Entrepreneurship as a means to create islamic economy

Entrepreneurship As A Means To Create Islamic Economy – Analysis

May 17, 2013

By Murray Hunter

Introduction

Today, the Ummah (Muslim community) represents over

20% of the world’s population. However most of the

Ummah exists within the bottom of the economic pyramid,

lacking any real integration with the world economy, and

devoid of entrepreneurial opportunity. They are left to

languish within a generational cycle of poverty. Even

within some of the ‘rich’ Islamic nations of the world like

Saudi Arabia, poverty and acute unemployment are on the

rise1.

This malaise is hampered by regular natural disasters and

social unrest through many parts of the Islamic world. One

of the Ummah’s special problems in South-East Asia is

the predominant rural domicile, where many have become

victims of ‘rural underdevelopment’.

The feudal-like structure of many societies where

‘cronyism’ and ‘corruption’ exist as part of the culture is

taking away the fundamental human right to opportunity3.

The symptoms of ‘rural underdevelopment’ and ‘feudalism’

can be seen through growing unemployment, which is not

always captured in official government statistics. In

addition, a growing unbalanced affluence biased towards

city dwellers, the lack of resources, and access to

business networks to enable greater entrepreneurial

activity within these regions exists.

Lack of exposure to contemporary urban society greatly affects the scope of rural youth to discover and develop new

entrepreneurial ideas. Consequently, this encourages a narrow view of the world on the part of youth, where they

begin to feel powerless.

Lack of access to markets and the ability to acquire skills, contributes to a deeply ingrained lack of will and

acceptance of the status quo, from which they feel unable to escape from.

An isolated Ummah from the rest of the world is a source of disadvantage which contributes to the cycle of poverty.

While the world is progressing economically, much of the Ummah is being left behind economically. However this

poverty isn’t just economic. It extends to social poverty which acts as a breeding ground for ignorance, apathy, drug

dependence, crime, and amorality. This leads to spiritual poverty.

Many Muslims feel that they are prisoners of secular society where values are contrary to Islam, and consequently

they are unwilling to engage. Most Islamic countries have modeled their economies upon Keynesian fiscal and

Friedman’s monetarism framework as their basic platforms.

Others, like Malaysia, are business friendly, but exercise a great amount of regulation within the marketplace.

Banking systems are internationalized where speculative currency exchange and interest rates fluctuations are

markets in their own right, promoting a speculative and rent seeking society.

Civil secular laws and business conventions provide an unappealing business environment.

Many young people see business as a career being contradictory to their religious devotion. Therefore very few see

entrepreneurship as a way to deepen their faith.

In addition, higher education, particularly within the sphere of business and entrepreneurship are very much biased

towards ‘western theories’ and ‘ideals’, which excludes the possibility that Islamic concepts can form an alternative

and unique framework for the practice of business and entrepreneurship4.

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Today within the ASEAN region there are very few places where Islamic entrepreneurship is taught.

So this is the challenge. To develop an entrepreneurial pedagogy for the Ummah. Finding ways to teach

entrepreneurship where the Ummah not just sees enterprise as being compatible with Islam, but as a way to enhance

one’s faith. Existing entrepreneurship theories can’t provide this.

“Conventional” business models advocated by local business schools do not provide the answer. Many young Muslin

entrepreneurs are looking for guidance and mentorship about how they can develop their businesses closer to

Tawhid principles5.

The lack of published academic and intellectual thought on Islamic business has not assisted this cause6. Intellectual

guidance could assist in developing more balanced views about how the principles of Islam can be utilized in

business.

The focus of most published works on Islamic economics and business has been within the domains of finance and

morals7, which leads many to the conclusion that Islam has little to contribute in the theories of economics and

business.

Table 1. Selected statistics from a number of Islamic counties2

Country Population

Muslims as

%

Population

%

Urbanization

Unemployment

(15-24) (%)

Poverty

(%)

GDP Per-

capita

(USD)

GDP Per-

capita

World

ranking

Afghanistan 31,108.077 99% 23% 36% (adult) 36% $1,000 219

Algeria 38,087,812 99% 66% 21.5% 23% $7,500 137

Azerbaijan 9,590,159 93.4% 52% 14.7% 11% $10,700 90

Bangladesh 163,654,860 89.5% 28% 9.3% 31.5% $2,000 192

Burkina Faso 17,812,961 60.5% 26% 3.8% 46.7% $1,400 206

Chad 11,193,452 53.1% 28% - 80% $2,000 194

Egypt 85,294,388 90% 43.4% 24.8% 20% $6,600 138

Eritrea 6,233,682 80% 22% - 50% $800 223

Gambia 1,883,051 90% 58% - 48.4% $1,900 178

Guinea 11,176,026 85% 35% - 47% $1,100 215

Indonesia 251,160,124 86.1% 44% 22.2% 11.7% $5,000 157

Iran 79,853,900 98% 71% 23% 18.7% $13,100 101

Iraq 31,858,481 97% 66% 16% (adult) 25% $4,600 162

Kazakhstan 17,736,896 70.2% 59% 4.6% 5.3% $13,900 96

Kyrgyzstan 5,548,042 75% 35% 14.6% 33.7% $2,400 185

Libya 6,002,347 97% 78% 30% (adult) (33%) $13,300 98

Malaysia 26,628,392 60.4% 72% 11.3% 3.2% $16,900 79

Mali 15,968,882 94.8% 36% 30% (adult) 36.1% $1,100 214

Mauritania 3,437,610 100% 41% 30% (adult) 40% $2,100 191

Morocco 32,649,130 99% 58% 17.9% 15% $5,300 153

Niger 16,899,327 80% 175 3.2% 63% $900 220

Nigeria 174,507,539 50% 50% $2,700 180



Pakistan 193,238,868 96.4% 36% 23.9% (adult) 70% $2,900 179

Saudi Arabia 26,939,583 100% 82% 28.2% - $25,700 59

Somalia 10,251,568 100% 37% - - $600 227

Sudan 34,857,910 97% 40% 20% (adult) 48.5% $2,400 184

Tajikistan 7,910,041 90% 26% $2,200 190

Turkmenistan 5,113,040 89% 50% 60% (adult) 30% $8,500 127

Uzbekistan 28,661.637 88% 36% 2.5% (adult) 39.6% $3,500 168

Western Sahara 538,811 100% 82% - - $2,500 183

Yemen 25,408,288 100% 32% $2,200 189

Dr. Umer Chapra in an on-line interview was very critical of the development of Islamic economic and business

theories claiming they were unbalanced in their approaches. He was reported to state that “Primary attention has

been given so far to Islamic Finance. This has led to the false impression that interest-free finance is all that Islamic

Economics has to offer. Since most of the governments in Muslim countries are not yet convinced that interest-free

finance is workable, excessive emphasis on it has created a resistance in official circles against Islamic Economics.

