Chapter 2 - DEVELOPING STRATEGIC PLAN FOR ENTREPRENEURSHIP IN ISLAMIC PERSPECTIVE.pptx

Chapter 2 - DEVELOPING STRATEGIC PLAN FOR ENTREPRENEURSHIP from ISLAMIC PERSPECTIVE. This slide is a special design for Master's students (MIBS & MIFB) in UUM.

1. TOPIC 2 - DEVELOPING STRATEGIC PLAN FOR ENTREPRENEURSHIP IN ISLAMIC PERSPECTIVE BIMM5043 By: Major Dr. Mohd Adib Abd Muin, IFP, CQIF (Wealth Management) Senior Lecturer Islamic Business School (IBS) Universiti Utara Malaysia 1 BIMM5043 - ENTREPRENEURSHIP FROM ISLAMIC PERSPECTIVE

2. OUTLINE Islamic Spiritual Core and Physical Core Combining Both Core in Developing Entrepreneurship Strategy Market and Culture Research of Target Group: Islamic Perspective Islamic Capital Preparation and Financial Knowledge Development of Effective Business Plan in Islamic View 2 BIMM5043 - ENTREPRENEURSHIP FROM ISLAMIC PERSPECTIVE

3. INTRODUCTION Entrepreneurship plays a vital role in the economic and social development of a nation. From an Islamic perspective, entrepreneurship is not only seen as a means to achieve financial success but also as a vehicle to fulfill religious obligations, promote societal welfare, and enhance ethical business practices. Islamic entrepreneurship is deeply rooted in the principles of Shariah (Islamic law) and guided by core values such as honesty, transparency, trustworthiness, and fairness, ensuring that business operations align with moral and ethical standards. In light of the increasing complexity and competitiveness of global markets, it is essential for Muslim entrepreneurs to develop a strategic plan that reflects Islamic principles while fostering innovation, sustainability, and growth. Such a strategic plan must integrate both the spiritual objectives ( falah ) and economic success, emphasizing the dual responsibility of an entrepreneur: to achieve material well-being and to contribute to the betterment of society. This introduction aims to highlight the importance of a strategic plan that not only drives entrepreneurial success but also promotes Islamic ethical standards. It will delve into key aspects such as Shariah compliance, risk management, profit-sharing models (such as Mudharabah and Musharakah ), and sustainable business practices, all of which are crucial to developing an entrepreneurship model that aligns with Islamic values and contributes to broader economic and social objectives. 3 BIMM5043 - ENTREPRENEURSHIP FROM ISLAMIC PERSPECTIVE

4. Cont.. يَـٰٓأَيُّهَا ٱلَّذِينَ ءَامَنُوا۟ لَا تَأْكُلُوٓا۟ أَمْوَٰلَكُم بَيْنَكُم بِٱلْبَـٰطِلِ إِلَّآ أَن تَكُونَ تِجَـٰرَةً عَن تَرَاضٍۢ مِّنكُمْ ۚ وَلَا تَقْتُلُوٓا۟ أَنفُسَكُمْ ۚ إِنَّ ٱللَّهَ كَانَ بِكُمْ رَحِيمًۭا ٢٩ “ O believers! Do not devour one another’s wealth illegally, but rather trade by mutual consent. And do not kill ˹each other or˺ yourselves. Surely Allah is ever Merciful to you .” (An-Nisa, 4: 29) 4 BIMM5043 - ENTREPRENEURSHIP FROM ISLAMIC PERSPECTIVE

