by Helmi Hakim | Oct 24, 2015 | Insurance, Investment, Miscellaneous, Motivation
Note: The story that I’m about to share is a fiction, and not a reflection of reality in Singapore.
The story goes….
On a bright, Sunday morning at a housing estate in Yew Tee, Misnah was beaming ear to ear, excited because she is going to finally get married to the love of her life, Ahmad the following week.
She and Ahmad had diligently save money in their Al-Wadiah savings account, giving Hibah of 0.8%/annum and the money accumulated is just nice to pay for their combined wedding at a halal restaurant.
They have also bought their lovely freehold condominium with a special themed concept and successfully attain Murabahah financing.
Ahmad since the first day, he started working, had diligently, invested his money in a shariah compliant equity fund, and now making a superb profit. He is smart, because during the subprime mortgage crisis in year 2008, he did a lot of top up, thus enhancing his portfolio return by so much more. That money is just nice, for their honeymoon trip to Morocco and also to finance the renovation cost of their new house. Ahmad is smart because gain of profit through capital appreciation is not taxable in Singapore. Alhamdulillah, all the profits belong to him.
Their wedding ensued with love and a year later, they were blessed with a beautiful daughter, named Siti.
Little did Ahmad know, his wife had also been investing in shariah compliant REITs, earning quarterly dividends, enough to pay for pampers and milk.
Ahmad gets his family covered under Islamic Insurance Takaful, because he loves his family.
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They also heard that the government is building an expressway called PUE (Pulau Ubin Expressway) and just issued Sukuk based on the ijarah model.
The Sukuk or Islamic bond is shariah compliant because the returns is not from interest coupons but from the toll reapt from the specially designed ERP gantries. Once the cost of building the expressway is recovered, the Sukuk will be redeemed at par.
Meanwhile, Ahmad quit his job as an engineer to fulfil his childhood passion to run his own business. He and his friend form a musharakah partnership, with 60:40 share. To set up the factory, his partner and himself, do it via the Istisna contract with XYZ financial institution and purchase the special raw materials from a local distributor under Salaam contract.
Time flies, their only daughter, Siti has grown up and want to go to a university in UK. She gets service based ijarah financing method to pay for her tertiary education. Her parents did some savings based on non restricted mudarabah, since she was young, and the money is just enough to pay for her food and accommodation while she is studying in UK.
Upon graduation, she found her soulmate, got married and the cycle continues……
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Now, back to reality.
Many of you might have read about DBS winding down its Islamic banking unit, The Islamic Bank of Asia Limited (IB Asia).
When I chat with my friends, they told me, that this is not surprising. HSBC insurance removed its Takaful products a few years back. NTUC Income closed its sukuk fund, NTUC Income Amanah bond too. It is some kind of a downward trend. 🙁
So the pertinent question is, “Is there really potential for Islamic Finance to grow in Singapore?”
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In my opinion, Singapore is the best country in the world to establish and grow Islamic finance.
We have a strong, well respected government, and a reputable brand name of a reliable financial hub with proven track records. Our economy is sound. We are rated the top investment grade of AAA by Standard & Poor. Our finance industry in Singapore is well regulated, with competent and highly qualified financial professionals. We are honest, sincere and if contracts or partnerships were formed, we stick and hold by to it.
Islamic finance thrives in such environment. 🙂
Although some may argue that, Singapore lack the critical mass of domestic consumers for Islamic Finance products, I believe that Singapore’s Muslim population of 700,000 is quite a sizeable niche market to start on and expand from there. In fact, I believe that Singapore’s Muslim population of 700,000 is a good core to start on.
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So with all the advantages that Singapore has to offer, how can we catapult ourselves to success? What is our story that we can share with the rest of the world, when it comes to Islamic Finance? 🙂
Stay tune on my blog, to discover more. Insya’Allah… 🙂
by Helmi Hakim | Mar 8, 2015 | Insurance, Investment, Miscellaneous
Latest, hot and spicy news!!! 1st Singapore Idol winner, Taufik Batisah is getting married!!! 🙂
I was humming, Singapore Idol’s Taufik Batisah, latest song, “Awak kat mana”
which means “Where are you?” in Malay….
The song is so catchy and the dance moves are so slick, cool and contemporary…. Nevertheless, sometimes, it can be annoying, when people keep repeating, “Awak kat mana? Awak kat mana? Awak kat mana?” :p
And as a financial consultant, everytime I hear this song, it reminds me to ask myself,
“Where Am I FINANCIALLY?” 🙂
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I used a few financial indicators and ratios to determine my financial bearings.