They find it to be of little value. This is unfortunate. We must blame ourselves for this. Islam is a complete way of life

and is capable of solving the problems of not only Muslim countries, but also of mankind”8.

In the same interview Dr. Chapra said that it was the responsibility of Islamic intellectuals to show how Islamic

economics could solve the socio-economic problems that humankind faced. This is in great need because there is a

distinct lack of theoretical and empirical analysis to show that an Islamic strategy can help solve economic problems,

particularly with the current state of the Islamic world, where there is decline in moral values, exploitive financial

systems, illegitimate governments, landlordism, lack of education, absence of justice and ineffective operation of

incentives and deterrents. Dr. Umer Chapra believes that there is great repetitiveness in what is written about Islamic

economics which is not serving any cause. An alternative Islamic perspective needs to be spelt out.

The message of Islam forms its basis from the Al-Qur’an, which is the direct word of Allah (S.W.T.). The Hadĭths are

documents made up of lessons taken from the life of the Messenger Muhammad (S.A.W.), written down by a number

of apostles, which put the knowledge from the Al-Qur’an in the context in which they were revealed to assist in

developing a general and universal significance9. Without the Hadĭths many important aspects of Islam would not be

known today and the Al-Qur’an would be at the mercy of those who misinterpret it10.

Need for an Islamic Model of Business

To date “The fanaticism and prejudice for Western managerial systems have also, among other things, veiled the

relevancy of Islam as a model of management, as well as generating a cynical reaction that the Islamic model existed

in history and concept only, but never practiced in modern life, even by countries with a Muslim Majority”11. Islamic

scholars argue three main reasons for the need to develop and implement an Islamic business framework;

1. The nature of man: Man has both the potential to rise to great spiritual heights and also disintegrate into total

immorality. Man’s ability to act rightly or wrongly is a matter of moral choice. Under the Islamic viewpoint, man’s

purpose on earth to carry out ibadah (relates man to Allah {S.W.T} through spiritual acts)12 and follow God’s will with

total devotion, according to his natural disposition (fitrah); where everything fits into the divine pattern under the laws

of Allah (S.W.T)13. Submission to the laws of Allah (S.W.T) brings harmony to man, however man was created with

many weaknesses14, forgetfulness15, greed for material comforts and power16, is capable of oppressiveness and

ignorance17, is rash and impatient18, stringy and miserably19, ungrateful20, quarrelsome21, ruthless22, and full of

self interest23, which can easily lead him astray.

2. The amoral society: General society has become amoral and lapsed in faith, believing that truth and reality is

based on what can be touched, smelled, seen, heard and tasted. This has lead to a society that has become

materialistic and less spiritual. This absence of spirituality is leading business into immoral activities such as stealing,

lying, fraud and deceit, making people believe that they cannot succeed without pursuing the same practices24.

3. The underdevelopment of Islamic societies: Approximately 80% of the World’s Muslins live in poverty, as cultural

minorities in other countries, with high incidences of unemployment and low productivity25. Countries with majority

Muslin populations, are declining in their knowledge generation, research, innovation and educational standards26,

have a generally a lower life expectancy, higher illiteracy rates, lower GDP per capita rates with the majority of people

living in fragile and non-arable lands, poorer infrastructure and water supplies and a larger number of dependents

than the non-Islamic World27. Islamic GDP as a percentage of total World GDP is estimated to be only 45% of what it

should be, in order to be on par with the rest of the world28.

The Al-Qur’an was written mostly within a business metaphor

The Al-Qur’an was revealed to the Prophet Muhammad (SAW), who was born into a trading family and brought up by

Abu Talib, who was a trader. Society in the Prophet’s time was almost totally dependent on trade as a means to earn

a living and unlike any other religion, the Al-Qur’an is heavily written in the metaphor of business and trade. Within



many parts of the Al-Qur’an life is paralleled to a business venture, where one earns profits to gain entry into heaven

– profits meaning faith and good deeds to others and those that accept Allah’s (SWT) guidance as a bargain to save

them from punishment on judgment day29. Islam urges individuals to strive their utmost to earn large monetary

rewards and spiritual profits, while at the same time being inspired to be successful and honest people30. This is part

of the concept of ad-din, which makes material and spiritual pursuits inseparable, where one’s whole life is concerned

with the needs of humankind here on earth to secure a comfortable life in the Hereafter31. Consequently, Islam does

not prohibit worldly success32, in fact Allah (SWT) has provided opportunities for humankind to obtain success and it

is certainly the responsibility of the individual to do so33. However involvement in business should also carry with it

benevolent intentions for others while seeking success for oneself34.

Islam espouses a transparent market economy

Islam espouses a market economy with freedom of the individual to operate a business with minimal outside

interference;

“He who brings goods to the market is blessed with bounty, he who withholds them is cursed.” (Ibn Majah & Al

Hakim)

A market mechanism is urged with free flowing knowledge without exploitation by middlemen;

“Do not chase after those who are going to the market before they reach the place.” (Al-Bukhari & Muslim)

Islam also prohibits price manipulation;

“Anyone who withholds goods until the price rises is a sinner.” (Muslim).

The basic tenants of an Islamic economy

Most Islamic countries sought out economic models that promoted economic development. The concept of social

market economy which Islam requires was often discarded in favour of secular models. Most countries adopted

concepts of “Islamic socialism” where references to Islamic teachings and Shariah were only cursory or cosmetic35.

The general principles of an Islamic economy can be summarized as follows36;

• Islam provides a supportive value system where a person should seek to achieve economically as well as

spiritually.

