Alhamdulillah… My mentees and I, financial consultants from NTUC Income Cooperative were honoured to be invited to Islamic Banking & Investment Asia/Middle East Congress 2016 a few months back. 🙂
I received a lot of requests on my Facebook for me to share takeaways and learning points from the 2-day congress – but there was too much to share and I was really busy.
The event by itself, was really awesome! 🙂
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As most of you might have known, I work as a financial consultant that helps Muslim families, plan their finance in a shariah compliant way in Singapore . So being able to interact face to face with industry leaders who champions Islamic Finance in the world is a dream come true for a financial practionioner like me in Singapore.
(My mentees and I)
There are really a lot of learning points, and I will try to share with you one by one… I will also add on my perspective, in the context of myself as a financial consultant helping out with the development of Islamic Finance in Singapore. 🙂
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1) Understand Islamic Finance background
Firstly, let us speak about the status quo as of now. Islamic Finance is 42 years old.
Considering its size of $2 trillion Islamic Finance over $460 trillion conventional finance, Islamic finance is still considered very small.
38 million Muslims touched by Islamic Finance according to Ernst & Young study and about 90 per cent of the Islamic Finance (IF) assets globally sit in six countries, namely Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates.
It was argued during the session that OIC members are not using Islamic Finance extensively. Part of the reason is because laws and regulations of the particular countries are not matured and developed. To their governments, Islamic Finance requires changes in laws, introduction of new things, and that is the main hindrance.
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……………………….. Financial Consultant, Helmi Hakim’s Perspective:
I agree that there is an enormous opportunity to grow Islamic Finance further.
The very fact that only 38 million Muslims are touched by Islamic Finance, less than 1% of the global Muslim population, only means that there is a lot of work that needs to be done to educate and empower Muslims itself to undertake Islamic Finance products.
There is a huge opportunity for dakwah and it also means that there is a huge business potential and a relatively untapped market.
There are largely poor countries amongst the OIC countries, and I believe Islamic Finance noble principles and initiatives should be used to uplift the financial standard of the countries through economic and entrepreneurial activities/developments that will benefit the residents at large.
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2) Islamic Finance Positioning
The experts brought 2 salient points in terms of Islamic Finance positioning.
Firstly, the experts discussed that the brand, “Islam” itself has been a hindrance towards the globalisation of the Islamic finance industry.
A number of Non Muslim countries react rather adversely to that term. Even in China – where people are not averse to Islam but to religion in general – the pitch for Islam becomes difficult. We tend to use the term “Islamic Finance” globally even in places where people are not comfortable with it.
The second salient point is the usage of Arabic terms to all the contracts. In Malaysia, the population do not speak Arabic. However, when we talk about contracts, all the terms are in Arabic. The panel argued that the idea is not feasible in places where the locals cannot even pronounce the terms. In some countries, they don’t have the Arabic alphabet kh-aa and H-aa.
The panel suggested that we should call the terms, as it is. It is participatory by nature. Call it participation banking. Or call it risk sharing.
In addition to that, we should educate everyone that that Islamic Finance is good for all of mankind.
The experts proposed what the industry ought to do is to pitch Islamic Finance as it is and suggested that if syariah compliant instruments went by a religious-neutral name and with less Arabic terms, it would open more interest beyond the Muslim market.
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………………………. Financial Consultant, Helmi Hakim’s Perspective:
To a certain extent, I agree that we have to be flexible when marketing shariah compliant principles, financial products in the market. To me, the main thing is that the financial products need to be free from riba, maysir and gharar.
When I market shariah compliant financial products to Muslims in Singapore, I educate them how it works with all the Arabic jargons and substantiate them further with Quran and Hadith.
However, when I promote to non-Muslim clients, I use universal noble principles like transparency, putting people before profits, concept of profits and risk sharing etc2, which are consistent with the principles of Islamic Finance.
I educate that Muslims cannot take usury/interest because God told us in the Quran. We believe Quran is God’s words.
