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Shariah RFP M1 study materials
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Shariah RFP M1 practice questions

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Question 1Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

In Shariah financial planning, what does the prohibition of riba primarily require of a client's investment portfolio?

  1. That profits be donated to charity whenever they exceed an agreed benchmark
  2. That returns be earned from genuine commercial risk-sharing or asset-backed activity rather than guaranteed interest Correct answer.
  3. That all returns be fixed in advance so the client can budget reliably
  4. That investments be limited to precious metals held in physical custody

Explanation

Riba is any contractually guaranteed increase on a loan or exchange of money for money. Shariah-compliant portfolios must therefore earn returns through trade, leasing, or partnership in real assets and risk rather than predetermined interest. Fixing returns in advance is precisely the feature that makes a scheme ribawi.

Question 2Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

A planner is screening a company for a Shariah-compliant equity portfolio. Which business activity would normally cause the company to be excluded outright?

  1. Manufacturing industrial pumps for water utilities
  2. Providing IT consulting services
  3. Retail sale of packaged halal food
  4. Operating a conventional interest-based lending book Correct answer.

Explanation

Conventional lending that earns interest is a core impermissible activity, so a company whose main business is interest-based finance fails the sector screen regardless of its other merits. Manufacturing, halal food retail, and IT consulting are ordinary permissible trades.

Question 3Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

What is the role of zakat in a Shariah financial plan?

  1. It is a mandatory annual wealth purification due on qualifying assets held for a lunar year above the nisab Correct answer.
  2. It replaces the need for any retirement or estate planning
  3. It is an optional charity paid only when the client feels able
  4. It applies only to income earned from employment

Explanation

Zakat is an obligatory annual charge on qualifying wealth that has reached the nisab and been held for a full lunar year. It purifies wealth and is a fixed obligation, not discretionary charity, and it does not remove the need for other planning.

Question 4Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

A client wants a home purchase finance structure in which the bank buys the property and resells it to the client at a disclosed markup payable in instalments. Which contract is being described?

  1. Ijarah
  2. Murabaha Correct answer.
  3. Qard hasan
  4. Musharakah mutanaqisah

Explanation

Murabaha is a sale at cost plus a disclosed profit margin, commonly used for property and goods financing with deferred instalments. The markup is earned on a sale of an owned asset, not on a loan of money.

Question 5Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

Why do Shariah financial planners distinguish between the Islamic calendar year and the Gregorian year when calculating zakat?

  1. Because zakat rates differ between the two calendars
  2. Because zakat is only due in years with thirteen lunar months
  3. Because the Gregorian calendar is used for zakat on cash and the lunar for zakat on gold
  4. Because the lunar year is shorter, so the zakatable holding period and due date shift each Gregorian year Correct answer.

Explanation

The hawl is measured by the lunar year, which is about eleven days shorter than the solar year. Consequently the zakat due date migrates earlier each Gregorian year, and planners must track it on the hijri calendar. The zakat rate itself does not vary with the calendar.

Question 6Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

A client holds shares in a mixed-activity company that passes the sector screens but has minor interest income. How is this normally handled in portfolio purification?

  1. The client pays zakat twice on those shares
  2. The shares must be sold within thirty days of purchase
  3. A proportionate share of the dividend attributable to impermissible income is given away to purify the holding Correct answer.
  4. The entire dividend is prohibited and must be refused

Explanation

For mixed companies that pass the screens, the impermissible income component is cleansed by donating the corresponding proportion of the dividend, without a reward expectation. The rest of the return remains permissible for the investor.

Question 7Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

In a takaful arrangement, how are risk and surplus typically handled compared with a conventional insurance contract?

  1. Risk is transferred entirely to a reinsurer outside the fund
  2. The operator invests premiums in interest-bearing bonds and shares the interest
  3. Participants contribute to a pooled fund on mutual assistance, and the operator manages it for a fee rather than bearing the risk for profit Correct answer.
  4. The operator guarantees a fixed maturity payout to every participant

Explanation

Takaful is built on mutual protection: participants donate or contribute to a shared fund used to pay claims, and the operator earns a defined fee for management. The operator does not carry the risk as a profit-making insurer, and the fund must avoid interest-bearing investments.

