Random Research - January & February

Assalamualaikum (Peace Be Upon You),

I meant to post these earlier but was somewhat busy. I tend to have a knack for finding (and perhaps searching) for random and slightly weird researches. These are two that I came across in January and February.

January - Durian Fever

In January, my facebook news feed was inundated with durian pics from friends back home in Brunei. For those who have no idea what I'm writing about, durian is a fruit which I believe is found mainly in Asia. Some hate it, some love it, for it has a strong smell associated with it. This research got my attention, for it is ironic that something with a strong smell could potentially be a mouth disinfectant.

February - Don't Hurt the Clowns

After my fieldwork, all hands are now on deck, going through statistics books. However, while reading one book, I randomly stumbled through a research on clowns and coulrophobia (fear of clowns), and somehow ended up reading this article. Though the article isn't exactly a research per se, it does point out that...um clowns are people too (?).

Peace,
Umar

Social/welfare institutions: Need for a re-think?

Assalamualaikum (Peace be upon you),

The recent article in Borneo Bulletin on the indebted plight of single mothers reminds me of some of the interviews I had recently with zakat recipients. It reinforces my view that social institutions that involves giving out financial support to others, needs to re-think the way they look at personal finance in a world where governments are pushing individuals to be more financially dependent and literate, such as the pension issue that faces numerous countries and individuals.

At the very least, when creating financial solutions for the poor, there is a need to be more thorough and further consideration on the costs of individuals facing hardship. Between those who have and have-not, $1 is valued differently.

Without criticizing these institutions, the emphasis should be to creatively come up with better, innovative ways on how, from a personal financial view, that these social institutions can evolve forward. The relative success of microfinance from the early days of Grameen bank in Bangladesh is interesting, though the issue of interest or riba prevails. Can we come up with better way to help improve the situation of the poor, without interest? Can we create a comprehensive and inclusive financial solution that is fair for all concerned?

My thoughts.

Take care,
Umar

Past, Present & Future - Me, Myself & My Research

Assalamualaikum (Peace be upon you),

I was watching the RSA Animate of Professor Philip Zimbardo's talk on 'The Secret Powers of Time' and several things got me thinking.

1. The Past

Am I a 'Past-oriented' person? Growing up, I used to be 'past positive' but then at some point, I probably became more of a 'past negative'.

Mistakes and regrets are norms of life. Though they dent our past, they do not define us. We define ourselves by what we do next, i.e. how we correct our mistakes or avoid doing the things that leads to those feelings of regret. <---This paragraph is the easy part, the writing.

The harder bit is the correcting or avoiding. My life, alhamdulillah, is relatively blessed. Those who I interviewed in my research, those living in poverty, face a challenge I can only write about. Whether they were born into poverty or fell into the poverty trap, it is a paramount challenge for them, to overcome. If some made mistakes when they were younger or naive, how do they correct their wrongs now. What can they do? Who will help them? Alhamdulillah, I live in a country where zakat plays a critical role in poverty alleviation and I hope it continues.

2. The Present

I'm trying to be more future-oriented than before. At present, that's my new year resolution. But before I talk about the future, let me dwell on the present. 

Three bits are on my mind these days. Not surprisingly, my research is one of them. Being realistic, I'm cautious on whether it will be a truly applied research, or bring about changes that I initially intended. Currently, I just hope it adds to the discussion on zakat, awqaf and personal finance. It is after all, the synergistic discussion of a single topic that advances the way we see our world differently, do things better or re-invent old concepts.

Another bit on my mind is my late beloved grandmother. She passed away around this time last year, and she's a true inspiration. She usually prays for us, grandchildren, to do well in our studies and life. I miss her & I pray she is granted Jannah. Amin. Al-fatihah.

"...To Allah we belong and to Him is our return." (2: 156)

3. The Future

Our return.

In my understanding, in Islam, the bigger picture is that this life on earth is transitory. We are no more than a traveller living in a transient world, doing good where we can & avoiding evil as ever.