For those who never heard about Islamic Finance at all, I skip through all the jargons, and cater my presentation specifically for them using simple examples. The keyword here is know your target market, speak their language and “Be Flexible”! 🙂
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3) What Islamic Finance Advocates and The Status Quo Now
Islamic Finance has been known as profit and risk sharing.
Nevertheless, the current status quo, in the Islamic Finance world, 90% of the Islamic Finance transactions are of Murabahah or Ijarah, which is predominantly known as Debt Financing.
Only 10% of the Islamic Finance transactions are Musyarakah or Mudarabah (Equity Financing)
The panel discussed that, since Islamic Finance is all about profit and risk sharing, the industry itself should move more towards Musyarakah and Mudarabah.
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Why are all the financial institutions still advocating Murabahah or Ijarah?
We have to understand that Islamic Finance Institution are subject to the same liquidity capital requirement as conventional counterpart, similar to Basel requirements.
In transactions like Musyarakah, the capital charge is 400% on the Bank’s risk-weighted assets.
Whereas, in Murabahah, the capital charge is only 8% on the Bank’s risk-weighted assets.
Bank Regulatory capital charge is simply the amount of capital that the Banks are required to hold against their assets.
It is understandable that equity financing has more risk, and because its more risky, the capital charges, the capital cost are thus higher than debt financing. It is understandably too expensive to run a Musyarakah, thus most financial institutions will prefer a Murabahah or a Tawarruq.
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………………………. Financial Consultant, Helmi Hakim’s Perspective:
I understand. Musyarakah and Mudarabah are more reflective of the essence of Islamic Finance. It is more reflective of the nature of risk and profit sharing advocated in Islamic Finance.
Thus, I come out with a 2 throng strategies on how this can be done, over the long term.
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Firstly, the Islamic Finance industry that operates itself in markets with predominantly, high percentage of Muslim population should start to focus in developing and promoting shariah compliant instruments that are of Musyarakah and Mudarabah in nature aggressively.
Those countries with lower percentage of Muslim population, can start of with Murabahah, Ijarah or Tawarruq.
Its because, we would not want a situation where you try to promote more of Musyarakah and Mudarabah in countries with lower percentage of Muslim population, they see that it is not feasible, the whole idea of introducing Islamic finance instruments will not even proceed.
Like a Malay proverb says, “yang dikejar tak dapat, yang dikendong keciciran“, which means what you’re running after, you do not get and you lose what you have.
Countries with high percentage of Muslim population, should lead the way. 🙂
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The second strategy, to bring more of Musyarakah and Mudarabah is to educate the local population of the benefits of equity financing and at the same time growing their money through investment in equities or participating in commerce activities.
Encourage entrepreneurship, the concept of profit and risk sharing, the concept of doing research before investing your money, the concept of SWOT (Strengths, Weakness, Opportunities, Threats) analysis.
The very concept, we invest our money, when we make profits, we share it 70%:30%, or maybe 60%:40%, instead of regardless, we make profit or loss, I will get a pre-determined rate of return (profit rate) of 10%.
It is because, we do not want Islamic Finance to be seen, just as a replicate of conventional finance with a shariah compliant label on it.
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I hope you learnt from my sharing above and do appreciate if you could share this blog post with your family and friends. Jazakallah Khayran… 🙂
Today’s topic which I will like to share with you is “How To Save Money During The Month Of Ramadan?”
You see, Ramadan taught us Muslims GOOD VALUES like….
1) Peace (Brings you closer to God, thorugh your night prayers, taraweh)
2) Patience (control your hunger from dusk till dawn, break-fast)
3) Empathy (think of how the poor survive without food)
4) Moderation
5) Charity
Yet, we see a lot people in the month or Ramadan splurge instead of saves. Why? Because it is easier to splurge than save. The desire to spend is there.
…and the desire to spend INTENSIFIES when…
…you take a look at the wide choices of buffet advertisement in the papers, with a hungry stomach
….you take a look at the HARI RAYA PROMOTIONS that is going on, especially with no money downpayment needed
…you went to the bazaar and entice with so much, delicious, sweet, colorful, tantalising kuehs, and end up buying more than needed.
