Csr in islamic perspective
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The document discusses asset valuation and corporate social responsibility (CSR) from an Islamic perspective. It outlines key principles for asset valuation in Islam based on the Quran and Hadith, including that assets are only valuable if they provide benefits to society. CSR in Islam is guided by principles of obedience to God, public interest, and environmental protection. The document contrasts the Western view of CSR as aligned with materialism versus the Islamic view, which takes a holistic approach based on spiritual teachings of the Quran and Hadith. CSR from an Islamic perspective focuses on human dignity, free will, equality and rights as derived from divine revelations.
Csr in islamic perspective
- 1. Investment Function Specifications for the TSR Case Asset Valuation Process CSR Model for the TSR Case TSR for Better Civilization
- 2. Qur’an and Hadith in the Investment Activity Investment Activity mainstream - economic is the action or process of investing money for profit or material result. (wikipedia) -“Economic activity that forgoes consumtion today with an eye to increasing output in future.” (P. Samuelson W. Nordhaus) According Qur’an and Hadith 1. Lukman verse 34
- 3. Qur’an and Hadith in the Investment Activity According Qur’an and Hadith 2. Al-Hashr verse 7 investment or property turnover in Islam should not be just one certain group.
- 4. Qur’an and Hadith in the Investment Activity According Qur’an and Hadith 3. Yusuf: verses 46-50 Investments that means delaying the use of the wealth we have at this time, or means storing, managing and developing it is recommended in the Qur'an.
- 5. Identification Investment Function Specification for TSR What is Investment in Islamic Perspective ? Investment and risk relations in Islamic Bank ? The Principles of Islamic Investment for hereafter objective?
- 6. Investment in Islam Investment Free from Subhat (mix between halal and haram) Free from Gharar (uncertainty Free from Maysir (sepculation/ga mbling Free from Riba Free from haram
- 7. Investment in Islam Investment in Islam investment should meet following criteria: “Al-Ghorm bil Ghonm” meaning that “with risk comes profit” “Al-Kharaj bil Daman” meaning “profit comes with responsibility”
- 8. “Al-Ghorm bil Ghonm” meaning that “with risk comes profit” This legal maxim asserts that profit can only be acquired by the taking of risk. The behavior is in direct contrast to riba where the taking of risk is absent from the taking of surplus out of a loan. The law of riba allows capital to increase without any possibility to decrease, while the law of al-bay allows capital to increase or decrease based on market conditions and systemic events.
- 9. “Al-Kharaj bil Daman” meaning “profit comes with responsibility” This legal maxim asserts that when a sale is made, the selling party is required to give a guarantee that the goods are in good condition and provide benefits (manfaat) to the buyer. The guarantee can be in the form of warranty agreement wherein defective goods, if any, can be exchanged for a new one or repaired without incurring additional cost to the buyer.
- 10. Investment in Islamic Bank Shariah Principles Islamic Contracts Relationship Prohibition of Riba Murabaha (cost-plus) Salam (future delivery) Istisna (purchase order) Ijarah (leasing) Wadiah (safe custody) Musharakah (Partnership) / Mudarabah (Trust Profit Sharing) Buyer-Seller, Lessor-lessee Investor-entrepreneur Partner-partner, etc. Prohibition of Gharar Prohibition of Maisir Prohibition of haram activities Al-ghorm bil ghonm Al-Kharaj bil daman The contractual relationship in Islamic banking business is depicted below:-
- 11. 11 RISK Mitigation on Each Investments Investment in Islamic Bank and Risk Contract Stage 1 Stage 2 Stage 3 Murabahah: Risks Operational risk – of commodity ownership as IB is responsible for damage until it is delivered to buyer. Credit risk – default in payment. Liquidity risk – due to delayed payment from buyer (timing mismatch) Market & Commodity risk – due to commodity price fluctuation arising from non- acceptance of delivery of commodity. Relationship: Buyer and Seller Suitable for financing of manufacturing of finished goods, purchase of raw materials, machinery. Also fixed asset. Mitigation Take collateral / g’tee / cash margins /Takaful cover Impose stringent controls e.g. financial covenants, conditions to utilization. Align rewards/pricing to risk. Apply benchmarks & hedging
- 12. 12 RISK Mitigation on Each Investments Investment in Islamic Bank and Risk Contract Stage 1 Stage 2 Stage 3 Istisna’: Risks Performance risk – defective goods or mismatch of specification . Delivery risk – unable to deliver goods on time Credit risk – default in payment on timely basis. Liquidity risk Market, Commodity & Price volatility risk - due price differential between nominal set price & market price. Relationship: Buyer and Seller For financing of acquisition of assets to be fabricated / manufactured. Flexible mode & timing of payment. Flexible delivery time. Mitigation Performance guarantee. Assess past performance. Accept only reputable contractors/manufac turers. Reserving adequate capital. Structure payment on progressive basis against timeline / work schedule.
