CONTENTS · viii CONTENTS 2. Islam and the Globalized Business Environment 19 Muhammad Mansoor Khan 2.1 Introduction 19 2.2 The national business environment 20

vii

List of Figures xviList of Tables xviiPreface xviii

Part 1 Islamic Business Environment

1. Islam and Business: Beliefs, Values, and Norms 3Mohammad Omar Farooq and Fareed Hadi1.1 Introduction 41.2 Beyond Islamic banking and finance 51.3 Essential Islamic beliefs pertaining to business 5

1.3.1 Tawhid (Monotheism) 51.3.2 Risalah (Prophethood, Messengership) 61.3.3 Aakhira (Afterlife) 6

1.4 Essential aspects of Islamic law 6 1.5 Essential values of Islam 7

1.5.1 Humanity orientation 71.5.2 Integrity and delivering on promises 71.5.3 Shared prosperity and Islamic economy 71.5.4 Fairness 81.5.5 Stewardship and sustainability 81.5.6 Real economy and earned income and wealth 91.5.7 Success orientation 91.5.8 Teamwork and collaboration 91.5.9 Continuous improvement 101.5.10 Accountability 10

1.6 Functional norms 101.7 Islamic business environment 12

1.7.1 Goal of business 121.7.2 Resource needs of a business 141.7.3 Business decisions 141.7.4 The stakeholders 15

Discussion Questions 16Selected Bibliography 16Notes 17

CONTENTS

viii CONTENTS

2. Islam and the Globalized Business Environment 19Muhammad Mansoor Khan2.1 Introduction 192.2 The national business environment 20

2.2.1 Political leadership 202.2.2 Macroeconomic measures 212.2.3 Demographic factors 212.2.4 Legal framework 212.2.5 Customers 222.2.6 Employees 222.2.7 Communities 222.2.8 Suppliers 22

2.3 The globalized business environment 232.3.1 Global population and diminishing natural resources 232.3.2 Global competition 242.3.3 Globalization of business and finance 242.3.4 Global warming 252.3.5 Modern technologies and innovations 252.3.6 Global connectivity and social media 262.3.7 Corporate governance and corporate social responsibility 262.3.8 Professional ethics and integrity 272.3.9 International accounting standards and practices 27

2.4 Challenges faced by Muslim-majority countries in the twenty-first century globalized world 272.4.1 Muslim-majority government 272.4.2 Political autonomy of Muslim-majority countries 282.4.3 Muslim-majority countries and Western financial institutions 292.4.4 Muslim-majority countries’ economies and financial markets 292.4.5 Western and Islamic MNCs 292.4.6 Muslim-majority countries and world politics 302.4.7 Human resource crisis in Muslim-majority countries 302.4.8 Western culture and the Muslim polity 302.4.9 Global extremism and the Muslim polity 312.4.10 Enlightened Muslim world 31

2.5 Islamic values and principles for developing the open economy environment 31Discussion Questions 33Selected Bibliography 33Notes 34

3. Entrepreneurship and Small Business Ownership 35Rasem Kayed3.1 The entrepreneurial process 37

3.1.1 Who is an entrepreneur? 383.2 An Islamic perspective of entrepreneurship 39

3.2.1 Ownership in Islam 39

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3.2.2 Islam and entrepreneurship 413.2.3 The Muslim entrepreneur 43

3.3 Entrepreneurial opportunities 443.3.1 From creative ideas to entrepreneurial opportunities 443.3.2 Screening opportunities 453.3.3 The identification of entrepreneurial opportunities 453.3.4 Three views of entrepreneurial opportunity 463.3.5 Where to look for promising business ideas 46

3.4 Small business start-ups 473.4.1 What is a small business? 483.4.2 Small businesses and entrepreneurship 483.4.3 Popular sectors for small business enterprises 493.4.4 Advantages of owning a small business 493.4.5 Challenges of owning a small business 513.4.6 Small business: Factors leading to failure and success 52

3.5 Starting and financing small business enterprises using Islamic principles 543.5.1 Forms of business start-up enterprises and available financing options in an

Islamic economy 543.6 Factors that enable or inhibit entrepreneurship development 56

3.6.1 Personality factors: The entrepreneur 563.6.2 Sociocultural factors 573.6.3 Environmental/institutional factors 593.6.4 Other factors 61

Discussion Questions 64Comprehension Questions 65Activities 65References 66Selected Bibliography 67Notes 67

4. Business Ethics and Social Responsibility 69Mohammad Adli Musa and Mohd Ariff Mohd Daud4.1 Introduction 704.2 Business ethics 714.3 Islamic business ethics 724.4 Islamic business ethics framework 73

4.4.1 God-consciousness: Tawhīd 744.4.2 Justice: Adālah 744.4.3 Benevolence: Ihsān 75

4.5 Responsibility to stakeholders 764.5.1 Responsibility to customers 764.5.2 Responsibility to employees 774.5.3 Responsibility to stockholders 774.5.4 Responsibility to creditors 774.5.5 Responsibility to the environment 774.5.6 Responsibility to community 77

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4.6 Law and ethics 774.7 Conclusion 78Discussion Questions 81Selected Bibliography 81

Part 2 Management and Marketing

5. Islamic Commercial Jurisprudence 85Abu Umar Faruq Ahmad5.1 Introduction 855.2 Shariah: Theoretical foundations of commerce, finance, and economy 86

5.2.1 Shariah: Meaning and definition 865.2.2 Sources of Shariah 875.2.3 Fiqh and Fiqh al-Muʿ āmalāt 885.2.4 Maqāsid al-Shariah and Islamic finance 89

5.3 Underlying philosophy of business transactions in Islam 915.3.1 Riba-based transactions 915.3.2 Transactions based on Gharar 915.3.3 Transactions involving Maysir and Qimar 925.3.4 Sacredness of contracts 935.3.5 Prevention of harm 93

5.4 Valid and invalid contracts for business transactions in Islam 935.4.1 Meaning and definition of contract 935.4.2 Valid and invalid contracts 94

5.5 Types and key features of valid contracts 945.5.1 Commutative contracts 955.5.2 Controversial debt-creating contracts 975.5.3 Partnership-based contracts 995.5.4 Charitable contracts 1005.5.5 Fee- and service-based contracts 1025.5.6 Supporting contracts 103

5.6 Invalid contracts 104Discussion Questions 106Selected Bibliography 106Notes 107

6. Organizational Culture and Managing Change and Innovation 109Ahmad Rafiki and Sutan Emir Hidayat6.1 Introduction 1106.2 Application of Islamic organizational culture 110

6.2.1 The concept of Islamic organizational culture 1106.2.2 Islamic culture: The prominent features 1116.2.3 Organizational culture and firm performance 1166.2.4 Organizational culture and knowledge creation capability 1186.2.5 Organizational culture and organizational change 120

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6.3 Work ethics, leadership, and organizational culture 1206.3.1 Islamic work ethic and organizational culture 1206.3.2 Leadership and organizational commitment 122

Discussion Questions 125Abbreviations 126Online Resources 126Selected Bibliography 127

7. Islamic Marketing 131Hurrem Yilmaz, Osama Sam Al-Kwifi and Zafar U. Ahmed7.1 Introduction 1327.2 Islam and business 1337.3 Islamic values for an ethical framework 1347.4 Islamic consumer behavior 1357.5 Islamic markets 1377.6 Segmenting Islamic markets 1397.7 Principles of Islamic marketing 1407.8 Islamic marketing mix 141

7.8.1 Product 1417.8.2 Price 1437.8.3 Promotion 1447.8.4 Place 1457.8.5 People 145

7.9 A short story 1467.10 Successful companies 146

7.10.1 Tekbir clothing (Turkey) 1477.10.2 Wardah halal cosmetic (Indonesia) 147

7.11 Digital platforms and Islamic marketing 1487.11.1 Alchemiya.com 1487.11.2 Zilzar.com 1487.11.3 Halaltrip.com 148

7.12 Consumer neuroscience and halal products 148Discussion Questions 150References 152Selected Bibliography 154

Part 3 Human Resource Management and Decision Making

8. Human Resource Management and Labor Relations 157Pawan Budhwar and Vijay Pereira8.1 What is Human Resource Management (HRM)? 158

8.1.1 HRM in general 1588.1.2 HRM in the Middle East: An overview 158

8.2 Factors influencing HRM 1608.2.1 Framework of factors influencing HRM in a cross-national context 1608.2.2 Factors influencing HRM in the Middle East 161

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8.3 Challenges for HRM in the Middle East 1638.3.1 The way forward 164

8.4 Summary 165Discussion Questions 166Online Resources 166Selected Bibliography 166

9. Employee Behavior and Motivation in the Light of Islam 169Soleman Mozammel9.1 Introduction 1709.2 Impact of Islamic values on individual, team, and organizational behavior

and performance 1709.2.1 Islamic values: Ethics 171

9.3 Islamic values: Employee behavior and organizational performance 1719.4 Identify the nature and importance of job design 172

9.4.1 Job design: Importance 1729.5 Identify the factors affecting individual motivation, behavior,

and performance in Islam 1749.5.1 Motivation 1749.5.2 Motivation: Other schools of thought 175

9.6 Islamic perspective 1769.7 Tools used by Islamic and modern businesses to measure employee performance 178

9.7.1 Employee engagement 1789.8 Transformational leadership: A tool 179

9.8.1 Leadership in Islam 180Discussion Questions 181Selected Bibliography 181

10. Decision Making 183Mohammad Selim10.1 Introduction 18310.2 Steps in decision making 186

10.2.1 Decisive and indecisive groups of people 18610.2.2 How to make decisions 18610.2.3 What are the steps? 18610.2.4 Six steps in decision making 187

10.3 Shura and consultative decision making 19010.3.1 Shura strengthens the bonds of unity and cohesion 19010.3.2 The scope of Shura 19110.3.3 Shura is participatory decision making 19110.3.4 Qualities and acumen of Shura members 19210.3.5 Shura is an obligation and requirement for effective decision making 192

10.4 Types of decisions 19210.4.1 Programmed decision 19310.4.2 Nonprogrammed decisions 193

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10.5 Faulty decision making 19410.5.1 Overconfidence bias 19410.5.2 Hindsight bias 19410.5.3 Anchoring bias 19410.5.4 Framing bias 19410.5.5 Escalation of commitment 194

Discussion Questions 195Selected Bibliography 195

Part 4 Finance and Accounting

11. Financial Markets and Institutions 199Bora Aktan and Saban Celik11.1 Financial markets 200

11.1.1 Debt markets and stock markets 20111.1.2 Money markets and capital markets 20111.1.3 Primary and secondary markets 20511.1.4 Spot markets and futures markets 20511.1.5 The role of financial markets 207

