An attempt to teach us how to manage our debt and pay-off before we die. Also lesson on budgeting and avoiding over consumption.

1. DEBT MANAGEMENT INDEBT MANAGEMENT IN
ISLAMISLAM
Salaudeen Jubril ASalaudeen Jubril A
jubrilsalaudeen@gmail.comjubrilsalaudeen@gmail.com

2. The TrickThe Trick
 Debts LeverageDebts Leverage
 Geared Credit AllowanceGeared Credit Allowance
 Float pay later FacilityFloat pay later Facility
 Flexibility I.O.U Soft-loanFlexibility I.O.U Soft-loan

3. DEBT: State and National LevelDEBT: State and National Level
 With regard to the community level,With regard to the community level,
specialists have described the negativespecialists have described the negative
consequences and the danger it poses toconsequences and the danger it poses to
the economy:the economy:
 Debt is tearing down schools, clinics andDebt is tearing down schools, clinics and
hospitals and the effects are no lesshospitals and the effects are no less
devastating than war.devastating than war. Adebayo AdedejiAdebayo Adedeji

4. The Debt MapThe Debt Map
Key
SILIC: (RED)Severely indebted low-income country (or
HIPC: Highly indebted poor country)
SIMIC: (BLUE) Severely indebted middle-income
country
MILIC: (YELLOW) Moderately indebted low-income
country

5. What we pay and who is paidWhat we pay and who is paid
 Each year developing countries pay the West nine timesEach year developing countries pay the West nine times
more in debt repayments than they receive in grants.more in debt repayments than they receive in grants.
 The UK Charity Comic Relief raised £26 million in 1997.The UK Charity Comic Relief raised £26 million in 1997.
Africa paid this back in debt service in just over a day.Africa paid this back in debt service in just over a day.
 Each person in the Third World owes about £250 to theEach person in the Third World owes about £250 to the
West - much more than a year's wage for many.West - much more than a year's wage for many.
 Of the 32 countries classified as severely indebted low-Of the 32 countries classified as severely indebted low-
income countries, 25 are in sub-Saharan Africa.income countries, 25 are in sub-Saharan Africa.

6. Cont…Cont…
 Africa spends four times as much on debtAfrica spends four times as much on debt
repayment as she does on healthcare.repayment as she does on healthcare.
 For a billion people, development is beingFor a billion people, development is being
thrown into reverse. After decades ofthrown into reverse. After decades of
steady economic advance, large areas ofsteady economic advance, large areas of
the world are sliding back into poverty.the world are sliding back into poverty.

7. EffectEffect
 Debt is in one of the principal causes ofDebt is in one of the principal causes of
poverty;poverty;
 it has hampered the economicit has hampered the economic
development of essential services suchdevelopment of essential services such
as healthcare and education.as healthcare and education.
 Ecuador spends 47% of its governmentEcuador spends 47% of its government
income on servicing debt and only 12% onincome on servicing debt and only 12% on
education and just 7% on healthcareeducation and just 7% on healthcare

8. SolutionSolution
 Cancellation of the backlog of unpayableCancellation of the backlog of unpayable
debt of the poorest countries - most ofdebt of the poorest countries - most of
which are in Africa.which are in Africa.
 This could signal the beginning ofThis could signal the beginning of
dramatic improvements in healthcare,dramatic improvements in healthcare,
education, employment and developmenteducation, employment and development
for countries crippled by debt (Nigeria)for countries crippled by debt (Nigeria)

9. Debt: Language and ShariahDebt: Language and Shariah
 The fuqaha’ define dayn (debt): an obligation toThe fuqaha’ define dayn (debt): an obligation to
be fulfilled, al-Mawsoo’ah al-Fiqhiyyah (21/102).be fulfilled, al-Mawsoo’ah al-Fiqhiyyah (21/102).
 linguistic dayn (debt) in Arabic has to do withlinguistic dayn (debt) in Arabic has to do with
submission and humiliation.submission and humiliation.
 The connection between the shar’iah meaningThe connection between the shar’iah meaning
and the linguistic meaning ;The debtor is aand the linguistic meaning ;The debtor is a
prisoner,prisoner,
 The Prophet (S.A.W) said: “Your companion isThe Prophet (S.A.W) said: “Your companion is
being detained by his debt.” Narrated by Abubeing detained by his debt.” Narrated by Abu
Dawood, 3341; classed as hasan by al-Albaani inDawood, 3341; classed as hasan by al-Albaani in
Saheeh Abi DawoodSaheeh Abi Dawood