• People are expected to earn their own living, if possible.

• The pursuit of wealth is legitimate, however moderation in lifestyle is espoused.

• Prices should be just, based upon competitive markets.

• The inequality of income should not be allowed to become too wide, therefore the state should intervene to ensure

that equality is maintained.

• The needy are protected by society through Zakat.

• Land and capital are productive factors, only when combined with labour. Therefore income should not just be

derived from ownership. Finance, leases, loans, etc., should be based on the sharing of risk as a basic principle of

justice and equity.

• Islamic values frown upon wasted resources, human skills, and idleness.

• Humans are God’s custodians and only possess resources temporarily. As trustees, they must ensure these

resources are passed onto the next generation intact, consequently Muslins have a duty to protect the

environment37.

• Private ownership is paramount within the economy, where the state should only interfere under exceptional

circumstances. Monetary policy should only be utilized to stabilize prices. Fiscal policy should only be used to

preserve an equilibrium between tax revenue and public expenditure. The state’s role is solely to provide sufficient

infrastructure for society to operate fairly and equitably38.

• Antisocial practices that damage society are forbidden where monopoly and hoarding and other market distortions

are not permitted. In addition all transactions where ‘one person wins and one person losses’ are forbidden.

Social justice in Islam is derived through productive work, where equal opportunities exist for all, and everybody can

utilize their abilities to work and gain just reward for their efforts39 – This is entrepreneurship.

Ironically Islamic economics offers one of the oldest theoretical foundations for any economic model today. It is the

only economic model that built in moral and ethical mechanisms, with guidelines to control speculation. In this way,

Islam is not just a divine belief in God, but a carefully worked out set of rules that provides a set of principles and

code of conduct which organizes and regulates society40.

Piety through business

Thus Islam espouses that free trade is a major factor in the enhancement of living standards of the general

community, subject to some constraints on business in the interests of the wider community.

Central to Islam is Tawhid “…a man’s commitment to Allah, the focus of all his reverence and gratitude, the only

source of value. What Allah desires for man becomes value for him, the end of all human endeavour41.” Tawhid is

the Islamic way of life, the fundamental of all Islamic civilization, which is process, means and end together. Tawhid is

both the essence of the individual and the society he or she lives in. Tawhid is acceptance of one creator and His



divine guidance of humanity42. Tawhid implies both the mission and morality of humankind in both social and

spiritual contexts.

Mankind’s responsibilities under Tawhid fall into two categories, fard’ain which is an individual’s obligation to perform

his or her religious duties and fard kifayah, which is an obligation for man to serve the entire community, through

services to each other, necessary for the community to live safely and comfortably. Thus the obligation to improve the

Muslim Ummah (community) falls under fard kifayah43, where undertaking business is the principal method44 of

improving the economy and community;

“Be involved in business as nine out of ten sources of income lie in business” (Ihya)

An Islamic Business Framework

The building blocks of Tawhid are the concepts of al-iman (belief), al-ilm (knowledge) and al-amal (pious acts and

efforts). Al-iman is the belief in the existence of one God and Creator, with a commitment to His teachings and

revelations, revealed through the Al-Qur’an, and Prophets, through the Hadĭths and Sunnah (What the Prophet

Muhammad (S.A.W.) said, did, agreed or disagreed to). Our faith in Allah (S.W.T.) is reflected in our daily behavour,

influenced by our moral system formed and contained within us. It is our inner self;

“Faith is not expectations and not outward ornamentations, but implanted in the heart and realized through

actions.” (Ibn Najjar & Dailami)

Al-iman is deepened by al-ilm45, which is the responsibility of all Muslims to seek46 in order to fulfill and perform al-

amal. Knowledge (spiritual, wisdom and scientific) is the foundation of all acts of al-amal which would be futile and

unproductive without the search for further knowledge47 to enhance the wellbeing of society48. Islam places great

importance on scientific discovery, knowledge and wisdom to develop civilisation49. Al-iman and al-ilm manifested

through al-amal is the basis of the advancement of civilization for the benefit of humankind and the Ummah in

particular. This is undertaken under the principle of ad-din, mentioned above, which is referred to as ibadah.

In Islam a person, who of faith, knowledge and pious devotion,

manifested in effort and acts, using reason and experience and

adheres to the teachings of the Al-Qur’an and Prophets is a person

of Taqwa, adhering to the philosophy of Tawhid. He is fulfilling his

purpose on earth to perform ibadah50 to God, through obedience

(ta’ah), which conforms to his true and essential nature (fitrah) of

man. This relates man to God through everything an individual

does, including spiritual duties, thoughts, actions and deeds to

other people51.

As man operates in a social environment, Islam prescribes a

number of forms of business organization, through which his

obligations can be fulfilled. A mushharakah can take a number of

forms;

a) Mudarabah: Partnership where one manages the partnership and another supplies the financial support,

b) Shirkah: where two or more individuals pool financial resources and share profit and loss on an agreed ratio and

held liable to the extent of their capital, and

c) Syari’ah: each partner is able to operate other businesses, independent of the principle business.

Such business organizations are founded and operated on the principle of al-ta’awun (mutual assistance and

cooperation) among members of a society for both their mutual benefit and that of a society as a whole52.

Islamic business is governed by the rules of syar’iah, the path by which all Muslims should follow. The syar’iah is the

divine law that establishes the standards of justice and human conduct, as well as what is permitted and prohibited in

action. The syar’iah is based on the Al-Qur’an, Sunnah and interpretations by Islamic scholars. Some Muslim

scholars have stated that these standards are beyond human and are a goal or path of guidance53, where others see

these utopian ideals as mandatory for advancement of the community54.

Central to the syar’iah are the concepts of halal and Toyyibaan, which govern all the economic activities of man in

wealth production and consumption of wealth, where certain means of gaining a livelihood are declared unlawful55.

Halal means lawful or permitted for Muslins56, a concept that is much wider than just issues of food, concerning as to

whether things are undertaken according to the syar’iah57. Toyyibaan is a much wider concept, meaning good,

clean, wholesome, ethical in the Islamic concept. In nutrition, toyyibaan is much wider than halal, as food must also

be clean, safe, nutritious, healthy and balanced58. Toyyibaan would also mean that agriculture must be undertaken

within sustainable practices59, and in business that things are done with good intentions60.

