Chapter 4: Entrepreneurship and Islamic Business

BPMS1013 Theory & Practice of Islamic Business

1

CHAPTER 4: ENTREPRENEURSHIP AND BUSINESS IN ISLAM

By: Mohd Adib Abd Muin

Islamic Business School (IBS), UUM

2013


2

What is Entrepreneur?What is Entrepreneurship?What is the Principle of Islamic Entrepreneurship?Why we do need Islamic Entrepreneur?What is the different Islamic Entrepreneurship and

traditional?


3

INTRODUCTION Entrepreneurship is a part of Islamic culture. According to Prophet Muhammad

and his companions," there are a lot of Muslims that are successful entrepreneurs in the world and Islam always invite all Muslims to be innovative, entrepreneur and active.

Entrepreneurship is a strategic area which has always been attentive and always changing over time.

For Muslims, entrepreneurship have played a vital role in the formation of Islamic civilization from the time of the Prophet again.

Entrepreneurship or better known as an area of their business in particular Muslims in early Islam, but not immune to the Prophet himself.

An entrepreneur’s behaviour is bound by sharia or the Islamic law. The conduct of a Muslim entrepreneur is different from the non Muslim counterpart as his or her main objective of involving in business is to be submissive to Allah, the Almighty God in every single action taken in business transaction.


4

ISLAMIC ENTREPRENEURSHIP

Entrepreneurship is an integral parts of Islamic religion The Muslim entrepreneurs are ‘khalifah’ and have the responsibilities to

develop prosperity and sees business as part of ‘ibadah’ or good deed. In Islam, the activity also known as Ibadah –or good deed Position of Entrepreneurship and business in Islam - encouraged to venture

into business. Prophet Muhammad SAW expounded that 9 out 10 sources of sustenance are through business.

Islamic Economic System - Islamic Entrepreneurship should operate within the domain of Islamic Economic system and act as the vehicle towards global acceptance of Islamic Economic System.

Guiding Principles of Islamic Entrepreneurship is by the al-Quran and al-Hadith

Entrepreneurial Ethics based on exemplary conducts of Prophet Muhammad SAW


5

Cont….M. A. Abdullah & A. Hoetoro (2011) said “Islam does support every

Muslim entrepreneur to have an appropriate vision that directs his/her enterprise to triumph over business competition within the globalization era.”

“ Thee do we worship, and Thine aid we seek, show us the straight way”

(Surah al- Fatihah: 5-6)Allah said in Qur’an:

al- Talaq: 3al-A’Raaf: 157al- Baqarah: 177Al- Zukhruf: 32


6

PRINCIPLES OF ISLAMIC BUSINESS

• freedom• Transaction without

riba• fair• Good services• Protecting the right

of sellers and buyers

• Honest and trust• Hard working

CONCEPT OF ISLAMIC BUSINESS

• Exchange goods with goods or money

• The purpose of making a profit

• Valid contract terms in syariah

• Mutual agreement between the seller and buyer

BUSINESS IN ISLAMIC PERSPECTIVES


7

Honesty in

dealing the

business Mutual

respect and

esteem

Satisfying all

business obligatio

nsLawful earning

( Halal).

Humanity in

business

contacts

Priority and

sharing behavio

ur

BASIC CONCEPTS, SYSTEMS AND BUSINESS PROCESSES


8

FACTORS OF

PRODUCTION

TRADITIONAL

LAND

CAPITAL

LABOR

CONTEMPORARY

TECHNOLOGY

ORGANIZATIONS

ENTREPRENEURSHIP

FACTORS OF PRODUCTION


9

PRAYING FIVE TIMES A DAY

CONCERNED WITH THE PROVISION OF HALAL

ALWAYS TRUE

PRIORITIZING USER RIGHTS

FULFILL ZAKAT

ALWAYS BE GRATEFUL

ALWAYS REPENT

Characteristic of Islamic Intrepreneurs

KEEP GOOD RELATIONS WITH HUMANS

RENDER A SERVICE

HELPING OTHER ENTREPRENEURS

STAYING AWAY FROM VICES

NO SABOTAGE

PAY LOAN


10

Component of environment

External environment

Macro external environment

Economics

Social and cultural

Technology

Politics and laws

Micro external environment

User

Competitors

Suppliers

Financial institutions

Non government organization

Non government

agencies

Internal environment

Organizational structure

Organizational culture

Organizational resources

Intrepreneurs and Environment


11

Productiona process of converting input (production resourcess) into finished goods or