5. Cont.. ٱلَّذِينَ يَأْكُلُونَ ٱلرِّبَوٰا۟ لَا يَقُومُونَ إِلَّا كَمَا يَقُومُ ٱلَّذِى يَتَخَبَّطُهُ ٱلشَّيْطَـٰنُ مِنَ ٱلْمَسِّ ۚ ذَٰلِكَ بِأَنَّهُمْ قَالُوٓا۟ إِنَّمَا ٱلْبَيْعُ مِثْلُ ٱلرِّبَوٰا۟ ۗ وَأَحَلَّ ٱللَّهُ ٱلْبَيْعَ وَحَرَّمَ ٱلرِّبَوٰا۟ ۚ فَمَن جَآءَهُۥ مَوْعِظَةٌۭ مِّن رَّبِّهِۦ فَٱنتَهَىٰ فَلَهُۥ مَا سَلَفَ وَأَمْرُهُۥٓ إِلَى ٱللَّهِ ۖ وَمَنْ عَادَ فَأُو۟لَـٰٓئِكَ أَصْحَـٰبُ ٱلنَّارِ ۖ هُمْ فِيهَا خَـٰلِدُونَ ٢٧٥ “ Those who consume interest will stand ˹on Judgment Day˺ like those driven to madness by Satan’s touch. That is because they say, “Trade is no different than interest.” But Allah has permitted trading and forbidden interest . Whoever refrains—after having received warning from their Lord—may keep their previous gains, and their case is left to Allah. As for those who persist, it is they who will be the residents of the Fire. They will be there forever .” (Al-Baqarah, 2: 275) 5 BIMM5043 - ENTREPRENEURSHIP FROM ISLAMIC PERSPECTIVE

6. In Islamic entrepreneurship, the concept of balancing between the Islamic Spiritual Core and the Physical Core is essential. These two dimensions represent the integration of faith and worldly endeavors, ensuring that the actions and motivations of Muslim entrepreneurs align with both their spiritual and material goals. 6 BIMM5043 - ENTREPRENEURSHIP FROM ISLAMIC PERSPECTIVE ISLAMIC SPIRITUAL CORE AND PHYSICAL CORE

7. The Islamic Spiritual Core refers to the set of values, beliefs, and ethical principles derived from Islamic teachings that guide an entrepreneur’s behavior and decision-making. It reflects the inner dimension of faith (Iman) that drives a Muslim entrepreneur's intention and actions. Key elements include: Tawhid (Oneness of God) : Acknowledging that all aspects of life, including business and trade, are part of one’s service to Allah. Entrepreneurship is seen as a means of fulfilling the greater purpose of serving humanity and earning halal (lawful) sustenance. Taqwa (God-consciousness) : Entrepreneurs are guided by a sense of accountability to Allah in all their dealings. This encourages honesty, trustworthiness, and fairness in business practices, avoiding fraud, exploitation, or unethical behavior. Niyyah (Intention) : Having the right intention behind every business activity is fundamental in Islam. Entrepreneurs must ensure that their ventures aim to promote the welfare of the community, fulfill social obligations, and earn halal income, rather than merely chasing profit for personal gain. Akhlaq (Ethical Conduct) : Upholding virtues such as truthfulness, justice, patience, and compassion is a cornerstone of Islamic entrepreneurship. It reinforces the idea that business should serve the broader social good, and that profit-making must be accompanied by ethical responsibility. Falah (Success in This World and the Hereafter) : Islamic entrepreneurship seeks not just material success but ultimate salvation. The notion of success ( falah ) in Islam goes beyond worldly gains and includes achieving spiritual prosperity in the Hereafter. 7 BIMM5043 - ENTREPRENEURSHIP FROM ISLAMIC PERSPECTIVE a. ISLAMIC SPIRITUAL CORE

8. The Physical Core refers to the practical and tangible aspects of entrepreneurship that involve the operational, financial, and managerial elements of running a business. While the Spiritual Core ensures adherence to Islamic values, the Physical Core focuses on the actual execution of business strategies and the achievement of economic goals. Key elements include: Innovation and Risk-Taking : Islamic entrepreneurship encourages creativity and innovation, provided it aligns with Shariah principles. Entrepreneurs are expected to take calculated risks, especially through Shariah-compliant contracts such as Mudharabah (profit-sharing) and Musharakah (partnership), where profit is shared, and risk is minimized through collective effort. Business Management : Islamic entrepreneurs are required to manage resources efficiently and responsibly. This includes financial stewardship, ethical marketing, transparent communication, and ensuring the well-being of employees and customers. Halal and Haram : Entrepreneurs must ensure that all aspects of their business, from sourcing to production and distribution, comply with halal standards. This includes avoiding prohibited (haram) industries such as alcohol, gambling, and interest-based financial practices. Sustainability and Social Responsibility : In line with the Maqasid al-Shariah (objectives of Shariah), which aim to protect faith, life, intellect, wealth, and lineage, Islamic entrepreneurship emphasizes sustainable practices that contribute to the well-being of society and the environment. 8 BIMM5043 - ENTREPRENEURSHIP FROM ISLAMIC PERSPECTIVE b. PHYSICAL CORE