I will like to introduce you a simple, yet powerful concept that you can use to avoid OVERSPENDING in this fasting month. The concept is….. 3Rs…
REDUCE,REUSE,RECYCLE
REDUCE wastage
When buying food to break your fast, see for yourself, whether you can finish eating, what you buy.
You do not want to end up throwing away excess food. It is against the spirit of Ramadan.
REUSE and RECYCLE
When you shop for hari raya, differentiate between needs and wants.
Do you need to spend few more thousands for the curtains decorating the windows of you house, or is it okay to REUSE and RECYCLE, the one that you still have?
Do you need to buy with ZERO downpayment needed that very comfortable sofa, to fit in your main hall, or is it okay to just hold on to what you currently have?
I just came back from my holiday trip to Europe a week back, and I received a lot of emails, whatsapp messages, asking me specifically on retirement planning in Singapore. I am still following up, one by one. 🙂
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Since the Rebecca Lim’s fiasco, many of you have asked me on how to calculate how much you need to save today, so that you have enough money to retire comfortably in Singapore, and the best part, how to do it in the shariah compliant way. 🙂
(My mum and dad approaching their retirement years, relaxing at Table Mountain, in South Africa)
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I always share with my clients that how much you need to save today, is dependent on the type of retirement lifestyle that you want to lead when you choose to retire.
You choose whether you want to lead a sedentary lifestyle or a lavish one when you retire, or simply maintain your existing lifestyle.
Many of you, if you have been spending, example, $3000/mth today, you would not want to drastically reduce your spending power to $1000/mth when you retire right? Simply because you are not working and there is no cashflow coming in as before. 🙂
You will want to MAINTAIN your lifestyle.
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Today, I am going to share with you a very simple yet powerful retirement planning concept.
Let say you are 30 years old now. You would like to retire at the age of 60. Mortality age for average Singaporeans is about 90 years old. (Of course, there are people who lives much longer, but we take the age of 90 for this example.)
The period from 30 to 60 years of age is what we call the Accumulation Period.
Whereas from 60 years old to 90, is what we call the Retirement Period.
My question to you is this: When you retire, how much do you want to spend every single month?
If you ignore inflation, and you ignore investment return on your savings, how much exactly do you want to spend every single month?
$3000/mth? $5000/mth? $10,000/mth?
Write Your Answer On A Piece Of Paper: I want to spend $________ every single month when I retire.
Now take a look. Your ACCUMULATION PERIOD is 30 years and your RETIREMENT PERIOD is also 30 years.
Ignoring inflation and investment return, if you want to spend example, $3000/mth, when you retire, you have to also save $3000/mth today, for you to retire.
Right? 🙂
How much you need to save today, is dependent on the type of retirement lifestyle that you want to lead when you choose to retire.
You choose whether you want to lead a sedentary lifestyle or a lavish one when you retire, or simply maintain your existing lifestyle.
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When I share this concept with my clients, most are astounded. It is a very simple, but profound concept that you can use to calculate, how much you need to save now, every month to have the DESIRED retirement lifestyle you can have in the future.
Of course. After you know roughly, how much to save, the next question is how to grow that money, the shariah compliant way in Singapore.
Many of my clients understand that I build a long term advisor-client relationship with them to help them grow their investable assets (go download and read my book, if you don’t know what is investable assets) and at the same time grow their networth the shariah compliant way in Singapore.
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In Singapore, there are a few ways to grow your investable assets, the shariah compliant way.
Firstly, buy shariah compliant stocks, direct from the market. (recommended only if you have the financial knowledge)
For me, this is a good long term strategy to include shariah compliant stocks in your portfolio to grow your money for your retirement.
Have a watchlist of shariah compliant stocks, and start doing your homework.