11.2 Financial institutions 20911.2.1 Depository institutions 20911.2.2 Insurance and pension funds 21011.2.3 Exchange brokers 21011.2.4 Other investment intermediaries 21011.2.5 The role of financial intermediaries 211

11.3 How the financial system functions 21211.3.1 Basic functions of the financial system 21311.3.2 Asymmetry in financial markets 21411.3.3 Crises in financial markets 21611.3.4 Contagion of financial crises 218

11.4 Financial market and economy 21911.4.1 The financial system and economic activity 21911.4.2 Globalization of financial markets 22011.4.3 Regulation and supervision of financial markets 221

Discussion Questions 223Case Study 223Online Resources 224Selected Bibliography 224Notes 224

12. Islamic Banking and Finance 227Abdus Samad12.1 Role of banking and finance 228

12.1.1 Introduction 22812.1.2 Role of banking and financial institutions 228

xiv CONTENTS

12.2 Historical development of Islamic banking and finance 22912.2.1 Historical background/underpinning of origins of Islamic banks 22912.2.2 First attempts and the operation of Islamic banks 22912.2.3 Development of Islamic banking in Muslim countries 23012.2.4 Development of Islamic financial institutions in the Western world 232

12.3 Principles and conceptual foundation of Islamic banking and finance 23312.3.1 Principles of Islamic banking and finance 23312.3.2 Conceptual foundations of Islamic banking and finance 234

12.4 Understanding basic operations of Islamic banking and finance 23612.4.1 Islamic banking and finance 23612.4.2 Balance sheet in Islamic banking and finance 23612.4.3 Liabilities (sources of funds of Islamic banks) 238

12.5 Contemporary experience of industry as alternative to conventional financial system and its merits, limitations, and constraints 24312.5.1 Experience of Islamic banking industry 24312.5.2 Limitations of Islamic banking 244

Discussion Questions 246References 246Notes 247

13. Corporate Governance of Islamic Financial Institutions 249Shakir Ullah13.1 Introduction to corporate governance 25013.2 Levels of conventional corporate governance structure 250

13.2.1 Top management 25013.2.2 Middle management 25113.2.3 Lower management 251

13.3 Corporate governance for Islamic financial institutions (IFIs) 25113.4 Profit versus interest 25213.5 The role of regulations in the governance of a company, including financial

institutions 25213.6 Need for a parallel governance structure for IFIs 25313.7 Pillars of Shariah governance structure 25313.8 International standard-setting bodies 253

13.8.1 Local regulatory frameworks 25413.9 Lines of authority in dual governance structures 256Abbreviations 258Online Resources 259References 259Note 259

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14. Islamic Accounting: Principles and Practices 261Sutan Emir Hidayat and Alfatih Gessan14.1 Accounting from an Islamic perspective 262

14.1.1 Evolution and historical development of international financial reporting standards (IFRS) and practices 262

14.1.2 History and principles of Islamic accounting 26414.1.3 Objectives of Islamic accounting 266

14.2 Accounting standards for Islamic financial institutions 26814.2.1 Application of international financial reporting standards for Islamic

financial institutions: Benefits and challenges 26814.2.2 Financial statements of an Islamic bank 271

14.3 Conclusion 277Discussion Questions 278Selected Bibliography 280Note 280

Glossary 281

Index 291

3

ISLAM AND BUSINESS: BELIEFS, VALUES, AND NORMS

Mohammad Omar Farooq and Fareed HadiUniversity of Bahrain, Bahrain

1

Contents1.1 Introduction1.2 �Beyond�Islamic�banking�and�finance1.3 Essential Islamic beliefs pertaining to business1.4 Essential aspects of Islamic law1.5 Essential values of Islam1.6 Functional norms1.7 Islamic business environment Discussion Questions Selected Bibliography Notes

Learning Outcomes

LO1: Explain�the�role�of�business�and�resources�used�for�it.

LO2: Describe�the�business�environment,�key�stakeholders,�and�major�types�of�decision�making.

LO3: Understand�the�core�beliefs�and�values�of�Islam�pertaining�to�business�and�commerce

LO4: Recognize�the�emphasis�of�the�Qur’an,�as�exemplified�in�the�life�of�the�Prophet�(p),�on�trade�and�prosperity�in�human-centered,�sustainable�development

LO5: Explain�the�role�trade�has�played�in�the�history�of�Islamic�civilization�and�the�contemporary�aspirations and initiatives to bring Islamic values to business and the economy

INSIGHT: Shared ProsperityChobani�is�a�Greek�yogurt�maker,�a�privately�owned�multibillion-dollar�company�in�the�USA. Its�CEO�and�founder�is�Hamdi�Ulukaya,�a�Turkish�immigrant�to�the�USA.

On�April�27,�2016,�he�declared�that�his�company�will�offer�shares�to�its�2000�full-time�employees� that� are� 10�percent� of� the� company’s� future� value� in� the�event�of�a�sale�or�an�IPO. This�will�make�many�of�its�employees�millionaires.

This�is�commonly�known�as�an�employee�stock�ownership�plan�(ESOP),�and�the�underlying�value�is�called�shared�prosperity –�a�highly�relevant�approach�to�profit�sharing.

4 ISLAMIC BUSINESS ADMINISTRATION

1.1 IntroductionAn economy is a system that seeks to balance the resources of a country against the wants and needs of its people. The main activities in an economy consist of:

• Production (supply)

• Consumption (demand)

• Distribution (linking demand and supply).

Businesses participate in the economy to produce and supply what consumers demand. Businesses in a market economy serve as the growth drivers in a number of interrelated ways:

• Creating employment and income-earning opportunities for the working population

• Purchasing resources

• Supplying goods and services

• Fostering innovation

• Generating savings and capital

• Fulfilling the needs and wants of society.

In the Muslim world, businesses play roles similar to those played by businesses in the rest of the world where Muslims live and have businesses. Though businesses share certain features, Islam as a way of life brings certain beliefs, values, and norms in shaping and conducting business. A synopsis of these beliefs, values, and norms are explored in this chapter, which also presents the basics of business. Further, these beliefs, values, and norms underlie all aspects of business covered in this book.

Muslim societies throughout history have led, fostered, and facilitated trade and business around the world. That changed as the Western world embarked upon its colonizing enterprise throughout the world, including the Muslim world as the Ottoman Empire disintegrated. After the breakup of the Ottoman (Turkish) Empire (1299–1924 AD), the Muslim world emerged from the postcolonial period as nation-states. The Organization of Islamic Cooperation (OIC), an international organization established in 1969, consists of 57 member states and represents more than 1.6 billion people, with a combined GDP (at purchasing power parity, or PPP) $18.6 trillion (Euro zone: $12.39 trillion, NAFTA $20.1 trillion). These countries

From�an�Islamic�viewpoint,�what�the�owner�of�Chobani�did�is�not�a�matter�of�law�or�legalistic�exercise.�Rather,�this�is�Islam�beyond�the�realm�of�law�or�mere�legal� considerations.� In� it� there� is� vision,� values,�ethics,� and,�most� importantly,�care�reflecting�Islam.�We�may�wonder�what�the�world�would�look�like�if�those�who�have� the� power,� wealth,� and� privilege� to� embrace,� promote,� and� practice� the�value of “shared prosperity.”

The�Qur’an�teaches�that�wealth�should�not�circulate�among�the�wealthy�few�[59/al-Hashr/7]!�Beyond�legality,�this�is�a�value-oriented�approach.

Source:�Chobani’s�vision�in�the�owner’s�words:�https://www.chobani.com/about/.

5ISLAM AND BUSINESS: BELIEFS, VALUES, AND NORMS

vary in area, demographics, stage of development, resources, and so forth. However, during the postcolonial era, only a few countries, among which are Malaysia and Turkey, have made significant progress in their industrial development.

1.2 �Beyond�Islamic�banking�and financeDuring the postcolonial period, one of the key developments and contributions of the Muslim world that has gone mainstream and attracted significant attention from around the world is Islamic banking and finance (IBF). This niche industry is based on the avoidance of certain religious prohibitions, the most important of which is riba (traditionally equated with interest).

While there is no national economy that can be identified as an Islamic econ-omy where business activities are conducted based on Islamic values and parame-ters, according to Islamic Finance Outlook 2018 by S&P Global Rating, the Islamic banking and finance industry has been growing at a robust pace and reached $2 trillion in assets. The development of this field has led to the establishment of:

• financial institutions (e.g. Al Baraka and Kuwait Finance House banks)

• standard-setting and other support institutions (e.g. Islamic Financial Services Board [IFSB], Accounting and Auditing Organization for Islamic Financial Institutions [AAOIFI])

• academic and professional research institutions (e.g. International Centre for Education in Islamic Finance [INCEIF], Islamic Shariah Research Academy [ISRA])1

• regulatory bodies as part of central banks.

However, there is little focus or emphasis on business in general or nonfinancial businesses in particular for which financial institutions and markets exist.

With the growth and expansion of the IBF industry, and for its sustainability and relevance, the focus needs to shift to the real world of business and help develop relevant knowledge, infrastructure, and competencies.

Whether it pertains to banking, finance, or economics, considering any of these from Islamic perspectives requires making explicit the underlying foundation of beliefs, values, and principles. The same is true of business from Islamic perspectives.

1.3 �Essential�Islamic�beliefs�pertaining�to businessIslam as a practical, balanced, wholesome and comprehensive way of life (deen) is based on three core beliefs: tawhid (monotheism), risalah (prophethood, messeng-ership), and aakhirah (afterlife). These beliefs constitute the foundation of every aspect of Muslim life, including business.

1.3.1 Tawhid�(Monotheism)Tawhid entails that there is a God, the one and only God, who created human beings as part of the universe. Even though humans share this universe with their fellow creations, God made human beings distinct as thinking and discerning crea-tures that are able to reason and make choices. Muslims are expected to acknowl-edge God in their lives by searching for and affirming his guidance and upholding it to the best of their ability.


1.3.2 Risalah�(Prophethood,�Messengership)As part of our natural disposition, we human beings search for explanations of our life and existence, and if there is a Creator or God, it makes sense that mankind should receive communication from the Creator. God has sent divine revelations throughout history, and the last and final revelation is the Qur’an, received verbatim via the Prophet Muhammad (p).2 The Qur’an is the fountain of the beliefs, princi-ples, and values of Islam. The life of the Prophet (p) exemplifies the normative best practices of Islam, which is known as sunnah and preserved through hadith, but this source is not in the same category as the Qur’an.

1.3.3 Aakhira�(Afterlife)There is a life after death, which includes a Day of Judgment, when God will hold human beings accountable. Those who find favor with God in light of his guidance in this world will go to paradise and enjoy eternal bliss. In contrast, those who find disfavor with God will be doomed. Thus, the afterlife is based on the concept of accountability in this life, but more importantly in the life hereafter, which should shape all the transactions, pursuits, decisions, and choices, whether those relate to commercial or noncommercial activities.

