Shariah RFP M1 cheat sheet

Shariah Financial Planning - Module 7 Capstone Reference

• Shariah financial planning is a goals-based process constrained by maqasid al-Shariah (preservation of din, nafs, aql, nasl, mal); every recommendation must be tested against these five before it is presented to the client.

• Core planning cycle: establish client facts and niyyah, identify halal objectives and constraints, screen current assets and liabilities for Shariah compliance, design the plan, implement, monitor and purify. The cycle repeats annually or on material change.

• Riba prohibition covers any stipulated increase on a loan of money (qard) and any exchange of ribawi items without spot settlement and equal countervalue; planning must eliminate interest-bearing deposits, conventional loans and late-payment penalties that accrue to the lender.

• Gharar (excessive uncertainty) and maysir (gambling) exclude conventional insurance, options, futures and speculative derivatives from the investable universe; takaful replaces conventional insurance on mutual, tabarru-based principles.

• Zakat is a wealth purification obligation, not a tax: 2.5% on zakatable assets held for one lunar year (hawl) above nisab, which is 85g gold or 595g silver or their cash equivalent; the silver standard is the more inclusive nisab for mixed asset holders.

• Zakat base = cash and bank balances + trade goods at market value + receivables expected to be collected + gold and silver + shariah-compliant investments held for trading, minus short-term liabilities due immediately. Fixed personal-use assets and the family home are excluded.

• Purification (tazkiyah) of impure income: dividend purification = (non-compliant income / total revenue) x dividend received; interest income received must be given away entirely without intending reward; purification is separate from and additional to zakat.

• Inheritance planning is bound by the fixed Quranic shares (faraid): a bequest (wasiyyah) may not exceed one-third of the net estate and may not favour an already-entitled heir; takhliq/waqf structures are used to direct the remaining two-thirds legitimately.

• Shariah governance in planning: an in-house or advisory Shariah board issues fatwa and annual compliance certification; the planner documents screening methodology, purification calculations and the audit trail so the recommendation is defensible at review.