1. www.mihe.org.uk mihe The Markfield Institute of Higher Education Presentation by Prof. Seif Tag El Din Copyright 2009 The Markfield Institute of Higher Education ‘Good Business’ in Islamic perspective Aston University – Business School Tuesday, 2 June 2009.

2. mihe www.mihe.org.uk The Markfield Institute of Higher Education Presentation by Prof. Seif Tag El Din Copyright 2009 The Markfield Institute of Higher Education Contents I - ‘Business’ in Islamic legacy. II - What makes up for ‘Good Business’? III - The Financing dimension

3. mihe www.mihe.org.uk The Markfield Institute of Higher Education Presentation by Prof. Seif Tag El Din Copyright 2009 The Markfield Institute of Higher Education I. ‘Business’ in the Islamic legacy. General Definition: ‘Good Business’ is any organised form of productive work satisfying ethical values within a given socio-economic framework. The Question: what is the value of productive work in a Muslim’s life? ‘Life’ is envisaged in the Quran as the total time resource that God has endowed upon every one of us to test how well we act.

4. mihe www.mihe.org.uk The Markfield Institute of Higher Education Presentation by Prof. Seif Tag El Din Copyright 2009 The Markfield Institute of Higher Education I/ I ‘ Doing better’ is the key challenge. “ [It is He] Who created life and death in order to test who among you is doing better” Holy Quran (67:2). Therefore, doing better is the key term that give value to a Muslim’s life, as it should be the case for every human – no waste of time ! However, what makes up for Good Deed? Simply, any act that yields a good result; this is called kheir in the language of the Quran.

5. mihe www.mihe.org.uk The Markfield Institute of Higher Education Presentation by Prof. Seif Tag El Din Copyright 2009 The Markfield Institute of Higher Education 1 / 2 Kheir is economic prosperity “Surely, human loves kheir passionately” ((100:9); this how humankind is described in the Quran. Kheir is therefore the desired fruit of productive activity from an Islamic perspective. Productive Deeds fall into two categories: 1.Worshipping activities (prayers; fasting; pilgrimage etc) – rewarded mostly in the Hereafter 2.Worldly activities (economic, social and political) – rewarded mostly in this World.

6. mihe www.mihe.org.uk The Markfield Institute of Higher Education Presentation by Prof. Seif Tag El Din Copyright 2009 The Markfield Institute of Higher Education I/ 3 Good ‘business’ as economic kheir Let there be a party amongst you who call for kheir, enjoin right practice [ma'qul] and prevent wrong practice..” Holy Quran (3: 104) See how the term ‘party’ underscores the importance of specialisation. In particular, calling for good standards of business belongs to the category of economic kheir.

7. mihe www.mihe.org.uk The Markfield Institute of Higher Education Presentation by Prof. Seif Tag El Din Copyright 2009 The Markfield Institute of Higher Education II. What makes up for good business? Two Main Criteria: First : Nature of Economic Activity: ‘good business’ is any organised form of productive work that contributes to socio-economic wellbeing. All the ‘oughts’ and ‘ought nots’ of Shariah (Islamic Law) are pointedly designed to project the Islamic perspective of socio-economic wellbeing.

8. mihe www.mihe.org.uk The Markfield Institute of Higher Education Presentation by Prof. Seif Tag El Din Copyright 2009 The Markfield Institute of Higher Education 2/1 Relevance of Islamic finance? Second: Business management This relates to how productive factors (labour, capital and natural resources) are organised, utilized and rewarded in a business activity. Islamic finance is particularly concerned with how to reward ‘capital’, given the strict prohibition of usury in the Quran.

9. mihe www.mihe.org.uk The Markfield Institute of Higher Education Presentation by Prof. Seif Tag El Din Copyright 2009 The Markfield Institute of Higher Education III. The financing dimension “God permits sale [trade] and prohibits usury’ Holy Quran (2: 275)– usury is interpreted as interest on capital. This is the focal verse that underlies the current movement of Islamic banking and finance. –On one hand, it admits profitability in trade –One the other hand, it prohibits interest on money capital.

10. mihe www.mihe.org.uk The Markfield Institute of Higher Education Presentation by Prof. Seif Tag El Din Copyright 2009 The Markfield Institute of Higher Education 3/1 Islamic Financing Alternatives Profit-rate rather then interest rate is the common denominator of all Islamic financing modes The latter fall into two broad categories: (1) Profit Sharing modes: Mudaraba and Musharakah are risk-sharing modes where return depends on the actual profitability of the enterprise. (2) Fixed return modes: structured transactions where fixity of return follows from deferred sale of goods or sale of intangible services in leasing.

11. mihe www.mihe.org.uk The Markfield Institute of Higher Education Presentation by Prof. Seif Tag El Din Copyright 2009 The Markfield Institute of Higher Education 3/2 Generic Fixed Return Modes Murabaha: mark-up credit sale – the most commonly adopted mode. Ijarah: Islamic alternative lease financing Salam: the alternative for future delivery financing Istisnaa: the alternative for Industrial production financing.

12. mihe www.mihe.org.uk The Markfield Institute of Higher Education Presentation by Prof. Seif Tag El Din Copyright 2009 The Markfield Institute of Higher Education Conclusions Good business’ in the Islamic perspective depends on two factors: –Nature of economic activity: how it contributes to socio-economic wellbeing –Quality of business management : how productive factors are organised, employed and rewarded. We focused in this presentation on how capital should be rewarded, which the major focus of Islamic finance.