Question 8Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

A client's will leaves one-third of the estate to charity and the rest to heirs. Under Islamic inheritance rules, how should the planner treat this bequest?

  1. It is invalid because no bequest may be made to charity
  2. It is valid because a bequest up to one-third is permitted without heir consent Correct answer.
  3. It is valid only if the charity is a relative
  4. It is valid only if the estate exceeds the nisab

Explanation

A Muslim may bequeath up to one-third of the estate to non-heirs, including charity, without needing the heirs' consent; anything beyond that requires their approval. The remaining estate is then distributed according to the fixed shares. Nisab and kinship to the charity are not conditions for this bequest.

Question 9Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

Which statement best captures the purpose of the Shariah supervisory board in an Islamic financial institution?

  1. It independently reviews and certifies that products, contracts, and operations conform to Shariah rulings Correct answer.
  2. It sets the institution's profit targets and pricing
  3. It markets Shariah-compliant products to retail customers
  4. It audits the financial statements for accounting accuracy

Explanation

The Shariah supervisory board issues rulings and reviews contracts and operations to confirm conformity, providing independent religious governance. It does not perform marketing, commercial target-setting, or financial auditing, which belong to other functions.

Question 10Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

A client asks for an investment that avoids gharar. Which feature should the planner specifically screen out?

  1. A disclosed rental yield on a leased property
  2. A contract whose subject matter, price, or delivery is left materially uncertain Correct answer.
  3. A partnership with a defined profit-sharing ratio
  4. A trade with a documented delivery date

Explanation

Gharar refers to excessive uncertainty in essential contract terms such as the object, price, or timing of delivery. Disclosed yields, agreed profit ratios, and documented delivery dates reduce uncertainty and are acceptable. Contracts with material ambiguity in core terms are the ones to avoid.

Question 11Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

A client receives a salary and holds cash savings above the nisab for a full lunar year. Which combination correctly describes zakat on these monetary assets?

  1. No zakat because cash is not a productive asset
  2. Two and a half percent on the savings held for the hawl, subject to nisab at the start and end Correct answer.
  3. Five percent on savings only if they are invested in equities
  4. Ten percent on the salary at the moment it is received

Explanation

Cash and bank balances are zakatable at one-fortieth (2.5 percent) once they reach the nisab and complete the lunar-year holding period. Salary is not separately charged at receipt; it becomes zakatable when it accumulates as savings.

Question 12Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

In an ijarah contract for equipment financing, which element is essential for the arrangement to remain Shariah-compliant?

  1. The bank must own or validly hold the usufruct being leased Correct answer.
  2. The rental must be a fixed interest rate on the financed amount
  3. The client must pay the full price upfront
  4. The equipment must be sold to the client at the outset

Explanation

Ijarah transfers usufruct for rent, so the lessor must own the asset or its usufruct and bear the ownership-related obligations. Rent is a charge for use of the asset, not interest on money lent, and ownership need not pass at inception.

Question 13Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

A planner is designing a retirement plan for a client who wants Shariah-compliant growth. Which approach is most consistent with the domain's principles?

  1. A scheme guaranteeing a fixed annual payout regardless of underlying performance
  2. A savings account earning compound interest reinvested monthly
  3. Speculative short-term trading on margin with borrowed funds
  4. A portfolio of screened equities and sukuk held for long-term real-asset returns Correct answer.

Explanation

Screened equities and sukuk provide Shariah-compliant exposure to real economic activity and asset-backed returns suited to long-term growth. Guaranteed fixed payouts and interest-bearing savings replicate riba, and margin speculation with borrowed funds introduces both riba and excessive risk.

Question 14Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

Which contract would a planner use when a client and a partner both contribute capital and share profits according to an agreed ratio while sharing losses in proportion to capital?

  1. Musharakah Correct answer.
  2. Kafalah
  3. Wakalah
  4. Murabaha

Explanation

Musharakah is a joint partnership in which each partner contributes capital, profits are shared by agreement, and losses fall in proportion to capital contributed. The other contracts cover cost-plus sale, agency, and guarantee respectively.

Question 15Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

A client's estate plan includes a waqf. What distinguishes waqf from an ordinary charitable gift in Shariah financial planning?