Download the companies’ annual report. Know how the company makes money. Calculate their profitability, gearing and investment ratios. Analyse deeply the trends, if the gross profit margin, the net profit has increased consistently for the past 10 years.
If the sales has increased, gross profit has increased, net profit has increased over the years, go through the company’s cashflow statement, to check that the company do not just have credit sales (close sales but customers owe them money in credit) , but can also are able collect money (cold, hard cash) from their sales.
There are many fundamental analysis that you should do when analysing and choosing shariah compliant stocks. The above is just 1 example. Learn about them first, before investing your money direct to the stock market. This is important because you would not want yourself to involve with maysir (speculation), when your niat (intention) is already to grow your money the shariah compliant way.
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……………. Secondly, buy commodities like physical gold bar.
I see this more of a wealth preservation strategy. In your effort to accumulate your wealth, it is good to diversify and commodities like gold.
However, make sure that you buy gold bar, you can sell immediately to the seller if you urgently need money.
By the way, I wrote a 4000 words report on investing in gold. If you are my existing clients, and you are interested to learn more, you can request it from me (and get advice when you meet me for financial review). 🙂
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Third strategy, which is my favourite strategy is investing your money in shariah compliant funds. This is my favourite strategy because I can do it passively.
I will skip my explanation on what is the difference between shariah compliant fund and conventional ones. What is riba, maysir, gharar. Imam Nawawi Riba rulings etc2…. (If you are interested to learn more, just fix an appointment with me, and I will share more)
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In this blog post, I will share why investing in equity funds are different that investing in stocks. I will speak in the perspective of making money ONLY. Usually, when my clients plan for their retirement, they will have a long investment time horizon. Perhaps 15-25 years.
The thing about investing in stocks, specifically penny stocks (small caps stocks), the stock price can go up and can go down, and can even go bust.
A professional manage shariah compliant fund works differently. The fund price can go up and it can go down, however, long term wise, it will always go up. Why?
Firstly, inflation. Example, you love drinking coffee. You drink it everyday.
(An “atas” coffee, I made for myself… )
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How much did you pay for your coffee? $1?
Another 10 more years, will your coffee still cost you $1?
Definitely NO, because the price will have increase because of inflation. Similarly, because the price of the coffee increase, when you check the trading, profit and loss statement of the coffee company, the sales will increase, the gross profit will increase, the net profit will increase, everything in the financial statement will increase, thus the stock price and in effect the fund price will also collectively increase.
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2nd reason, human population growth. Now, maybe in Asia Pacific, I assume, 10 million people drink coffee everyday. Another 10 years, will the figure remain the same?
Definitely NO.
Due to human population growth, more people will drink coffee. Similarly, because more people drink coffee, when you check the trading, profit and loss statement of the coffee company, the sales will increase, the gross profit will increase, the net profit will increase, everything in the financial statement will increase, thus the stock price and in effect the fund price will also collectively increase.
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3rd reason, you have professionals to manage your fund. There is a set of rules (qualitative and quantitative) for fund managers have to follow when selecting stocks specifically when it comes to shariah compliant fund.
One of the examples, if that the gearing ratio cannot be above 30%. Thus diligence is exercised when the fund managers select shariah compliant stocks in the shariah compliant equity fund.
If the stocks does not meet the criterias, and at the same time, are not performing well, it will be removed by the fund manager and replace by a better performing one. That is why shariah compliant fund price, specifically, can go up and down. However, long term wise, it will always go up.
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4thly, specifically for my clients, you have me to rely on, giving you advice when to do a top up, when the fund price is selling cheap. Example, you buy apples today. Price of an apple cost you $1. One day, it drops to $0.99.
$0.95.
And $0.90. What will you do? Just ignore it. You dollar cost average.
However, when the apple price goes down to $0.70, $0.60, financial advisors like me, will ask you to buy more apples, so that when the price goes up back to $0.90, $0.99 or even $1.10, you make more money. You enhance your portfolio returns by so much more. 🙂
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Alright….. I hope you benefit from my sharing. This is a recording of a video (which I recorded 6 years ago) , of a simple way on how to gauge how much money you need to save so that you can retire comfortably in the future.. A simple yet powerful strategy on retirement planning. Watch it now!
