The Relation Between Social Enterprise and Islamic Business

Written by on December 4, 2012 in charity, Entrepreneurship, poverty - 2 Comments

Though wealth creation is the primary goal taught by the great businessmen, social impact is considered to be a more fulfilling outcome for some. It’s true what people say, money is not timeless, but what you do with that money can be. The light you instill in the uneducated, the medicine you provide to the ill, or the food and water you provide to the malnourished is far more enduring than the car you drive or the house you buy. Most advocates of social entrepreneurship believe that creating a business with a social impact leaves much more than just a humble footprint behind.

The concept of social entrepreneurship however is not new despite the recent rise in press coverage. It has existed since the 6th century and one group of the world’s population was taught the importance of such business: Muslims.

SocialEnterprise

Social value has been deemed as far richer than monetary value

Muslims live their lives in accordance to the teachings of their founder, Muhammad, who led his life as a humble merchant and was the ‘trustworthy one’ by all those known to him. His teachings and examples of business dealings were strongly linked to humanitarian values where the poor, the sick and orphans took precedence. He acknowledged the suffering of people in surrounding environments and continually created solutions for them while creating a system that would ensure their care long after his passing.

The mention of Muhammad is significant to understand how today’s Muslims are encouraged to create wealth; supporting the notion of an existing relationship between Islamic business and Social Enterprise.

According to the Qur’an (59:8), ‘the object of the Islamic economic system is to secure the widest and most beneficent distribution of wealth through institutions set up by it and through moral exhortation. Wealth must remain in constant circulation among all sections of the community and should not become the monopoly of the right’.

In Islamic law, the principal economic obligation is the payment of the capital levy called the Zakat (Quran, 22:79), which is “a levy imposed upon the well-to-do which is returned to the poorer sections of people” . This law applies to both individual and business wealth. In the wealth that is produced, three parties are entitled to share: the working man, the person supplying the capital, and the community as representing mankind. According to Sir Zafrulla Khan, ‘The community’s share in produced wealth is called the Zakat. After this has been set aside for the benefit of the community, the rest is “purified” and may be divided between the remaining parties that are entitled to share in it.’

Though Zakat is imposed only as a small percentage on one’s actual assets, Islamic teachings encourage the injection of wealth into communities where support is small or absent. Wealth is encouraged to be in constant circulation, either into the business, or into local communities to ensure the poor and sick are consistently attended to.

Comparatively, a social enterprise is an organisation, which focuses on environmental, social and economical well-being with a profit-making business model. The primary aim of a commercial business is to maximise shareholder wealth whereas the primary aim of a social enterprise is to maximise social value. Simply put, it is the bridge between non-profit organisations and commercial businesses.

In relation to the business model followed by Muslims, both Islamic wealth and social enterprise-related wealth are shared by equity holders and communities. These two types of businesses have community interests in common and are also faced with similar issues, a major one being reduced assets as money is constantly being circulated either for the purpose of business expansion or for community support. Some would argue that this makes sustaining a social enterprise business model much more difficult in comparison to other enterprises’ purely because their products and services focus on something more than just increasing profits: social value.

Consumer trends have shifted towards investment into products that come attached with an individual and social benefit, which is why the successes shared by many social enterprises have been profound. Muslims and Social Enterprise owners pursuing businesses based on either of the two models discussed are keen to accept the challenges ahead of them as they find solace in making a difference on a social level. To them and the consumer, this holds far greater value than the accumulated wealth itself.

Sheeza Ahmad

Sheeza is currently building social platform @HelpingB to inspire individuals to B the positive change in the world.

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  • http://twitter.com/AustinJ_Lee Austin Lee

    Very interesting comparison! Moving this idea forward, what can social enterprises and Islamic businesses learn from each other? Furthermore, is the relation is strong enough to coordinate potential partnerships? I really appreciate you writing this article – thank you.

  • http://www.facebook.com/david.meddings.9 David Meddings

    @ Sheeza, you seemed to have missed the major point of Islamic business, that riba/usury is forbidden including the use of paper/fiat money. And zakat which is accorded the same importance as the prayer has to be paid in gold, silver or commodity. The obeyance of these rules is social enterprise (modern term) for over 1000 years muslims called this muamalat.