Islamic Financial Planning Concepts by Johnny Moi, MFP, IEP, RFA

1. ISLAMIC FINANCIAL
PLANNING CONCEPTS
By
Lt Cmdr Johnny Moi (Ret)

2. DEFINITION
The development and implementation of a systematic and
comprehensive financial plan with the objective of achieving one’s
personal & financial goals according to the Holy Quran
Generally, Islamic financial planning involves taking a broad view
of one’s financial affairs covering many areas of wealth
management, and then going through a step-by-step process to
solve financial problems and achieve financial goals according to
the Holy Quran

3. SOURCES: DEVELOPING IFP
. Conventional financial planning model
. Primary sources
• Al-Quran
• Sunnah /Hadith
. Secondary sources
• Ijtihad – evaluation of existing financial instruments
• Ijma - consensus of the Muslim scholars on Islamic laws
• Qiyas - analogical deduction
• Uruf – custom or usages that are not contradicting with
Syariah

4. WHY ISLAMIC FINANCIAL PLANNING?
Islam as a comprehensive religion – emphasizes worldly life and hereafter.
Concept of Allah’s bounty – very important in Islam as a good Muslim is required
to have a proper balance between the fulfillment of his spiritual and worldly
obligations.
Muslims are encouraged to plan their life and put effort to achieve the goal
setting before proceeding to “tawakal”.
A Muslim still has to commit to financial planning because either he would leaves
debt or children to the trusted one.

5. WHY IFP? CONT…
he Prophet stated;
“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-Dailani)
As Muslims, we are not discourage from acquiring wealth, but we must know how to
earn and spend it in accordance with the Islamic principles.

6. WHY IFP? CONT…
 In Islam, Muslims are discouraged to be in debt.
 Greatest sin is to die in a state of debt and no asset to pay it off.
 Therefore in Islam, financial planning can be used as a tool in
managing one’s wealth.
 In this perspective, financial planning is therefore a must and is not
only for the high-income earner and rich but applies to all.

7. PILLARS OF IFP
ealth protection
ealth accumulation
ealth preservation
ealth distribution

8. WEALTH PROTECTION
oncept of protection in Islam – TAKAFUL
akaful means joint guarantee, whereby a group of participants agree to
jointly guarantee among themselves against a defined loss.
ased on the principle of “Ta-awun” (mutual assistance) and Tabarru
(donation, gift or contribution) where the risk is shared collectively by
the group voluntarily.
akaful provides guarantee against loss or damage & with Takaful,
Muslims can plan ahead for any unwanted/unfortunate events.
.g. – General Takaful & Family Takaful

9. ACCUMULATION OF WEALTH
chieving a reasonable capital growth with the objective of preserving accumulated
wealth.
nvolves asset allocation strategies, investment policy and others.
hannels of investment must be Syariah compliant – free from elements of gharar
(uncertainty), Riba (usury), maisir (gambling) and free from haram products such as
pork, alcohol etc.

10. WEALTH PRESERVATION
rotecting wealth against every conceivable financial risks and treats through sound wealth
management – quality investment etc.
o one should suffer unnecessary losses due to the quality of investment advice they
receive or to a failure to protect one’s assets.
slamic view – wealth as a trial and man are responsible as the trustee to the wealth that
ALLAH has given to him. Man are required to work hard if he wants to acquire wealth.
xamples of Islamic products that can help to preserve wealth : Family Takaful, Wadiah &
Mudarabah Savings, Islamic shares.

11. WEALTH DISTRIBUTION
mportant discipline in IFP – proper wealth distribution after death.
eath is inevitable, but many tend to ignore.
anger of leaving a mess to family members –disputes etc.

12. DEFINITION:FARAID, WASIYAH & HIBAH
 Faraid - Distribution of estate after one’s death according to the
Quran. Guidelines of estate distribution can be referred in verses 12
and 176 surah An-Nisa.
 Wasiyah - basically means giving a gift to others in term of wealth,
debt and beneficence of one’s property after his death. However, not
for legal heirs & allowable at maximum of 1/3 of total assets.
 Hibah - Giving one’s wealth to others without the expectation of any
replacement or exchange with the transferring effect on the ownership
during lifetime or executed upon death. Applicable either to family
members (legal heirs) or members who are not entitled to inheritance.

13. WEALTH PURIFICATION
undamental concept in IFP.
pending on those in need is a highly commendable form of ibadah or
worship. The Prophet declared:
“A generous person is close to Allah, close to Paradise, close to people,
and far from Hell. However, a miserly person is far from Allah, far from
Paradise, far from people, but close to Hell. Allah loves more an
ignorant man who is generous than a worshipper who is miserly.
(Narrated by At Tarmizi)”
adaqa (almsgiving) and Infaq (spending in the service of God) are
voluntary whereas Zakat is obligatory.

14. ZAKAT
he third pillar of Islam.
ompulsory in Islamic jurisprudence.
ave the capability to purify our wealth, protects our soul from miserliness, selfishness and
greed.
cts as an instrument to clean poverty in the society.

15. IFP: PRODUCTS & SERVICES
Protection Distribution Purification
Family Takaful
Takaful Plans for:
Medical needs
Motor Vehicle
Fire
Financing /
Mortgage plan
Etc.
Al-Wadiah
Savings
BBA Investment
Property
Etc.
Takaful Plans for:
Haji & Umrah
Education
Marriage
Housing
Family Takaful
Shares
Sukuks
Unit Kutipan &
Agihan Zakat Majlis
Ugama Islam
Federal & States
nominated by MUI
Counters at all
Islamic Banks
Waqaf plan offered
by Islamic
Insurance
companies
Refer to
Accumulation & Preservation

16. About the Author: Lt Cmdr Johnny Moi (Ret.)
•Certified Islamic Estate Planner (IEP, Malaysia)
•Certified Master Financial Planner (MFP, USA)
•Registered Financial Associate (RFA, USA)
•Fellow of the American Academy of Financial
Management (FAAFM)
•Author of Servant Leadership according to the Holy
Books Series 1.0 & 2.0
•Former Chief Editor & Writer of LEADERS publication (
www.theleaders-online.com)
•Was Contributing Columnist for the New Straits Times
– Property Column
•Freelance Editor & Writer on Business, Strategy,
Technology and Leadership and Holy Books to
Business. Email:johnnymoi7@yahoo.com