9. Combining the Islamic Spiritual Core and the Physical Core in developing an entrepreneurship strategy requires a balanced integration of faith-based principles with practical business tactics. This ensures that entrepreneurial efforts not only lead to financial success but also uphold Islamic values and contribute to societal welfare. An Islamic entrepreneurship strategy must harmonize spiritual goals with efficient business execution, making it both ethically sound and economically viable. The Islamic Spiritual Core provides the moral and ethical foundation for an entrepreneurship strategy. This core revolves around aligning business decisions and practices with the principles of Tawhid (Oneness of God), Taqwa (God-consciousness), Niyyah (pure intention), and Akhlaq (good ethics). These principles guide the strategic decisions of entrepreneurs in a way that ensures accountability, fairness, and adherence to Shariah (Islamic law). The Physical Core focuses on the tangible and operational aspects of the business, including resource management, marketing, innovation, and financial growth. It involves the practical actions and decisions needed to ensure a business remains competitive and profitable while adhering to Islamic guidelines. 9 BIMM5043 - ENTREPRENEURSHIP FROM ISLAMIC PERSPECTIVE 2. COMBINING ISLAMIC SPIRITUAL CORE AND THE PHYSICAL CORE IN DEVELOPING ENTREPRENEURSHIP STRATEGY

10. Incorporating the Islamic Spiritual Core in the strategy involves: Setting Ethical Objectives : The primary objective of an Islamic entrepreneur is not just to maximize profit but to contribute to social welfare and achieve holistic success ( falah ). For instance, profits must be earned through halal (permissible) means, and the business should serve as a platform for societal development and alleviation of poverty, thus aligning with the principles of zakat (charitable giving) and sadaqah (voluntary charity). Ensuring Shariah Compliance : Every aspect of the business strategy—from product development to financial transactions—must comply with Islamic law. This includes avoiding riba (interest), gharar (uncertainty), and engaging in fair trade practices. Contracts such as Mudharabah (profit-sharing) or Musharakah (joint partnership) provide Shariah-compliant ways to finance and manage business ventures. Fostering Trust and Integrity : Islamic teachings place great emphasis on trust ( amanah ) and integrity ( sidq ). In strategy development, this translates into transparent dealings with customers, employees, and partners. It builds a strong reputation, which is key to long-term business success and sustainability. 10 BIMM5043 - ENTREPRENEURSHIP FROM ISLAMIC PERSPECTIVE Cont..

11. Incorporating the Physical Core in the strategy involves: Resource Optimization : Efficient management of resources, including capital, human talent, and technology, is critical to the success of any business. Islamic entrepreneurs must utilize these resources in a responsible way, ensuring that they are sourced and deployed in accordance with halal principles. For instance, the use of Ijara (leasing) or Murabaha (cost-plus financing) contracts can help fund assets in a Shariah-compliant way. Product Innovation and Market Adaptation : Islamic businesses must continuously innovate and adapt to changing market conditions while staying within the bounds of Shariah. New products and services must be designed to meet the evolving needs of consumers while offering clear halal alternatives. For example, in response to consumer demand, businesses might offer Shariah-compliant versions of conventional financial products like Sukuk (Islamic bonds) or Takaful (Islamic insurance). Strategic Growth and Expansion : Growth strategies for an Islamic business must consider long-term sustainability over short-term gain. Expansion efforts should be undertaken in a way that remains true to Islamic ethics, considering the social and environmental impacts of the business’s growth. The business must avoid ventures that could compromise its ethical or religious commitments. 11 BIMM5043 - ENTREPRENEURSHIP FROM ISLAMIC PERSPECTIVE Cont..

12. Developing an Islamic entrepreneurship strategy requires the effective integration of both the Spiritual and Physical cores. This fusion ensures that business operations are ethically guided while being pragmatic and results-oriented. Successful Islamic entrepreneurship requires a harmonious integration of the Islamic Spiritual Core and the Physical Core . Entrepreneurs must align their business practices with their spiritual beliefs, ensuring that while they strive for profitability and growth, they do so in a manner that promotes ethical conduct, social justice, and community welfare. For instance: When making business decisions, an entrepreneur guided by Tawhid and Taqwa will avoid engaging in unethical practices, even if they seem profitable. By prioritizing Niyyah and Akhlaq , an entrepreneur focuses not just on material success but also on leaving a positive social impact, such as providing fair wages or supporting charitable initiatives. This balance between spiritual and material aspects ensures that entrepreneurship in Islam is not just a means of wealth accumulation but a way to fulfill one’s duty to Allah and contribute to the greater good of society. 12 BIMM5043 - ENTREPRENEURSHIP FROM ISLAMIC PERSPECTIVE INTEGRATING THE SPIRITUAL AND PHYSICAL CORE

