysia (IBFIM). She is also a certified accountant with the Malaysian Institute of Accountants (MIA).

Wealth management, said Norsa’adah, covers a wide area in a person’s life cycle from the asset and wealth creation stage to accumulation, protection, and distribution.


“Financial management is one part of wealth management and in entails access to a formal system such as banking, insurance and takaful”, she said.

This wealth management process, according to Norsa’adah, starts when a person manages one’s own money and continues until after death, whereupon the wealth is managed and administered for distribution to the next-of-kin.

Unlike conventional wealth management, there are four stages in Islamic wealth management. These consist of wealth creation, accumulation, protection and distribution.

The first component of the wealth management process kicks off when a person generates or creates own income, through active participation such as working for other people or for own business or via passive activity such as the income that one receives from real estate or book royalties, among others.

It is the person’s responsibility to ensure that the income derived is from sources or activities that are ‘halal’ and shariah compliant.

Important elements in this process of wealth creation are savings, daily expenses, expenses incurred by his living space, medical, “zakat”, “infaq” and taxes.


The second component, wealth accumulation, can be done via investments in shariah compliant funds.

In her book, Norsa’adah explains that a person can add a higher value to his/her assets and income by investing in real estate, equities, gold and silver, unit trusts and fixed deposits.

He can choose to invest in the product that is similar to the conventional fixed deposit that is designed to adhere to the Islamic laws, which is offered by Islamic banks.

An individual should take precautions by gathering information before making any investments to make sure that the gains from these investments are ‘halal’ and at the same time avoid pitfalls that may trap him/her later on.

“Investing in a company that is operating an internet investment scheme for example, is of course not shariah compliant”, Norsa’adah said.


As mentioned in her book, the third component outlines how one should take precautions to protect his/her income and assets from risks such as damages, accidents and financial burdens when he/she is no longer able to generate good income.

In conventional banking, purchasing an insurance policy will provide this cover. Similarly, under an Islamic financial practice, one can obtain a takaful policy for the same purpose.

“It is imperative to start the third process as early on as possible, especially when one has dependants and financial liabilities like loans”, Norsa’adah added.

Wealth protection is critical – especially for the sole breadwinner – because it ensures that in the event one is incapacitated and no longer able to earn an income to support his family, the proceeds from the takaful policy can take care of the contingencies.

“Wealth accumulation and protection normally start simultaneously. One has to put aside a portion of one’s income for investment purposes, but savings should be top priority for those who have no dependants yet”, she said.


The last component that one has to observe under Islamic wealth management is to ensure that the wealth distribution is in accordance with shariah principles, to the rightful heirs, after the person dies.

Under the conventional system, when a person passes away the assets will be distributed according to the will one leaves behind. However, in the absence of a will, the assets will be assigned to the heirs in accordance to the Distribution Act.

In Islam, however, when a person dies, the wealth one leaves behind will be apportioned according to the faraid system, which is the Islamic law that deals with the distribution of the estate of a deceased person among his heirs.

Five key issues must be settled before the assets are distributed. The heirs must ensure that the person’s remains are properly buried, all debts – whether to a Muslim or a non-Muslim – are settled, all jointly acquired property claims are addressed, and the will is executed.

These five key elements of the administration of assets after a Muslim dies are explained in detail in the book.


According to the definition furnished by the Lembaga Zakat Selangor on its website, linguistically “zakat” refers to “purification”, “augmentation” and “prosperity”.

For a more specific definition, “zakat” refers to the amount that an obligated Muslim has to pay from his income and assets according to calculations based on the duration of his ownership as well as on the minimum amount of payment to be paid out.

This final amount will distributed to eligible recipients known as asnaf. Meanwhile, infaq or charity is defined in the Malay lexicography as the giving up of assets and properties for a good cause as permitted by the Islamic laws in the form of charity, contributions and patient expenses, expenses for underprivileged children and money for disaster funds, among others.

Paying taxes on the other hand is a citizen’s obligation because the government will then use the tax collections to build facilities and develop infrastructures for the people.

These three activities are included under the wealth generation and creation component and they are the expenses that a person has to bear.


Wealth distribution does not have to happen only after a person dies. A living person can still bequeath his wealth through the process of waqaf.

Waqaf is a concept that refers to the action of a person to return the wealth, which belongs to Allah in the first place, to its rightful owner by using it for causes that can benefit all.

“There are two types of waqaf: one made when during a person’s lifetime, and one which is made after he dies. A person can bequeath his wealth in the form of money or real estate to be used for a good cause. The same applies with the waqaf that one bequeaths after his death.

“The difference is that while a person can give away limitless amount of one’s wealth for waqaf while still alive, only one-third of the entire estate can be given to waqaf after he dies”, said Norsa’adah.

Islam, like any other religion, encourages its followers to continue to improve their lives and seek abundance from halal sources, not only for themselves but also for their families and mankind in general.


According to Norsa’adah, this wealth management knowledge should be learnt early in life, especially so when the person has an income, although one is still far from being rich.

“It is only when a person understands and accepts that wealth management can secure success both in this life and the hereafter, will it be easier for a person to practice it as a way of life”, she added.



Thursday, August 28th, 2014 EN

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