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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!