The Islamic way of life (deen) is based on comprehensive guidance from the Qur’an and the exemplary life of the Prophet Muhammad (p). However, over time, Muslim societies have put disproportionately more emphasis on laws and codes, known as fiqh or Islamic law.3

1.4 �Essential�aspects�of Islamic�lawAll activities in life are driven by certain values and conducted within a framework of legal precepts. But contemporary Islamic practices and norms are heavily legalis-tic, creating a fundamental gap between laws and values. We discuss values in the next section.

The legal aspects of Islam can be understood in the framework of Shariah and fiqh. Shariah is the divine path that consists of broader and general guidance as well as a set of specific injunctions (fardh, obligation) and prohibitions (haram). Muslims are required to practice the fardh, avoid the haram, and conduct themselves only within the limits of what is permissible (halal). Both the domains of injunctions and prohibitions consist of a small list, leaving the overwhelmingly larger domain to human judgment and interpretation. When it comes to details about these injunc-tions and prohibitions, there are differences among various groups of Muslims. The domain of fiqh is the conscientious and dedicated effort of Muslim scholars and experts throughout the ages to interpret the Shariah to deduce rulings and solutions as needed in different contexts of life.

Islamic law is based on a number of sources, including the primary sources – the Qur’an and sunnah/hadith – and secondary sources – ijma’ (consensus) and qiyas (analogical reasoning). Urf or custom that does not conflict with the Qur’an or sun-nah is also regarded as an additional source.

The specialized part of fiqh that relates to business is Islamic commercial jurispru-dence, which also covers various types of business contracts. Since all such interpre-tations are fallible, Muslims are to exercise their discretion in adopting and applying the principles in a harmonious and problem-solving way.

[Q 45:18] Then�We�put�you,�[O�Muhammad],�on an ordained way [Shariah]�concerning the matter [of religion];�so�follow it and do not follow the inclinations of those who do not know.


1.5 �Essential�values�of IslamAs a comprehensive way of life, Islam offers as guidance to humanity a set of essen-tial values that also applies to business. The distinction between laws and values is fundamentally important. For example, it is not legally required of a Muslim to feed a hungry person. But from a value-oriented perspective, Islam teaches, as the Prophet Muhammad (p) said, “A man is not a believer who fills his stomach while his neighbour is hungry.”4 While a more comprehensive framework can be contem-plated, in the context of business and economy, the following main values are pre-sented here.

1.5.1 �Humanity�orientationIslam teaches its adherents that they are to serve humanity. It is a message and imperative for believers to serve as a model for humanity both at the individual and collective level. Indeed, one of the primary factors that facilitated the spread of Islam since the post-Prophetic era has been the merchants and traders, who through their exemplary conduct reflect strong ethics and deep empathy.

In practical terms, this means recognizing the importance of a high ethical stan-dard (benchmark principles that, when followed, foster the higher values of fairness, trust, care, and transparency), best practices, and good governance for modern busi-nesses at all levels. Such businesses pursue profit with relevant human sensitivity while fulfilling their social responsibility as well.

Social responsibility is an ethically driven perspective where various entities, individuals or organizations, are considered duty-bound to fulfill their civic duty for the benefit of the broader society. Such a perspective seeks a balance between the pursuit of profit and economic growth on the one hand and the welfare of society and a sustainable environment on the other.

1.5.2 �Integrity�and delivering�on promisesMakkah and Madinah, two of the holiest cities of Islam, were major centers of trade even during pre-Muhammad (p) ages. Muhammad (p) was born in Makkah in 570 AD and chose business as his profession. Before he became the Prophet, Muhammad (p) was honored by his community as al-Amin (the Trustworthy) through his role as a successful and trustworthy businessperson and a social activist. A core value he imparted to his followers is amanah (trust), which means that they should have the highest level of integrity and keep promises at all levels, individual, institutional, national, and international.

A related value is taqwa (God-consciousness; Q 49:13), or being aware of God as the most important reference in making any choice or decision. He is constantly cognizant of our actions and thoughts and will hold human beings accountable.

Furthermore, Islam ennobles business as a profession, as long as it is done with integrity and care while avoiding what is prohibited in Islam and what is harmful to others.

1.5.3 Shared prosperity and Islamic economyBecause Muslims believe in the life hereafter, they aspire to true and lasting gains in the form of rewards of eternal peace and happiness in the life hereafter. Thus, in this life, while they devote themselves to the full demands of life, or live fully, they

Q 3:110“O believers, you are created for mankind …”

Q 4:58“Indeed, God commands you to render trust to whom it is due and when you judge between people to judge with justice …”

Q 49:13“… the most honourable of you with God is that (believer) who has taqwa.”

The Prophet (p) said:�“The�truthful,�trustworthy merchant is with the�Prophets,�the�truthful,�and�the martyrs.” [Jami al-Tirmidhi,�Kitab�al-Buyu,�#1209]

Q 59:7“… let not wealth circulate among a few …”


should not give in to greed or miserliness. They embrace the notion or value of shared prosperity. Indeed, to believe otherwise would be inconsistent with Islam.

Thus, the business arena can and is expected to be competitive in a way that enhances the common good, but from an Islamic viewpoint it cannot be predatory.

Because Muslims seek prosperity, they have an inclusive attitude based on empa-thy, where the notion of shared prosperity is highly relevant. The Prophet’s teaching is categorical: “A person is not a believer who fills his stomach while his neighbor is hungry.”5

The issue of an Islamic economy or an economy that reflects the values and parameters of Islam is relevant in this context. While many academic definitions of an Islamic economy have been proposed, one holistic way to describe such an econ-omy can be that an Islamic economy is based on “sustainable, shared prosperity, subject to a few Islamic prohibitions.” Others have emphasized the following four ethical axioms for an Islamic economy: (a) tawheed (unity); (b) al’adl wal ihsan (equilibrium); (c) ikhtiar (free will); and (d) fardh (social responsibility).6 Islamic businesses flourish in an economic system that reflects and upholds the core Islamic values and parameters.

1.5.4 FairnessFairness, in Arabic adalah or qist, is one of the central values of Islam. The standard set by Islam for fairness is rather higher than in any other faith or ideology.

The Islamic conception of fairness requires a higher level of conscience and con-sciousness, where a person is expected to know and recognize what is unfair and is supposed to stand for fairness, even if it goes against oneself. When it comes to fair-ness, all religions consider it important, but Islam sets a much higher standard by asking people to stand for justice and fairness in a self-critical manner. Such a self- critical and self-reflective perspective can have major, positive implications for the choices and decisions people make, especially when others’ lives and interests are affected. Upholding fairness makes people more sensitive to the potential impacts of their decisions, policies, and conduct.

Thus, a stakeholder-oriented approach to business considerations is more rele-vant from an Islamic viewpoint than a narrow, shareholder-focused approach. A stakeholder is any party that is affected by or can affect an entity. Thus, the share-holders of a business are among key stakeholders, but in a stakeholder- oriented approach, employees, customers, suppliers, communities, regulators, and govern-ment are all given due considerations in a company’s decision making.

1.5.5 Stewardship and sustainabilityGod created man as his khalifa (vicegerent) on the Earth. The notion of khalifa embodies the role of stewardship as well. God also reminds us in the Qur’an of the balance he has created and calls upon mankind not to upset that natural balance. This is central to our understanding of the modern concept of sustainability and environmental/ecological balance.

All people, whether producers or consumers, businessmen or regulators, as stakeholders on this Earth have a responsibility as a steward, and their decision making and choice should be geared toward shared prosperity from both intragen-erational and intergenerational perspectives.

Q 4:135“O you who have believed, be persistently standing firm in justice, witnesses for God, even if it be against yourselves or parents and relatives. Whether one is rich or poor, God is more worthy of both. So follow not [personal] inclination, lest you not be just. And if you distort [your testimony] or refuse [to give it], then indeed God is ever, with what you do, Acquainted.”

Q 57:7-9“And the heaven He raised and imposed the balance. That you not transgress within the balance. And establish weight in justice and do not make deficient the balance.”


1.5.6 �Real�economy�and earned�income�and wealthIslam teaches the value of labor and earning of wealth through work and contribu-tions to value creation. That is why riba, commonly equated with interest or unjust unearned income, is prohibited.

A real economy consists of the domain of production and consumption, where there must also be due emphasis on savings and the production of capital goods. Technology is an important factor in real economic growth and development. Another relevant factor in this context is institutions, established ways of behaving or established procedures, as embodied in organizations and their structure.

Modern business as part of the industrial age requires proper emphasis on the real economy, avoiding excessive financialization.

Islam emphasizes avoidance of excessive uncertainty and speculation, commonly associated with financialization, and a focus on the real economy promotes real value creation, instead of merely making money from financial activities.

1.5.7 Success orientationIslam encourages its adherents to pursue success and achieve things in both lives, this one and the hereafter. The call to ritual prayer from mosques includes the state-ment, “Come to falah” (success, prosperity; salvation), where success is ultimately linked with salvation in the hereafter.

Whether for the hereafter or in this world, human aspirations should push peo-ple and businesses to pursue success within an ethical framework.

This requires vision, knowledge, competence, experience, determination, and sincerity. Vision is what guides any entity toward specific goals or destinations. The journey toward success requires knowledge and competence. In a modern society, knowledge and competence are gained through education and training. Success in any endeavor also requires determination and perseverance. As Jack Welch, former CEO of General Electric (1981–2001), affirmed: “Good business leaders create a vision, articulate the vision, passionately own the vision, and relentlessly drive it to completion.”

1.5.8 �Teamwork�and collaborationBusiness is a collective enterprise, where teamwork and collaboration in every aspect are important. The concepts of jama’ah (organization) and ta’awun (cooperation/collaboration) are relevant in this context.

Effective teamwork and collaboration require skilled, motivated, and empow-ered human resources. The input of all stakeholders is duly sought, valued, and utilized, whenever appropriate.

While Islam motivates people to work in teams and to collaborate, it also instills a spirit of avoiding collaboration in unethical matters. Moreover, it inspires people to play a constructive role in preempting or preventing wrongdoings. This value has highly positive implications for the creation of a symbiotic organizational culture and environment, contributing to effective management of change and innovation.

The contemporary business world is highly dynamic, and the pace of change is often fast owing to many disruptive factors. Successful businesses must be adept at change management, where, along with individuals and teams, they are prepared to reallocate resources, revise business processes, adjust budget allocations, or change modes of operation, which may lead to reshaping the business. Organizational

[Q 2:275]“ … But God has permitted trade and has forbidden Riba …”

Financialization: A�process�whereby�the�economy is dominated by�financial�capital,�marginalizing�the�real�economy,�with�rising�vulnerability to asset price bubbles.