semi finished goods. services are also considered as a product. any preparation of services are

considered as a production. involves planning, staffing, directing and controlling all activities related to

the production of goods and services.

Marketingmarketing is a system of business activities designed to plan and execute

the conception, pricing, promotion and distribution of products (including goods, services, organizations, people, places and ideas) to encourage a change that could meet the needs of consumers and at the same time achieving organizational objectives.

FUNCTION OF BUSINESS IN ISLAM


12

Financial financial management involves the individual financial, business or non-

business organizations, government and non-governmental organizations and all entities involved with money.

financial functions within a business including forecasting funding needs, raise funds for the company, managing funds and make sure the fund is used in the best way.

Human resources human resources of an organization is a staff that includes employee and

manager in the organization. they offer talent, knowledge, skills and experience to the organization.

without human resource organization not only can’t move but it will not exist.


13

CUSTOMERS

SUPPLIERS

FINANCING

COMPETITORS

GOVERNMENT

EMPLOYER

BUSINESS ENVIRONMENTS

ECONOMIC

POLITICS &

REGULATIONS

SOCIOCULTU

RAL

TECHNOLOGY


14

Proprietorship

•Owned by individuals •Need a small capital•For examples:- proprietorship in Islam must follow the rules of Islamic principal such as should not deal with haram products (alcohol,wine,pork) also not gambling,not cheating,not lying.

Partnership

•Is a business run by one, two or more of the owner in the profit.•-You and your partner is co-owner’s and they will share profit or risk distrubution.•-In Islamic partnership, if the partner borrows money to the third party, which exceeds his capital, and he commits for external loans, his liabilities are unlimited

Mudarabah

•Is a relationship held by two or more in which one party acts as a supplier and the other runs the firms on behalf of them.•-Division of the rate of profits based on an agreement which involves one party called ‘proprietor’ who supply capital to the firms, and the other called ‘entrepreneur,’ (Khan, 1992, p.216) who accept the capital and run the business

The Types Of Business


15

CHALLENGES AND BUSINESS PROSPECTS IN ISLAM

There are many challenges in business:1) Corruption is the acts prohibited in Islam because it cause hostility and fighting among ourselves in get a services that are offered by some party. The rich will get richer and the poor are poorer. 2) There are elements of fraud either from the buyer, the seller or the goods sales in terms of measurement. For examples: sell a good that did not own and nowadays in business there a way to hide other payments that are not described or explained to the customer during transactions.3) Gharar ( a sale that involves uncertainty)For examples: sale of fish and birds that have not been arrested or shown to the buyer by the seller


16

In Islamic business, ‘riba’ is not allowed. Therefore there will no bias in the community which will cause the rich become richer and the poor become poorer. Islamic business is based on Syariah Principle.

Government offer opportunity for entrepreneur to expand their business with finding fun especially in term of financial lending.

For example, government agencies that involve in helping entrepreneur such as Amanah Ikhtiar Malaysia (AIM), Perbadanan Nasional Berhad (PNB) and others.


17

REFERENCESAli, A. A. (1994). The Holy Qur’an: Text and Translation.

Islamic Book Trust. Kuala LumpurM. A. Abdullah & A. Hoetoro (2011). Social Entrepreneurship

as an Instrument to Empowering Small and Medium Enterprise: An Islamic Perspective. International Journal Management Business Resources

P.R.M. Faizal, A.A.M. Ridhwan, and A.W. Kalsom “ The Entrepreneur Characteristic from al- Quran and al- Hadis” International Journal of Trade, Economic and finance. Vol. 4, No 4, August 2013