In Islam, the individual’s vision, mission and objectives in business

is to achieve both success in this world and the hereafter. This is

al-falah. Islam puts very little restriction upon the scale of worldly

success62, except specifying, it must be reasonable, provides the

comforts of worldly life63, with consideration to the poor and

suffering64, and within the balance of worldly and spiritual life65.

Mans success must also serve the legitimate needs of the

ummah66. This is in great contrast to the singular objective of

profit maximization in contemporary business thinking67.

Allah (S.W.T.) equipped man with the faculties of understanding

right and wrong, so that he may obtain a bright destiny68. Man has

a free choice in what he chooses. Opposition and straying from his true nature (fitrah) will bring discord to the

individual where negative attributes will distort his true nature, which could lead him into doing evil deeds69. The



individual has his al-iman and al-ilm to keep him from this path of self destruction (al-fasad), which would manifest

itself through nepotism, favourtism, envy, greed, corruption, injustice and ignorance70. This in Islam is the influence

of satan, manifested in many different ways to man to lure him away from God’s chosen path for him. Man becomes

unfocused through ignorance and lack of knowledge71.

Achieving al-falah means that man has lived up to God’s trust placed upon him, through performing his ibadah, while

obeying all the laws of the syar’iah. This is where man has overcome his weaknesses in the service of Allah (S.W.T.)

through righteous deeds (amal), in his obligation of fard kifayah. Man has reached the state of amanah, fulfilling the

trust God has put in him72.

Islam also specifies the way organizations should be operated and managed. As discussed, an organization must

base all its work on al-amal and ibadah with the overall management objective of achieving al-falah for the

organization as a whole and each individual within it. This is based upon a foundation of al-iman and al-ilm, within a

civilization based upon a tawhid philosophy, so that employees have the opportunity to achieve taqwa and avoid

straying towards the state of al-fasad. Central to achieving this are the concepts of shura and adab (justice and

rights).

Shura is total organizational community participation in decision making to ensure an organization gets the best

views, is creative, to develop employees understanding of decisions made, to achieve better implementation of

decisions and strengthen the Islamic fraternity73. Shura is can also be seen as a organizational control mechanism to

prevent management and individuals within the organization from straying down the path of ignorance, greed and

oppression74, so that the organization can continue to serve its members and the wider community and thus sustain

itself. Shura creates a positive learning environment within an organization, similar to the concepts of learning

organization. The Al-Qur’an states that the concept of shura is mandatory upon an organisation75.

An organization should build its foundations upon the basic principles of human rights in its administration based on

the concept of adab. Adab is based on the existence and recognition of Allah (S.W.T.) and recognition of his

commands and laws (syar’iah). Within an organizational context, adab persuades man to do good and avoid evil (al-

fasad), in accordance with the nature of man (fitrah) and nature of his action (al-amal). Adab comprises four major

responsibilities, 1. responsibility to God, 2. responsibility to oneself, 3. responsibility to society and other human

beings, and 4. responsibility to the universe and other creatures76.

Over the last few decades ‘Western’ management ideas and ethics have moved closer to Islamic principles and

ethics. Stephen Covey, a devout practicing member of The Church of Latter-Day Saints, evangelistically preaches

personal development, fulfillment and spirituality within the context of the organization. Covey’s first book The Seven

Habits of Highly Effective people set a standard of highly ethical and humanistic principles that all individuals should

strive for in business77:

• Be proactive as this will develop the ability to control one’s environment, rather than be controlled by it, as is

generally the case;

• Begin tasks with the end result in mind, avoid distractions and concentrate only on relevant activities, which will

make you much more productive;

• Organize correctly and undertake the most important tasks first in a step by step approach;

• Look for win-win strategies so that all benefit;

• Listen to people first and understand them before you try to make them understand you, which will assist in

maintaining positive relationships with people;

• Look to develop synergy between people which will develop a better outcome, greater than what individuals can

achieve working by themselves; and

• Continually seek self-renewal, spiritually, mentally, emotionally, socially and physically.

Covey’s book sold over 15 million copies and launched him on a career of consulting to many of the top Fortune 500

companies. Covey built a training and consultancy company which has over 12,000 direct facilitators with curriculum

materials translated into numerous languages. Covey’s organization has also developed pilot programs with cities

wishing to become principle centered communities. Covey’s set of life rules is not without their critics who claim his

ideals are too idealistic and difficult to implement as well as being seen as a quick fix approach. However, this does

not detract from the extremely large following of devotees to Covey’s methods growing around the world. There are

similarities with Peter Drucker, Dale Carnegie and David Allen in the approach. Dale Carnegie’s work is also on the

rise again in popularity and consequently, corporations are taking notice of the importance of employee personal

growth within the corporate environment.

The above ‘Western’ management ‘gurus’ have had great impact upon the corporate world and way management is

taught at business schools. In the world where 20% of the population follow Islam, there is little evidence that Islamic

management principles are practiced in Islamic countries of South East Asia. Ironically, unlike the ‘West’, Islamic

Scholars, in agreement with Dr. Umer Chapra’s observations have not agreed due to various interpretations of Islam

to any universal Islamic business model for the Islamic World to embrace and espouse. ‘Western’ management

scientists have taken the initiative on similar principles that were laid down in the Al Qu’ran and Hadiths, more than

1500 years ago.

Entrepreneurship as the driver of Islamic economy

As entrepreneurship embraces community through a Tawhid model, then any entrepreneurship pedagogy should

also be community based. A village through a Community Shura Council, the source of true democracy and

empowerment, must play a role in espousing entrepreneurship to the youth within their community.



The existing higher education infrastructure is not suitable to assist in developing Islamic entrepreneurship pedagogy

at this point of time. Business schools and entrepreneurship courses are fixed upon the metaphor of ‘high growth

entrepreneurship’, where the mushharakah has more complex objectives.

