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ESTATE PLANNING IN ISLAMIC FINANCE: GETTING THE APPROACH RIGHT
AUTHOR: FARES MOURAD, HEAD OF ISLAMIC FINANCE, BANK SARASIN & CO LTD., SWITZERLAND
The Islamic wealth management industry is one of the fastest growing sectors in the Middle East and has sparked high interest outside the region, with global fund assets reaching over $50 billion by the end of 2009 (Ernst and Young IFIR 2010). However, de- spite this growth, it should be acknowledged that the industry is still relatively young and it is clear that certain areas remain hugely underdeveloped.
In 2009 Bank Sarasin introduced a compre- hensive Islamic wealth management service offering the full spectrum of Sharia-compli- ant private banking products and services to all of their clients in the GCC countries. To support this service, a dedicated de- partment with high level expertise and a renowned Sharia Board have been put in place, to ensure high quality delivery as ex- pected from a Swiss Private Bank.
Based on their vast market knowledge and expertise, Bank Sarasin realised that a key area of the industry - estate planning and wealth reservation, hardly received any at- tention within the Islamic world and indeed the distinction between the more general approach and that which is required by the Qu’ran is seldom discussed.
28 Global Islamic Finance October 2010
Fares Mourad is of Damascene origin and began his career in fi- nance at a subsidiary of Commerzbank in Luxembourg as an FX and MM dealer. He then moved to the Arab Bank in Frankfurt as head of Treasury sales and a member of the bank’s Superviso- ry Board. Following that, he moved to UBS as a senior Portfolio Manager and member of its FI strategy committee where he re- mained for ten years. He obtained a post graduate Diploma in Is- lamic Finance in 1999 and joined UBS’s team entrusted with set- ting up and executing the bank’s strategy in Islamic Finance. In 2005 Fares joined Credit Suisse as Global Head of Islamic Invest- ments with the mandate to set up and realise the bank’s strategy in this field. Three years later, he joined Bank Sarasin as Head of Islamic Finance. Bank Sarasin is now the only Swiss private bank in the GCC with a complete in-house Islamic Private Offering and Fares sees himself as a bridge builder between cultures.
He graduated from the University of Jordan in 1964. As well as his work commitments, he is also a frequent lecturer at the Zu- rich University for Applied Sciences and the Centro Internacion- al de Formacion Financiera, Univesidad d’Alcala, Madrid.
As a result, they have created a tailored serv- ice that enables their Islamic clients to have the forward-planning tools and processes necessary to ensure that the trust placed in them by Allah is handed to their successors in a proper manner and that they are also well trained to administer their assets in a sustainable way.
Knowing the rules Before planning a strategy, it is important to understand the teachings of the Qu’ran on this subject as these are mandatory rules that must be obeyed. Unlike in the West, estate planning for Muslims is based on the principle that all wealth belongs to Allah and that anyone who possesses wealth is sim- ply its caretaker. According to the Qu’ran, wealth creates specific religious responsi- bilities where good financial deeds should
be conducted during one’s lifetime as prep- aration for the afterlife; social responsibility and accountability are deeply embedded in the Islamic concept of wealth. Islamic estate planning needs to take into consideration the concept and meaning of wealth in Islam, the religious requirements of making a will, the rules of inheritance, and philanthropic and charitable donations.
Islamic wealth management has three phas- es: first, the proper acquisition of wealth; second, the preservation of wealth; and third, the correct expenditure and distribu- tion of wealth. Estate planning predominant- ly manages the latter two phases which this article will explain. As wealth is considered to belong to Allah, this private guardianship of wealth ends with the death of the guardi- an. Therefore, appropriate provisions to deal
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