Resource:�Thomas�Palley�(2013).�Financialization: The Economics of Finance Capital Domination,�Palgrave�Macmillan,�2013.

[Q 3:104]And let there be [arising] from you a community inviting to [all that is] good, enjoining what is right and forbidding what is wrong, and those will be the successful (muflihun).

[Q 5:2]… And cooperate in righteousness and piety, but do not cooperate in sin and aggression.

Q: 42:38And those … whose affair is [determined by] consultation (shura)

[Q 2:148]… hasten towards all that is good.


change management (OCM) considers organizations in their entirety and deter-mines what needs to change.[1] OCM principles and practices include CM as a tool for change focused solely on the individual. Management of change and innovation requires businesses to focus on how people and teams are affected by transitions and positioning employees effectively.

1.5.9 Continuous improvementThe dynamics of human progress and development depends on continuous improve-ment. In business, especially in a competitive environment, this is fundamentally important.

A relevant Islamic concept is islah, which has a broad range of meanings: improvement, amelioration, correction, reconstruction, renovation, remedying, establishment of peace, happiness, order, reformation, restoration, and redressing.

It is a comprehensive concept with broad implications. The very spirit of it is to approach a problem with a solution-oriented mindset to seek ways to make good things better and to transform conflicts into cooperation. People have the God- endowed power to change themselves individually and collectively. Islah provides a positive framework with a higher purpose. It begins at the individual level with emphasis on good and positive thought, which steadily leads to a positive attitude and, in turn, positive actions and outcomes for the society.

1.5.10 �AccountabilityIslamic belief in aakhirah inculcates a firm and deep sense of accountability (hisab), where it is believed that every action is recorded and acknowledged by God, and whatever happens in this world, there will be accountability in the hereafter.

This belief leads to taqwa (God-consciousness) that makes believers act and make decisions/choices that guide people, individually and organizationally, toward what is good and beneficial. A person or entity with taqwa upholds a high ethical standard with an inner sense of accountability.

1.6 Functional normsBased on the aforementioned beliefs and values, Islamic civilization developed a robust, sophisticated, and vibrant business environment and culture. Islamic civili-zation was multiethnic, multicultural, and multifaith, and this was further facili-tated by international and intercivilizational interactions, where Muslim societies enthusiastically embraced the language, knowledge, and experiences of other societ-ies. This experiential factor enriched Muslim societies and civilization deeply, and it was the gradual disconnect in the same context in Muslim societies that led to their decadence, which is reflected in its position in global business and economy.

The development of the modern world in the past few centuries is now indis-pensable for businesses to develop from an Islamic perspective. The experience and rich history of modern business is a relevant treasure. Human experience crystallizes into customs and norms. Indeed, appreciating the accumulated human experience and benefiting in the form of customs (urf) is also a functional norm in Islam. With the exception of anything that contradicts the injunctions and prohibitions in Islam, Muslims can and should benefit from such experience, in light of some of the widely recognized norms that are also consistent with and valued by Islam.

[Q 4:124]If any do deeds of righteousness (amali salihat), – be they male or female, – and have faith, they will enter Paradise, and not the least injustice will be done to them.

The Prophet Muhammad (p) said: “Shall I not inform you of something more excellent�in�degree�than�fasting,�prayer,�and sadaqah�(charity)?”�The�people�replied:�“Yes,�Prophet�of�God!”�He�said:�“It�is�islah –�putting things right between�people;�spoiling them is the shaver�(destructive).”�[Sunan Abu Dawood;�vol.�3,�#4901]

Q 88: 25–26Verily, to Us will be their return: Then verily, for Us will be their Reckoning.”


• Simplicity, Instead of ComplexityOne modern business that has become iconic is based on the philosophy of “sim-plicity”: Apple. Its founder, Steve Jobs, was passionate about innovation and value, but always keeping “simplicity” in focus as well.7

Islam inculcates the value of simplicity in life while pursuing effectiveness and desired outcomes. Normally, for any destination, we should seek the straight or simplest route, sirat al-mustaqim (the Straight Path).

• Emulation, Best PracticesGeneral Electric is one of the largest and best managed conglomerates; its slogan is “We bring good things to life.” Between 1981 and 2001, under the leadership of CEO Jack Welch, the company’s stock value appreciated 4000 percent. Using a circumplex model consisting of 12 styles of thinking and behavior, Welch helped ensure “best practice in leadership development.”8

The Prophet Muhammad (p) is presented in the Qur’an as exemplary (uswatun hasana). [Q 33:21]

Both from religious and competitive business perspectives, establishing or upholding best practices is an important part of Islamic business models.

• Self-SupervisionGoogle is a leader in the information technology revolution. A key aspect of the company’s management model is to avoid micromanagement and promote self- supervision. The company promotes the idea throughout the firm that it “Empowers the Team and does not micromanage.”9

The concept of taqwa is to value self-supervision. Inculcating taqwa among peo-ple enhances the culture and environment of self-supervision and helps avoid micromanagement. In the book Managing by Values (Dolan, et al.) it is underscored that “the best work arises from conditions of self-supervision rather than external control” (p. 102).

• TransparencyTransparency is not among the greatest virtues of most businesses. However, some companies embrace the principle and value of transparency as part of their commit-ment to best practices. MOZ is a small, emerging tech company that from its incep-tion has treated transparency as a core value. According to its CEO Rand Fishkin, “Transparency for us isn’t a question of business value or marketing strategy – it’s one of our core values. That means we’d be transparent (and have been) even when it’s harmful to the business.”10

Islam also places a fundamental emphasis on transparency. Consider that before God, we are all transparent and nothing is hidden. Good governance requires trans-parency along with a sense of accountability. Businesses that care about Islamic norms value transparency in dealing with all stakeholders, where God should also be treated or acknowledged as the most important stakeholder.

• Self-Criticism and Self-ImprovementMicrosoft, one of the leading global companies of modern times, incorporates self-criticism into its process of self-improvement.11 Successful businesses have a well-established culture of self-criticism and self-improvement. Like self- supervision, it is internally driven by an entity’s core values and norms.


In Islam this value of self-criticism is related to the principle of fairness. As men-tioned earlier, the Qur’an teaches its adherents to “stand for justice … even if it goes against yourselves.” [Q 4:135]

• Excellence as a Way of LifeIBM is another global business icon that embraces excellence in a special and focused way. According to IBM, “Excellence must be a way of life.”12

The pursuit of excellence is a core norm for success in any field, including busi-ness. Islam teaches its adherents that whatever they do, they should do it in an excellent manner. This is the underlying spirit of being the follower of the Uswatun Hasana, the exemplary, Prophet Muhammad (p).

• Diversity as Enrichment and EnablingMost successful businesses do not seek to form a monolithic group. Rather, they appreciate diversity as a form of enrichment. Ernst & Young is a multinational pro-fessional services company and one of the four leading accounting firms. It is also ranked third among the top 50 companies for diversity. The company articulates its commitment to diversity: “At EY, we believe that only the highest- performing teams, which maximize the power of different opinions, perspectives and cultural references, will succeed in the global marketplace. Our focus on diversity and inclu-siveness is integral to how we serve our clients, develop our people and play a leader-ship role in our communities.”13

Islam does not view diversity as something negative. God created mankind with diversity in terms of ethnicity, language, gender, age, habits, aptitude, interests, and so on. The dynamics of improvement, or positive change, is facilitated by an appro-priate degree of diversity.

The preceding sections discussed beliefs, values, and norms from an Islamic per-spective. The following sections will discuss the essential aspects of business that must be guided by those beliefs, values, and norms.

1.7 Islamic business environmentEnvironment is a key determinant of the success of any business. A business starts, exists, and evolves in a dynamic environment. Functionally, there can be a social/cultural environment, an industry environment, and an economic environment, while scopewise there are regional, national, and global environments.

A business must always be cognizant of changing environments, including the regulatory environment. Effective businesses not only monitor the various environ-ments, but also play their own role to shape those environments in a positive manner.

Whether operating under normal conditions or during times of change, businesses that wish to pursue goals from an Islamic perspective are expected to strive to foster an environment that is consistent with the beliefs, values, and norms explained earlier. These are important not just from a religious perspective; rather these are beliefs, val-ues, and norms essential for establishing and running profitable businesses.

1.7.1 �Goal�of businessA business is a commercial enterprise (firm: shirka) or legal entity that earns income or profit (rib’h) by supplying products or services desired by consumers. All aspects


of a business, from launch to operations to expansion, as well as the beliefs, values, and norms presented earlier in the chapter, need to be taken into consideration. While business-related topics are explored in this book, specific Islamic dimensions are identified when relevant.

Choosing to start a business is what entrepreneurship is all about. With a deep aversion to unearned or unjust income, commonly from enterprises that do not take appropriate risk, Islam emphasizes work and earning a livelihood, especially through entrepreneurial undertakings. At the macro level, an economy needs to promote and facilitate entrepreneurship and create opportunities through small and medium-sized enterprises, while at the micro level, it constitutes a major decision for an entrepreneur that entails a set of interrelated decisions in the following areas:

• the purpose and value of starting the business;

• the demand and stakeholders the business is trying to satisfy;

• the resources (factors of production) needed;

• key management functions this business will entail;

• the environment (economic, social, cultural, political) within which the business must operate.

Conventionally, the goal of any business is to earn a profit. A new business starts by identifying unmet demand that can be served by the entrepreneur. A demand may exist due to a gap in the market or competitive advantage based on quality, cost, innovation, or technology.

Profits or earnings are the difference between the revenues a firm takes in and the costs it incurs. In accounting terms, this is shown on an income statement as the net profit or the bottom line. The gross sales or revenues are known as the top line of a business. Increasing the bottom line requires either increasing the top line or reduc-ing the costs of achieving efficiency (more output from fewer resources). It is only natural that businesses would like to increase profits as much as possible. However, contrary to the narrow economic concept of profit maximization, a business can achieve certain target profits as part of a broader set of goals that relate to key stakeholders.

Businesses usually thrive in an environment where entrepreneurs are free to choose what enterprises they want to get into and where they also have the freedom to enjoy the rewards of their efforts. However, businesses operate in organized soci-eties, where government regulations are in place to ensure the proper functioning of the system, to enforce property rights, and to protect the rights of all partici-pants in the economic system. These aspects are relevant from an Islamic perspec-tive as well.

Nonprofit organizations also pursue specific goals, but profit is not their motive. They may make a profit, but instead of benefiting the owners or any share-holders, the profits are reinvested in the entity. Many hospitals and universities, for example, are nonprofit institutions, and they are regulated differently compared to commercial firms.

