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Welcome to Islamic Banking Connect June 2015
The auspicious month of Ramadan
Ramadan is the 9th Month of the Islamic calendar. Fasting during the month of
Ramadan was ordained during the 2nd year of Hijrah. Ramadan is the most
important month of the Islamic calendar. It is a month which affords Muslims
the opportunity to renew their commitment and re-establish their relationship
with their creator.
It is a month of goodness, which offers every Muslim an opportunity to strengthen his Imaan
(faith), purify his heart and soul, and gain closeness to Allah the Almighty.
The Month of Ramadan has many virtues
Abu Huraira (may Allah be pleased with him) reported Allah's Messenger (may peace be upon him)
as saying: When there comes the month of Ramadan, the gates of mercy are opened, and the
gates of Hell are locked and the devils are chained.
Rewards are multiplied manifold for good actions carried out during this month.
It is the month in which the Quraan was revealed. Allah has blessed this month with the night of
power (Lailatul Qadr) which is better than a 1 000 months, (i.e. worshipping Allah on that night is
better than worshipping Him a thousand months)
Fasting during the Month of Ramadan
Fasting during the month of Ramadan is obligatory upon every sane and mature Muslim. There are
many virtues with regard to fasting during this month. The Messenger of Allah (may peace be upon
him) mentioned “Whoever fasts during Ramadan with purity of belief and with expectation of
reward, will have his sins forgiven”.
Abu Huraira (may Allah be pleased with him) reported Allah's Messenger (may peace be upon him)
as saying: Allah, the Majestic and the Exalted, said: Every act of the son of Adam is for him except
fasting. It is done for My sake, and I will give a reward for it. By Allah in Whose Hand is the life of
Muhammad, the breath of the observer of fast is sweeter to Allah than the fragrance of musk.
Additional night prayers (Taraweeh)
During the month of Ramadan, Muslims offer additional prayers during the night known as
Taraweeh. The Messenger of Allah (may peace be upon him) mentioned “Whoever stands in
prayers during the nights of Ramadan with purity of belief and with expectation of reward, will have
his sins forgiven”.
Acts of worship during Ramadan
Recitation of the Quraan
The Month of Ramadan has a special association with the Quraan, hence special importance should
be given to recitation of the Quraan during this month.
Sadaqah (Optional Charity)
One should increase in giving charity during this month. It is mentioned in a Hadith that the
Messenger of Allah (may peace be upon him) would increase in charity during this month.
Dua (Supplication)
Ramadan is the month of mercy and forgiveness. Therefore one should supplicate to Allah and seek
Allah’s forgiveness as much as possible.
Acts to refrain from
During the Month of Ramadan, extra attention should be given to refrain from sins such as
backbiting, lies, vulgarity, cheating, etc.
May Allah the Almighty bless us with the strength to benefit as much as possible from the month of
Ramadan. Ameen!
The importance of Zakaat and its calculation method
Zakaat literally means to grow/increase or to purify and cleanse. The proper
distribution of Zakaat grows the donor's wealth and purifies him/her spiritually
and financially.
“Abu Huraira Radiyallahu Anhu narrates from the Prophet, May Peace be Upon Him Saying: Every
morning 2 Angels descend, the one prays: Oh Allah Give he who spends a substitute, while the
other prays: Oh Allah Give he who withholds destruction”. (Bukhari and Muslim)
Zakaat is one of the five pillars of Islam and obligatory upon:
• An adult, sane, free Muslim
• Who possesses wealth in excess of specified minimum (Nisaab)
• It should be possessed for a complete lunar year (354 days)
*Items of personal needs, e.g. clothing, household furniture, utensils, cars, etc. are excluded from
Zakaat.
Zakaat is compulsory on 2,5% of Net Assets if it is equal in value or more than 612
grams of Silver (Nisaab) R2129,38 as on 22 Sep 2007.
Notes:
(A) There is no Zakaat on 9 carat gold. However, if it is for resale purposes then there will be
Zakaat on its market value. Zakaat is payable on gold and silver kept for personal use (Jewellery)
according to the Hanafi Mazhab. According to the Shafiëe Mazhab there is no Zakaat on gold and
silver kept for personal use.
(B) Zakaat will be paid on the current market value of shares.
(C) Foreign exchange must be valued at official exchange rates.
(D) All those debts, which are recoverable even after a lengthy period should be added here. Bad
debts cannot be written off from Zakaat that is due.
(E) There is no Zakaat on properties bought for investment purposes (i.e. rental purposes, Zakaat
will be paid on rental income), whether bought as whole properties, or syndications.
(F) Insurance policies, retirement funds, endowment funds, etc: Zakaat on the mentioned funds
are calculated on the Lower of either the total contributions paid to the fund or the surrender value
or actuarial value of the policy at the valuation date. This ruling applies when such funds are
contrary to Shari’ah Law, but in the event of these funds complying with Islamic Law then Zakaat
will be calculated as the calculation of shares. Please note that if any fund fails to comply with the
principles of Islamic Law then it will not be permissible to invest in such fund.