  1. The donated asset is permanently dedicated to charitable use, with its corpus retained and benefits distributed Correct answer.
  2. The asset is lent to beneficiaries and returned later
  3. The gift is revocable at any time by the donor
  4. The gift must be paid in cash only

Explanation

Waqf permanently dedicates an asset's corpus to charitable purposes while its usufruct or income is applied to beneficiaries. Because the dedication is irrevocable and the corpus is retained, it differs from a one-off gift.

Question 16Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

A client wants to know whether a sukuk investment is acceptable. Which feature would make a sukuk structure problematic?

  1. The structure includes a partnership in a real project
  2. The issuer holds tangible assets backing the certificates
  3. The returns are linked to the income of an underlying leased asset
  4. The returns are a fixed interest payment on the principal regardless of underlying assets Correct answer.

Explanation

Sukuk must represent ownership in real assets, usufruct, or a project, so returns derive from those underlying assets. A fixed interest payment on principal independent of any asset is a bond-like ribawi feature and defeats the purpose of the structure.

Question 17Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

How should a planner treat a conventional mortgage already held by a client who is transitioning to a Shariah-compliant plan?

  1. Convert the interest into a donation to the lender
  2. Ignore the mortgage because past contracts are outside the plan
  3. Assess the existing obligation, plan a compliant refinancing path, and avoid new riba-based commitments Correct answer.
  4. Immediately declare the contract void and stop all payments

Explanation

Existing riba-based obligations are real liabilities that must be managed, so a planner reviews them and structures a compliant exit or refinancing while preventing new impermissible commitments. Unilaterally repudiating the contract or ignoring it would harm the client and misstate the planning task.

Question 18Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

A client plans to fund a child's education through a mudarabah-based savings product. Which risk should the planner explain most clearly?

  1. Investment losses may reduce the capital unless they result from the manager's misconduct or negligence Correct answer.
  2. Profits are fixed at the outset by the contract
  3. The capital is guaranteed by the institution in all circumstances
  4. The client bears no commercial risk because the manager does all the work

Explanation

In mudarabah the rabb al-mal supplies capital and bears commercial loss unless the mudarib breaches duty through misconduct or negligence. Profits are shared by an agreed ratio and cannot be fixed in advance, and capital is not guaranteed.

Question 19Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

What is the primary purpose of the nisab in zakat planning?

  1. It sets the minimum threshold of wealth at which zakat becomes due Correct answer.
  2. It identifies which relatives may receive zakat
  3. It fixes the lunar calendar date for payment
  4. It determines the percentage rate applied to gold

Explanation

The nisab is the minimum wealth threshold that must be reached before zakat applies to a category of assets. The rate and the calendar are separate matters, and eligibility of recipients is governed by the categories of zakat beneficiaries.

Question 20Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

A client wants to include a non-heir friend in the estate plan. What is the standard route under Islamic inheritance rules?

  1. Transfer the entire estate to the friend by will
  2. Allocate a share to the friend through the fixed inheritance shares
  3. Make a bequest to the friend within one-third of the estate, subject to the applicable conditions Correct answer.
  4. Rely on the friend being adopted into the family

Explanation

Fixed inheritance shares are reserved for designated heirs, so a non-heir can only benefit through a bequest limited to one-third of the estate. A will covering the whole estate to a non-heir would exceed that limit and require heir consent for any excess.

Question 21Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

Which situation most clearly illustrates gharar in a financial planning product?

  1. A lease with a rent stated in the contract
  2. A savings plan whose maturity payout depends on an undisclosed formula and unspecified assets Correct answer.
  3. A sale with a price and delivery date both fixed
  4. A partnership with a written profit-sharing ratio

Explanation

Gharar arises when essential terms such as the payout basis or underlying assets are unknown or ambiguous, making the outcome excessively uncertain. Stated rents, fixed prices with delivery dates, and documented profit ratios are all defined terms.

Question 22Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

In a wakalah bil istithmar arrangement, what is the institution's role and entitlement?

  1. It guarantees the client a fixed return
  2. It lends money to the client at interest
  3. It becomes the owner of the client's capital and keeps all profits
  4. It acts as an agent investing on the client's behalf for an agreed fee or share Correct answer.

Explanation

Wakalah bil istithmar appoints the institution as an investment agent acting for the client, typically for a disclosed fee or agreed share. The institution does not take ownership of the capital, guarantee returns, or lend at interest.