The teaching of Islamic entrepreneurship should be conducted at the schools, and madrasas to reach the young, and

mosques to reach the rest of the community. Within Islamic communities large pools of funds exist through the Zakat

mechanism which could be channeled for empowerment. “Zakat revenue can be spent under tamlik mechanism for

providing an opportunity or raising productivity of the poor. Viewed from the long term perspective the poor would

become in time self-reliant, hence reducing the national burden of spending money on social security schemes79.”

Community savings Cooperatives based on Islamic principles can promote micro-entrepreneurs through the provision

of riba free micro-finance where risk is shared. The sharing of risk will eliminate the exploitative nature of

microfinance upon the Ummah80. This has the potential to open up a completely new paradigm in economic

behavior.

Community mentoring and teaching should aim to strengthen the Islamic aspects of culture to overlay other cultural

aspects within the community that may inhibit a true understanding of Islamic entrepreneurship. Raja Petra

Kamarudin criticized Malay Muslims for being too focused on “Islamic practices” without accepting “Islamic values”,

“…Malays pride themselves on being good Muslims. ….. Malays are very ritualistic in their Islamic beliefs. They do

not care much about values. It is practice that counts when it comes to Malays and Islam. Values don’t count. For that

matter, the Malays do not even begin to understand what Islamic values are81”.

Therefore culture has a large influence upon cognitive perceptions and beliefs, and thus a role to play in enriching

community religious values. Community perceptions to a great degree drive behavior, thus there needs to be a move

from ritual to value driven behavior. Perceptions are heavily influenced through the attitudes and beliefs we develop

through our upbringing and integration into the society we feel we belong to. Our values and beliefs shape our views,

where we try to fit what we sense in the world according to these sets of beliefs. This helps form our values, which

are reinforced by artifacts such as symbols, storytelling and group behavior. It is a complex and circular phenomenon

where beliefs reinforce the artifacts and the artifacts reinforce the beliefs. This is why culture is hard to change

because its elements act like bonding glue, pulling those who deviate back in, or if the bond is actually broken casting

the individual out of the critical mass of the rest of the populace. Our values are based upon a set of conscious and

sub-conscious assumptions that would seem to be shared throughout the community.

This simplistic model of culture highlights attribute sets made up from the assumptions, beliefs, values and artifacts of

the society in question. Each set of attributes can be looked at as being either negative or positive in a dialectic sea

that continues to ebb and flow within itself. Culture is a living entity, sometimes developing strong negative attributes,

which are destroyers, rather than the enrichment of a religious culture.

So for example in the case of entrepreneurship, there is a set of positive influences (or attributes) and a set of

negative influences (or attributes) within a community. The strength of each attribute will be different and even

change from time to time as new information or events happen and are perceived through their shared cognitive

‘glasses’ within the community. The key will be; how to strengthen the positive and weaken the negative. With

different strengths as is with water, air and solids, one can only work with what can be molded and shaped. It’s easier

to work with sand on a beach that granite on the side of a mountain. Leadership facilitation dialogue seems the best

way to engage the unconscious assumptions within a communities culture.

Working with this model may enable real mindset change. The

author believes that failure to solve the many community issues and

exploit entrepreneurial opportunities, has a basis in a socio-psycho

‘mindset’.

Without mindset change, the allocation of resources into

communities is not likely to change the nature of the Ummah.

Each village needs to determine their scope of interests and

activities their particular community may best be suited, according

to the surrounding hinterland. Thus a seaside village would be

expected to engage in different activities from a farming or mountain

community. These selected activities should be supported by the

development of ‘appropriate indigenous technologies’ that suit the

lifestyle of the community. Public universities have a major role to

play through outreach programs in this area.

The objective should be to create ideas that fit into the schema of

the people living in a village, which builds enthusiasm and pride. This requires a diagnosis of positive and negative

cultural attributes to understand the root causes of cultural behaviour, so that groups can be engaged and assisted in

seeing new ways of acting in the world. Much can be learned from the work of Paulo Freire in this area.

From an idea, opportunity must be seen and developed into a strategy that can be accepted and followed, according

to the aspired lifestyles of the people, which in the Ummah’s case is an Islamic one.

Markets must be identified and accessed utilizing the current means of communications, transport and logistics

available (one must add here that the advent of the internet is one of the tools with the largest potential for

empowerment – something that didn’t exist a little more than a decade ago). Resources must be acquired and

exploited to enable the opportunity to be exploited. There must also be access to skill development forums, so groups

can acquire the necessary knowledge to undertake a venture. The elements needed to create a village based venture

are summarized in Table 2 below;

Table 2. The Required and Existing Elements of Empowerment

Element Existence



ValuesIslam very positive values towards enterprise, independence and empowerment. This

has to be brought to the surface of some cultures or sub-cultures, i.e., refocusing on

the functional rather than the dysfunctional aspects.

Confidence Confidence is a group phenomena and can be improved through engagement of

group processes to achieve new ways of seeing.

Ideas The skills of ideation can be developed through access to communications technology

and developing both partial and whole brain thinking.

Potential Opportunities By linking ideas to markets, modes of entry, resources and skill needs, potential

opportunities can be constructed.

Product Focus on themes rather than marketing mixes, look for ways to incorporate consumer

fears, existence, acceptance, hopes and dreams in the product (spiritual materialism)

Markets

Markets exist in various forms and segmentations with much more fragmentation,

coupled with the ability to communicate are potentially accessible to village

communities. Identify aspirations of consumers, connect products and channels to

these aspirations.

Technology

Technology is a way of how to make and do things. Product manufacture can be

undertaken in scaled down models to suit decentralization, small unit output and

flexibility. The focus is on how to do things in more cost effective ways, within the

existing cultural socio-organisational setting.

Competitive Advantage In many FMCG markets competitive advantage has more to do with theme, schema

and branding, through selected channels of distribution, than economies of scale. The

product is a fulfiller of dreams.

Skills

Not all the skills taught at formal educational institutions are needed to start an

enterprise. In this regard its only necessary to provide people with what they need

from the point of view of business, product development and production. There is a

need for the “village university” to focus on showing people how to see, learn how to

do and connect to consumers.

Agency/NetworksThrough modern communications technology (internet & travel) it is now possible to

contact and interact with very wide groups of people, including agencies of interest,

customers, grant agencies and sourcing know-how.

