FAITH CONSISTENT INVESTMENT (“FCI”)

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Presentation By:
DATO’ MOHAMED IQBAL
TRUSTEE, TAQWA FOUNDATION, MALAYSIA
[MEMBER, UNESCAP BUSINESS ADVISORY COUNCIL]

Published in: Economy & Finance, Technology
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FAITH CONSISTENT INVESTMENT (“FCI”)

  1. 1. TBLI CONFERENCE ASIA 2008 <ul><li>FAITH CONSISTENT INVESTMENT </li></ul><ul><li>(“FCI”) </li></ul><ul><li>Presentation By: </li></ul><ul><li>DATO’ MOHAMED IQBAL </li></ul><ul><li>TRUSTEE, TAQWA FOUNDATION, MALAYSIA </li></ul><ul><li>[MEMBER, UNESCAP BUSINESS ADVISORY COUNCIL] </li></ul><ul><li>29 MAY 2008 </li></ul><ul><li>LANDMARK HOTEL, BANGKOK, THAILAND </li></ul>
  2. 2. FAITH CONSISTENT INVESTMENT (“FCI”) <ul><li>THE QUESTIONS : </li></ul><ul><li>1. WHAT are the hurdles in implementation ? </li></ul><ul><li>2. CAN FCI, if inserted in a new paradigm, be a viable alternative to the socio- economic crisis? </li></ul>
  3. 3. FAITH CONSISTENT INVESTMENT (“FCI”) <ul><li>In Islam IT IS ALL THE WAY! </li></ul><ul><li>Investment must always be faith consistent. </li></ul><ul><li>Conform to Islamic laws (Syariah). </li></ul><ul><li>There is a comprehensive development of Syariah compliant investment opportunities as part of the Islamic financial system. </li></ul>
  4. 4. ISLAMIC APPROACH IS HOLISTIC <ul><li>Human Being </li></ul><ul><li>Purpose on earth Angelic </li></ul><ul><li>Innate nobility MAN </li></ul><ul><li>Inherent weakness Animal </li></ul><ul><li>Need to be guided to fulfill THE TRUE HUMAN NATURE </li></ul>
  5. 5. ISLAMIC APPROACH IS HOLISTIC <ul><li>Individual </li></ul><ul><li>Relationship with the Creator </li></ul><ul><li>Relationship with fellow human beings </li></ul><ul><li>- to family </li></ul><ul><li>- society </li></ul><ul><li>Relationship with Creation </li></ul><ul><li>- to planet/universe </li></ul><ul><li>Religious duty must manifest in all aspects </li></ul><ul><li>moral responsibility of individual’s conduct, communal, societal and/or corporate contexts </li></ul>
  6. 6. ECONOMIC ACTIVITY <ul><li>ISLAM POSITIVELY ENCOURAGES ECONOMIC ACTIVITY </li></ul>COMMUNITY WELL BEING STABILITY POVERTY : “ POVERTY TAKES PEOPLE TO BOUNDARY LINE OF DISBELIEF!”. [HADITH] “ BUT SEEK THE ABODE OF HEREAFTER WITH THAT WHICH ALLAH HAS GIVEN YOU, AND NEGLECT NOT YOUR SHARE OF THE WORLD”. [Q.28:77] NOTE : TWO WORLDS ARE NOT IN CONFLICT, BUT ARE INTER-RELATED “ NEXT TO OBLIGATORY PRAYER IS THE OBLIGATION OF EARNING AN HONEST LIVING”. [HADITH]
  7. 7. PURPOSE OF ECONOMIC ACTIVITIES <ul><li>SLAVES TO WORLDLY WEALTH </li></ul><ul><li>NEGLECT OF MORAL AND SOCIAL DUTEIS </li></ul><ul><li>TURN A WAY FROM ALLAH’S PATH </li></ul><ul><li>TRADE IS PERMITTED – USURY IS FORBIDDEN </li></ul><ul><li>ACTIVE PASSIVE </li></ul><ul><li>WHOLLY INVOLVED NOT INVOLVED (NOMINALLY INVOLVED) </li></ul><ul><li>RISK-TAKING RISK-AVOIDING (BUSINESS RISK) </li></ul><ul><li>CONCEPT OF “RISIKI” = SUSTENANCE (SUSTENANCE PROVIDED BY GOD) </li></ul><ul><li>- SEEKING SUSTENANCE THE HALAL WAY </li></ul><ul><li>- SYARIAH COMPLIANT </li></ul><ul><li>- WEALTH = PURIFICATION ( ZAKKAT ) </li></ul>
