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ISLAMIC FINANCE FOR SMEs ENTREPRENEURS WHAT TO TAKE THE LEAP? MOHAMAD NASIR

Across the world, entrepreneurs are driving
innovation and economic growth locally, regionally
and internationally. Business and government leaders
are encouraging entrepreneurship in speeches and
different conferences around the world.

Although governments must provide the regulatory
and economic environment for entrepreneurs to
flourish, the question that individuals, aspiring to be
entrepreneurs, must answer is when do they take
the plunge into this new world of entrepreneurship?

Some of the questions that a person contemplates
as they consider being an entrepreneur are: when to
take the jump into entrepreneurship or am I even
the right person? Do you take this risk right out of
college or do you wait until you have gained some
experience in the corporate world? Do you launch
a startup after financial security or do you have to
belong to a family of entrepreneurs?

There are two areas that need to be considered
before answering these questions; first is the
characteristics of entrepreneurs and the second is
the timing of venturing into entrepreneurship.

Entrepreneurs have a tendency of being problem
solvers: they identify a problem and attempt to solve
it or see an opportunity and grab it.

Dan Meader of Allowance Manager, developed
an app and web portal for parents to manage their
children’s allowance when he realized there must be
a better mechanism for him and his wife to track and
fund their children’s allowance.

Some of us don’t consider physicians to be
entrepreneurs in business. However, meet Dr.
Bassam Osman, a practicing neurologist, who was
having difficulty investing in a Halal way. So, in
1984 he and a few partners launched the first Halal
Mutual Fund in the United States.

The primary characteristic of an entrepreneur
is the drive: the ability to work through obstacles
and hurdles. So, if you have the drive, you will be
able to succeed in your endeavors. One of other
characteristics that you will need to develop and
utilize is vision. Entrepreneurs have vision. They
see into the future when everyone else sees a dead
end. Entrepreneurs are imaginative, creative, and
determined. They adapt, learn and develop. They
understand how to take calculated risks.

Never forget to dream big. Shahed Amanullah,
the founder of Zabiha.com, had only one regret as
an entrepreneur: he did not dream big as he was
developing his business. He launched Zabiha.com as
a Muslim food portal rather than a food portal for
all Americans. Zabiha.com could have been the Yelp
of today.

Now is probably the best time for an entrepreneur
to take the risk to enter into this new world. There
are always advantages and disadvantages of waiting,
postponing, and trying to find the perfect time. This
is difficult to achieve since there is no perfect time.
If an entrepreneur waits to gain experience and
financial security, he will have other responsibilities
that may hinder his ability to make the jump. If
an entrepreneur jumps early, he will have limited
experience and unnecessary mistakes will happen.
Either way, as my father, Dr. Ibrahim Nasir, always
drove home, that one should always be learning and
developing oneself either in career or in business.
Nadia, the cofounder of Launchgood, recently said
at a finance conference, always be learning.

ISLAMIC FINANCE PRINCIPLES AND CSR PRINCIPLES WHAT CONVERGENCE?
SIMONA FRANZONI ASSOCIATE PROFESSOR
Department of Economics and Management
University of Brescia (Italy)


ASMA AIT ALLALI
ASSOCIATE PROFESSOR
PhD in Business and Law and Corporate Social Responsibility at the University of Brescia (Italy)

  1. ISLAMIC FINANCE: A SOCIALLY RESPONSIBLE AND OPEN ECONOMIC MODEL

Islamic finance is based on principles and values
in which sustainable development and social
responsibility play crucial role in its existence.

In order to comprehend Corporate Social
Responsibility (CSR) from an Islamic financial
point of view, it is necessary to look into its
related principles and values, and aim to deeply
understand what are the underlying dynamics
as well as identify the similarities between the
conventional CSR and Islamic finance.