Logistics Logistics have advanced in recent years and can be coupled together such as the

internet and EMS to create direct logistic systems between producers and consumers.

ResourcesWe have to learn to use what we have and utilize these limited resources

innovatively. There are many methods of alternative funding that can be explored

and set up, i.e., Zakat, unit trusts, closed equity markets, etc.

Organisation

New forms need to be generated from often discarded forms such as cooperatives.

Cooperatives can exist at both production and market levels. People can form their

own companies under umbrellas, organizations should be focused on linking the

young with their older generation. Coalitions can be sort with larger organizations in

developed countries for branding and market purposes. Organisations have to fit

with existing social schema and develop from there, as people are ready.

Positive values towards enterprise are required to motivate people to do things. Groups hold various values

associated with fate and future, abilities, possibilities, and the rewards of their labours, etc. Any positive values that

exist within Islamic doctrine are often immersed by other values developed through social and life interactions.

Changing values is the most challenging aspect of empowerment. One must not make the mistake of trying to

convert others to our own values, however noble we feel they are. This has been one of the greatest mistakes of

those ‘trying to help’ in the past. A village may not be ready for a new industry, but it might accept a new idea to pass

the time and earn some small extra income. Not all people want to be an entrepreneur in the sense we teach in

conventional entrepreneurship programs.

The facilitation of change thus involves the creation of new contexts that would break up the old established patterns,

in favour of new ones. Competing invisible forces (attractors) compete with each other to generate a situation where

the group can travel along different paths in the future. The mentor must find the right place and time and facilitate

new contexts that make the present paradoxes or contradictions irrelevant. Change becomes dialectic, where

potential new futures have their opposites which are resisting any change, for example83;

Positive Negative

Innovate Avoid mistakes

Think long term Live for today

Spend for the future Spend for today

Work as a group Work by oneself

Be flexible Follow rules and norms



Figure 4. Overall Producer, Marketing and

Mentor Model86

Collaborate Compete

Make joint decisions Make your own decisions

Changing values also requires a group acceptance of new sets of values and individual confidence in the group’s

acceptance. This requires dialogue to build new consciousness. David McClelland, best known for his achievement

model and work on power in organizations, also researched a person’s needs for affiliation. He found that the need

for affiliation or intimacy with a group plays an important role in motivation86. There are various reasons behind the

need for intimacy. Groups are perceived to provide a sense of security for individuals where there is some

uncertainty, or fear of something external to the individual and group. Groups also provide individuals with a cognitive

clarity (sense of how to interpret events around them) and a way to make a self evaluation and social comparison

about the way they should dress, talk, think and act. Thus developing motivation, based on McClelland’s model and

work with entrepreneurs in India, may best be undertaken within a group context84.

Ideas, shape the future of any individual, enterprise and village. It is ideas that have the potential to become

opportunities and ‘going-concern’ ventures.

Young graduates are the hope for future entrepreneurship in villages

around the region, as the catalyst of change. They are tomorrow’s leaders

and have a specific role to play in development. Students have access and

knowledge to the information tools of our age. They are the potential

mobilizers, liaisers and leaders of village empowerment, should they

choose to stay and do something. Graduates understand their own and

also understand universities as a source of technology and can learn how

to deal with relevant agencies for their cause. Graduates and the young are

the only people who can build enterprises in rural areas in the future.

Through linking all the elements together new organizations can be evolved

that are based on the village model and link with consumers in developed

markets in two way communication. Figure 4 shows what could be85. Due

to the advances in communication through the internet, graduates and

villages now have unprecedented access to a wider international

community of buyers, retailers, Fairtrade organisations and consumers

directly, with which to communicate their intentions and seek support and

customers; to advance the cause of empowerment to people in developed

countries without third party agents.

A producing company would be a democratic co-operative based upon

shura, of local producers, workers and collectors, mentored by

professionals who come from their own villages. The venture, will have ethical trade at its heart, working in

partnerships with producers to first meet their nutritional, food and health needs, including local communities, have

long term arrangements with the marketing company, and will act as a resource base for its producers/partners, fully

supporting them in providing them with required services at their doorstep, leaving them to farm and on farm

responsibilities, in adhering to Tawhid principles. The aim is to provide a smooth, transparent, and fully managed

supply chain, from primary production, knowledge, management, adding value, holding capacity and ensure the

‘Cash to Cash Cycle’. The company would act according to the following based principles;

1. Commitment to Social Justice in Organic Agriculture

2. Transparency and Accountability

3. Direct and long-term trade relationships built on trust and mutual respect.

4. Equitable distribution of returns to stakeholders

5. Communication and information flow

6. Skills development and capacity building

7. Internal ethics, and

8. Professionals manning the PC, support the local community87.

The cooperative would be committed to organic, integrated and sustainable production. The cooperative would be

involved either in agriculture or in both agriculture and product manufacturing as part of the overall marketing strategy

of the marketing company.

Finance for the cooperative will come partly from the marketing company which will channel funds according to the

cooperatives designated projects.

The producing companies aim is to develop a share holding structure that is beneficial to all parties involved. It is

hoped that key producers will become shareholders in the company, thereby becoming ‘producer partners’. Although

PC will also engage in one-off trades with producers considered ‘non-partners’, the above benefits, and the option to

become ‘shareholders’ and therefore receive a yearly ‘bonus’ .

Three types of shares are envisaged to add maximum flexibility to the way the village can be organized:

a. The Founder’s shares, which would be the majority initially

b. Shares bought by large investors (which will not be sought initially)

c. Shares held by producers, who would not invest other than with their products and favourable pricing.

The objective of the central marketing company would be to develop the market and organize producers according to

the needs of the market. The company would primarily be involved in product development in association with a

university, organizing logistics from producers to the market, providing finance to producer units and undertaking the

national marketing.