P.S. : If you find my sharing beneficial, do share this blog post with your love ones. Insya’Allah… 🙂
P.P.S. By the way, if you wish to discover a simple & halal way to create a positive monthly cashflow and calculate your net worth for FREE, then please click here…
You have attended my signature program, the “Unlock Your Money” session, where I share practical strategies on managing your cashflow, allowing you to have more money in your pocket every month.
Right now, I would love your help. I am developing an educational platform to share more on Islamic Finance in Singapore, in a form of video format. I need your feedback and suggestions. View the video below to hear me out on my plans that will benefit anyone who is interested to know more about Islamic Finance.
After that, I appreciate it if you can drop a comment below on the topics you would like to personally benefit from my sharing sessions in the future. Insya’Allah…. 🙂
My wife and I went to a baking class last week, to learn how to bake macarons.
Some of my colleagues, were telling me,
“Aiyah… Why go for class? Just go to youtube and see how to make it!”
On that very day, when my instructor demonstrated to us in class, the procedures, step by step, I was telling myself… “Not bad… Mix here. Mix there, and its done! It looks pretty easy! :)”
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However, when it comes to our turn to do it on our own, I began to face difficulties. I started beating the egg white using the handheld mixer, while gradually adding the sugar, bit by bit .
I didn’t know when to stop beating the egg whites. When to add the colouring? When to add the almond mixture? Fortunately, the trainers were there to guide and show me how to test the texture of our batter, step by step, before adding the rest of the ingredients, one by one.
Even to stir the batter using a spatula has a technique to it! 🙂
From a stressful situation, it became a joyful experience for a novice baker like me, who has never operated a mixer before in my life. The experts were there to guide me and my wife. 🙂
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and finally the final product! 😛
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While learning to bake macarons, I listened to the experiences of my classmates on how they tried to learn to bake macarons on their own and failed.
The trainers shared useful tips with us. Example, the egg whites have to be refrigerated for 3 days, the particular type of food colourings to use and many other tips that I won’t be able to discover unless I learn it from a professional baker.
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When I returned home and consolidated my thoughts, I can relate this to my profession as a financial planner. Many times, our prospects out there thought they can manage their money and their portfolio on their own. They think they don’t need help.
When they face financial problems, they try to troubleshoot on their own. When they want to buy insurance, they try to do it on their own, without seeking advice from us, the financial professionals.
At last, what happens? Many were faced with helpless situations when in need. They don’t understand what they bought. Things that insurance doesn’t allow them to claim, they try to claim. Things that insurance allows them to claim, they don’t claim.
Worse – some lost their money in get-rich-quick schemes that promise them attractive returns in a very short period of time.
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After advising thousands of Singaporeans out there on personal finance since year 2007, I genuinely feel that everyone should seek professional help when it comes to managing their own money.
Qualified financial advisors like us, harness our skillset to troubleshoot, save and bail individuals from disastrous financial situations. I personally have created proven systems on how anyone can instantly have more money inside their pockets every month, how you can accumulate money fast and how you can grow your money in a shariah compliant way in Singapore..
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My friends… If you want to make superb macarons, you look for a professional baker. If you want to learn how to speak Arabic, you look for an Arabic Language teacher. If you want to learn more about Islamic Finance, you look for a financial planner who is trained in Islamic Finance.
Isn’t that simple to understand? 🙂
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And oh yes, talking about macarons – next week, I will be heading to Paris with some of my colleagues for our incentive trip award. I will sample the authentic French macarons there and test them out! Yes. Time to sample authentic macarons made by professionals!
Enjoy your day! 🙂
A certified financial consultant, Helmi Hakim has won praise for his patience, perseverance and practicality when solving his clients’ financial concerns. For more information on how you can manage your finances better, contact Helmi Hakim at 96520134.