The same context applies in Islamic financial planning. Although in conventional financial planning, the future can be related to planning for children's education and retirement, it is somewhat different in Islamic financial planning. As Muslims, the future is the eternal hereafter, and in the realm of Islamic financial planning that should include understanding the role of zakat and awqaf to enhance that future. For instance, related to ongoing charity/awqaf, Prophet Muhammad (pbuh) said: "Whence a child of Adam dies, his/her deed comes to an end except for three things: an ongoing sadaqah, knowledge that benefits (others), and a righteous child who prays for him/her."

In terms of deeds, what better deed that one that does not end. In terms of my research, the question would be how can social finance benefit more from personal finance, zakat and awqaf combined. In the contemporary financial world we live in, with the savings and pensions issues, how can we create an interwoven zakat, awqaf and personal financial system that benefits all of us, both the rich and the poor, both in this world and the next?

If you have a thought on this, drop me a line or email.


Take care,
A. Umar

I'm tired...

Three sentences usually sum up our days or certain events. There's the classic romantic words of 'I love you'. There's also the equally important, though non-romantic words of 'I am hungry' & there's the frequently-said words of 'I am tired'.

I am tired...

Today marks a 30-day countdown to the end of my research fieldwork, with about 60% of interviews done. The exhaustive nature of the fieldwork is expected & that's why I tried to pace myself by taking breaks every now & then. However, recently, I'm starting to feel the 2nd leg of the fieldwork to be somewhat too tiring.

Firstly, there's the burden of the expectations in some interviews. Since my fieldwork involves the poor or those receiving financial welfare, there are times when I worry that my research will not achieve anything, let alone try to help, in any shape or form, those in poverty.  I recall one particular respondent half-pleading to me, to help him on certain welfare issues. In hindsight, I don't know how I managed to respond to him or in that situation. This in itself is not an isolated incident. In another, a respondent stresses or hopes that his responses/pleas/complaints do not stop in his living room. In a sense, he was hoping that something be done to address it. In one sense, I could just take these pleas/responses in my stride. In others, I at times feel the burden of getting my research done right & as fast as I can, whenever this happens. I am tired.

Secondly, there's the issue of failure. There are times I get concerned that the 2-3 years of sweat & effort amounts to nothing, a failed research, nothing more than an attempt at something seemingly noble. Once upon a time, in a different job, I used to return from work, feeling tired but content on a job well done. A sense of feeling, that I had done what I can for that day. These days, I yearn for those days. Nowadays, I am wary of having spent 2-3 years spending time on this bit & coming back empty-handed. Was it (or Will it be) a job well done?

These are some of the things that hover above me like a grey cloud. In some ways, it's a bit selfish. This is a minute issue, a drop in the ocean, compared to the poverty issues faced by some individuals or families...compared to the bereaved families of those who lost their loved ones...and compared to those who yearn for justice against the oppressor.

I am not complaining. I am simply saying, I am tired.

Take care all. 

Peace be upon you.

Ramadan or No Ramadan: Don't forget Zakat on Wealth

Salam (Peace be upon you),

Please don't forget to pay your zakat on wealth (e.g. savings, mutual funds, fixed deposits etc), even after Ramadan, to those in need. Below is a short summary of some forms of wealth, alongside some links.

1. Savings a/c: Identify the lowest balance in the lunar year. If more than 1 savings a/c is held, don't forget to combine the differing sums before comparing w/ the nisab (See link)

2. Fixed deposits: Since fixed deposits are likely to be left invested for 1 year or more, the amount held for 1 lunar year is zakatable at 2.5%.

3. Mutual funds: Although I haven't come across fatwas on mutual funds, its near-similarity to stocks can be argued that the approach to zakat on shares = zakat on mutual funds. In 1988, the OIC Fiqh Academy notes that company shares purchased for trading purposes are treated similarly to trading on business inventory. In other words, 2.5% of the market value of shares is used to compute the zakatable amount [Those interested in the zakatability issue of the monthly mutual fund payments could read up Yusuf Al Qardawi's writeup (See p. 72 of this volume).

4. Money lent: Different scholars have different views (See p. 58 of Al-Qardawi's volume 1 for a short, succinct discussion).