(G) E.g. Edgars accounts and water and lights accounts that are due, etc.
(H) Only instalments due within the next one year should be added here.
(I) Only instalments due within the next one year should be added to the loan amount, and not
the total loan amount. This would be in the case where a loan was used to purchase an asset on
which Zakaat is payable, e.g. trading stock. If the loan was taken to purchase an asset on which
Zakaat is not payable, e.g. machinery, then the instalments due on such a loan would not be
added to this loan amount.
(J) The abovementioned rule (I) also applies here. Please note that interest-bearing loans are not
permissible in terms of Shari’ah. Islamic alternatives should be opted for.
Zakaat should be calculated every year on a fixed date within the Islamic calendar, e.g. 5th
Ramadan every year. Usage of the solar calendar could lead to complications, therefore not
advised. This is a simple Zakaat calculator for majority of cases. If there are any complications or
queries, kindly contact your Imaam.
“The current
investment
horizon for
residential
property is
believed to be
around 5 years to
allow for proper
capital
appreciation.”
Outlook for the SA residential housing market
According to Jacques du Toit, Property Analyst at Absa Home Loans, the South
African property market showed a steady performance in 2014, with nominal
price growth of just above 9% and real price growth of about 3% after
adjustment for inflation. Du Toit says a normalisation of and more balanced
housing demand and supply conditions have largely contributed to the house
price growth seen in 2014.
Du Toit says that this was not a bad performance, taking into account last year’s economic trends
and the ongoing financial strain experienced by consumers. According to Absa’s latest Housing
Review, the average price of affordable homes increased by a nominal 6,4% in 2014, compared
with growth of 3,5% in 2013. In real terms, prices increased by a marginal 0,3% last year, after
declining by 2,1% in 2013. Middle-segment housing experienced a nominal price growth of 9,4% in
2014 (10% in 2013), while, in real terms, the average price of homes in this category improved by
3,1% in 2014, after real price growth of 4,0% in 2013. In 2014, a nominal price growth of 9,7%
(5% in 2013) was recorded in the luxury housing segment. This translated into a real price growth
of 3,5% in 2014 after adjustment for the effect of inflation (-0,7% in 2013). The following price
changes occurred in the three middle-segment categories in 2014:
• small houses (80m² ─ 140m²): 9,8% year-on-year (y/y) nominal and 3,5% y/y real;
• medium-sized houses (141m² ─ 220m²): 7,5% y/y nominal and 1,3% y/y real; and
• large houses (221m² ─ 400m²): 7,7% y/y nominal and 1,6% y/y real.
The latest indicators show that nominal middle-segment house price growth came to 8,4% (y/y) in
February this year, down from 8,9% y/y in January and a recent high of 9,9% y/y in September
last year. On a month-on-month basis, nominal price growth slowed down further, to 0,3% in
February. “The gradual declining trend in nominal house price growth since late last year is much in
line with continued subdued real economic growth of 1,3% y/y in the final quarter of last year. Full-
year growth was 1,5% in 2014 (2,2% in 2013 and forecast at 2,2% in 2016). Somewhat higher
interest rates and a continued low level of consumer confidence could also have played a role in the
lower house price growth in early 2015,” explains Du Toit.
The outlook for house prices in 2015 is one of continued single-digit growth, against the
background of the outlook for major economic and household sector-related factors, although base
effects may cause price growth to be somewhat lower compared to 2013 and 2014, when price
growth of 10% and 9,3% respectively was recorded. “Based on current expectations regarding
nominal house price growth of around 8% and consumer price inflation of 4%, real price inflation is
projected for this year, continuing on from the previous two years,” says Du Toit.
The aspects that drive the property market and, ultimately, property prices are believed to be:
Economic factors
Although South Africa’s inflation and interest rates are currently at the lower end of the scale,
ongoing poor economic growth and continued high unemployment is putting downward pressure on
growth in house prices.
Consumer factors
Consumers are experiencing a decline in real household incomes, a lack of savings, increased
household debt, worsening credit risk records — more than 10 million credit-active South African
consumers currently have impaired credit records — and a lack of confidence in their financial
recovery. Increasing electricity- and transport costs are also influencing consumers’ finances
negatively. These factors have a negative impact on house price growth, as it decreases demand in
the housing sector.
Finance factors
The Reserve Bank has made it clear that South Africa is in a rising interest rate cycle. The current
forecast is for interest rates to rise by 25 basis points in September this year, and by a cumulative
75 basis points through 2016, in order to curb upward inflationary pressures. Higher interest rates
drive down the affordability of finance, and the resultant decrease in demand slows down growth in
house prices. Furthermore, with more consumers struggling with debt and impaired credit records,
banks may have to re-assess their appetite for risk, and possibly tighten their qualification criteria
for mortgage finance.