Also, the concept of social business is important in an Islamic context. Popularized by the founder of Grameen Bank and Nobel Laureate Muhammad Yunus, a social business is a cause-driven business whose purpose is to solve major socioeconomic problems in a “financially sustainable way.” In a social business, the investors/owners are entitled to gradually recoup their capital invested, but they cannot earn any return or dividend.14


1.7.2 �Resource�needs�of a businessA business needs resources or inputs to produce its products or services. These resources are also known as factors of production. From the perspective of modern economics, all resources are categorized into four factors of production:

a. Land: all natural resources unaltered by other factors of production.

b. Labor or human resources: all human exertions, physical or mental.

c. Capital: artificial resources used to produce something else, such as buildings, machinery, or equipment, for example.

d. Entrepreneur: a person who undertakes the initiative to organize and manage business activity and assumes risk.

From the viewpoint of Islamic economics, capital is not regarded as an independent category. Rather, the reward from capital must be based on some entrepreneurial activities. While conventional economies are based on interest as a reward of capital ownership, from a traditional Islamic perspective, instead of interest, profit is the reward of capital and entrepreneurship as a combined factor.

Also, from a financial viewpoint, a business needs funds, which is known as financial capital. The business may acquire financial capital from personal or insti-tutional sources. For institutional sources, there are financial institutions, such as banks as financial intermediaries, that bring together savers and borrowers, as well as capital markets.

Though technology is not regarded as a resource, it does affect all factors of pro-duction. Technology can affect how various resources are combined in production, which in turn determines which resource earns what share of the pie. In modern business practice, in addition to technology in general, information technology (a specialized area of technology that facilitates the use of information to produce products) and e-commerce (business based on electronic communications, such as the Internet) have become pivotal.

1.7.3 Business decisionsRunning a business involves a broad range of tasks and decisions. There are many aspects of decision making for which, depending on the size of the business, there are different functional responsibilities.

Setting up a business requires that the entrepreneur select a suitable location, employ effective human resources, establish relevant facilities, acquire the necessary raw materials, and produce, market, and supply the product or service.

Thus, businesses have a number of functional areas, including the following:

• Management, whose role involves planning, organizing, leading, and control-ling the firm’s resources to achieve the firm’s mission. This area also involves identifying and managing risk and uncertainty. In the complex modern environ-ment, a business needs to be familiar with various qualitative and quantitative tools for effective decision making.

• Operation, which refers to the processes by which a business utilizes and con-verts its resources into products or services. Modern technology and institutional frameworks have a major impact on business. Thus, depending on its nature and size, a business must cope with managing human resources to motivate employ-ees using a number of strategies, from augmenting productivity to maintaining efficient distribution and supply chain management.


• Finance, which involves planning, securing, and utilizing funds. In particular, in this regard from an Islamic perspective, there are some key prohibitions, includ-ing riba (commonly equated with interest), gharar (excessive uncertainties), and maysir (gambling, speculation).

• Marketing, which involves activities connected with identifying customers’ needs and designing products or services to meet those needs.

• Accounting, upon which managers base their decisions; thus, there is a need for relevant financial and business-related information that is accurate and timely. Accounting professionals gather, organize, and present relevant information to enable managers to analyze and make decisions. While much of conventional accounting presents no issues from an Islamic viewpoint, specific areas of accounting require adaptation to harmonize conventional standards. The AAOIFI and IFSB have made valuable contributions in this regard, with a par-ticular focus on Islamic financial institutions.

1.7.4 �The�stakeholdersA broad range of parties have an interest or stake in a business. These parties are known as stakeholders, and they include owners (shareholders), employees, custom-ers, creditors, and suppliers.

From an Islamic perspective, in addition to the stakeholders recognized in con-ventional businesses, there should be one more focal point in all our decision mak-ing: God, to whom we will all return and be accountable. Not recognizing or acknowledging God in our decision making and choices is the primary reason behind unethical and unfair decisions and choices made by people in their respective spheres. When leaders, managers, supervisors, or workers act or decide as if they were outside the purview of God (or as if they won’t be held accountable for their choices and decisions), they create an environment in which unethical decisions are more likely. The Islamic business environment is discussed in further detail in Chapter 2.

Chapter HighlightsThe� world� of� business� is� competitive,� sometimes� brutal� or� even� predatory.�However,�a�good,�successful�business�does�not�have�to�depend�on�or�cater�to�the�negative aspects of human behavior or aspirations.

In�the�contemporary�context,�most�businesses�worship�profit�and�sharehold-ers,�the�consequences�of�which�are�reflected�in�reoccurring�crises�that�are�often�crises of ethics and poor corporate governance.

Businesses that embrace Islamic imperatives can play a vital role in the human�community�by�setting�examples�that�draw�on�the�best�of�human�experi-ence� while� at� the� same� time� being� guided� by� the� beliefs,� values,� and� norms�enshrined�in�the�Qur’an�and�exemplified�in�the�life�of�the�Prophet�Muhammad�(p).�With�a�spirit�of�serving�humanity�in�its�quest�to�be�successful�in�this�world�and�in�the�hereafter,�people�need�to�harness�their�potentials�to�raise�the�standards�of�business�in�the�Muslim�world�and�beyond.

This�opening�chapter�lays�out�a�core�set�of�beliefs,�values,�and�norms�that�should�serve as the foundation for the development of a robust and vibrant business envi-ronment and culture in this globally competitive world. Businesses inspired by these beliefs,� values,�and�norms�can�offer�a�better�model,� contributing� to�human-cen-tered progress and development based on shared prosperity and ethical conduct.


Key TermsAccountingAakhira�(afterlife)Bottom lineCapitalCreditorsDividendE-commerceEfficiencyEntrepreneurEntrepreneurshipFactor of production

(Resources)Falah�(success;�

prosperity)

Fardh�(obligatory)FinanceFinancial intermediariesFinancializationFiqh�(Islamic�law)FirmHalal�(permissible)Haram�(prohibited)Human�resourcesInformation technologyInstitutionsManagementMarketingNatural resources

Nonprofit�organizationProfitReal�economyRisalah�(prophethood/

messengership)ShareholderShariah-compliantSocial businessStakeholder,�

Taqwa (God-consciousness)

Tawhid�(monotheism)Top�line

Discussion Questions

�1.� What� are� the� three� key� beliefs� of� Islam?� How� do� these� beliefs� relate� to�business?

�2.� What�is�the�difference�between�Shariah and fiqh?

�3.� How� does� Islam� view� business� as� an� occupation?� How� does� the� life� of� the�Prophet�Muhammad�(p)�relate�to�business?

�4.� Islamic�civilization�has�been�known�for�its�robust�and�vibrant�commerce.�What�factors�facilitated�the�role�of�business�in�Islamic�civilization?

�5.� What� does� Islam� have� to� offer� in� terms� of� the� development� of� world-class�businesses?

�6.� What�are�the�factors�of�production�from�conventional�and�Islamic�viewpoints?

�7.� What�are�the�functional�decision�areas�for�a�business?

�8.� Who�are�the�key�stakeholders�in�a�business?�Who�is�the�most�important�stake-holder�for�decision�making�from�an�Islamic�perspective?

�9.� What�are�some�differences�in�laws�and�values?�Beyond�legal�aspects,�how�can�embracing the values of Islam facilitate the development of better businesses in the�Muslim�world?

Selected BibliographyAl-Jayyousi,�O.R.�(2012).�Islam and Sustainable Development: New Worldviews. London:

Routledge.Becker,� K.� (Ed.).� (2004).� Islam and Business: Cross-Cultural and Cross-National

Perspectives.�London:�Routledge.Dolan,�S.,�Garcia,�S.�and�Richley,�B.�(2006).�Managing by Values: A Corporate Guide to

Living, Being Alive, and Making a Living in the 21st Century.�Basingstoke,�Palgrave�Macmillan.


Farooq,�M.O.�(2011).�Toward Our Reformation: From Legalism to Value- Oriented Islamic Law and Jurisprudence.�IIIT:�Herndon.

Helble,�M.�(2006).�On�the�Influence�of�World�Religions�on�International�Trade.�Journal of Public and International Affairs,�17(11),�279–288.

Naqvi,�S.N.H.�(2003).�Perspectives on Morality and Human Well-Being: A Contribution to Islamic Economics.�Leicester:�The�Islamic�Foundation.

Wilson,� R.� (2006).� Islam� and� Business.� Thunderbird International Business Review,�48(1),�109–123.

Yusoff,�N.M.�(2002).�Islam and Business.�Selangor:�Pelanduk.

Notes� 1.� Albaraka.com;�kfh.com;�aaoifi.com;�ifsb.org;�inceif.org;�isra.my.� 2.� Whenever�the�Prophet�Muhammad�(p)�is�mentioned,�Muslims�send�salutation�

to�him�in�the�form�“Peace�be�upon�him,”�which,�as�a�reminder,�is�abbreviated�throughout�this�book�as�(p).

� 3.� Farooq�(2011).� 4.� Al-Adab Al-Mufrad,�https://sunnah.com/adab/6/12.� 5.� Al-Adab al-Mufrad,�Book�of�Neighbors,�#112.� 6.� Naqvi,� Syed� Nawab� Haider� (1997).� “The� Dimensions� of� an� Islamic� Economic�

Model,”�Islamic Economic Studies,�Vol.�4,�No.�2,�1–23.� 7.� Sarah�White�(November�11,�2015).�“7�tech�giants�share�their�core�values,”�cio.

com,� http://www.cio.com/article/3004381/careers-staffing/7-tech-giants-share-their-core-values.html#slide2.

� 8.� Human� Synergistics� International� (2011)� “Best� Practice� Case� Study,”� https://www.humansynergistics.com/docs/default-source/case-studies-and-white-papers/gecasestudy_v-1-0.pdf?sfvrsn=2.

� 9.� D. Garvin� (December� 2013).� “How� Google� sold� its� engineers� on�management,”� Harvard Business Review,� https://hbr.org/2013/12/how-google-sold-its-engineers-on-management.

�10.� J. McGill� (March� 28,� 2015).� “Why� these� 9� companies� choose� transparency,”�Entrepreneur,� https://thenextweb.com/entrepreneur/2015/03/28/why-these-9-companies-choose-transparency/#.tnw_N9B3IgIs.

�11.� M. Cusumano�and�R. Selby�(1995).�Microsoft Secrets,�New York,�Free�Press.�Also,�see�Sarah�White,�op. cit.

�12.� IBM.com.�“IBM�Management�Principles�and�Practices,”�http://www-03.ibm.com/ibm/history/documents/pdf/management.pdf.�Also,�see�Sarah�White,�op. cit.

�13.� Ernst� &� Young,� http://www.ey.com/us/en/about-us/our-people-and-culture/diversity-and-inclusiveness.