After doing my cashflow statement and my networth statement, I used these financial ratios to determine, if I am financially okay or not. I encourage you to use it too.
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1) Basic Liquidity Ratio
Basic Liquidity Ratio indicates your ability to meet your monthly expenses and other emergency needs.
Basic Liquidity Ratio= Cash/monthly expenses
Like a Malay proverb which says, “Sediakan payung sebelum hujan”, which literally means ‘Prepare your umbrella before it rains”.
In my own words, you need to prepare some liquid cash in your bank, that you can take out anytime you need, without any hassle.
As a rule of thumb, if you are an employee, I encourage you to have at least 6 months of your monthly expenses in your bank, ready for use during emergency.
If you are self employed, where your income can fluctuate up and down, have at least 12 months of your monthly expenses in your bank.
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2) Liquid Assets to Net Worth Ratio
Liquid Assets To Net Worth Ratio calculates the amount of net worth you have in terms of cash.
This is important because in an emergency situation, it may not be easy to convert your assets into cash, without any hassle.
You wont caught up in a situation, as my mum always say, “nak terberak, baru nak siapkan jamban” which literally means “wanna shit, then you want to dig a hole.”
Therefore, it is necessary to maintain some assets in cash.
Liquid Assets to Net Worth = Cash / Net Worth
I recommend you to have at least 15% cash in proportion to your networth.
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3) Debt Service Ratio
(measure the proportion of ‘take home’ income, net of CPF contributions, used to make regular repayments of debt)
Debt Service Ratio = Total monthly debt repayments / Monthly take home income
I recommend you to have a debt service ratio of 35% and below. It means you have enough take home pay to service your monthly debt repayment.
Anything above than that is unhealthy and will put a financial strain in your life.
You will not want to live life, waking up every morning, only to work and slog hard like a slave just to earn enough to pay your debt. Have some financial buffer and live life comfortably! 🙂
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4) Savings Ratio
(calculates the proportion of income the one sets aside as savings for the future)
Savings Ratio = Savings / Gross Income
Personally for me, if you are still single, don’t have much financial commitments, I highly recommend you to save as much money as possible. The higher your savings ratio, the better it is!!! 🙂
If you are married, have kids, and aged parents to support, target to save at least 20% of your gross income.
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5) Change In Income Ratio
((This Year Income – Last Year Income)/ Last Year Income) X 100
As you know, I am self employed and I make money by earning commissions when I provide my clients with financial planning advice. I have an excel spreadsheet where I monitor my commissions earned every month, cumulatively every year.
I expect my change in income ratio to increase steadily by at least 20%/year. This is imperatively important to me and also my clients, because they know, that my financial planning practice does well, and I can stay in the business for long, to service them, as long as they live! Alhamdulillah, my production improved by 32% last year and for the first time in my career, I become the top 85 financial consultants in my insurance cooperative in the whole of Singapore. 🙂
If you are self employed or running your own business, I encourage you to calculate your own Change In Income Ratio too! 🙂
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and by the way, if you are still wondering, what’s the Taufik Batisah’s song that I have been talking about earlier, tune in below! Enjoy! 🙂
by Helmi Hakim | Feb 20, 2015 | Investment
If you have been reading my blog post, you will have known that I am a financial consultant who specialises in Islamic Finance in Singapore, and have been actively recruiting financial consultants, to assist me in the promotion of cooperative insurance and shariah compliant fund in Singapore.
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Alhamdulillah…. A lot of you, have contacted me. I have 5 mentees taking exams now, to join me as a financial consultant and many more visitors from my blog who express their interest to support Islamic Finance in Singapore by subscribing our shariah compliant financial instrument.
I will love to interact with more of you out there, readers of my blog, thus I will like to throw a short quiz. This quiz will test you on your understanding of fundamentals of Islamic Finance in the most practical sense. You can email me your answers at helmihakim@hotmail.com and I will revert you with your results.
(Don’t worry if you are unsure of the answers. Just give it a try!) Insya’Allah… 🙂
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1) Ahmad changes $SGD 100 to RM$250 on the spot with a money changer at Raffles Place shopping centre. Is the transaction
Halal or Haram?
2) Salim buys 5 gram of gold online at $150, paying immediately via bank transfer and collect it from the seller, 1 week later. Is the transaction
Halal or Haram?