- 13. 13 RISK Mitigation on Each Investments Investment in Islamic Bank and Risk Contract Stage 1 Stage 2 Stage 3 Salam: Risks Supply / Operational risk – due to commodity’s delivery timing /specification mismatch Business & reputation risk. Market risk & liquidity risk – due to delay in delivery. Commodity / Price volatility risk – between delivery & sale of commodity for a long position. Credit risk – due to default from buyer’s side to purchase commodity at agreed price. Relationship: Buyer and Seller Allows purchaser to lock in a price, thus protecting both parties from price fluctuation. Applicable for all types of commodities except ribawi items. e.g agriculture product Mitigation Seller’s indemnity. Insurances/Takaful cover Apply benchmark, hedging & VAR. Collateralize the facility. Match payment tenor to cash flow.
- 14. 14 RISK Mitigation on Each Investments Investment in Islamic Bank and Risk Contract Stage 1 Stage 2 Stage 3 Ijarah: Risks Business risk - due to external event surrounding the business Operational risk – unable to provide the usufruct due to non- completion or ownership of asset. Credit risk - default in monthly rental and/or obligation on maturity of Ijarah contract Liquidity risk - Operational risk – damage of assets during the lease period. Market risk - variation between estimation & market price or refusal to purchase the lease asset by Lessee on maturity. IB will have to dispose at market prevailing price at that instant. Relationship: Lessor and Lessee Mitigation Insurance/Takaful against losses or damages to asset. Invoke the contract. Obtain guarantee. Monitor & manage account closely. Structure repayment at different time period instead of lump sum at maturity.
- 15. 15 RISK Mitigation on Each Investments Investment in Islamic Bank and Risk Contract Stage 1 Stage 2 Stage 3 Musharakah: Risks Business risk - due to external event surrounding the business. Operational risk – due to moral hazard Credit risk (non- payment of obligation) Liquidity risk (inability to provide cash for further investment). Market risk (forced disposal at lower than market price) Equity risk Relationship: Partner A and Partner B Combines investment & management. Suitable for e.g. financing of house under construction. Mitigation Management involvement, monitoring, insurance Sale of equity to 3rd party. Reserving adequate capital. Propose restrictive covenants Payment structure on several preset instalments.
- 16. 16 RISK Mitigation on Each Investments Investment in Islamic Bank and Risk Contract Stage 1 Stage 2 Stage 3 Mudharabah: Risks Business risk Operational risk Liquidity risk Credit risk Market risk Equity risk Relationship: Capital Owner and Entrepreneur The two parties complement each other, allowing a business venture to be completed. E.g. mobilization of funds via savings & investment account. Mitigation Stringent assessment on partners knowledge / experience, feasibility study, insurance Monitoring business performance, financials. Reserving adequate capital. Payment structure on several preset instalments.
- 17. ATURAN ETIKA Independensi, Integritas, dan obyektifitas Standar umum dan prinsip akuntansi Tanggungjawab kepada klien Tanggungjawab kepada rekan seprofesi Tanggung jawab dan praktik lain Did you know that the most profitable investment ?