5. Money saved up in a family takaful plan: These types of takaful generally places some portions of premiums as savings. Try asking them of your policies 'surrender value', i.e. how much you currently have in that policy. If it's yours & potentially withdraw-able, isn't it eligible for zakat too? (See link)

Don't forget that the 2.5% zakat rate is applicable on financial assets for a lunar year (i.e. using Islamic/ Hijrah calendar). Monzer Kahf notes that if zakat is paid following a solar year (e.g. Gregorian calendar), the rate should be adjusted to 2.5776%, since the lunar year is shorter than the solar year, by around 11 days or so (See p. 13 of this booklet).

My thoughts only.

Eid Mubarak.

Long Walk To Discovery

Salam (Peace Be Upon You),

I'm in the midst of reading Nelson Mandela's book 'Long Walk To Freedom'. Hence, the shamelessly, lame title of this particular post. It's been a while since my last post. Things have changed, as is life. It's probably time this blog has too, as I write more about research.

Since pursuing a PhD and going through an academic researcher route, or at least training to be one, I can't help think about my research. It consumes my days, both working and weekends. I'm not saying I work hard, for thinking about things is different from doing it. Especially when it comes to the fieldwork, I worry about the getting the interviews done, hoping my research assistants do not quit and other details, which other researchers may consider as well.

On a personal level, since my research relates to poverty, I have been thinking more about the lives of those who are poor. I know we are different, yet similar. Their houses may look shabby and derelict, but our intentions are the same. Do we not all wish to live in a nice house and live happily? Our current situations may differ due to birth (i.e. being born poor or non-poor) or due to one's own circumstances (e.g. too much debt, bad luck etc.), but our future situations are the same. For we will die one day, in the same earth or layer of soil. No one grave essentially different from the next.

At times, it feels tiring to do this research. Obviously, as in some other forms of research, the rejection rate can be high. Although I've worked in customer service before and developed a bit of a thick skin, it can bring you down sometimes. But such is life, the wheel that turns around. I have faith in such things. For if ever there was something to bring one down, it should be for doing a good cause. Few probably so, than trying to help reduce poverty, even if it is from a research or academic point of view. There's this Hadith or saying of the Prophet Muhammad (pbuh) which goes along the lines of:

"When any one of you sees anything that is disapproved (of by Allah), let him change it with his hand. If he is not able to do so, then let him change it with his tongue. And if he is not able to do so, then let him change it with his heart, though that is the weakest (kind of) faith."

In this context, isn't poverty an evil or a thing disapproved? Even if attempting to mitigate poverty is difficult to achieve, it should be worth it. Nothing good ever came easy. And along the way, who knows. We may confront our own biases, refine our thoughts or maybe inspire someone to do at least one good thing. 

More importantly than inspiring or trying to change others, is the need to realise that our actions should be more of a discovery of ourselves, the changes of our line of thought, our perception of others & the short, worldly life that we live in. Hence, the corny title of a 'long walk to discovery'.

Take care all. 

Sincerely,
Umar

Planning your retirement (Brunei-specific...ish)

Assalamualaikum (Peace Be Upon You),

My major disclaimer is that though I have a certificate in financial planning, I'm not a certified financial planner per se. The bits below should be taken at face value, till you meet a certified financial planner (who's actually certified by an established financial planning body like the CFP and the like). Unfortunately, in Brunei, financial planning is currently unregulated, making trusting planners somewhat more difficult. But just to add some cred(ibility:) to what I'm saying, I'll nerdily add 1 or 2 references along the way.

My actual intention is just to highlight some "simple" steps to plan your retirement (It actually may not be simple, they'll be numbers, calculations [Thanks goodness for websites] & maybe the odd, irrelevant diagram). Let's start w/ a scenario: Say, I'm currently 25 (Du bi du) & I want to retire at 55. I have a fictitious TAP (an Employee Provident Fund) of $20,000 & an investment deposit of $10,000.