The management of the company would be by a small group of professionals, preferably post graduate students

under mentorship. The organization would aspire to be a knowledge based company, which would compile and



pictorial depiction of a localized Entrepreneurial Islamic

Economy.

disseminate information to those groups that require it for smooth operations. The specific groups within the company

would include;

• Strategic group

• Management group

• Marketing group

• Product development group

• Extension group

• Resource sourcing group

• Direct Marketing (sales group)

A interdependent and cooperative cluster can develop according to these community enterprises, based on their

special skills, resources, and location. This will help develop differentiation, where the village can create a form of

comparative advantage that brings new wealth. This is the philosophy behind many of the Halal hubs being

developed around the Asian region today. For example, regions like Satun (Thailand) and Kelantan (Malaysia) can

develop cultural Halal tourism and Islamic herbal medicine. Sarawak could specialize in jungle based handicrafts, and

Janda Baik just North of Kuala Lumpur could enhance the Halal farming project through cluster development.

Such projects would enhance community identity and create

further economic opportunities, where whole communities can

become an integrated matrix, where for example there may be

collectors of raw materials, processors, traders, and other

support businesses developing through the cluster.

An Islamic economy can be developed from village level where

amanah and equity can be assured. Community shura councils

will be much more able to deal with local village issues than any

provincial or regional government, where bureaucracy finds it

very difficult to deal with anything outside the scope of its

responsibilities. Community Shura Councils can also play the

role of commercial arbitrators where there is the absence of law

enforcement and court jurisdiction is not practical.

Even the Dinar and Dirham can be brought into the community

as a means of exchange at a community level. Dinar and

Dirham can be issued by a local authority, implemented by the savings cooperative taking on the functions of a

central bank, and overseen by the Community Shura Council, which can set conversion rates to local legal

currencies.

An Islamic economy is based upon community iman, ilm, integration and interdependence. However each

entrepreneurial agent is also independent within his or her own business, that fulfills a function within new value

chains that are constructed. The key to any successful cluster is therefore, community vision and thereafter close

cooperation. In this way unique value chains can be developed to serve potential markets.

However the greatest challenge to overcome in implementation is overcoming community division and non-

cooperation.

There are enough mentors within the Ummah today to assist in this form of community empowerment. Today’s

Muslim business academics have a responsibility as part of their own personal jihad to integrate Islamic principles

into business theory and entrepreneurship pedagogy.

New forms of competitive advantage can be developed when Islamic values have been integrated into the heart of a

firm and its products. Table 3 below shows that themes and branding philosophies some companies have used

successfully in the past.

Table 3. Market/Brand Paradigms Utilized by Some International Companies

Aveda The Body ShopHPA

(Malaysia)

Hain Celestial

Group

Est. Sales USD619mil (2006)USD1.5Billion

(2006)USD40Mil

USD738Mil

(2006)

Location USA UK Malaysia USA

Established 1978 1976 1999 1926

Products Personal Care Personal Care HerbsOrganic food

and cosmetics

Basic Philosophy To sustain the

environment and

Social

humanitarianism

Halal &

Toyyibaan

Free of artificial

ingredients,

Kosher foods



give back to

communities

activism on many

issues

Ethics Yes Yes Yes

Green Yes Yes Yes

Natural Yes Yes Yes Yes

Organic Yes Yes Yes

Community Yes Yes

Cultural

Religious/Spiritual Yes Yes

Mode of DistributionDirect

Marketing/Salon

Retail and

e-Commerce

Direct

Marketing

General

distribution

OwnerEstée Lauder

Companies Inc.L’Oreal

Private

OwnershipListed company

Both the Halal and ethical markets are growing exponentially today throughout the world. Consequently, the need for

an Islamic model is increasing in importance today. There is a growing awareness among Muslims about their duties

and responsibilities to adhere to the Tawhid. As Muslim consumers require more Islamic goods and services88,

Islamic compliant supply chain development is a major growth industry in itself, and is becoming a feature within

conventional supply chains internationally. The concepts of Halal/Toyyibaan are compatible with GMP/HACCP, and

also incorporate a strong ethical framework that is consistent with the rapidly growing global ‘ethical product’ and

‘Fairtrade’ movements89. However how many ‘Islamic corporations’ on the ground are actually complying with

Islamic principles, other than Halal certification remains an interesting area for future research. Indonesia, Malaysia

and Thailand are developing Halal food hubs without taking into consideration the underlying Tawhid principles to

make these proposed hubs holistic in their approach to Islamic business.

Conclusion – Towards Islamic Economy

An Islamic economic system is compatible with the concept of ‘western’ social economics90. Islamic economics

provides a way of creating equity within a community, which other models have failed to achieve91. Entrepreneurship

is the preferred method of agency within an Islamic economy, where high levels of interdependency through clusters

based on community are advocated.

Developing entrepreneurship based upon Tawhid principles is empowering to the Ummah and a way to integrate with

the world without the need to compromise religious beliefs and values. The nexus of ‘appropriate indigenous

technology’, ‘branded differentiation’, and deeply held firm values can create new sources of wealth within a

community. This helps to enable the creation of barriers to entry for imitators, a problem with many village based

clustering around the world.

To achieve the above requires a paradigm change. The Islamic economic paradigm has been largely ignored by both

‘western’ and Muslim economists. However the Islamic approach to economy and entrepreneurship limits

speculation, debt, and exploitation, all casual factors to some degree in the 2008 global financial crisis. Islamic

economy and entrepreneurship encourages mudarabah (profit and loss sharing) and thus lays the foundation for a

cooperative society. This is the challenge for academics, policy makers, and most importantly, the communities

themselves. An economically prosperous community has better chance of reaching community piety than an

impoverished community. The Al-Qur’an is not just a book of divinity, it is a practical book of empowerment, largely

ignored for its potential in this regard.

So much can be achieved through the right intention:

“Indeed, Allah will not change the condition of a people until they change what is in themselves”92.

This is a paper presented to the 6th Annual Muslim World Conference 2013, “Competitive Collaboration Strategies

and Muslim Common Culture in the ASEAN Community”, Bangkok, Thailand, May 2013.

