Islamic Wealth Management: Explore Ethical Wealth Solutions

Islamic Wealth Management: Where Purpose and Principles Meet Prosperity

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Summary: In this article, we will unpack how Islamic wealth management – with principles such as Shariah-compliant investing, avoidance of interest, risk-sharing models, estate planning and charitable obligations like zakat and waqf, offers one an ethical yet comprehensive avenue for wealth creation, while also staying true to one’s values.

In a world driven by religious values as much as it is by money, wealth management has evolved beyond just chasing returns. It now also attempts to align one’s finances with impact and faith-based goals, and the greater good. In this context, Islamic Wealth Management has emerged as a compelling approach for individuals looking to grow and preserve their wealth ethically to reflect their values.

The key principles of Islamic wealth management

Rooted in the ethical frameworks of Shariah law, at the heart of Islamic wealth management are seven guiding principles designed to ensure wealth is grown, preserved and passed on with integrity.

Shariah compliance

Every investment made under the ambit of Islamic wealth management must comply with Shariah law. Therefore, investing in and/or financing activities in industries involved in alcohol, gambling, entertainment, tobacco, pork, or even the production of munitions is not permitted.

Avoidance of interest income

Riba refers to guaranteed interest returns not tied to risk, labour, or productivity. This can include interest on loans or deposits in accounts wherein money yields more money with the passage of time. Any such investments are forbidden as they benefit the lender at the expense of the borrower, allowing for income without any effort.

Risk sharing

Islamic wealth management accentuates profit-and-loss-sharing arrangements between partners, such as Mudarabah (Profit-sharing) and Musyarakah (Joint ventures).

Mudarabah refers to a contract between a capital provider (rabbul mal) and an entrepreneur (mudarib), wherein profit is shared between the two parties according to a mutually agreed-upon profit-sharing ratio (PSR). The capital provider bears losses as long as they are not caused by misconduct or negligence on the part of the entrepreneur.

Musyarakah refers to a partnership between two or more parties, whereby all parties will share the profit and bear the loss from the partnership.

Ethical investments

Zakat, one of the five pillars of Islam, is a mandatory obligation to be fulfilled in the form of charity. It aims to purify one’s wealth by supporting eligible recipients (asnaf), particularly the less fortunate. It becomes mandatory only when the value of one’s assets exceeds a threshold known as Nisab.

Another form of charity prevalent in Islam is referred to as Sadaqah. These donations, unlike Zakat, are entirely voluntary and can be made at any point in a financial year, as and when one chooses to do so.

Charity can also be done in the form of Waqf, which involves donating assets to a charitable cause. These assets are held in trust and cannot be sold or transferred again. Instead, for charitable purposes in perpetuity. This may include cash Waqf that can later be used for projects such as the construction of schools, hospitals, and mosques, as well as Waqf in the form of fix assets such as land, property and the like.

Takaful coverage

Takaful (also known as Islamic Insurance or Takaful Insurance), refers to a coverage benefit for any misfortunes based on cooperation and mutual assistance. In essence, participants contribute their funds in a pool that is managed by a Takaful operator under the contract of Wakalah (agency) and Tabarru’ (donation) for the purpose providing assistance to other participants in need.

This arrangement is free from Riba (Interest), Gharar (Uncertainty), and Maisir (Gambling). The funds are also then invested in Shariah-compliant businesses to grow and provide financial assistance to anyone who may require it, whether due to accidents, illnesses, natural disasters, or otherwise.

Estate planning

According to Faraid (islamic inheritance law), Islamic wealth management accords great importance to estate planning via Wasiat (Last will and testament) to ensure equitable distribution of wealth amongst one’s kin after one’s passing.

This can also be done via Hibah or gift giving, which involves voluntarily transferring ownership of one’s assets without expecting anything in return.

These instruments allow one to safeguard their assets and ensure their wishes are honoured after their passing, preserving harmony and financial stability in the family across generations.

Standard Chartered bank and Islamic banking: A 32-year-long legacy

Standard Chartered Bank offers you over three decades of expertise with Islamic Banking products, with integration of Standard Chartered Saadiq Berhad in 2008 as a full-fledged Islamic banking subsidiary. Our services are open to all who seek ethical, transparent, and value-driven financial solutions, regardless of their faith.

Some of our Islamic personal banking products include Saadiq My HomeOne‑i (a diminishing partnership home financing solution), Term Deposit‑i (a Shariah-compliant fixed deposit), and the Sustainable Savings Account‑i, a savings account that complies with Environmental, Social and Governance (ESG) principles. Each product is designed to uphold all the core principles of Islamic wealth management while striving to maintain access to the convenience of modern banking practices.
Islamic wealth management is a comprehensive wealth solution that offers a value-driven approach to growing, preserving, and passing on wealth, grounded in the moral and ethical frameworks of Shariah. It can provide for both capital appreciation and a stable income; while helping one fulfill one’s obligations towards society as a whole.

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