3) Ramli went to his friend, Muthusamy Mamashop to buy 2kg of dates for break fast in the month of Ramadan. He promises to pay $20 on the 1st day of Shawal. Is the transaction
Halal or Haram?
4) Yusof went to the car dealer at Commonwealth and test drive some second hand cars. He got interested with Honda Civic Hybrid and immediately paid $20,000 cash. Nevertheless, he collects the car 7 days later, after settling season parking application with HDB.
Is the transaction
Halal or Haram?
5) Idris owns a Samsung handphone. His brother owns an Iphone 5. They decided to exchange phone as Idris is an Apple fan whereas his brother is a Samsung fan. Is the transaction
Halal or Haram?
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Email me your answers at helmihakim@hotmail.com or whatsapp me your answers to 96520134 (if you are lazy…hahahah)and I will revert you with your results! Look forward to hear from you soon! 🙂
by Helmi Hakim | Jul 7, 2013 | Insurance, Investment, Miscellaneous
Few weeks back, my colleagues and I were invited to the World Islamic Banking Conference, at Pan Pacific, Singapore.
It was an eye opening event for us, as most Islamic finance practitioners, from all over the world conglomerate to discuss, debate and share ideas, on how to further promote the beautiful essence of Islamic Finance to the whole world.
We, financial consultants, from the only insurance cooperative in Singapore, have our fair share of experiences in promoting shariah compliant funds in Singapore, and to meet and listen in to the worthy speakers, from countries like Malaysia, Kuwait, Bahrain, Dubai, is a breath taking experience indeed.
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If you have read my previous blog post, you will have realised that every single financial catastrophe that had happened, or is currently ongoing, are due to 3 prohibitive elements. Riba (Interest), Gharar (Uncertainty) and Maysir (Gambling).
Allah S.W.T has told us in the Quran, 1400 years ago, through its messenger, Prophet Muhammad (may peace and blessings be upon him), to avoid these elements, in our daily financial activities.
Today, everytime, there is a financial catastrophe, the world looks for a solution. The solution is indeed, Islamic Finance! 🙂
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I have written a detailed report on the subprime mortgage crisis and you can read the synopsis here. https://helmihakim.com/investment/my-research-on-the-subprime-mortgage-crisis-2008-and-how-it-relates-to-islamic-finance/
In the report, you will understand that the subprime mortgage crisis enveloped due to the 3 elements, as I mentioned above.
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Islamic scholars thus developed financial products, that embodies the principles of Islamic finance. No riba, No Maysir, No Gharar… Difference between Islamic finance instruments as compared to its non shariah equivalents is that, Islamic finance advocates profit and loss sharing, prohibits speculative activities, disallows interest bearing loan facilities and its instruments must be assets based.
The substantive discussion, that stands out during the conference was that, if that is the case, why is it difficult to streamline efforts by Muslim countries, across different jurisdictions, to implement such products, that can be consistently, accepted and used across the world population in the first place?
Why, though the idealogy of Islamic Finance, is growing at a rapid rate, it is still comparatively minute, small, as compared to conventional finance counterpart?
Discussions between the established panels shed some lights on the issue. The answer to it is because of the Impossibility To Have Only One Standardised Shariah Ruling.
I have detailed the crisp of the discussion and 2 main reasons why it is impossible to have one standardised shariah ruling in the world, and how we can come with a solution to it.
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Reason 1: 4 Schools Of Thoughts
As most, will have known, there are 4 Islamic school of thoughts, namely, Shafii, Maliki, Hanafi and Hanbali. Different interpretation of the 4 schools of jurisprudence results in a lack of uniformity in specific forms of Islamic principles applied in Muslim countries.
Similar banking procedures and financial instruments may be accepted in one Muslim country and be rejected in another one.
Malaysia, for instance, is considered to be more liberal in its view of shariah compliance, while Saudi Arabia has much stricter rules on what is allowed and what is prohibited.
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Solution No 1: Mutual Respect amongst industry practitioners and promote multi jurisprudence in an Islamic Shariah Board
In the conference, the speakers agreed that 95% of fatwas (religious advice by Islamic scholars) are on the same page. The only difference in opinion is on a meagre 5%. The 5% difference in opinion is not true or false, nor true or bad. It is based on a premise of good or better.
In Islam, differences of opinion is actually acceptable.
There is this authenticated hadith reported by al-Bukhari and Muslim.