Step 1: Estimate your retirement expenses

• Some planners & finance websites might provide a rule of thumb like "An easy rule of thumb is that you’ll need to replace 70 to 90 percent of your pre-retirement income" (p.7). 
• Although rules of thumb are handy, it might not be for everyone or be too rigid (e.g. post-retirement may see higher or lower actual expenses due to health costs, vacations etc). 
• The better thing, according to Mittra, Potts & LaBrecque (2005), is to work out an expected expenses figure. Look at your monthly expenses, break it down to fixed vs. flexible expenses, create key categories & estimate a figure for each category.
• In this scenario, let's say mine works out to $3,000 per month or $36,000 per year. This is how much I need each year after retirement.

Step 2: Calculate the lump sum needed at age 55

• As I'll need $36,000 per year until I pass away, I need to know how much I ideally would like to save by 55. In a sadistic world, I'll need a financial calculator, face some mental anguish but thanks to the internet, let's use this webpage. Imagine we're at year 2041, when I'm umm 55. Put in the following figures: 
• Present value: Leave it zero (Cos we want to find this figure - This is the lump sum we need to have saved up by 2041.)
• Future value: I'm putting $10,000 here, assuming I want to leave it as inheritance money.
• Number of payments: 20 (Assuming I withdraw a fixed amount per year & my life expectancy is 75.)
• Payment amount: $36,000 (I want $36,000 per year after retirement.)
• Profit rate: I'll put in 0.98% (Inflation-adjusted profit rate)
• Payment at: Begin ('Cos I want to receive the 36k at the beginning of each year.)
• Press the PV icon, which is the present value, which in this scenario is the lump sum I ideally would like at age 55 = $665,557.26.

Step 3: Estimate your retirement income

• Question is: With my current TAP + savings, is it enough to climb up to cover that lump sum?
• To simplify, I'll combine the 2 investments in this calculation. Assuming I want to save B$500 per month on top of the 30k, from age 25 to 55 (that's 30 years) & the estimated profit rate of the investment is 6%. Using the same website, enter the numbers (In this scenario, we're back in 2011, aged 25):
• Present value: -30,000 (Put a negative sign 'cos money is going out.)
• Future value: Leave it zero (We want to find this figure)
• Number of payments: 30 (Assuming I invest a fixed amount per year, not per month.)
• Payment amount: -6,000 (500 x 12, Put a negative sign 'cos money is going out.)
• Profit rate: 6% (Inflation-adjusted profit rate).
• Payment at: End ('Cos I want to invest at the end of the year.)
• Press the FV icon, which is the future value, which in this scenario is your actual lump sum (should your investment assumptions fall into place). You would get $646,653.85.

Step 4: Reconcile the difference

• With an estimated retirement nest/income at $646,653.85, & the required nest/expense at $665,557.26, that means there's a deficit of $18,903.41. In reality, there's a lot of options to deal with this. E.g. retire later, try to earn more, lower your retirement expenses, reposition your investments, take more risks, save/invest more etc.

Step 5: Review & update your plan periodically.

• Things happen. E.g. Investment rates may go up or down, or I may decide to retire later. It's always advisable to review your plan to make sure you're on track.  

Step 6: Meet an actual, certified financial planner

In this scenario, I used some of my own assumptions e.g. I only deposit at year end, instead of month end. I assumed my investments will go up per year at 6% etc & ignored the newly introduced SCP in Brunei. So here comes the corny line:

If there's one thing I would like you to take away from this boring post...(assuming you've survived)....is to meet a decent certified financial planner &  gauge your actual retirement needs. It might be depressing knowing all the money you need to save or changes you have to make, but it's better to bite the bullet now, rather than face the ultimate bullet later on in retirement.

[Fuh, it seems like a long post. I can continue my life now.]

[ps Lemme know if anyone spots any errors.]

[ps2 I lied. I couldn't find a decent, irrelevant diagram...but I could find this link, which would have saved 20 minutes of your life, rather than reading this post :) ]

Offline Reference: 

Mittra, Sid, Potts, Tom, & LaBrecque, Leon (2005). Practicing Financial Planning for Professionals. Michigan: RH Publishing

Peace, 

Umar