�14.� Yunus,�Muhammad�(2010).�Building Social Business: The New Kind of Capitalism That Serves Humanity’s Most Pressing Needs,�Readhowyouwant.com.

291

AAakhira (Afterlife), 6, 10AAOIFI, see Accounting and Auditing

Organization for Islamic Financial Institutions

AAOIFI accounting standard, 272, 275Abdul Rahman ibn Awf, 41Absolute sincerity, 112Accept conventional procedures, 270Accountability, 10, 111–112Accounting, 15Accounting and Auditing Organization for

Islamic Financial Institutions (AAOIFI), 55, 103, 262, 266, 268–271, 274

Action, decision making in, 190Actual deception, 104Adalah, 8, 74–75Al-‘adl, 74Advanced accounting information systems, 27Adverse selection, 214–216Affective reaction, organizational change, 120Aforementioned nationalization programs, 160Afterlife, 6Ahmad, E., 136Ajmal Perfumes, 151Akhlaq, 111, 121Alchemiya.com, 148Alharbi, A., 230Ali, A., 121Allah (SWT), 72, 112–114, 116, 118

putting trust in, 111sovereignty, 40

Allocative theory of entrepreneurship, 46Al-Rajhi bank, 231Alserhan, B. A., 137, 141Amanah (trust), 7, 178, 238–239American Accounting Association, 264al-Amin, 7Anchoring bias, 194Anomalies, 208Apparent mistakes, 104Application of international financial reporting

standards for Islamic financial institutions, 268–271

Aqada, 93ʿAqd, 93–94

Arkān, 94Asad, M., 87ASDA’A Burson-Marsteller, 138Asset management firms, 211Assets, 236–238Asymmetry in financial markets, 214–216Auditing Organization for Islamic Financial

Institutions (AAOIFI), 253–254Authority in dual governance structures, lines

of, 256–257

BBadawi, J. A., 122Bagehot, W., 228Bahrain, 231Bahrain Islamic Bank, 231Bai al-salaam, 238Bai baithaman ajil,’ 237–238Bait al-mal, 262Balance sheet, 236–238, 271–272Balance sheet structure of depository

institution, 209Bangladesh, 232Bank bills, 202Banker’s acceptances, 202Bank-guaranteed bills, 204Banking and financial institutions, 228Banking crisis, 216Bank Islam Malaysia, 231Bank Muamalat, 232Banks’ balance sheets, supervision of, 221Al-Banna, H., 229Barney, J.B., 118Basel Accord, 245Basel Committee on Banking Supervision, 253Al-Basri, Imam Hasan, 117Bay’ ‘istisnāʿa, 96–97Bay’ murābahah, 95–96Bay’ salam, 96Beekun, R. I., 122Benefits of job design, 172–173Benevolence, 79Benevolent loans, 270BICEPS, see Boosting Initiatives for

Collaborative Emission-reduction with the Power of Shippers

Bloomberg report, 227

INDEX

292 INDEX

Bolton Report, 49Boosting Initiatives for Collaborative Emission-

reduction with the Power of Shippers (BICEPS), 25

Borrowers, 214, 233Bottom line, 13Bounded rationality model of decision making,

193Brokerage firms, 210Brotherly relations, 114Budhwar, B. S., 160Budhwar, P., 160Buon, T., 122Business

decisions, 14–15enterprises, 21, 22, 24, 25ethical norms, 70and finance, globalization of, 24–25firms, 76goal of, 12–14Islam and, 133–134opportunities, 45organizations, 71participate in economy, 4resource needs of, 14

Business ethics, 27, 71–72in Western and Islamic contexts, 70

Business transactions in Islam, philosophy of, 91gharar-based transactions, 91–92maysir and qimar transactions, 92–93prevention of harm, 93riba-based transactions, 91sacredness of contracts, 93

Buyers, 215Bygrave, W. D., 56

CCadbury, G., 158Cadbury, S. A., 250Canada, 232Cantillon, R., 38Capital, 14Capitalism, 172Capitalistic spirit, 263Capital markets, 201–202, 203–204Capital market securities, 201Central Shariah board (CSB), 256Certificates of participation, 204Chachi, A., 230Charitable contracts, 100–102China-Pakistan Economic Corridor (CPEC), 30Chobani, 3Citi Group, 268Cleanliness, 114Cognitive reaction, organizational change, 120Cognitive theory, 176

Collectivism, 119“Come to falah,” 9Commerce, theoretical foundations of, 86–91Commercial banks, 212Commercial papers, 202Commercial ties, 218Commitment, escalation of, 194Communism, 39Communities, 22

responsibility to, 77Commutative contracts, 95–97Company, 217Company equity, 216Compatible leadership approaches, 122Competitiveness, 24Complete coercion, 104Confidence, 217Conservatives, 139–140Consultative decision making, 112

Shura and, 190–192Consumer finance companies, 211Consumer neuroscience and halal products,

148–149Contemporary business world, 9Contemporary discourse, on business ethics, 70Continuous improvement, 10Contracts

meaning and definition of, 93–94sacredness of, 93

Controversial debt-creating contracts, 97–99Conventional accounting framework, 269Conventional bank, 273

assets, comparison with, 238Conventional corporate governance structure,

levels of, 250–251Conventional financial system, 200, 202Conventional FIs, 270Conventional standards, 266Cooperation, 113Corporate bonds, 204Corporate governance, 250

and corporate social responsibility, 26for Islamic financial institutions, 251–252

Corporate social responsibility (CSR), 26CPEC, see China-Pakistan Economic CorridorCrawshaw, J., 158Creative decision-making model, 193Credit crunch, 217Creditors, responsibility to, 77Cross-national context, 160CSB, see Central Shariah boardCSR, see Corporate social responsibilityCulture, 57, 110, 136Currency crisis, 216Currency markets, securities exchanges

and, 205

293INDEX

Current account deposits, 238–239Customer feedback, 46Customers, 22

responsibility to, 76

DDanaGas, 78Dar Al Maal Al Islami Trust (DMT), 233Darûriyāt, 90Debt-creating contracts, see Commutative

contractsDebt markets, 201Decision making, 183–184

faulty decision making, 194Shura, 190–192steps in, 186–190types of, 192–193

Decisive group of people, 186Deiss, G. G., 141Deloitte, 199Democratic political leadership, 20Demographic factors, 21, 26Denmark, 233Deposit insurance, 221Depository institutions, 209Derivative instruments, 205–206Devon Bank of Chicago, 232Devout Muslims, 171Discovery theory of entrepreneurship, 45Distribution, 273Distribution of risk, 213Diversity, as enrichment and enabling, 12DMT, see Dar Al Maal Al Islami TrustDollar-denominated bond, 220Domestic business environment, 20

EEast Asian Muslim-majority countries, 29E-commerce, 14Economic environment, 59Economic growth, 219Economies, 4, 216

benefits to, 50–51financial market and, 29, 219–221

Economists, 38Education, 58Effective and right decision making, 183Effective monitoring system, 116Efficient financial system, 219Efficient market, 208Egeturk, 132Egypt, 230EMI, see Euromonitor InternationalEmployee behavior and motivation, 169–170

employee engagement, 178–179Islamic perspective, 176–178

Islamic value, 171–172job design, nature and importance of,

172–174motivation, 174–176organizational behavior and performance,

170–171transformational leadership theory,

179–180Employees, 22

engagement, 178–179performance, 170responsibility to, 77specifications, 173

Employee stock ownership plan (ESOP), 4Emulation, 11Enanny, F., 122Enlightened Muslim world, 31Entrepreneur, 36, 38

benefits to, 50overview of, 36–37personality factors, 56–57

Entrepreneurial characteristics, 38–39Entrepreneurial opportunities, 36, 44–47Entrepreneurial process, 37–39Entrepreneurship, 13, 36–39, 54

development of, 56–61Islam and, 41Islamic perspective of, 39–44small businesses and, 48–49

Environmental/Institutional factors, 59–61Environment, responsibility to, 77Equity theory, 176Escalation of commitment, 194ESOP, see Employee stock ownership planEsposito, J. L., 121Ethical entrepreneurship, productive and, 42Ethical framework, Islamic values for,

134–135Ethics, 171

law and, 77–78Ethis Ventures, 69–70Eurobonds, international bond markets and,

220–221Eurocurrency markets, 220Eurodollar market, 220Euromonitor International (EMI), 142“Excellence as a Way of Life,” 12Excessive unfairness, 104Exchange-based/debt-creating contracts,

see Commutative contractsExchange brokers, 210Exchange rate, 217Existing information, 159Expenses, 273External factors, small business failure, 53External financing, 208

294 INDEX

External Shariah audit, 255–256Extrinsic motivation, 174

FFactoring companies, 211Factors of production, 14Fairness, 8Al-Faisal, M., 230Faisal Islamic Bank of Bahrain, 231Faisal Islamic Bank of Egypt, 230Faisal Islamic Bank of Sudan, 231Falah, 109, 178Al-Falah, dimensions of, 118Family, 58Fardh, 6Fard kefayah, 37FAS, see Financial Accounting StandardFāsid, 94FAS No. 1 of the AAOIFI, 271–272Faulty decision making, 183–184, 194Fee-based contracts, 102–103Feedback, 116Finance, 15Finance Outlook 2018, S&P Global Rating, 5Financial Accounting Standard (FAS), 268Financial assets, 213–214Financial capital, 14Financial crises, contagion of, 218–219Financial institutions, 209–212

financial system of, 228Financial intermediaries, role of, 211–212Financialization, 9Financial lease agreement, 204, 210Financial leasing companies, 210Financial markets, 200–201

asymmetry in, 214–216crises in, 216–217debt markets and stock markets, 201and economy, 29, 219–221globalization of, 220–221money markets and capital markets,

201–204primary and secondary markets, 205regulation and supervision of, 221role of, 207–209spot markets and futures markets,

205–207Financial statements of Islamic bank, 271–277Financial system

of financial institutions, 228functions of, 212–219

Financial ties, 218Fiqh al-muʿāmalāt, 6, 88–89Firm performance, 116–118Fishkin, R., 11fMRI technology, see Functional magnetic

resonance imaging technology

Foreign bonds, 220Forward contract, 206Framing bias, 194Franklin, B., 186Functional magnetic resonance imaging (fMRI)

technology, 148–149Functional norms, 10–12Functions of intermediaries, 211Fund aggregation, 212Futures contract, 206Futures markets, 205–207

GGallup Coexist Foundation, 137GATT, see General Agreement on Trade

and TariffsGCC, see Gulf Cooperation CouncilGeneral Agreement on Trade and Tariffs