10. The weight of DebtThe weight of Debt
 We were sitting with the Messenger of Allaah (peace andWe were sitting with the Messenger of Allaah (peace and
blessings of Allaah be upon him) when he raised hisblessings of Allaah be upon him) when he raised his
head towards the sky, then he put his palm on hishead towards the sky, then he put his palm on his
forehead and said: “Subhaan-Allaah! What a strict issueforehead and said: “Subhaan-Allaah! What a strict issue
has been revealed to me!” We remained silent and werehas been revealed to me!” We remained silent and were
afraid. The following morning I asked him, “O Messengerafraid. The following morning I asked him, “O Messenger
of Allaah, what is this strict issue that has beenof Allaah, what is this strict issue that has been
revealed?” He said, “By the One in Whose hand is myrevealed?” He said, “By the One in Whose hand is my
soul, if a man were killed in battle for the sake of Allaah,soul, if a man were killed in battle for the sake of Allaah,
then brought back to life, then killed and brought back tothen brought back to life, then killed and brought back to
life again, then killed, and he owed a debt, he would notlife again, then killed, and he owed a debt, he would not
enter Paradise until his debt was paid off.” al-Nasaa’i,enter Paradise until his debt was paid off.” al-Nasaa’i,
4367.4367.

11. ImplicationImplication
 Beware of debt, for it starts with worry and itBeware of debt, for it starts with worry and it
ends with war. Narrated by Imam Malik in al-ends with war. Narrated by Imam Malik in al-
Muwatta’ (2/770).Muwatta’ (2/770).
 In Musannaf ‘Abd al-Razzaaq (3/57) it says: IbnIn Musannaf ‘Abd al-Razzaaq (3/57) it says: Ibn
‘Umar (may Allaah be pleased with him) said: O‘Umar (may Allaah be pleased with him) said: O
Humran, fear Allah and do not die in debt, lest itHumran, fear Allah and do not die in debt, lest it
be taken from your good deeds when there willbe taken from your good deeds when there will
be no dinars and no dirhams.be no dinars and no dirhams.

12.  According to World bank, “ThereAccording to World bank, “There
are presently 15 to 17 millionare presently 15 to 17 million
Nigerians who are financiallyNigerians who are financially
overextended.”overextended.”

13. CLOSER HOME: WHAT IS DEBT?CLOSER HOME: WHAT IS DEBT?
 Debt occurs whenDebt occurs when
goods, services, orgoods, services, or
money is received inmoney is received in
exchange for aexchange for a
promise to pay apromise to pay a
definite sum of moneydefinite sum of money
at a future date.at a future date.

14. DEBT IN CAPITALISMDEBT IN CAPITALISM
 ADVANTAGESADVANTAGES

ConvenientConvenient

Useful for emergenciesUseful for emergencies

Often required to hold aOften required to hold a
reservationreservation

Ability to purchaseAbility to purchase
expensive items soonerexpensive items sooner

Eliminates the need toEliminates the need to
carry large amounts ofcarry large amounts of
cashcash
 DISADVANTAGESDISADVANTAGES

Paying interestPaying interest

Additional fees areAdditional fees are
commoncommon

Temptation toTemptation to
overspendoverspend

Can cause largeCan cause large
amounts of debtamounts of debt

Identity theftIdentity theft

15. Debt in IslamDebt in Islam
 Islam permits assuming debt withinIslam permits assuming debt within
affordable limits. If debts are incurredaffordable limits. If debts are incurred
responsibly then prompt and full repaymentresponsibly then prompt and full repayment
is important.is important.
 The Prophet Muhammad (SAW) said, “theThe Prophet Muhammad (SAW) said, “the
best among you are those best in paying offbest among you are those best in paying off
debt” (Muslim) and “procrastination (delay)debt” (Muslim) and “procrastination (delay)
in repaying debts by a wealthy person isin repaying debts by a wealthy person is
injustice” (Bukhari).injustice” (Bukhari).

16. Paying debtPaying debt
 ““Whoever contracts a debt intending toWhoever contracts a debt intending to
repay it, Allah will repay it on his behalf,repay it, Allah will repay it on his behalf,
and whoever contracts a debt intending toand whoever contracts a debt intending to
waste it, Allah will bring him to ruin”waste it, Allah will bring him to ruin” ( Bukhari).( Bukhari).

17. The prophet supplicationsThe prophet supplications
 ““Allah, I seek refuge with You from sin andAllah, I seek refuge with You from sin and
debt”.debt”.