The Islamic finance model has its foundation
and origin in the Quran and in the Sunna, a
model founded on ethical and religious values
and principles that are very and essentially near
the concept of CSR that requires responsible
actions and protection of stakeholder’s
interests. In other words, an economic-financial
model that requires – in addition to the
observance of individual religious obligations –
the assumption and fulfillment of responsibility
towards the protection of interests of other
people, the environment and therefore the
balance between one’s own interests and those
of the society.

Islamic Finance bases its activities on the real
economy, i.e., on goods that can be identified
and are tangible, and calls on the parties to
support the risks linked to the success or failure
of the investments they have undertaken.

This finance is open and within the reach of
everybody, Muslims and non-Muslims, because
of its ethical, peculiar characteristics.

There are five fundamental ‘pillars’ that
oversee the regulation and religious validity
(Shari’a compliance) of any Islamic economic
and financial activity, as follows:

  1. Ban on Ribà (charging of interest);
  2. Ban on Speculating (maysìr) and introducing elements of uncertainty in contracts (ghàrar);
  3. Ban on the use of, trade and investment in, prohibited assets or activities (haram);
  4. Profit and Loss Sharing – PLS principle;
  5. The obligation to have real assets underlying all financial transactions.

Starting from theoretical studies to religious
principles, underlying the correct functioning
of Islamic finance institutions, the main
objective of this analysis was that of verifying
whether there is any convergence between
the religious principles of Islamic finance and
the CSR principles proposed for conventional
companies.

2. ORPORATE SOCIAL RESPONSIBILITY IN ISLAMIC FINANCE

Nowadays, CSR is relevant to creating a stable
economic environment that aims to safeguard
the interests of community. In particular,
this has been undertaken and discussed by
academics who have studied the conventional
economic model.

During the last decade, several studies have
been conducted into CSR in the context of
Islamic finance. In more detail, these studies
have been focused in two parts. One of them
tried to analyse the client perception of CSR
related to Islamic finance while the other
studied the method in which CSR and its
outcomes are reached through execution of
liable business management by Islamic financial
bodies.

Regulations and guidelines have been
introduced by several International Accounting
Institutions of Islamic Finance to support the
development of CSR according to clear and
uniform rules and practices at international
level.

The Accounting and Auditing Organisation
for Islamic Financial Institutions (AAOIFI) played
an important role in 2010, when among other
governance standards developed one on CSR.
Standard No. 7 “Corporate social responsibility
conduct and disclosure for Islamic financial
institutions” defines CSR and explains in detail
what is meant for each of the responsibilities
included in the definition of CSR. In particular,
the guidelines regarding CSR shown in Standard
7 of the AAOIFI are subdivided into two
categories: mandatory and recommended.

The ‘mandatory’ guidelines on conduct
(obligatory for all IFIs with respect to the laws
of the country) concern the implementation of
a set of internal Islamic bank procedures based
on the following: respect for CSR principles;
the safeguarding of their interests in the
drafting of the contract; supervision of the
sharia compliance of earnings and investments;
the safeguarding of the personnel’s welfare;
and policies defining the conditions for the
stabilisation of the zakàh (compulsory alms for
Muslims).

The ‘recommended’ guidelines on conduct
(recommended for institutes that have the
capacity to apply them) concern the following:
the definition of the conditions for benefitting
from qard hasan (loan without interest) granted
for social reasons; the implementation of
investment, instrument and operating process
selection procedures aimed at safeguarding and
protecting the environment, clients, micro and
small businesses; policies aimed at setting up
charity-oriented social activities; and policies
of endowment (waqf) management aimed at
reinforcing the company’s commitment to
integrate CSR principles into its management
activities.