During the battle of the Confederates, Prophet Muhammad S.A.W mentioned to his companions to go to this clan, Banu Qurayza’s place, which were a few miles from Al-Madinah and said “No one among you should pray Asar except at Banu Qurayza.”.
When they went, it came to the Asar prayer. One group says, they will stop and pray, and then continue journey. The other group says, no, they will proceed, and pray when they reach Banu Qurayza.
When they reached Banu Qurayza’s place, they asked the prophet, and the prophet did not disagree, did not reject both. He accepted both. (Source:Sahih Bukhari 5:59:445, See Also: Sahih Muslim 19:4374)
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From this hadith, we can see that during prophet’s time, there is such thing as differences in opinion. One group take the explicit, literal meaning, while the other group looks at what is the meaning behind the ruling. The underlying meaning, that the latter group interpreted is that Prophet wanted them to go, and reach Banu Qurayza as soon as possible.
Hence, applying in today’s context, when we talk about shariah, and when there are differences in opinion, we should see the beauty of interpretations, and not bicker over it.
The speakers in the conference agreed that, encouraging mutual respect and ethics of disagreement between scholars and industry practitioners is important, and promoting multi jurisprudence in an Islamic Shariah Board, can be a positive development indeed, in the near future.
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Reason 2: Contextual Difference Due To Time And Place
It cannot be ignored and denied that the shariah ruling may change due to time and place.
“al-hukmu yaduuru ma’a ‘illatihi wujudan wa ‘adaman”.
The hukum or the ruling move from time to time due to several factors.
One of the speakers in the conference narrated his experience sitting in shariah’s council in a bank in Sri Lanka, minority Muslim country and Bank Islam Malaysia, in Muslim majority country. In some issues presented to the shariah council, he has to agree that factors in Sri Lanka has to be taken into consideration in deciding the shariah ruling.
Situations in Malaysia and situation in Sri Lanka is different. Hence, it is difficult, to come out with a similar, identical set of shariah rulings in Malaysia and in Sri Lanka.
When I meet some of my clients in Singapore, they told me that they read from the internet about a lot of different opinions from Islamic scholars, all over the internet. They then get confused to what is permissible and what is not. One Islamic scholar says, you can do this, and the other says, that you can’t. So who should we follow?
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Solution No 2: Understand contextual difference due to time and place
Alhamdulillah, in Singapore, MUIS (Majlis Ugama Islam Singapura) has been proactive in issuing fatwas on finance and estate matters like, cooperative insurance, revocable insurance nomination, CPF nomination and joint tenancy. The fatwas have been helpful to us, financial consultants in Singapore, in our efforts to educate the Muslim population of 600,000 in Singapore, and to our Non Muslim friends.
The religious experts interpretation of the Quran and Hadith, in pertinence to Singapore’s context.
This in fact, has been practice by various shariah scholars.
Imam Shafie, for example, he has 2 different opinions. Al Qawl Qadim and Al Qawl Jadid
His old views of Imam Shafie when he is in Baghdad, and new views of Imam Shafie when he moved to Cairo, Egypt.
That shows the varying concept of shariah and now in modern Islamic Banking and Finance world. Pertinent issues affect the rulings by the shariah scholars….
In the conference, the speakers shared another anology to substantiate understanding contextual difference due to time and place.
For example, as a Muslim, we have to pray 5 times a day.
The dawn prayer (Subuh/Fajar), the midday prayer (Dhuhr) , the mid afternoon prayer (Asr), the sunset prayer (Maghrib), and the night prayer (Isya’).
In the Quran, it does not tell us to pray the Fajar prayer at 5.30am everyday. It can’t, because in Kuala Lumpur, in January, the fajar prayer will be at 5.30am, when it comes towards August, it could be 6am, the time change.
The Quran will tell, in order for us to determine, when we can start your fajar prayer, when it ends, this is the formula.
That is why we can see that we can pray the fajar prayer, anywhere in the world. In UK, it could be 3am in the morning. Certain time of the year, it could be 3am, 4am.
Similarly in Kuala Lumpur or Singapore for itself, the time could change. But the formula is given. In order for us to perform the fajar prayers, this is the starting point and this is the ending point, and throughout the year, we are able to pray, using that formula. It does not say specifically that we must pray at 5am or at 6am. No. If we do that, then it becomes quite difficult.
The point of contention, for that anology is to enlighten us further that Allah S.W.T has given us the formula for everything. It is up to the shariah scholars to exercise their ijtihad. The shariah experts to exercise the ijtihad. Their knowledge to come out with the opinion about certain situation at a certain point of time, at a certain place.