(GATT), 30General Council for Islamic Banks and

Financial Institutions, 243Generate promising business ideas,

46–47Gharar-based transactions, 91–92al-Ghazālī, 75, 89Ghurar, 234Global competition, 24Global connectivity and social media, 26Global extremism, and Muslim polity, 31Global financial crisis of 2008–2009, 244Globalization

of business and finance, 24–25of financial markets, 220–221

Globalized business environment, 19corporate governance and corporate social

responsibility, 26global competition, 24global connectivity and social media, 26globalization of business and finance,

24–25global population and diminishing natural

resources, 23–24global warming, 25international accounting standards and

practices, 27modern technologies and innovations,

25–26professional ethics and integrity, 27

Global population, and diminishing natural resources, 23–24

Global Reporting Initiative (GRI) framework, 27

Global warming, 25Goal-setting theory, 176Golden Rule, 79Goldsmith, R. W., 228Good behavior, 113

295INDEX

Google, 11Governance Standards, 254Government bonds, 203Government policies and initiatives, 60–61GRI framework, see Global Reporting Initiative

frameworkGulf Cooperation Council (GCC), 160Gulf Cooperation Countries (GCCs), 243

HHaddara, M., 122Hadīth, 6, 73, 88, 112, 178Hajiyāt, 90Halal, 6, 41, 43, 55, 137–139, 142, 147, 201

consumer neuroscience and, 148–149Halal Assurance System (HAS), 146Halaltrip.com, 148Hamdani, S. N. H., 136Hamidullah, M., 229Hāmish jiddiyyah, 103Haram, 6, 139Harm, prevention of, 93Harper, M., 47HAS, see Halal Assurance SystemHawālah, 102, 103Hawthorne effect, 179Hedge funds, 212Herd behavior, 218Hibah, concept and meaning of, 101Hicks, J. R., 228Hidayat, S. E., 122High-performance work systems (HPWSs), 165Hindsight bias, 194Hiyal, 97Hofer, C. W., 56Hofstede, G., 110, 119Honesty, 111Hossain, M., 123Household equity, 217HPWSs, see High-performance work systemsHRM, see Human resource managementHumanity orientation, 7Human resource management (HRM), 157

challenges for, 163–165factors, 160–163in general, 158in Middle East, 158–160

Human resources, 9Hygiene factors, 175

IIAIB, see International Association of Islamic

BanksIʿārah, 101–102IASB, see International Accounting Standard

Board

IASC, see International Accounting Standards Committee

Ibadah, 41, 43, 116, 178IBF, see Islamic banking and financeIBM, 12‘Ibrā,’ 102IDB, see Islamic Development BankIdentification of entrepreneurial opportunities,

45IEA, see International Energy AgencyIFI, see Islamic financial institutionIFRS, see International Financial Reporting

StandardsIFSP, see Islamic financial service providerIhsān, 75–76, 178, 180Al ihsan, 180IIGCC, see Institutional Investors Group on

Climate ChangeIjāb, 93‘Ijārah, 97‘Ijārah mawsufah bi al-dhimmah, 97‘Ijārah thumma al bay,’ 97‘Ijārah wa-iqtinā, 97Al-ijera, 238Ijma, 6, 87, 134, 191Ijtihad, 191Ikhlas, 112, 178Iman, 180Inaction, 183–184Income Statement, 272–274Incomplete coercion, 104Indecisive group of people, 186Individualism, 119Individualist organizations, 119Indonesia, 231–232Industrial Revolution in 1800s, 263Information technology, 14Information transmission, 214Initial public offerings (IPOs), 208Innovations, modern technologies and, 25–26Institutional Investors Group on Climate

Change (IIGCC), 25Institutions, 9Instrumental reaction, organizational change,

120Insurance and pension funds, 210Insurance firms, 210Integrity, professional ethics and, 27Interest, 233

profit vs., 252Internal factors, small business failure, 52–53Internal mistakes, 104Internal Shariah audit unit (ISAU), 255Internal Shariah compliance unit (ISCU), 255International Accounting Standard Board

(IASB), 27, 271

296 INDEX

International accounting standards and practices, 27

International Accounting Standards Committee (IASC), 263–264

International Association of Islamic Banks (IAIB), 253

International bond markets and eurobonds, 220–221

International business enterprises, 22International Energy Agency (IEA), 25International enterprises, 27International financial markets, 220International Financial Reporting Standards

(IFRS), 27, 262–264, 268–271International Monetary Fund, 243International standard-setting bodies, 253–256Intrinsic motivation, 174Intuitive decision-making model, 193Invalid contract, 94, 104Investment intermediaries, 210–211Investors, 213IPOs, see Initial public offeringsISAU, see Internal Shariah audit unitISCU, see Internal Shariah compliance unitIslah, 10Islam

and business, 133–134and entrepreneurship, 41essential values of, 7–10

Islam bank vs. conventional bank, 240–243Islamic vs. Western entrepreneurship, 44Islamic accounting, 261–262

history and principles of, 264–266from Islamic perspective, 262–268objectives of, 266–268standards for Islamic financial institutions,

268–277Islamic banking and finance (IBF), 5

basic operations of, 236–243experience of, 243–244historical development of, 229–233limitations of, 244–245modern, evolution of, 227–228principles and conceptual foundation of,

233–236role of, 228–229

Islamic banking and financial services industry, 97

Islamic banking industrydeposits/liabilities, characteristics of,

239–240experience of, 243–244limitations of, 244–245operation of, 229–230statement of financial position,

components of, 272

Islamic Bank International of Denmark, 233Islamic beliefs, 5–6, 10Islamic business environment, 12

business decisions, 14–15goal of business, 12–14stakeholders, 15

Islamic business ethics, 72–73framework of, 73–76

Islamic civilization, 10Islamic commercial jurisprudence, 6, 85–86

business transactions, Valid and invalid contracts for, 93–94

invalid contracts, 104philosophy of business transactions, 91–93Shariah, 86–90valid contracts, types and key features of,

94–104Islamic consumer behavior, 135–136Islamic Co-operative Housing Corporation, 232Islamic Development Bank (IDB), 231Islamic economics, 14Islamic economy, 5

shared prosperity and, 7–8Islamic finance, 89–91Islamic Finance House, 232Islamic financial institution (IFI), 202, 250,

262, 267accounting information, 270accounting standards for, 268–277corporate governance for, 251–252parallel governance structure for, 250, 253

Islamic financial service provider (IFSP), 97Islamic Financial Services Board (IFSB), 243,

254, 255Islamic financial system, 91Islamic insurance, 228Islamic law, essential aspects of, 6Islamic leadership principles and qualities, 124Islamic management, 170Islamic marketing, 131–132

companies, 146–148consumer neuroscience and halal products,

148–149digital platforms and, 148Egeturk, 132Islam and business, 133–134Islamic consumer behavior, 135–136Islamic markets, 137–139Islamic values for ethical framework,

134–135Malaysia, halal hub, 146marketing mix, 141–142Middle Eastern traditions and heritage,

142–146principles of, 140–141segmenting Islamic markets, 139–140

297INDEX

Islamic markets, 137–139segmentation of, 139–140

Islamic motivation, 177Islamic organizational culture

concept of, 110and firm performance, 116–118and knowledge creation capability,

118–119and organizational change, 120prominent features, 111–116

Islamic organizational setting, 170Islamic perspective, 176–178

of entrepreneurship, 39–44Islamic scholars, 177Islamic Shariah law, 267Islamic values

for ethical framework, 134–135ethics, 171

Islamic viewpoint, 4Islamic way of life (deen), 6Islamic work ethic (IWE), and organizational

culture, 120–122Islamization, 172Istanbul Chamber of Commerce, 200Istikhara, 189Istinsa, 238‘Istisnāʿa, 97IWE, see Islamic work ethic

JJabir Ibn ‘Abdullah, 189Jackson, A., 229Jafari, A., 141Jama’ah (organization), 9Job description, 173Job design, nature and importance of,

172–174Job specification, 173–174Jobs, S., 11Juʿālah, 102Justice, 113

KKafālah, 102, 103Kalsekar, A. R., 143Kao, J., 38Kartajaya, H., 141Kasriel, D., 142Key macroeconomic factors, 21Key socioeconomic factors, 21Key success indicator (KSI), 170Khalifa (vicegerent), 8, 78Khalifah, 40, 43Khaliph, 113Khan, M. F., 136Khan, M. W., 123Al-Khattab, U., 144

Al-Khawarizmi, 264Khulafa-e-Rashedeen, 192al-Khuluq, 120Knowledge creation capability, 118–119KSI, see Key success indicatorAl-Kwifi, S. O., 149

LLaw, and ethics, 77–78LDCs, see Less developed countriesLeadership and organizational commitment,

122–124Leadership in Islam, 180Leasing companies, 210Legal environment, 59Legal framework, 21Lenders, 214Less developed countries (LDCs), 229Lewis, M. K., 252Liabilities, 236, 238–243Liberals, 140LIBOR, 220Limiting entry, 221Liquidity, 213–214Liu, J., 136Local regulatory frameworks, 254–256Lower management, managers, 251

MMacroeconomic measures, 21Madinah, 7Makkah, 7Makrooh, 139Malaysia, 231

halal hub, 146Management, 14Managing by Values, 11Mandoob, 139Maqasid al-Shariah, 269Market efficiency, 208Marketing, 15Maslow, A., 175Maslow’s theory, 177Masuo, D., 118Material motivations, 177Maudidi, A. A., 229Mawardi, 192Maysir, 92–93, 234McKinnon, R., 228Media, 58Mellahi, K., 160MENA, see Middle East and North AfricaMicrosoft, 11Middle East

challenges for HRM in, 163–165factors Influencing HRM in, 161–163HRM for, 158–160

298 INDEX

Middle East and North Africa (MENA), 227Middle management, managers, 251Miller, A., 141Miscommunication, 110Misinterpretation of information, 110Missionary spirit, 111Modanisa, 151Modern commercial banking, 102Modern Islamic banking and finance, evolution

of, 227–228Modern technologies and innovations, 25–26Money markets, 201–202Money market securities, 201Monotheism, 5Moral hazard, 216Morality, 121Moten, A. .R., 122Motivation, 174–176Motivation theory, 175Muʿāmalāt, 88–89Mudārabah (Silent partnership), 54, 55, 77,

99–100, 237–239, 244, 270, 275Mudārabah muqayyodah, 270Mudarib, 55, 272Multinational companies, 220Munshi, U., 69Murabahah, 236–237Musharakah (Partnership financing), 54–56,

100, 237, 244Muslim authors, 123Muslim communities, 145Muslim consumers, 133, 137, 139, 145Muslim consumer segment, 132Muslim countries, Islamic banking in, 230–232Muslim employees, 171Muslim entrepreneurs, 36, 41, 43Muslim leaders, 123Muslim-majority countries, 27, 132

economies and financial markets, 29enlightened Muslim world, 31global extremism and Muslim polity, 31human resource crisis in, 30Muslim-majority government, 27–28political autonomy of, 27–28Western and Islamic MNCs, 29Western culture and Muslim polity, 30and Western financial institutions, 29and world politics, 30