13. The following steps can be taken to integrate both cores: Ethical Business Model Design : The business model must include mechanisms that reflect the entrepreneur’s spiritual beliefs, such as donating a portion of profits to charitable causes or offering products and services that solve societal challenges. At the same time, the model must be commercially viable and financially sound. Shariah-Compliant Financial Strategies : Entrepreneurs should implement financial strategies that avoid haram (forbidden) activities such as interest ( riba ) while using permissible methods like Mudharabah and Musharakah for investment and partnership arrangements. Financial goals should be set to ensure fair profit-sharing while minimizing risk and uncertainty ( gharar ). Balancing Profitability and Social Responsibility : A core part of the Islamic spiritual approach is contributing to the well-being of society. This should be balanced with the physical goal of achieving profitability. Islamic entrepreneurs can implement corporate social responsibility (CSR) programs, engage in ethical labor practices, and ensure their operations are sustainable and environmentally friendly. Customer-Centric Innovation : Innovation should be directed toward offering halal, high-quality products and services that meet the needs of consumers. Businesses should actively seek feedback from customers, ensuring that they are creating value in a way that is beneficial for both the consumer and the broader community. 13 BIMM5043 - ENTREPRENEURSHIP FROM ISLAMIC PERSPECTIVE INTEGRATING THE SPIRITUAL AND PHYSICAL CORE

14. Conducting market and culture research from an Islamic perspective involves analyzing the target group’s needs, preferences, and behaviors while ensuring compliance with Islamic ethical principles. The goal is to not only capture consumer insights but also to create products and services that are halal (permissible) and tayyib (pure and wholesome). Understanding the Target Group in an Islamic Context Islamic Principles in Market Research Cultural Insights and Consumer Behavior in the Islamic Market Islamic Guidelines on Product Development and Marketing Shariah-Compliant Consumer Research Tools Challenges in Islamic Market Research Aligning Market Research with Islamic Ethics 14 BIMM5043 - ENTREPRENEURSHIP FROM ISLAMIC PERSPECTIVE 3. MARKET AND CULTURE RESEARCH OF TARGET GROUP: ISLAMIC PERSPECTIVE

15. Islamic market research requires a deep understanding of the target group's religious beliefs, values, and cultural practices . Islamic principles guide many aspects of daily life, including consumption patterns, financial behavior, and lifestyle choices. To effectively reach Muslim consumers, businesses must consider: Halal Preferences : Muslim consumers prioritize halal products, from food to finance. Market research should investigate the demand for halal-certified products and services, as well as the credibility of halal certifications in the target market. Cultural Sensitivities : Understanding cultural norms is critical, especially in regions with significant Muslim populations. For example, modesty in clothing, gender roles, and religious observances such as Ramadan can significantly affect consumer behavior. Religious Holidays and Events : Businesses targeting Muslim consumers must consider religious holidays like Ramadan and Eid al-Fitr, which significantly influence purchasing behavior. Market research should assess how spending patterns shift during these periods and tailor offerings accordingly. 15 BIMM5043 - ENTREPRENEURSHIP FROM ISLAMIC PERSPECTIVE Understanding the Target Group in an Islamic Context

16. From an Islamic perspective, market research should adhere to ethical guidelines in line with Shariah principles . Key considerations include: Honesty and Transparency : Information gathered from the target group should be obtained ethically, with full consent and transparency about the purpose of the research. Deceptive practices, such as misrepresenting the research objectives or manipulating data, are prohibited in Islam. Avoiding Intrusion : Respecting the privacy of individuals is a core principle in Islam. Market research should not involve invasive practices or collect information that violates the privacy of individuals or communities. Equity and Justice : Research must be conducted in a way that avoids discrimination or exploitation of any group. The Prophet Muhammad (SAW) emphasized fair treatment and honesty in trade, which extends to modern business practices, including market research. 16 BIMM5043 - ENTREPRENEURSHIP FROM ISLAMIC PERSPECTIVE b. Islamic Principles in Market Research

