The Islamic Financial planning is an emerging financial sector in the market that needs encouragement and support by the regulators, practitioners and other stakeholders. Malaysia can capitalize on its global Islamic financial status to push further the boundaries of this new sector. This financial sector can potentially growth along with the growth of the Islamic finance because it is one of its components.
Financial planning is essentially a process, i.e. it is not a product. According to MFPC constitution defines it as a process or methodology of assisting clients in determining their financial goals, objectives and priorities and the resources to meet them in an optimal and practical manner. The outcome of the process is to help the client achieve his financial goals and objectives. The product approach offers the financial products first and then trying to package them into a financial plan. The financial planning approach, does not assume a need as in the product approach. Goals and objectives are set based on the current circumstances of the individual who assume the position of a client. Since goals and objectives may vary over time, the financial planning process should be a never-ending process. The process described is comparable to identifying the characteristics of all the holes (problems) before selecting the plugs (solutions) to fit those holes which are more logical than the reverse way performed by financial solutions seller. It can be understood that financial planning is a process of meeting the goals of the client through a proper management of his finances and existing wealth. The advisor does not possess the finance or the wealth but only provide the advice base on his knowledge and skills, the determination of the financial goals and objectives are base on the available data gathered by the financial planner, in addition to that the financial planning is structured based on the current circumstances of the client whereby the financial planning is designed according to the existing wealth of the client. It is very important to observe the proper matching between the condition and circumstances of the client. The goals of the client may include buying or selling, saving or spending, education, starting a new business, restructuring an existing business, opening new windows for investment or planning for retirement, etc.
The major parties involved in formulating the financial planning scope and framework are:
- The personal financial planner
- The client of the personal financial planner
- The financial goals
- The existing wealth and resources of the client
- The financial plan provided by the personal financial planner
The Islamic Financial Planning
The concept of Islamic financial planning is based on the incorporation of the Shariah rules and elements into the process of the financial planning, whereby Shariah rules and principles will be positioned as the core of the application of financial planning, and accordingly Shariah will be observed, respected, and enforce throughout the process.
Shariah financial planning could be defined as: “a process of assisting clients in determining their financial goals and priorities and the resources to meet them optimally within the parameters of the Shariah.” Or “the process of meeting life goals through the management of finances in accordance with the Shariah.” According to this concept the services provided to the customer must be Shariah compliant in its concept, criteria, structure which satisfy the client needs and Shariah rules and requirement. Shariah is very concern about the financial planning due to its financial implication on the family and society at large. Therefore Muslims are encouraged and urged to plan their life economically and financially as well in order to achieve the objectives of Shariah in society, business and finance which bring prosperity and happiness to every individual in the ummah. The financial planning never been against the concept of tawakul and destiny, Shariah always urge Muslim to spend effort to achieve the goal of Shariah especially which are related to the five universal fundamental objectives of Shariah. One of them is the preservation of the wealth whereby the financial planning plays this role to materials this objective.
The prophet Muhammad (s.a.w) says: ‘My Lord, help me and do not give help against me, grant me a victory, and do not grant victory over me, plan on my behalf and do not plan against me, guide me and made my right guidance easy for me, grant me victory over those who act wrongfully towards me. (Narrated by Abu Daud.) From Shariah perspective the financial planning comes first and take place to fulfill the fundamental principles of (al Akdu bil asbaba) taking the necessary steps needed, than followed by tawaful, whereby the person will submit him self to Allah and seek help and success by making dua. This is a very important sequence, whereby the human being effort take place first within the existing capacity and effort after that the submission to Allah followed by tawakul and seeking the success and achievement, and not vise versa. The financial planning takes into account the principle that Allah is the sole giver of “bounty” to every living creature on this planet including Muslim and non Muslim, human being and animal and other creators that Allah only knows. This part of his mercy Allah Says: ‘For Allah is He Who Gives (all) sustenance. (Al-Dhariyat 51:58). The Prophet says: ‘A Muslim should prepare himself for the next world as if he is going to die tomorrow, but at the same time work hard to improve all his worldly comforts as if he is going to live forever.( Narrated by Al-Dailami).
It is important to note that one of the objectives of financial planning is to achieve the balance between the material and soul, to be a person who lives to fulfill the needs of both of them equally. This established concept is not against wealth creation, but it to monitors and regulates acquiring wealth and spending according to Shariah principles. This fundamental principle should be understood by the financial planner and the client.
To be continued …
Tags: Islamic Finance Planning