Starting from the CSR concept and the
related considerations, it is interesting to
investigate and identify the possible common
principles, values and objectives, in order
to understand the underpinning dynamics
and identifying the convergences among the
principles underlying conventional CSR and
Islamic Finance. The methodological approach
is based on case studies (Yin, R.K., 2013), a
qualitative method based on data collection
acquired from documents and questionnaire
interviews. In particular, the analysis has focused
on the study of two cases countries. The first
country is Morocco, an Islamic country that, in
2017, introduced the first participation bank
according to the Act 103.12 2015. Moroccan’s
case focused itself on “Umnia Bank”, the first
participation bank that inaugurated the opening
of its first branches in several cities in Morocco.
The second country is Germany which is
not an Islamic country but it introduced, at
experimental stages, the first Islamic bank
named KT Bank AG, in 2015.

ISLAMIC FINANCE PRINCIPLES AND CSR PRINCIPLES: WHAT CONVERGENCE?

Nowadays, CSR presents itself as a basic concept
that is directly connected to the success of
enterprise in terms of sustainable and durable
value creation, as well as the achievement of
economic, social and environmental results that
take into account the protection of stakeholders.

The theoretical studies on the religious
principles underlying the concept of CSR of
Islamic financial institutions, the studies of CSR
definition formulated by the AAOIFI (Standard
No. 7) and the analysis of the two case studies
mentioned above, show strict convergence
between the social responsibility of companies
as structured in conventional economic systems.

In particular, the elements of convergence are
found in the following responsibilities: economic
responsibility, discretionary responsibility,
ethical responsibility and legal responsibility.
The convergence shows its effects once a
company owns up to its responsibility, through a
managerial conduct that considers stakeholder
protection and the creation of sustainable value.

This convergence leads to a better integration
of Islamic financial institutions in conventional
economic contexts and a harmonization of
the regulations and directives relative to CSR
directed at economic entities operating in the
same countries.

Finally, the element of divergence from the
conventional CSR concept is the obligation
of Islamic financial institutions to assume
responsibility of a religious nature, i.e.,
respecting the principles and obligations
established by Islam and applying them in
their business activities. The element of nonconvergence refers to the nature of Islamic
finance itself and this should not prevent
the integration and development of both
conventional CSR and Islamic CSR because
there are several common elements that make
both systems compatible despite the existence
of such discordant elements.

CONCLUSION

Both conventional and Islamic CSR
concepts have several common principles. The
convergence between the two systems should
encourage the implementation of economic
collaboration policies between Muslim and
non-Muslim countries, and between Islamic and
conventional banks; considering, on one hand, a
growing attention of the investor-savers to CSR
and the stakeholders’ rights protection, and on
the other hand, a strong presence of the Muslim
community, especially, in the European context.

This convergence leads to a better integration
of Islamic financial institutions in conventional
economic contexts and a harmonization of
the regulations and directives relative to CSR
directed at economic entities operating in the
same countries.

An aspect found in the case studies
analysed, specifically in the case of Germany
where KT Bank AG aims to offer complete
financial products and services compatible with
the Shari’a principles and at the same time in
compliance with the German Banking Act. This aimed at all those who are interested, beyond
religious ideology, in investing their savings in
a business conducted according to principles
and values related to CSR. In the Moroccan
case study, it is underlined as the Legislator
intending to implement the use of participatory
Islamic financial instruments (musharaka and
mudaraba) based on the PLS principle, which
represents reliability, honesty, cooperation,
justice and social responsibility as part of Islamic
finance purposes.


As a result, we can state that CSR may be the
element of convergence for these two systems,
an instrument going beyond the traditional
concept of marketing strategy in the short
term, promoting a sustainable concept to create
sustainable value for stakeholders in terms of
economic, social and environmental returns.

PEACE OF MIND AN ISLAMIC PERSPECTIVE ON HOW TO ATTAIN IT KHALFAN ABDALLAH

Professor Gilbert, author of Stumbling on Happiness wrote, “The human being is the only animal that thinks
about the future…. We think about the future in a way that no other animal can, does, or ever has, and this
simple, ubiquitous, ordinary act is a defining feature of our humanity.” Humans, in the course of thinking about
the future, may end up with more peace of mind or they may end up with confusions, uncertainty, lack of inner
peace, and to the extreme, can decide to end their lives and the life of others.