17. When researching the Muslim market, it’s important to delve into cultural values that shape consumer behavior. Some factors to consider include: Collective Orientation : In many Muslim-majority cultures, there is a stronger focus on family and community rather than individualism. Products or services that emphasize family values, community welfare, or charitable giving (such as Zakat) are more likely to resonate with this target group. Brand Trust and Religious Authority : Muslims often look for brands that have gained the endorsement of religious scholars or trusted community figures. Brands that demonstrate a strong commitment to Islamic values tend to earn greater loyalty. Modesty and Ethical Consumption : Modesty is an important cultural value in Islamic societies, affecting fashion, media consumption, and even food choices. Additionally, ethical consumption is a growing trend among Muslim consumers, who prefer brands that are socially responsible and environmentally sustainable, aligning with the concept of Islamic stewardship ( Khilafah ) . 17 BIMM5043 - ENTREPRENEURSHIP FROM ISLAMIC PERSPECTIVE c. Cultural Insights and Consumer Behavior in the Islamic Market

18. Once market research has identified the needs and preferences of the target group, businesses must ensure that their products and services are developed in line with Islamic guidelines : Product Integrity : Products and services must be halal (lawful) and tayyib (pure). This includes food, cosmetics, finance, and lifestyle products that are free from prohibited substances like alcohol, pork, and interest ( riba ). Ethical Marketing : Islamic ethics emphasize honesty in marketing. This means avoiding exaggerated claims, false advertising, and manipulative tactics that might deceive customers. Marketing strategies should promote products truthfully while reflecting Islamic values of fairness and integrity. Sustainable and Socially Responsible Offerings : Islamic teachings encourage responsible consumption and care for the environment. Businesses that emphasize sustainability, waste reduction, and corporate social responsibility (CSR) will appeal to Muslim consumers who are guided by these values. 18 BIMM5043 - ENTREPRENEURSHIP FROM ISLAMIC PERSPECTIVE d. Islamic Guidelines on Product Development and Marketing

19. The tools and methods used for market and culture research in Islamic markets must comply with Islamic ethical standards: Surveys and Focus Groups : These methods are effective but must respect the privacy of respondents. Questions should be respectful of religious and cultural sensitivities, and data collection must adhere to Islamic ethics. Digital Analytics : While online tools like social media analytics and website data are useful for understanding consumer behavior, they must be used ethically. Any form of data mining or targeted advertising that intrudes on personal privacy is discouraged in Islam. Shariah-Approved Research Frameworks : Companies can collaborate with Shariah Advisory Boards to ensure that their market research methods and business strategies comply with Islamic principles. This provides credibility and trust in the eyes of Muslim consumers. 19 BIMM5043 - ENTREPRENEURSHIP FROM ISLAMIC PERSPECTIVE e. Shariah-Compliant Consumer Research Tools

20. Researching the Islamic market comes with unique challenges, including: Diverse Interpretations of Islamic Guidelines : Muslim populations are not homogenous. Different schools of thought (e.g., Sunni, Shia) and cultural contexts can lead to varying interpretations of what is halal or acceptable. Businesses must navigate these differences carefully. Halal Certification Complexities : In some regions, consumers may question the legitimacy of halal certifications. It’s important to understand the local certification bodies and their credibility with the target group. Evolving Consumer Expectations : As younger generations of Muslims become more tech-savvy and globalized, their expectations of brands shift. Businesses need to stay updated on how digital technologies, social movements, and global trends influence Muslim consumers. 20 BIMM5043 - ENTREPRENEURSHIP FROM ISLAMIC PERSPECTIVE f. Challenges in Islamic Market Research

21. For businesses targeting Muslim consumers, conducting market and culture research requires a deep understanding of both Islamic principles and the cultural context of the target group. By aligning research methods with Islamic ethical guidelines, businesses can create products and services that resonate with the values of Muslim consumers while maintaining their trust and loyalty. Emphasizing halal integrity, ethical marketing, and social responsibility will not only meet consumer demand but also contribute to the broader goal of promoting ethical and sustainable business practices in line with Islamic teachings. 21 BIMM5043 - ENTREPRENEURSHIP FROM ISLAMIC PERSPECTIVE g. Aligning Market Research with Islamic Ethics