  8. 8. ETHICAL VALUES <ul><li>FAIRNESS, JUSTICE, EQUALITY, HONESTY </li></ul><ul><li>QURAN SAYS : “WOE TO THOSE WHO DEAL IN FRAUD. THOSE WHO WHEN THEY HAVE TO RECEIVE BY MEASURE FROM PEOPLE , EXACT FULL MEASURE; BUT WHEN THEY HAVE TO GIVE BY MEASURE OR WEIGHT TO OTHERS GIVE LESS THAN DUE. </li></ul><ul><li>DO THEY NOT THINK THAT THEY WILL BE CALLED TO ACCOUNT ON A MIGHTY DAY, </li></ul><ul><li>A DAY WHEN (ALL) HUMANKIND WILL STAND BEFORE THE LORD OF THE WORLD?” [Q.83:1-6] </li></ul><ul><li>ISLAMIC SYSTEM IS BASED FIRMLY ON MORAL VALUES, RENDERING </li></ul><ul><li>BASICALLY WORLDLY ACTIVITIES TO FORMS OF WORSHIP. </li></ul>
  9. 9. SOCIALLY RESPONSIBLE INVESTMENT RESPONSIBLE (FOR INVESTOR) RISK - TAKING RISK AVOIDING LOW HIGH MODERATE CSR – CORPORATE SOCIAL RESPONSIBILITY ALL THE WAY ALONG SR – SOCIAL RESPONSIBILITY AT THE END SRI – SOCIALLY RESPONSIBLE INVESTMENT DECISION AT SOURCE/AT THE OUTSET DIRECTS THE INVESTMENT DECISION SOCIALLY BASICS : A) PROTECTION OF CAPITAL (SAFETY) B) RETURNS RESPONSIBLE <ul><li>RETURNS – MORE IN VALUE </li></ul><ul><li>TIME VALUE FOR MONEY </li></ul><ul><li>INFLATION </li></ul>INVEST
  10. 10. <ul><li>MAXIMISING PROFIT IS NOT MOST IMPORTANT . </li></ul><ul><li>CHARITY AND SOCIAL RESPONSIBILITY ARE PART AND PARCEL OF THE TOTAL INVESTMENT, WHICH MUST PRODUCE THE BOTTOM LINE . </li></ul><ul><li>BUSINESS IS NOT CHARITY. </li></ul><ul><li>CHARITY SHOULD NOT OFFEND HUMAN DIGNITY. </li></ul>ISLAMIC ATTITUDE
  11. 11. <ul><li>PROHIBITION OF INVESTMENTS IN INTEREST-BEARING ASSETS </li></ul><ul><li>AVOIDANCE OF INVESTMENT IN CERTAIN DESIGNATED INDUSTRIES </li></ul><ul><li>AVOIDANCE OF EXCESSIVE RISKS </li></ul><ul><li>AVOIDANCE OF UNCERTAINITY </li></ul>MAIN REQUIREMENTS OF SYARIAH COMPLIANCE
  12. 12. <ul><li>HIGH DEGREE OF TRANSPARENCY </li></ul><ul><li>FAIR CONTRACTS TO AVOID UNCLEAR TERMS </li></ul><ul><li>DISCLOSURE AND AVOIDANCE OF AMBIGUITY </li></ul><ul><li>GUARANTEES ARE NON ACCEPTABLE AS THEY TEND TO BE UNBALANCED CONTRACTS </li></ul>MARKET PERCEPTION
  13. 13. <ul><li>ISLAM - GROWING INTEREST </li></ul><ul><li>ISLAMIC FINANCE – ECONOMIC ALTERNATIVES </li></ul><ul><li>IMF : 1980 – PUBLIC ENDORSEMENT OF ISLAMIC BANKING PRINCIPLES </li></ul><ul><li>ISLAMIC BANKS – EVOLUTION OVER 3 DECADES </li></ul><ul><li> – GLOBAL IN NATURE & FUNCTIONS </li></ul><ul><li>CONVENTIONAL BANKS – PARTAKING IN ISLAMIC BANKS </li></ul><ul><ul><ul><li>- FINANCE, INSURANCE (TAKAFUL) </li></ul></ul></ul><ul><li>US $200 BILLION </li></ul><ul><li>GROWTH ABOUT 15% ANNUALLY </li></ul>TREND & FUTURE

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