Question 23Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

A planner reviews a client's takaful surplus distribution. Which treatment is consistent with the mutual model?

  1. The operator retains the entire surplus as profit
  2. The surplus must be invested in interest-bearing deposits before distribution
  3. Any surplus may be shared with participants or retained according to the disclosed policy after covering claims and reserves Correct answer.
  4. The surplus is paid only to the operator's shareholders

Explanation

In a mutual takaful model the surplus belongs to the participants' pool, and its treatment, whether shared back or retained for reserves, must follow the disclosed policy after claims and provisions. The operator's entitlement is its fee, not the whole surplus.

Question 24Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

Which statement correctly describes the relationship between zakat and the nisab for gold in a client's portfolio?

  1. Zakat on gold is calculated at ten percent
  2. Zakat on gold is due once the holding reaches the nisab and completes the hawl Correct answer.
  3. Zakat on gold is due only when the gold is sold
  4. Zakat on gold is due on every gram regardless of quantity

Explanation

Gold held as wealth becomes zakatable at 2.5 percent once it reaches the nisab threshold and a full lunar year has passed. There is no charge on trivial quantities below the threshold, and sale is not a precondition.

Question 25Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

A client's business holds inventory for sale and also a cash reserve. How should the planner approach zakat on the business?

  1. Apply zakat to the inventory at market value plus zakatable cash, after deducting immediate liabilities, when nisab is met Correct answer.
  2. Exempt the business entirely because it is a company
  3. Apply zakat to the inventory at purchase cost only
  4. Apply zakat only to the cash reserve

Explanation

Trade inventory is valued at market value and combined with zakatable cash, with immediate liabilities deducted, to determine whether the nisab is met and how much is due. Limiting zakat to cash or using cost alone understates the base.

Question 26Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

In Shariah financial planning, what does the term riba specifically refer to?

  1. A fee charged for arranging a halal trade transaction
  2. An agreed profit share in a musharakah venture
  3. An unconditional increase charged for the mere deferment of a debt or on a loan of money Correct answer.
  4. A penalty paid to charity for late settlement of a debt

Explanation

Riba is the prohibited, guaranteed increase that accrues purely from lending money or extending time on an obligation, without any underlying exchange of real assets or shared risk. Trade profits, service fees, and charitable penalties are treated separately because they arise from genuine economic activity or from deterring default rather than from money itself.

Question 27Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

A planner is screening a company whose main business is halal but which earns part of its income from interest-bearing deposits. Under widely used Shariah screening norms, how is such a company normally treated?

  1. It is permissible with no further action because the core business is halal
  2. It may be permissible if interest income stays within a tolerated threshold, with purification of the dividend Correct answer.
  3. It is permissible only if the client donates the whole dividend to charity
  4. It is impermissible regardless of the proportion of interest income

Explanation

Most screening methodologies tolerate incidental impermissible income up to a small percentage of revenue or assets, provided the primary activity passes the sector screens. The investor then purifies the proportionate impure portion of any dividend received rather than avoiding the share entirely.

Question 28Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

Which structure makes a sukuk issuance most clearly asset-backed in Shariah terms?

  1. Investors hold beneficial ownership in a tangible asset or usufruct and receive returns from its income Correct answer.
  2. The return is set as a penalty for late payment by the originator
  3. The certificate represents a pure money loan to the originator
  4. The issuer promises to repay principal plus a fixed coupon regardless of the underlying asset

Explanation

Sukuk represent ownership in tangible assets, usufructs, or a defined project, so returns derive from the performance of that underlying rather than from money lending. Structures that reduce the certificate to a guaranteed loan with fixed interest lose the asset linkage that makes the instrument Shariah-compliant.

Question 29Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

A client wants to set aside part of the estate so its income funds a mosque indefinitely. Which instrument achieves a perpetual charitable endowment?

  1. A waqf of the property with the income dedicated to the mosque Correct answer.
  2. A hibah gift of the property outright to the mosque
  3. A qard hasan loan to the mosque
  4. A murabahah sale of the property to the mosque

Explanation

Waqf locks the corpus out of circulation and dedicates its usufruct or income to a specified charitable purpose, which continues after the founder's death. An outright gift transfers ownership and the mosque may sell the property, so the perpetual income objective is not secured.