22. In Islamic entrepreneurship, capital preparation and financial knowledge play a significant role in ensuring business ventures are compliant with Shariah law and successful in both ethical and financial aspects. Islamic teachings emphasize the importance of honesty, fairness, and avoiding forbidden practices like riba (interest) , gharar (uncertainty) , and haram (prohibited) activities in business transactions. Entrepreneurs must develop a sound understanding of Islamic finance principles to prepare capital in a manner that aligns with Islamic ethics. 1. Sources of Islamic Capital Mudharabah (Profit-Sharing) : In this partnership, one party provides the capital (the investor), while the other party (the entrepreneur) manages the business. Profits are shared according to an agreed ratio, but any losses are borne by the capital provider unless the entrepreneur acts negligently. Musyarakah (Joint Venture) : Both the entrepreneur and the investor contribute capital and share the profits and losses of the business. This partnership ensures equal participation and shared risk, which is fundamental in Islamic finance. Qard Hasan (Benevolent Loan) : This is an interest-free loan provided to help entrepreneurs without burdening them with repayment of interest. Only the principal amount is returned, and it serves as a charitable act for the lender. Crowdfunding or Collective Investment : Islamic crowdfunding platforms have emerged as a viable source of capital. Entrepreneurs can raise funds for their businesses from a large pool of investors, ensuring that all transactions are halal and Shariah-compliant. Takaful (Islamic Insurance) : Entrepreneurs can protect their businesses using Takaful, which operates on mutual assistance and shared risk principles. Unlike conventional insurance, which is based on uncertainty and interest, Takaful funds are invested ethically, and participants share in the profits or losses. 22 BIMM5043 - ENTREPRENEURSHIP FROM ISLAMIC PERSPECTIVE 4. ISLAMIC CAPITAL PREPARATION AND FINANCIAL KNOWLEDGE FOR ENTREPRENEURS

23. 2. Financial Knowledge in Islamic Entrepreneurship Islamic entrepreneurs need to have a strong grasp of financial literacy within an Islamic framework to manage their business operations and ensure they stay compliant with Shariah law. This includes: Understanding Islamic Contracts : Entrepreneurs should be familiar with contracts like Ijara (leasing) , Istisna (manufacturing contracts) , Murabaha (cost-plus financing) , and Sukuk (Islamic bonds) , which are common tools in Islamic finance. Shariah-Compliant Budgeting and Planning : Business planning must avoid forbidden financial practices such as charging or paying interest. Entrepreneurs must ensure that all financial projections, profit margins, and cost calculations align with halal standards. Risk Management : Islamic financial principles require risk-sharing rather than risk-transfer. Entrepreneurs need to understand how to manage risks through shared investment models like Musyarakah and Takaful. Additionally, they should avoid excessive speculation, which is prohibited under gharar . Zakat and Charitable Obligations : Entrepreneurs must account for their zakat (obligatory charity) , which is a pillar of Islamic economic ethics. Profits from the business should be purified by setting aside a portion for zakat and other charitable causes. 23 BIMM5043 - ENTREPRENEURSHIP FROM ISLAMIC PERSPECTIVE Cont..

24. 3. Steps for Capital Preparation and Financial Planning To ensure that their financial strategies are Shariah-compliant, entrepreneurs can follow these steps: Assess Halal Business Opportunities : Before acquiring capital, entrepreneurs must ensure their business idea is halal. This includes industries like halal food , Islamic finance , ethical fashion , and modest lifestyle products. Avoiding haram industries such as alcohol, gambling, and usury-based financial activities is critical. Choose the Right Islamic Financing Options : Depending on the business model, entrepreneurs must select appropriate financing options such as Mudharabah , Musyarakah , or Sukuk . They should work closely with Islamic financial institutions that offer Shariah-compliant products and services. Engage with a Shariah Advisor : Entrepreneurs may consult with Shariah advisors to ensure that their business plans, contracts, and financial operations adhere to Islamic principles. This can help avoid unintended violations of Islamic law. Implement Ethical Financial Practices : Ensuring transparency in transactions, fair trade, and ethical labor practices is essential for Islamic entrepreneurs. Maintaining accurate financial records and avoiding practices like hidden costs or unfair pricing is crucial. Consider Long-Term Ethical Sustainability : Islamic entrepreneurship promotes social responsibility and community welfare . Entrepreneurs should factor in the social impact of their business and its contributions to society in terms of job creation, fair wages, and charitable activities. 24 BIMM5043 - ENTREPRENEURSHIP FROM ISLAMIC PERSPECTIVE Cont..

