How Islamic finance and a more ethical capitalism go hand-in-hand

How Islamic finance and a more ethical capitalism go hand-in-hand

Sheeza Ahmad Available at:

The Qur’an’s teachings around business chime with the objectives of the worldwide social enterprise movement.

Though wealth creation is the primary goal taught by top businessmen, social impact is considered to be a more fulfilling outcome for others. Money is not timeless, but what you do with that money can be. The light you instil 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 particular group was taught the importance of such business: Muslims.

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 who knew 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 Sir Zafrullah Khan, the former Pakistani politician and diplomat, the Holy Qur’an states (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 (Holy Qur’an, 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 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.

Many examples can be found when exploring the Muslim world of social entrepreneurs who have values rooted in Islamic teachings. One notable organisation is the Grameen Foundation, which provides financial services, life-changing information and unique income-generating opportunities to improve the lives of the poor. In the last 15 years, the foundation and its partners have helped 9.4 million of the world’s poor.

Similarly, Net Impact Saudi Arabia (NISA) strives to make a positive impact in society by assisting social entrepreneurs with the provision of education, equipment and inspiration to aid with the growth of their business. NISA has successfully supported 10,000 business owners.

In relation to the business model followed by Muslims, equity holders and communities share both Islamic wealth and social enterprise-related wealth.

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 in 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.

Zulkifli Hasan
Oslo, Norway


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