Question 30Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

A client's will purports to give one-quarter of the estate to a nephew who is also a legal heir. How should the planner advise on this bequest?

  1. It is valid up to one-third of the estate automatically
  2. It is valid only if the nephew agrees to reduce his inheritance share
  3. It is valid because the will is a voluntary document
  4. It is invalid unless the other heirs consent after the death Correct answer.

Explanation

A bequest to an existing heir is not effective unless the other heirs unanimously consent after the testator's death, because the fixed shares are treated as a right that cannot be overridden unilaterally. The one-third ceiling governs bequests to non-heirs, not the consent requirement for heirs.

Question 31Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

In a mudarabah savings product, who bears the loss when the venture loses money without any misconduct by the manager?

  1. The mudarib bears the full financial loss because the manager controls the funds
  2. The rabb-ul-mal bears the financial loss while the mudarib loses the effort invested Correct answer.
  3. Losses are shared in the same ratio as the agreed profit split
  4. The loss is guaranteed by the institution's shareholders

Explanation

Mudarabah is a profit-sharing partnership in which the capital provider supplies the funds and the manager supplies skill and effort. Profits are shared by agreement, but an ordinary business loss falls on capital, while the manager's loss is the wasted labour, unless negligence or breach is proven.

Question 32Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

A planner is advising on zakat for a client whose wealth consists of a gold jewellery set, cash, and shares held for trading. Which statement correctly describes the zakat base?

  1. Gold, cash, and trading shares are each subject to zakat when the combined or individual values reach the nisab and a lunar year passes Correct answer.
  2. Shares are zakatable only when sold and the proceeds held for a year
  3. Zakat is due on the market value of a personal residence as well
  4. Only cash is zakatable because gold jewellery is always exempt

Explanation

Zakat applies to growing wealth such as monetary assets, gold and silver, and trade goods, assessed at the nisab threshold and after the completion of a lunar year. Personal-use assets such as a residence are outside the zakat base, but gold held as investment or jewellery according to scholarly positions is included.

Question 33Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

A client wants a home-financing structure in which the bank buys the property and sells it to the client at a disclosed mark-up payable in instalments. Which contract is this?

  1. Wakalah bil istithmar
  2. Salam
  3. Ijarah muntahia bittamleek
  4. Murabahah Correct answer.

Explanation

Murabahah is a cost-plus sale in which the financier discloses the acquisition cost and adds an agreed profit, with payment often deferred in instalments. It transfers ownership to the client at the outset, unlike ijarah, which is a lease that may end in a transfer.

Question 34Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

What distinguishes a takaful operator's surplus distribution from a conventional insurer's dividend?

  1. It is paid only to shareholders as a return on capital
  2. It is a guaranteed interest payment on the participant fund
  3. It is a return of contributions to participants from the risk pool after claims and reserves, as the model provides Correct answer.
  4. It is a penalty charged for late contribution payments

Explanation

In a mutual takaful model, participants contribute to a pooled fund from which claims are met, and any underwriting surplus may be returned to participants rather than distributed as profit to capital. The operator is compensated through a fee or share of surplus under the agreed model, not by owning the pool's surplus as insurer profit.

Question 35Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

A client asks whether a conventional life insurance policy with a savings element can be replaced by a Shariah-compliant alternative. Which product feature should the planner point to?

  1. A takaful plan in which participants contribute to a mutual risk pool and invest through a Shariah-compliant fund Correct answer.
  2. A murabahah loan taken to pay the premiums
  3. A conventional endowment policy with the interest component donated to charity
  4. A bank deposit paying a fixed guaranteed return

Explanation

Takaful replaces the insurer-insured risk transfer with mutual contribution and shared responsibility, and the savings element is invested in Shariah-compliant assets. Donating the interest portion of a conventional policy does not remove the prohibited contract from the arrangement.

Question 36Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

A planner is building a liquidity buffer for a client who wants full Shariah compliance. Which instrument is most appropriate for short-term cash?

  1. A conventional treasury bill purchased at a discount
  2. An interest-bearing savings account with the interest donated
  3. A forward currency contract for speculative gain
  4. A Shariah-compliant commodity murabahah deposit or a sukuk with short maturity Correct answer.