25. 4. Importance of Financial Knowledge in Decision Making Entrepreneurs who have a solid foundation in Islamic financial principles can make more informed decisions about their capital investments, operational strategies, and growth opportunities. Financial knowledge helps entrepreneurs: Avoid Haram Transactions : A deep understanding of Islamic finance helps entrepreneurs steer clear of transactions involving riba , gharar , or other prohibited activities. Enhance Profitability with Shariah Compliance : By utilizing ethical financial instruments like Sukuk or Mudharabah , entrepreneurs can raise capital without compromising their religious values, thus gaining trust among Muslim consumers and investors. Manage Risks Effectively : Knowledge of risk-sharing contracts such as Musyarakah allows entrepreneurs to distribute risks fairly while avoiding speculative or uncertain transactions. Align Business Goals with Islamic Ethics : Entrepreneurs with financial knowledge can ensure that their business practices reflect broader Islamic principles of fairness, justice, and communal well-being. This alignment fosters a balanced approach to profit-making that benefits both the entrepreneur and society. 25 BIMM5043 - ENTREPRENEURSHIP FROM ISLAMIC PERSPECTIVE Cont..

26. An effective business plan is a vital tool for entrepreneurs to outline their goals, strategies, and pathways to success. From an Islamic perspective , the development of such a plan requires alignment with Shariah principles , incorporating both ethical and practical considerations to ensure the business operates in accordance with Islamic values. 1. Introduction to Islamic Business Planning Islamic entrepreneurship is rooted in the values of honesty , fairness , and justice , as prescribed in the Qur'an and Hadith . A business plan in this context is not merely a blueprint for financial success but also a guide for upholding Islamic ethics in all transactions and interactions. This ensures that the business generates halal (permissible) income and contributes to the well-being of the community and society at large . The Prophet Muhammad (SAW) said: "The truthful and trustworthy businessman will be in the company of the Prophets, the truthful, and the martyrs." ( Tirmidhi ). This emphasizes the importance of honesty and integrity in business dealings, making them core elements of any Islamic business plan. 26 BIMM5043 - ENTREPRENEURSHIP FROM ISLAMIC PERSPECTIVE 5. DEVELOPMENT OF AN EFFECTIVE BUSINESS PLAN IN ISLAMIC VIEW FOR ENTREPRENEURS

27. 2. Key Components of an Islamic Business Plan To develop an effective business plan within the Islamic framework, the following components should be considered: a. Vision and Mission Statement The vision and mission of an Islamic business should reflect both the economic goals of the entrepreneur and the social and ethical responsibilities outlined by Shariah. The business’s purpose should be aligned with benefiting society while staying compliant with Islamic ethics. This ensures that wealth creation is accompanied by values such as social justice and community welfare . Vision : Long-term objectives, such as growing a halal business that provides ethical products/services and contributes to social good. Mission : The daily commitment to operational excellence while maintaining Shariah-compliant practices. b. Product or Service Offering The business plan must clearly define the products or services being offered, ensuring that they adhere to Islamic principles. This includes avoiding industries that are haram (prohibited), such as alcohol, gambling, and interest-based financial services. The entrepreneur should outline how the product/service contributes to meeting the needs of the target market while adhering to Islamic values. 27 BIMM5043 - ENTREPRENEURSHIP FROM ISLAMIC PERSPECTIVE Cont..

28. c. Market Research and Target Audience Conducting market research is essential to identify the needs and demands of potential customers, especially within the Muslim community. Understanding the preferences of customers who seek Shariah-compliant products or services allows the entrepreneur to align the business offerings with ethical and halal standards. Target Audience : The business should define its target customers, particularly those seeking halal-certified products or ethical business practices. This may include Muslims as well as non-Muslims interested in ethical, sustainable business practices. d. Shariah-Compliant Financial Model The financial aspect of the business plan must strictly follow Islamic finance principles. This means avoiding riba (interest) , gharar (uncertainty) , and haram investments. Instead, the entrepreneur can adopt Shariah-compliant financing models such as Mudharabah (profit-sharing) , Musyarakah (joint partnership) , or Murabaha (cost-plus financing) . Profit and Loss Sharing : Islamic business models often encourage profit-sharing agreements, where both the investor and the entrepreneur share risks and rewards. Avoidance of Interest : The business must outline how it will finance its operations without relying on interest-based loans. Instead, ethical forms of investment such as Sukuk (Islamic bonds) or crowdfunding may be considered. 28 BIMM5043 - ENTREPRENEURSHIP FROM ISLAMIC PERSPECTIVE Cont..