18. Managing DebtManaging Debt
 When someone remarked, “how often youWhen someone remarked, “how often you
seek refuge from heavy debt”, he (S.A.W)seek refuge from heavy debt”, he (S.A.W)
replied, “when a man gets into debt, hereplied, “when a man gets into debt, he
speaks and tells liesspeaks and tells lies, and, and he makes ahe makes a
promise and breaks itpromise and breaks it” ( Bukhari and” ( Bukhari and
Muslim).Muslim).

19. How do we Manage debtHow do we Manage debt
 1. Pay off1. Pay off
 2. Debt Forgiveness2. Debt Forgiveness
 3. The family assume the debt3. The family assume the debt
 4. Management by Dua4. Management by Dua
 5. The community assume the debt5. The community assume the debt

20. Paid off by the familyPaid off by the family
 The Prophet (peace and blessings ofThe Prophet (peace and blessings of
Allaah be upon him) said: “The soul of theAllaah be upon him) said: “The soul of the
believer is held hostage by his debt in hisbeliever is held hostage by his debt in his
grave until it is paid off.” Narrated by al-grave until it is paid off.” Narrated by al-
Tirmidhi, 1078.Tirmidhi, 1078.

21. Debt forgivenessDebt forgiveness
 ““If the debtor is in difficulty, grant him timeIf the debtor is in difficulty, grant him time
till it is easy for him to repay. But if yetill it is easy for him to repay. But if ye
remit it by way of charity, that is best forremit it by way of charity, that is best for
you if ye only knew” (2:280)you if ye only knew” (2:280)
 ““If anyone would like Allah to save himIf anyone would like Allah to save him
from the hardships of the Day offrom the hardships of the Day of
Resurrection, he should give more time toResurrection, he should give more time to
his debtor who is short of money, or remithis debtor who is short of money, or remit
his debt altogether.” (Muslim)his debt altogether.” (Muslim)

22. USING CREDIT WISELYUSING CREDIT WISELY
 Good Credit PurchasesGood Credit Purchases

Buying a house on credit is a smart move asBuying a house on credit is a smart move as
home values rise quickly and you can gainhome values rise quickly and you can gain
equity through appreciation.equity through appreciation.

Financing an education is a good investmentFinancing an education is a good investment
in the future. Your earning potential willin the future. Your earning potential will
eventually outweigh the cost of tuition.eventually outweigh the cost of tuition.

Be careful :Buying a car on credit purchase.Be careful :Buying a car on credit purchase.
It is important to not get caught up in buying aIt is important to not get caught up in buying a
car for more than you can afford.car for more than you can afford.

23. USING CREDIT WISELYUSING CREDIT WISELY
 Bad Credit PurchasesBad Credit Purchases

Credit card debt and other consumer debt isCredit card debt and other consumer debt is
the worst type of debt. Interest rates and feesthe worst type of debt. Interest rates and fees
on borrowing money this way will be theon borrowing money this way will be the
highest of all, mostly because there is rarely ahighest of all, mostly because there is rarely a
tangible item as collateral.tangible item as collateral.

Financing a car for longer than the life of theFinancing a car for longer than the life of the
vehicle can also be an unwise credit decision.vehicle can also be an unwise credit decision.

24. CREDIT CARDSCREDIT CARDS
 Credit cards are a great concept, butCredit cards are a great concept, but
they end up bringing financial ruin tothey end up bringing financial ruin to
many people who use them.many people who use them.

25. TIPS WHEN USING CREDIT CARDSTIPS WHEN USING CREDIT CARDS
 Never use credit cards as extra money.Never use credit cards as extra money.
Always allocate money from your currentAlways allocate money from your current
funds or monthly income in order tofunds or monthly income in order to
immediately payoff whatever you finance.immediately payoff whatever you finance.
 Read the fine print on the agreement toRead the fine print on the agreement to
make sure you are getting the best termsmake sure you are getting the best terms
available.available.

26. DEBT TO INCOME RATIODEBT TO INCOME RATIO
 Most experts recommend that no moreMost experts recommend that no more
than 28% of your gross monthly incomethan 28% of your gross monthly income
be used to pay for your housing expensesbe used to pay for your housing expenses
(including mortgage or rent, taxes and(including mortgage or rent, taxes and
insurance).insurance).
 They also recommend that your total D/IThey also recommend that your total D/I
be no more than 36% when paying all ofbe no more than 36% when paying all of
your recurring debt.your recurring debt.

27.  It is important to keep these D/I ratios inIt is important to keep these D/I ratios in
mind when acquiring new credit to ensuremind when acquiring new credit to ensure
you are always an attractive credit risk toyou are always an attractive credit risk to
any financial institution.any financial institution.
 Don’t find yourself being declined becauseDon’t find yourself being declined because
you have taken on too much debt.you have taken on too much debt.