Explanation

Short-term Shariah-compliant liquidity is typically held through structures such as commodity murabahah deposits or short-dated sukuk, which generate return from trade or asset ownership rather than from lending at interest. Discounted treasury bills and interest accounts are riba-based, and speculative currency forwards involve gharar and riba.

Question 37Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

What is the essential role of the Shariah supervisory board when a planner submits a new retirement product for approval?

  1. It independently reviews the structure and issues a fatwa confirming compliance Correct answer.
  2. It markets the product to retail clients
  3. It audits the institution's financial statements for accuracy
  4. It sets the commercial pricing of the product

Explanation

The Shariah supervisory board is an independent body of scholars that examines contracts, structures, and documentation and issues rulings on compliance. It does not perform commercial pricing or financial audit functions, and its independence is central to its credibility.

Question 38Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

A client's business holds sale inventory worth 200,000 and a cash reserve of 50,000 at the zakat date. How should the planner compute the zakatable base?

  1. Only the cash reserve, because inventory is a business asset
  2. The net profit of the business for the year
  3. Inventory at original cost only, excluding cash
  4. Inventory at market value plus the cash reserve, then apply the zakat rate if the total reaches the nisab Correct answer.

Explanation

Trade goods are valued at their current market value and added to monetary assets such as cash and receivables to determine the zakat base. If the combined total reaches the nisab and a lunar year has passed, zakat is applied to the whole base at the prescribed rate.

Question 39Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

Which feature of an investment product is the clearest example of gharar?

  1. A sale of fish still in the sea with no specification of quantity or quality Correct answer.
  2. A disclosed profit-sharing ratio in a musharakah
  3. A murabahah with a stated cost and mark-up
  4. An ijarah with a fixed rental and defined lease term

Explanation

Gharar arises where the subject matter, price, or delivery is so uncertain that the parties cannot know what they are exchanging, as with selling an unspecified catch not yet in existence or possession. Disclosed profit ratios, stated costs, and defined rentals give the parties sufficient certainty.

Question 40Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

A client holds a conventional mortgage and wants to transition to a Shariah-compliant home finance. What is the most appropriate planning approach?

  1. Convert the mortgage internally by having the client pay the interest to charity
  2. Advise immediate default on the mortgage to avoid riba
  3. Ignore the existing mortgage because it predates the client's compliance decision
  4. Compare early-settlement costs with a compliant refinancing structure and plan an orderly transition Correct answer.

Explanation

Existing obligations remain binding, so the planner should quantify exit costs and compare them with a compliant alternative such as murabahah or diminishing musharakah before recommending a transition. Advising default would harm the client and is not a legitimate compliance strategy.

Question 41Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

In a wakalah bil istithmar mandate, how is the institution compensated?

  1. It charges a fixed interest rate on the invested capital
  2. It receives nothing and works purely as a volunteer
  3. It takes all profits above the client's capital
  4. It receives an agreed agency fee or a specified share of profit for managing the investment Correct answer.

Explanation

Wakalah bil istithmar is an agency contract in which the institution invests on the client's behalf for an agreed fee or a defined share of profit. The client remains the owner of the capital and bears investment risk, while the agent is entitled to the agreed compensation.

Question 42Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

A client wants to leave a substantial gift to a non-heir friend while also providing for the legal heirs. Which route is consistent with Islamic inheritance rules?

  1. A bequest giving the friend the entire estate
  2. A wasiyyah bequest to the friend limited to one-third of the estate, with the remainder to the heirs Correct answer.
  3. A bequest to the friend that reduces the heirs' fixed shares
  4. A bequest that takes effect only if the heirs later agree to give up their shares

Explanation

A bequest to a non-heir may be made within the one-third limit without needing the heirs' consent, and the residue passes to the legal heirs under the fixed shares. Exceeding one-third requires the heirs' consent, and the fixed shares cannot be reduced unilaterally.

Question 43Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

Which statement correctly describes the nisab in zakat planning?

  1. It is the maximum amount of wealth exempt from zakat
  2. It is the minimum threshold of wealth at which zakat becomes due Correct answer.
  3. It is the lunar year that must pass before zakat is due
  4. It is the rate applied to zakatable wealth

Explanation

The nisab is the minimum threshold of zakatable wealth, set by reference to gold or silver, below which no zakat is due. The rate is a separate fixed percentage, and the lunar year is the holding period condition known as the hawl.