29. e. Operational Plan and Structure The operational structure should define how the business will function on a day-to-day basis, ensuring that ethical practices are maintained throughout. The entrepreneur should include: Business Operations : A detailed outline of daily activities, production processes, and service delivery methods that conform to halal standards. Supply Chain Management : The selection of halal-certified suppliers to ensure that the product remains Shariah-compliant from production to sale. Employee Conduct : Establishing codes of ethics for employees, promoting honesty, fairness, and Islamic moral values in the workplace. f. Marketing Strategy Marketing should not only aim for profit but also ensure that all communication and advertising align with Islamic values, avoiding deceit, false promises, and exploitation. The plan should detail how the business will reach its target audience using ethical marketing practices . Halal Certification : Marketing halal-certified products can attract customers looking for verified halal goods. Community Engagement : Participation in Islamic events, sponsorships, or partnerships with Muslim organizations can help establish the business within the Islamic community. 29 BIMM5043 - ENTREPRENEURSHIP FROM ISLAMIC PERSPECTIVE Cont..

30. g. Risk Management and Ethical Considerations Islamic entrepreneurs are encouraged to take calculated risks in their ventures, but these should be managed with integrity and fairness. The business plan must account for risk-sharing and ethical contingency planning that ensures the business remains sustainable while upholding moral standards. Shariah Risk Management : The entrepreneur should outline strategies to manage risks while avoiding speculative or uncertain ventures, in line with Islamic principles. h. Zakat and Corporate Social Responsibility (CSR) The business plan should incorporate zakat obligations (the mandatory Islamic charity) into the financial model. Additionally, an Islamic business should also embrace broader CSR practices, contributing to social welfare and environmental sustainability. Zakat : Allocate a portion of profits for zakat, which purifies wealth and aids in redistributing resources to those in need. CSR Initiatives : Engage in ethical and sustainable business practices that benefit society, whether through charity, community development projects, or environmental sustainability. 30 BIMM5043 - ENTREPRENEURSHIP FROM ISLAMIC PERSPECTIVE Cont..

31. In conclusion, developing a strategic plan for entrepreneurship from an Islamic perspective involves integrating Shariah principles with modern business practices to ensure both ethical integrity and economic success. Islamic entrepreneurship emphasizes values such as honesty , fairness , and social responsibility , which guide business operations towards benefiting not only the entrepreneur but also society at large. A well-structured strategic plan incorporates a vision aligned with Islamic ethics , Shariah-compliant financial models , and ethical risk management , while ensuring that the business contributes to the well-being of the community through zakat, charity, and sustainable practices. Entrepreneurs are encouraged to focus on halal products and services , ethical marketing, and fostering trust with their customers. By adhering to these principles, Muslim entrepreneurs can create businesses that thrive economically, remain morally sound, and contribute to the economic empowerment of the ummah (Muslim community) and the broader society. 31 BIMM5043 - ENTREPRENEURSHIP FROM ISLAMIC PERSPECTIVE CONCLUSION

32. In essence, Islamic entrepreneurship goes beyond mere profit-making. It encompasses a holistic approach , balancing spiritual values and worldly success, thereby ensuring that business endeavors lead to both material prosperity and spiritual fulfillment in accordance with Islamic teachings. A successful business plan from an Islamic perspective requires more than financial foresight; it needs to be deeply rooted in Islamic principles that guide both business operations and ethical decision-making. By adhering to these values, Muslim entrepreneurs can create businesses that not only thrive financially but also contribute positively to the welfare of society, fulfill religious obligations, and achieve success in both the dunya (world) and the akhirah (hereafter) . 32 BIMM5043 - ENTREPRENEURSHIP FROM ISLAMIC PERSPECTIVE CONCLUSION

33. 33 BIMM5043 - ENTREPRENEURSHIP FROM ISLAMIC PERSPECTIVE Q & A