28. BUDGETSBUDGETS
 A BUDGET HELPS YOU ORGANIZEA BUDGET HELPS YOU ORGANIZE
YOUR SPENDING BY:YOUR SPENDING BY:

telling you what money comes in, what moneytelling you what money comes in, what money
goes out, and where it goesgoes out, and where it goes

helping you identify expenses that aren’t ashelping you identify expenses that aren’t as
important to you so you can free up money forimportant to you so you can free up money for
those that arethose that are

showing you where some changes might beshowing you where some changes might be
neededneeded

29. BUDGETING PITFALLSBUDGETING PITFALLS
There are three main reasons budgets fail.There are three main reasons budgets fail.
1. Negative attitude – Try not to think of a1. Negative attitude – Try not to think of a
budget as a financial diet. Try to think of itbudget as a financial diet. Try to think of it
as a means to an end.as a means to an end.
2. Lack of motivation – The best motivators are2. Lack of motivation – The best motivators are
generated internally. It is important togenerated internally. It is important to
honestly believe that budgeting can help youhonestly believe that budgeting can help you
meet your goals.meet your goals.
3. Unrealistic expectations – The reality is that3. Unrealistic expectations – The reality is that
budgeting is an endurance event. Thosebudgeting is an endurance event. Those
who stick with it through thick and thin willwho stick with it through thick and thin will
come out ahead financially.come out ahead financially.

30. TIPS FOR CREATING A BUDGETTIPS FOR CREATING A BUDGET
 Use a templateUse a template
 Add/delete categories as applicableAdd/delete categories as applicable
 Plan on paying more of your debtPlan on paying more of your debt
 Prioritize your spending by determining wantsPrioritize your spending by determining wants
versus needsversus needs
 Have both a positive attitude and a positiveHave both a positive attitude and a positive
ending balanceending balance
 Put any annual payments into monthly paymentPut any annual payments into monthly payment
figuresfigures

31. DEBT MANAGEMENT PROGRAMSDEBT MANAGEMENT PROGRAMS
 If you do get yourself into a financialIf you do get yourself into a financial
nightmare, there are ways to get back onnightmare, there are ways to get back on
track successfully and without ruiningtrack successfully and without ruining
you’re your self.you’re your self.
 Debt management programs, which areDebt management programs, which are
also known as credit counseling sessions,also known as credit counseling sessions,
can save you a lot of money and years ofcan save you a lot of money and years of
paying on your debt if you have a goodpaying on your debt if you have a good
one. ( every mosque should have one)one. ( every mosque should have one)

32. DEBT MANAGEMENT PROGRAMSDEBT MANAGEMENT PROGRAMS
A good debt management set-up is aA good debt management set-up is a
third party who will contact your creditors to:third party who will contact your creditors to:

Re-bargain your interest rateRe-bargain your interest rate

Negotiate a payment structure with theNegotiate a payment structure with the
creditor that you can affordcreditor that you can afford

Determine a realistic amount of time for yourDetermine a realistic amount of time for your
debt to be eliminateddebt to be eliminated

33. KEYS TO DEBT MANAGEMENT PROGRAMSKEYS TO DEBT MANAGEMENT PROGRAMS
Key factors to keep in mind when selectingKey factors to keep in mind when selecting
aa
good debt management program:good debt management program:

Your current creditors lower your interest rateYour current creditors lower your interest rate
and not just your payment.and not just your payment.

It is very important you continue to receiveIt is very important you continue to receive
your statements to ensure no payments areyour statements to ensure no payments are
past due.past due.

It is not a loan. The out-fit collects theIt is not a loan. The out-fit collects the
payment from you and allocates it to yourpayment from you and allocates it to your
creditors.creditors.

34. DEBT MANAGEMENT PROGRAMSDEBT MANAGEMENT PROGRAMS
 For someone who gets into a bad financialFor someone who gets into a bad financial
position, these programs can be the key toposition, these programs can be the key to
getting back on track.getting back on track.
 Most programs structure your payments toMost programs structure your payments to
eliminate your debt in 4-5 years.eliminate your debt in 4-5 years.
 They make it so no new revolvingThey make it so no new revolving
accounts can be opened whileaccounts can be opened while
participating in the program so once youparticipating in the program so once you
have paid the debts off, you can have ahave paid the debts off, you can have a
fresh start.fresh start.

35.  Learning to make wise decisions withLearning to make wise decisions with
your purchases, investments, andyour purchases, investments, and
debt can be the key to your success.debt can be the key to your success.

36. End of PresentationEnd of Presentation
 Thank YouThank You