Peace of mind is often easier said than attained; when attained, the challenge is to maintain it. This article
reviews what Muslim scholars have said about peace of mind (al aman al nafsi).

In this article, peace of mind refers to the state of mind whereby one feels a sense of ease and peace within
the face of challenging circumstances. This implies a state free of despair, grudge, remorse, or blame, and more
importantly maintaining a constant positive attitude with Allah and with oneself or others, despite heavy losses
or afflictions.

SIGNIFICANCE OF PEACE OF MIND

We live in what some thinkers call a – VUCA (Volatile, Uncertain, Complex and Ambiguous) world. A lot of
Individuals as well as corporations face demanding circumstances without having any foreknowledge about it or
being unable to take appropriate timely action. Remez Sasson asserts, “Often, even when being in good financial
condition and in good health, people have no peace of mind…”

Peace of mind is good for health and an honorable living. Peace of mind is associated with habits such as
steadfastness (thabat), exuberance and hope, and free from despondency, anxiety, stress, worries, fear, and
mental and emotional restlessness.

HOW TO ACHIEVE PEACE OF MIND?
One school of thought advocates for training, as peace
of mind “is an acquired skill which requires time, practice
and perseverance to develop, just like any other skill.
Often, the skill package contain learning to change
mental attitude and developing inner strength and inner
detachment, through meditation and other means.”

Furthermore, several tips have been shared online, such
as those available on https://www.successconsciousness.
com/peace_mind.htm.

The question is, if it is possible to maintain that peace
of mind. One may argue that the given tips therein
are temporary in nature. Below are some of the more
permanent ways to maintain peace of mind as shared by
Muslim scholars.

1. STRONG FAITH
“As a matter of fact, those who believe and do not taint
their faith with wrongdoings will feel more secure and will
be better guided.” (6:82)

Thus having strong faith in God and in His ability to
rescue His believing servants, and cherishing the thought
that one is under the protection of the Most Powerful,
leads to feeling inner peace.

In the story of Moses and the Israelite, when they were
approached by the powerful army of the Pharaoh, the
Israelite felt that this was their end. However, Moses had
strong belief. We are told in the Holy Qur’an.

“And when the two companies saw one another,
the companions of Moses said, “Indeed, we are to be
overtaken!” [Moses] said, “No! Indeed, with me is my Lord;
He will guide me.” Then We inspired to Moses, “Strike with
your staff the sea,” and it parted, and each portion was like
a great towering mountain.” (26:61-63).

At any trying moment that has incapacitated one’s ability
to find a way out, they must remember that Almighty
Lord is not incapable, powerless or stoppable by any
force. They should direct their thinking and hope towards
Him, and say “Indeed, with me is my Lord; He will guide
me.” Or “Indeed, Lord is with me/us.”

As faith increases, so does inner peace. Without faith
in Him and the commitments to do deeds that uplift
faith, any perceived inner peace shall be delusional and
unsustainable. Devoid of faith in Him, surely, one is
moving on a losing path. “Losers indeed are those who
deny the meeting with Allah until the Hour takes them by
surprise, then they will cry, “Woe to us for having ignored
this!” They will bear ˹the burden of˺ their sins on their
backs. Evil indeed is their burden!” (6:31).

Finally, they must reflect on this question from the
Holy Quran: “Ask them: “Who delivers you from calamities
in the darkness of the land and of the sea, when you call
upon Him in open humility and silent terror: If You deliver us
from this affliction, we shall become truly grateful.” Say, “It
is Allah who saves you from it and from every distress; then
you [still] associate others with Him.”” (6:63). Therefore, He
is the best hope and the best savior.