Question 44Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

A planner is reviewing an ijarah contract for a vehicle. Which element is essential for the arrangement to remain Shariah-compliant?

  1. The lessee pays a fixed interest charge on the asset value
  2. The lessor owns the asset and bears ownership-related risks during the lease Correct answer.
  3. The lessor guarantees the residual value as a loan to the lessee
  4. The rental is set as a penalty for early termination

Explanation

In ijarah the lessor must own the leased asset and carry the obligations of ownership, such as major maintenance and destruction risk, while the lessee pays rent for usufruct. Charging interest on asset value or guaranteeing the residual as a loan converts the arrangement into a financing transaction with riba features.

Question 45Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

A client wants to share profits with a friend who contributes capital, with the client contributing capital and management. Which contract fits when both parties contribute capital and share profit by agreed ratio?

  1. Qard hasan
  2. Mudarabah
  3. Musharakah Correct answer.
  4. Salam

Explanation

Musharakah is a joint partnership in which both parties contribute capital and share profits according to an agreed ratio, with losses shared in proportion to capital. Mudarabah involves one party supplying capital and the other supplying management only.

Question 46Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

A client's retirement plan includes a diminishing musharakah home-financing arrangement. How should the planner explain the ownership structure?

  1. The institution lends the purchase price and charges interest until repayment
  2. The institution owns the property permanently and the client occupies it rent-free
  3. The client owns the property immediately and pays a fixed fee for the institution's guarantee
  4. The client and the institution jointly own the property, and the client buys the institution's share over time while paying rent on the outstanding share Correct answer.

Explanation

In diminishing musharakah the financier and client co-own the asset, and the client gradually acquires the financier's share while paying rent for the portion still owned by the financier. This differs from a loan with interest because the return is linked to ownership and usufruct rather than to money lent.

Question 47Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

Which statement best explains why a salam contract requires full advance payment of the price?

  1. It compensates the seller for the risk of future delivery
  2. It removes uncertainty over the price and makes the deferred obligation of goods acceptable Correct answer.
  3. It guarantees the buyer a fixed interest return
  4. It allows the buyer to resell the goods before delivery for profit

Explanation

Salam is an exception to the general rule against selling what one does not yet possess, permitted because the price is paid in full in advance and the specification and delivery terms are precisely defined. This structure reduces gharar to an acceptable level for the deferred goods.

Question 48Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

A client holds shares in a company whose core business is alcohol distribution but which also has a small halal division. How should the planner treat the holding?

  1. Permissible if the client purifies the alcohol-related profit
  2. Permissible if the halal division is large enough
  3. Impermissible because the core business fails the sector screen, regardless of the halal division Correct answer.
  4. Permissible only for a short holding period

Explanation

Sector screens exclude companies whose primary activity is impermissible, such as alcohol production or distribution, and a minor halal division does not cure the core business. Purification applies to incidental impermissible income in otherwise acceptable businesses, not to companies whose main activity is prohibited.

Question 49Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

A planner is designing a child's education fund using a Shariah-compliant equity fund. Which risk should be emphasised most strongly to the client?

  1. The fund's profit is fixed by the regulator
  2. Market volatility may reduce the fund value below the amount needed at the target date Correct answer.
  3. The fund is immune to inflation
  4. The fund guarantees a fixed annual return

Explanation

Shariah-compliant equity funds share market risk, so the value at the target date is uncertain and may fall short of the education cost. The planner should address this through time horizon, contribution flexibility, and possibly a lower-risk allocation as the date approaches.

Question 50Shariah RFP Capstone Programme (Module 7) - Shariah financial planning

Which situation most clearly involves a prohibited speculative element in a financial planning product?

  1. A client invests in a sukuk backed by rental income from a real property
  2. A client enters a contract whose payout depends entirely on an uncertain future event with no productive activity Correct answer.
  3. A client places funds in a commodity murabahah deposit
  4. A client buys shares in a listed company based on published financial statements

Explanation

Maysir is present where a party's entitlement depends purely on chance or an uncertain event rather than on productive activity or shared risk in real assets. Investing in listed shares, asset-backed sukuk, and trade-based deposits involves genuine commercial risk rather than pure gambling.