Notes:

Abdullah Abdul Elah Sallam & Murray Hunter (2013), Where is Saudi Arabian Society Heading?, Eurasiareview, May 1,

http://www.eurasiareview.com/01052013-where-is-saudi-arabian-society-heading-analysis/

2 The World Factbook, CIA, https://www.cia.gov/library/publications/the-world-factbook/index.html

3 Hunter, M., (2012), The Curse of Feudalism, New Mandela, August 24, http://asiapacific.anu.edu.au/newmandala/2012/08/24/the-

curse-of-feudalism/

4 Hunter, M., (2013), Are Western management ideas crippling Asian business education?, University World News, February 9th,

http://www.universityworldnews.com/article.php?story=20130206154746686



5 Hunter, M., (2012), Southern Thailand’s Islamic Business Revolution, Asia Sentinel, October 24,

http://www.asiasentinel.com/index.php?option=com_content&task=view&id=4925&Itemid=392

6 Hassan, R., (2006), ‘Islamic world faces intellectual stagnation’, Asia News

Network,http://www.nationmultimedia.com/2006/11/04/opinion/opinion_30018026.php, (accessed 6th

November 2006).

7 Shams, R., (2004), ‘A Critical Assessment of Islamic Economics’, HWWA Discussion Paper 281, Hamburg Institute of International

Economics, Hamburg, Germany.

8 Islamic Voice, ‘Islamic Economics Offers the Best to Mankind’, http://www.islamicvoice.com/june.2003/ine.htm, (Accessed 20th

December 2006).

9Al-Qur’an (3:164)

10 Koya, P.K., (Editor), (1996), Hadĭth ans Sunnah: Ideals and Realities, Kuala Lumpur, Islamic book Trust, Introduction xiii.

11Hassan, M., A., (1992), The Tawhidic Approach in Management and Public Administration: Concepts, Principless and an Alternative

Model, Kuala Lumpur, National Institute of Public Management, pp. 6-7.

12Al-Qur’an (51:56)

13Al-Qur’an (30:30)

14Al-Qur’an (4:28))

15Al-Qur’an (20:115)

16Al-Qur’an (102:1-2)

17Al-Qur’an (33:72)

18Al-Qur’an (17:11)

19Al-Qur’an (17:100)

20Al-Qur’an (17:67)

21Al-Qur’an (18:54)

22Al-Qur’an (70:19-20)

23Al-Qur’an (4:128)

24 Beekum, R., I., (1996), Islamic Business Ethics, Herndon, VA., International Institute of Islamic Thought.

25Mohsin, M., (1995), Economics of Small Business in Islam, Jeddah, Saudi Arabia, Visiting Scholar Research Series No. 2., Islamic

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27Kahf, M., (2003), Sustainable Development in the Muslim Countries, , Jeddah, Saudi Arabia, IDB Prize Winners’ Lecture Series,

Islamic Research and Training Institute, Islamic Development Bank

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29Al-Qur’an (35:29), (26:207), (17:82).

30Al-Qur’an (2:164)

31Al-Qur’an (5:3)

32Al-Qur’an (2:168)

33Al-Qur’an (14:32-34)

34Al-Qur’an (24:37)

35Nienhaus, V., (2010), Fundamentals of an Islamic economic system compared to the social market economy, Kas

International Reports, 11, P. 77, http://www.kas.de/wf/doc/kas_21079-544-2-30.pdf?101110141450

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37Al-Qur’an (20:6).

38Al-Qur’an (2:275-279)

39Al-Qur’an (2:279)

40Presley, J., R., & Sessions, J., G., (1994), Islamic Economics: The emergence of a new paradigm, The Economic Journal, Vol. 104,

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43Al-Qur’an (22:77)

44Al-Qur’an (2:275)

45Al-Qur’an (17:36)

46Al-Qur’an (92:4), (29:69).

47Hassan, M., A., (1992), op. cit., P. 24.

48Al-Qur’an (31:20)

49Al-Qur’an (35:28)

50Al-Qur’an (51:56)

51Al-Qur’an (2:21)

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59Al-Qur’an (7:58)

60Al-Qur’an (5:5), (2:168)

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62Al-Qur’an (2:198)

63Al-Qur’an (7:31)

64Al-Qur’an (25:67)

65Al-Qur’an (22:77)

66Al-Qur’an (3:1-2), (4:125)

67Al-Qur’an (6:132), (16:97), (16:93)

68Al-Qur’an (90:8-10)

69Al-Qur’an (30:41), (103:1-3)

70Al-Qur’an (33:72)

71Al-Qur’an (2:169)

72Al-Qur’an (33:72)

73Hassan, M., A., (1992), op. cit., pp. 66-68.

74Al-Qur’an (42:36-40)

75Al-Qur’an (3:159)

76Lapidus, M., (1984), ‘The Place of Adab in South Asian Islam’, in Metcalf, B., D., (Ed.), Moral Conduct and Authority, Berkeley, Los

Angeles, University of California Press, P. 39.

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78 Khaliq Ahmad 2002 Intellectual Discourse Vol. 8, no. 2 (IIUM)

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20th August 2007)

82 Morgan, G., (1984), Images of Organisation, Newbury Park, Sage

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84 McCelland, D., C., and Winter, D., G., Motivating Economic Achievement, New York, Free Press, 1969.

85 Hunter, M., Proposal Outline to Develop a Community Based Enterprise to Manufacture and Market Cosmetics, Personal Care,

Household and Medicinal Products in Pattani Province, Thailand, Submitted to the Hon. Governor’s Office, Pattani Province, April

2007, Unpublished document.

86 Hunter, M., (2008), Revolutionary Empowerment: A Re-look at Spirituality, Cultural Integrity and Development, Proceedings of the

Monash University SME Business Conference, July 8-10, Melbourne, Australia.

87 Principles set out for peoples companies by Dr. Subash Mentha, Bangalore, India, as communicated to the author.

88This is much wider than food and includes banking, finance, insurance, entertainment, tourism, and cosmetics, etc.

89 Hunter, M. (2012), “The Emerging Halal Cosmetic and Personal Care Market,” Personal Care March: P. 40.

90 Konrad-Adenauer-Stiftung, C., F., (2009), Guidelines for Prosperity, Social Justice and Sustainable Economic Activity, Berlin:

Konrad-Adenauer-Stiftung, http://www.kas.de/wf/doc/kas_17025-544-2-30.pdf

91 Umer Chapra, M., (2003), Islam and the Economic Challenge, Leicester, The Islamic Foundation and The International Institute of

Islamic Thought.

92Al-Qur’an (13:11)

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