  1. TOTAL TRUST
    “And whoever puts their trust in Allah, then He ˹alone˺
    is sufficient for them”. (65:3)
    This is referred to as a tool of the believer, of the past
    and present. A Believer never abandons his reliance in
    Allah, as it is only though reliance or trust alone that can
    change and improve his affairs and he never relents to do
    his duty because it is all that he needs to improve! What
    one can do, must do it with total reliance to Almighty as
    success or failure never comes except when He wills. So
    why fear the future? Why lose hope in times of difficulty or distress? Why feel overjoyed for a success? Everything belongs to Allah, thus they must trust in Him to rescue them from distress and be grateful for any success. Quran narrates, “Those to whom hypocrites said, “Indeed, the people have gathered against you, so fear them.” But it [merely] increased them in faith, and they said, “Sufficient for us is Allah, and [He is] the best Disposer of affairs”. So, they returned with favor from Allah and bounty, no harm having touched them. And they pursued the pleasure of Allah, and Allah is the possessor of great bounty.”” (3:173-174).
  1. REMEMBRANCE
    “Who have believed and whose hearts have rest in the
    remembrance of Allah. Verily in the remembrance of Allah
    do hearts find rest!” (13:28).
    Believers must constantly remember Allah; early morning
    and at night. Besides, Prophet Muhammad (PBUH) taught
    us what to do and the words to say at times of distress or
    sadness. Some of them are:

• It is reported that “When anything distressed the Prophet (PBUH), he prayed.”
• The Prophet (PBUH) used to invoke Allah at the time of distress, saying, “La ilaha illal-lahu Al-`Azim, al- Halim, La ilaha illal-lahu Rabbu-s-samawati walard wa Rabbu-l-arsh il-azim.”
• “The Messenger of Allah (PBUH) taught me some words to say at times of distress: Allah! Allahu Rabbi la ushriku bihi shay’an (Allah, Allah is my Lord, I do not associate anything with Him).”
• “Whenever a matter would distress him, the Prophet (PBUH) would say: ‘O Living, O Self-Sustaining Sustainer! In Your Mercy do I seek relief (Yā Ḥayyu yā Qayyūm, bi-raḥmatika astaghīth).’” And with this chain, “The Messenger of Allah (PBUH) said: ‘Be consistent with: “O Possessor of Majesty and Honor (Yā Dhal-Jalāli wal-Ikrām).’”

  1. SUPPLICATION
    The Prophet (PBUH) said, “Du’a (supplication) is worship.”
    Supplication is a weapon of a believer. It is a form of
    worship that a believer upholds during good times and
    bad times. Therefore, it is very important to constantly
    supplicate when one is in a good situation so that they
    can be answered when in distress. The Prophet (PBUH) said “He who wants to be happy
    to receive a response during distress or hardship, let him
    supplicate a lot when he is fine or happy.” “Get close to
    Him during the moments of ease, He will be close to you
    during hardship.
  1. POSITIVE ATTITUDE FOR EVERY DISTRESS
    Hassan Al Basri said “Don’t hate hardships that you face.
    Perhaps that which you hate, is what will save you and
    perhaps that which you like, may harm you”

“…perhaps you dislike a thing and Allah makes therein
much good.” (3:19)

We must know that distress and hardship are a blessing in
disguise for those who are patient and hope for a reward
from their Lord. The believer psychology is to remember
that, Allah forgive sins in return for every discomfort
that we experience in our lives. Surely, trials are part of
believer’s life journey, perseverance is his coach and His
Lord is the only hope for reward for every distress and
hardship.

“Do you think you will be admitted into Paradise without
being tested like those before you? They were afflicted with
suffering and adversity and were so ˹violently˺ shaken that
˹even˺ the Messenger and the believers with him cried
out, “When will Allah’s help come?” Indeed, Allah’s help is
˹always˺ near.” (2:214).

For more practical ways and details, you can download
and read: Al Aman Nafs by Dr. Muhammad Musa
Shariff at https://ia800501.us.archive.org/8/items/
waq65859/65859.pdf

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