Muslim-majority government, 27–28Muslim market segments, 137Muslim polity

global extremism and, 31Western culture and, 30

Muslim societies, 4, 6, 10, 171Muslim world, 4, 5Mustabeh, 139

NNapier, C., 264Nasr, S., 121Nasser Social Bank of Egypt, 230National business environment, 20–23Neatness, 114Needs theory, 175Negligible unfairness, 104Negotiable certificates of deposit, 202New age Muslims, 140New York Times Magazine, 71Niagara Syndrome, 184Non-Muslim companies, 142Nonprofit organizations, 13Nonprogrammed decisions, 192, 193Notes to financial statements, 277

OOCM, see Organizational change managementOdom, R.Y., 124Ogilvy Noor Brand Index, 137OIC, see Organization of Islamic CooperationOpen economy environment, Islamic values and

principles for, 31Operation, 14Option contracts, 206–207Organizational change, 120Organizational change management (OCM),

9–10Organizational commitment, leadership and,

122–124Organizational culture, 109

Islamic work ethic and, 120–122Organizational inhibitors, 163Organizational leaders, 179Organizational leadership, 172Organizational-level Shariah compliance system,

254Organizational-level Shariah governance

systems, 254Organization of Islamic Cooperation (OIC), 4Organization of Islamic Countries (OIC)-

sponsored Fiqh Academy, 254Ottoman Empire, 4Overconfidence bias, 194Over-the-counter markets, 205Owen, R., 158Ownership, 39–41, 237–238Ozsoy, I., 252

PParticipatory decision making, Shura, 191Partnership-based contracts, 99–100People, decisive and indecisive groups of, 186Personality factors, 56–57Pew Report (2009), 137Physical health, 114

299INDEX

Piston, 164PLS contract, see Profit-and-loss-sharing

contractPolitical autonomy, of Muslim-majority

countries, 27–28Political environment, 60Political leadership, 20Political stability, 60Pooling method, 274Poor macroeconomic indicators, 21Popular contracts, 103Popular sectors for small business enterprises, 49Portfolio, 213Post-Prophetic era, 7Practical strivers, 140“Presentation and Disclosure in the Financial

Statements of Islamic Banks,” 271Prevention of harm, 93Primary markets, 205Principal–agent problem in Islamic banking,

244Private and public pension funds, 210Private ownership, property rights and, 39–40Productive, and ethical entrepreneurship, 42Professional ethics and integrity, 27Profit-and-loss-sharing (PLS) contract, 233,

234, 244Profit-maximization approach, 145Profit vs. interest, 252Programmed decision, 193Progressive Muslims, 140Progressive political leadership, 20Promises, integrity and delivering on, 7Property rights, and private ownership, 39–40Prophethood, Messengership, 6Prophet Muhammad (PBUH), 40–41, 72,

110–114, 116–117, 120, 121, 133, 134, 144, 189, 192, 229, 264

Prophet peace be upon him (PBUH), 37Psychological process, 174Public ownership, 40–41

QQabul, 93Al-Qaradawi, Shaikh Yusuf, 90Al-Qarafi, 90Qard-al-hasan, 54, 100–101, 200, 235, 238,

268, 270Qatar, Indonesia, Saudi Arabia, Malaysia, UAE,

and Turkey (QISMUT), 243al-Qayyim, Ibn, 90Qias, 191Qimar, 92–93Qist, 8Qiyas, 6, 134Qonaah, 118Qualitative approach, 48

Quality of service, 178Quantitative approach, 48Qur’an, 6, 8, 12, 41, 70, 72, 76, 77, 113, 115,

120, 134, 180, 191, 233, 235Qur’ anic verse 16:90, 73Qutb, S., 229

RRabb al-mal, 55, 270Rammal, 253Rasasi Perfumes LLC, 143Rational decision making, 193Rational motivation, 175Real economy, 9Regulations, role of, 252–253Regulatory bodies, 26Reinforcement theories, 176Reject conventional processes, 270Reliable information, 137Religion, 57–58Religion-based marketing, 141Religious beliefs, 70, 170Religious/spiritual motivation, 174–175Repo, 202Reputation risk, 53Restricted investment accounts, 270, 274Restricted mudarabah, 55Revenues, 270Revenue sharing certificates, 204Reverse repo, 202Riba, 5, 9, 103, 233Riba-based transactions, 91Rib’h, 12Right and effective decision making, 184Risalah (Prophethood, Messengership), 6Risk avoidance, 217Risk, distribution of, 213Risk management in financial intermediaries,

212Rizq, 41Robbins, A., 184Roosevelt, F., 71

SSacredness of contracts, 93Sacrifice, 113Sadaqa, 235Sadaqah, 101Sadeq, A., 41Saeed, M., 135Salam, 238Sale-based sukuk, 203Samad, A., 230, 244Sarasvathy, S., 46Sarbanes-Oxley (SOX) Act of 2002, 70Saudi Arabia, 231SBP, see State Bank of Pakistan

300 INDEX

Schumpeter, J., 228Screening opportunities, 45Secondary markets, 205Securities exchanges and currency markets, 205Seeking divine guidance, 189–190Self-criticism, 11–12Self-improvement, 11–12Self-monitoring, 179Self-Supervision, 11Service-based contracts, 103SGS, see Shariah governance structureShared prosperity, 3–4

and Islamic economy, 7–8Share (stock) certificates, 204Shariah, 6, 40–42, 55, 71, 78, 91, 93, 97, 133

board/advisor, 255fiqh and fiqh al-Muʿāmalāt, 88–89governance, 250maqāsid al-shariah and Islamic finance,

89–91meaning and definition of, 86–87sources of, 87standards, 254vs. traditional governance, in IFIs, 256

Shariah-approved transaction, 235Shariah-based business reforms, 229Shariah governance structure (SGS), 253Shariah Standard No. 23, 103Shariah Supervisory Board (SSB), 252Shaw, E., 228Shirka, 12Shirkah, 54Short-term money market instruments, 202Shura, and consultative decision making,

190–192Shurut, 94Siagh, L., 252Siddiqi, M. N., 118Siddiqui, N., 229Siddiqui, R., 148Simon, H., 183, 186Simplicity, 11Single Shariah Board, lack of, 244–245Sirat al-mustaqim (the Straight Path), 11Small business, 37, 47

advantages of, 49–51challenges of, 51–52definition of, 48and entrepreneurship, 48–49failure and success of, 52–54popular sectors for, 49

Small business enterprises in Islam, 54–56Socialism, 172Socialization, 116Social justice, 91, 234–235Social responsibility, 7

Social scientists, 38–39Societal traditionalists, 140Sociocultural factors, 57Sole proprietorship, 54

and Al-Qard Al-Hasan, 54Sparrow, P., 160Spiritual/religious motivation, 175, 177Spot markets, 205–207SSB, see Shariah Supervisory BoardStakeholder-oriented approach, 8Stakeholders, 15

responsibility to, 76–77Standardization of Islamic accounting, 266–268State Bank of Pakistan (SBP), 254Statement of Changes in Restricted

Investments, 275Statement of financial position (Balance sheet),

271–272Statement of Sources and Uses of Qard Fund,

276Statement of Sources and Uses of Zakah and

Charity Funds, 275–276Stewardship, and sustainability, 8Stock certificates, 204Stockholders, responsibility to, 77Stock markets, 201Success, 9

in small business, 54Successful decision making, 187Sudan, 231Sukuk, 201, 203, 227Sukuk ijarah, 203Sukuk istisna, 203Sukuk murabahah, 203Sukuk salam, 203Sula, M. S., 141Sunnah, 6, 74, 120, 233Suppliers, 22–23Supply chains, 22Supporting contracts, 103–104Sūrat al-Mutaffifin (83:1–7), 75Sustainability, stewardship and, 8Swap contracts, 207Switzerland, 233Systemic risk of financial intermediaries, 211

TTa’awun (cooperation/collaboration), 9Tabarruʿ, 101Tabung Hajji, 231Tahsiniyāt, 90Takāful, 101, 228Taqwa (God-consciousness), 7, 10, 11, 74, 180Tawakal, 171Tawakul, 111Tawhid (Monotheism), 5, 78Tawhidic (God’s Oneness), 39

301INDEX

Taymiyyah, Ibn, 90Technological environment, 61Tekbir clothing (Turkey), 147Third principle of Islamic banking and finance,

234Thompson, J. W., 137Timmons, J. A., 38Top management, managers, 250–251Traditional motivational theories, 177Transformational leadership theory, 179–180Transparency, 11, 221Treasury bills, 202Troute, 229Trust, 113, 237–238Truthfulness, 111

UUmmah, 37, 192Uncertainty avoidance, 119UN Climate Change, 25UN Global Compact, 69–70United Arab Emirates (UAE), 157, 230United Kingdom (UK), 232United Nations Population Fund, 137United States of America (USA), 232Unrestricted investment accounts, 272Unrestricted mudarabah, 55ʿUqud tabarruʿāt, 100Urf, 6, 10U.S. gross national product, 179U.S. Securities and Exchange Commission

(SEC), 210Uswatun Hasana, 12Uthman ibn Affan, 41

VValid contract, 94–95

charitable contracts, 100–102commutative contracts, 95–97controversial debt-creating contracts, 97–99fee-based contracts, 102–103partnership-based contracts, 99–100service-based contracts, 103supporting contracts, 103–104

Value-maximization approach, 135, 145–146Ventromedial prefrontal cortex (vmPFC), 149Venture, 234Verbal deception, 104Vestel Group of Companies, 199Views of entrepreneurial opportunity, 46Vision, 9

WWadiah, 239Wajib, 139Wakālah, 103Wang, D., 119Wardah halal cosmetic (Indonesia), 147–148Wasta, 164“We bring good things to life” (Slogan of

General Electric), 11Welch, J., 9, 11Well-functioning financial system, 212Western and Islamic contexts, business

ethics in, 70Western culture, and Muslim polity, 30Western economies, 19Western financial institutions, Muslim-majority

countries and, 29Western multinational corporations, 24Western perspective, 176Western Philosophy, 171Western theories, 176, 177Western world, 4

Islamic financial institutions in, 232–233

Wilson, J. A. J., 136Wilson, R., 229, 230, 254

YYousef, D. A., 118, 121Yunus, Muhammad, 13

ZZakah, 31, 235, 264, 268–270, 275–276Zakāt, 77Al-Zarqa, Mustafa, 92Zilzar.com, 148

CONTENTS · viii CONTENTS 2. Islam and the Globalized Business Environment 19 Muhammad Mansoor Khan 2.1 Introduction 19 2.2 The national business environment 20

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