We as commoners, just follow, the fatwas, irshads and religious interpretations of our local Mufti and asatizahs in Singapore.. Alhamdulillah…. There are many more learning points that I garnered during the conference, and I will share bits and pieces, in time to come…. Insya’Allah… 🙂
by Helmi Hakim | May 2, 2013 | Investment, Miscellaneous
When I meet, my non Muslim clients who are learning more about Islamic finance, sometimes they are curious, and they asked me, why Muslims cannot take interest. (riba)
Why, Muslims, cannot include speculative investments, like derivatives etc2, in their investment portfolio? (maysir)
I will normally answer, that God doesn’t allow us and stop at that. Today, I decide to blog about it. 🙂
Prohibition of interest and speculative activities are clearly mentioned in the Quran.
Allah S.W.T said in the glorious Quran, Surah Al Baqarah, Verse 275
“Allah has permitted trade and has forbidden interest”
Charging and earning interest is haram (forbidden) in Islam. Islamic finance advocates profit and risk sharing. If Islamic institutions lend out money, it becomes partners with the borrower in the venture. Profits and loss will be shared according to agreement.
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Islamic finance also prohibits gambling and speculative activities
As stated in Surah Al-Maeda, Verse 90:
“O ye who believe! Intoxicants and gambling, (dedication of) stones, and (divination by) arrows, are an abomination,- of Satan’s handwork: eschew such (abomination), that ye may prosper.”
On the other hand, conventional banking and finance operation, accepts speculative financial instruments like derivatives.
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When I research about every single financial crisis that has happened in this world, and I went deep to the root of it, I realised that it is always because of interest (riba) and speculation.
Subprime mortgage crisis, Euro Debt Crisis, Asian Financial Crisis, Baring’s Bank case, you name it, most of the financial crisis that have happened in the world were due to interest and speculation.
I have written a 24 page report on the subprime mortgage crisis that happened in the year 2008, and how it lead to the global financial crisis in the year 2009. You can scroll at the end of this blog post, input your email and download it immediately. Its FREE.
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Speaking of subprime mortgage crisis, if we go to the root cause of it, it happened because of speculation and because people cannot afford to pay burgeoning interest from the loans they take. The subprime mortgage crisis happened because of the availability of subprime mortgage.
Subprime loan is a type of mortgage loan, being offered to those who are not qualified to get loans from mainstream lenders. These people are usually low income earners, first time borrowers or people who has a poor credit history.
Under normal circumstances, when people borrowed money from the bank, they were subjected to few criterias before their loan is approved.
They need to have strong credit scores and repayment histories, provide documentation for income and assets, and provide a down payment of 20% or alternatively purchase private mortgage insurance. If these criteria are fulfilled, their loan application is approved.
These groups of people are known as prime borrowers.
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However, competition amongst banks ensued, coupled with the view of treatment of loans as “assets” in the bank perspective, has lend to the lenience, of now, accepting loans for people who are previously not qualified.
Due to competition amongst banks, they now allow people who are previously not qualified to borrow. They are people whose FICO scores are under 660, defaulted on credit payment in the past 2 years or currently, owe more than half of their annual income in debt.
These people are called subprime borrowers. Their loan mortgages are known as adjustable rate mortgages.
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Adjustable rate mortgages have an initial interest rate. During the real estate bubble, many lenders offered mortgage loans with a very low initial interest rate designed to lure borrowers to loan products.
These very low interest rates, referred to as teaser rates, ended up getting a lot of borrowers into trouble. When the initial interest rate period ended, the interest rate and loan payment increased, sometimes drastically. This phenomenon has come to be referred as rate shock.
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For example, the monthly payment for a $300,000 mortgage loan amortised over thirty years with an initial interest rate of 5% is $1,610.46.
If, after the initial interest period, the interest rate jumps to 10%, the monthly mortgage payment jumps to $2,632.71.
Thus, lots of borrowers cannot service their monthly mortgage payments, and then default on their payments. With the interest rates rise and housing prices fall, the borrowers do not have enough equity to refinance or sell.
So you can see here that the root cause of it is the adjustable rate mortgage where initially the interest rate is low, but subsequently, it skyrocket.
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I will also touch on the speculative nature of human beings, thinking that property prices will always go up, till the property bubble happens. There are simply too many things to be discussed, and I have discussed it extensively in the report below. Key in your name and email below, and you can download it right away.