Taking all these factors into account, Du Toit believes that investment in property is still advisable,
as it contributes to the diversification of an investment portfolio, while capital appreciation and
income can be derived from the investment in the long term. “The current investment horizon for
residential property is believed to be around 5 years to allow for proper capital appreciation.
However, buyers should keep in mind that property values and capital appreciation are determined
by factors such as location and physical factors related to the property and the area,” concludes Du
Toit.
The importance of effective time management
According to Antoinette Lortan, Executive and Life Coach and owner of Human
Mirror Coaching and Consultancy, effective time management plays an integral
role in improving the quality of your everyday life by helping you to reduce
stress, gain control and self-confidence, and give you a sense of achievement
by increasing your productivity.
Time management is a deliberate act that should be constantly revisited to ensure that you are still
making the most of the time at your disposal. Time management is the process of planning and
exercising conscious control over the amount of time spent on specific activities to increase
effectiveness, efficiency and productivity. Time management is straightforward, but it takes self-
awareness and self-management.
Lortan teaches that effective time management is the key to personal success; it allows you to be
in charge of your life, accomplish more, work more efficiently and make better decisions. “When
you are pressed for time and have to make decisions, you are more likely to jump to conclusions
and not fully consider all the options available, which leads to poor decision making,” she says.
When it comes to practical application, it is important to start off by analysing how you currently go
about managing your time. Do you have a monthly plan that you break down into weekly and daily
objectives? Do you prioritise and re-prioritise your tasks daily before you leave the office? Effective
time management starts with being able to prioritise your activities to determine whether they are
urgent, important, both urgent and important, or neither urgent nor important. “People with poor
time management skills tend to prioritise tasks, and therefore their time, according to who shouted
last and loudest. Interestingly, loudness normally correlates with seniority, which discourages most
people from questioning and probing the real importance and urgency of tasks received,” says
Lortan.
The following time management matrix has proven to be very valuable in assisting with the
prioritisation of tasks and assigning time to them. Lortan explains that people tend to spend most
of their productive time in quadrants 1 and 3, while any spare time is typically spent in quadrant 4,
which consists of activities that ’steal’ time, efficiency and productivity. She adds that most people
spend the least time of all in quadrant 2, which is the most critical area for success, development
and proactive self-determination.
Creating platforms that enable business development
Absa Islamic Banking hosted a networking event in partnership with the
Pakistan Trade Commissioner to encourage trade between businesses in South
Africa and Pakistan, and showcasing the necessary networks to enable this.
The session was attended well by representatives from numerous businesses operating within
South Africa, including the Minara Chamber of Commerce.
Absa Islamic Banking was represented by Mufti Yusuf Suliman who spoke on the historical role of
Pakistan in the establishment of Islamic banking globally. He also spoke to the support received in
positioning Absa Islamic Banking as a gateway for entrenching Islamic banking on the continent, as
well as Absa Islamic Banking’s capability to meet the banking needs of businesses and individuals
alike.
Early successes of the event include a concluded Islamic investment of R90 million that was
secured by the team.
The event was supported by various business partners within Absa who attended the event and
used the session to strengthen existing networks and establish new relationships.
Private Bank Bulletin
Multi-currency Cash Passport™ card makes travelling easier
The Absa Retail International Banking (RIB) chip and PIN-protected Multi-
currency Cash Passport™ (MCCP) is a prepaid travel money card that allows
customers to load up to four currencies onto one easy-to-use card.
This Shari’ah-compliant card contains four currencies including US dollar, British pound, euro and
Australian dollar, allowing customers who want to bank the Shari’ah way to honour their values and
transact with ease while on their international travels.
The card is reloadable and it is valid for five years, after which it expires. Furthermore, cardholders
can avoid exchange rate fluctuations as currencies are preloaded, subject to meeting Exchange
Control Regulations and terms and conditions.
The MCCP card is a market leader and a trusted solution as it offers a flexible and convenient way
of carrying foreign currency safely and securely.
The card can be used to pay for goods and services at over 35,7 million point-of-sale locations
globally or to withdraw local currency of the country visited, from over 2,1 million ATMs globally
where the MasterCard Acceptance Mark is displayed. Customers do not need to worry about bank
operating hours or lengthy queues to access their funds.
If a customer runs out of a foreign currency while overseas, the card will automatically convert
funds from the next available currency purse into the currency required, provided there are
sufficient funds to cover the withdrawal or payment.
There is also a 24/7 emergency assistance service for lost, stolen or damaged cards for your peace
of mind, and the replacement card carries no additional cost.
Managing your MCCP card just got even easier, with the new ‘My Account’ mobile App
This App is available from the SA Apple and Google Play stores by searching for “Cash Passport”.
This will allow customers to:
• view balances and transactions
• find their nearest ATM
• move money between currency purses on the card
When a client returns from a trip, any unused currency on their card must be resold and can be
done at Absa free of commission.
Absa Private Banking Exceller and Marhaba account holders also qualify for special fees and
exchange rates on the Multi-currency Cash Passport™.
What better companion to have with you on your global travels than the Multi-currency Cash
Passport™ card!