- 18. PERILAKU ETIKA Profesi akuntan adalah semua bidang pekerjaan yang mempergunakan keahlian dibidang akuntansi, termasuk bidang pekerjaan akuntan publik, akuntan intern yang bekerja pada perusahaan industri, keuangan atau dagang, akuntan yang bekerja di pemerintah dan akuntan sebagai pendidik menurut Internasional Federation of Accountans (dalam Regar, 2003) Arleen & Yulius, 2008 Pengabdian Pada Profesi Kewajiban Sosiial Kemandirian Keyakinan Terhadap Profesi Hubungan dengan rekan seprofesi Gambaran Profesionalisme Akuntan Publik By Definition By Requirement By Reward By Prohibition
- 19. Boynton dan Kell (1996:55) dalam Ferdian dan Ainun 2006 membagi kekeliruan dalam Laporan Keuangan, yaitu : Kekeliruan dalam mengambil atau memproses data akuntansi yang akan digunakan untuk membuat laporan keuangan Kekeliruan perkiraan akuntansi yang diakibatkan oleh kekeliruan interpretasi terhadap fakta Kekeliruan dalam penerapan prinsip akuntansi terkait dengan jumlah, klasifikasi, tujuan dan pengungkapan By Definition Zakah Infaq Shodaqoh Waqaf Al Baqarah 261
- 20. Boynton dan Kell (1996:55) dalam Ferdian dan Ainun 2006 membagi kekeliruan dalam Laporan Keuangan, yaitu : Kekeliruan dalam mengambil atau memproses data akuntansi yang akan digunakan untuk membuat laporan keuangan Kekeliruan perkiraan akuntansi yang diakibatkan oleh kekeliruan interpretasi terhadap fakta Kekeliruan dalam penerapan prinsip akuntansi terkait dengan jumlah, klasifikasi, tujuan dan pengungkapan By Requirement Ikhlas Al Baqarah 265
- 21. Boynton dan Kell (1996:55) dalam Ferdian dan Ainun 2006 membagi kekeliruan dalam Laporan Keuangan, yaitu : Kekeliruan dalam mengambil atau memproses data akuntansi yang akan digunakan untuk membuat laporan keuangan Kekeliruan perkiraan akuntansi yang diakibatkan oleh kekeliruan interpretasi terhadap fakta Kekeliruan dalam penerapan prinsip akuntansi terkait dengan jumlah, klasifikasi, tujuan dan pengungkapan By Reward Multiply Reward Al Baqarah 261
- 22. Boynton dan Kell (1996:55) dalam Ferdian dan Ainun 2006 membagi kekeliruan dalam Laporan Keuangan, yaitu : Kekeliruan dalam mengambil atau memproses data akuntansi yang akan digunakan untuk membuat laporan keuangan Kekeliruan perkiraan akuntansi yang diakibatkan oleh kekeliruan interpretasi terhadap fakta Kekeliruan dalam penerapan prinsip akuntansi terkait dengan jumlah, klasifikasi, tujuan dan pengungkapan By Prohibition Want to be commended Show off or Riya Hurt the feelings of the recipient
- 23. 23 Fastabiqul Khairat Race in the good things Maslahat InvestmentMaslahatandInvestment “Al-Ghorm bil Ghonm” “Al-Kharaj bil Daman” Zakat, Infaq, Shodaqoh and Waqaf
- 24. Asset Valuation Process CSR Model for the TSR Case What is Asset Valuation? What is CSR Process ? How the Implementation ?
- 25. Asset INTANGIBLE “ All Elements of a business enterprise that remain after tangible assets are removed”. “ Elements after working capital and fixed asset that make the business go and contribute to earning power”. TANGIBLE/FIXED ASSET ASSET
- 26. Qur’an and Hadith in the Asset Valuation According Qur’an and Hadith 1. Ali Imran verses 14 Everything that is owned by a person or group in the form of wealth, or trade goods, home, money, animals and others that tend to want owned, controlled and exploited by humans.
- 27. Qur’an and Hadith in the Asset Valuation According Qur’an and Hadith 2. An Nuur 33 Wealth in Islam is essentially a mandate (surrogate) from Allah SWT. Meanwhile, the absolute owner of everything that is on earth, including property, is Allah. Ownership by man is only relative, limited to carrying out the mandate to manage and use in accordance with the provisions of God..
- 28. 28 Valuation Asset (highlight in mainstream economics) Market Value Insurable value Value-in-use Liquidation value Investment Value 1 2 3 4 5
- 29. 29 Valuation Asset in Islam Qur'an, Hadith, and Fiqh. These sources are hierarchical sequence can not preceded one another. The first source is always Qur'an, followed by Hadith, Fiqh then and so on There are three interrelated dimensions in the valuation assets (1) seeking the pleasure of Allah as the primary goal in determining the socio-economic justice; (2) the realization of benefits for society, namely the obligation to the community, and (3) meet personal needs, such as meeting basic needs. Based on these asset will be valuable if it can using for society beneficiaries.
- 30. 30 Asset and CSR Based on the principle asset will be more valuable if it has beneficiaries to the society CSR is constantly evolving and incorporates different approaches depending on circumstances and needs. In Islam such as for instance in Islamic Bank should packed with Islamic principles and moral foundation, ethics, and social responsibility. Besides the above principle of obedience to the commandments of God and the Caliph. And the last of the principle of public interest, and the the ummah in stopping environmental degradation and reduce poverty. (Ω,S)
- 31. 31 Asset and CSR The Western view on CSR is in general more aligned with the materialistic approach to life than with ethical concerns. For example, According to the theories of CSR based on the social contract, the 'social contract' between businesses and society needs renegotiating as society's preferences change. This confirms the relative and transitional nature of CSR in the business sense.
- 32. 32 CSR and TSR In contrast to the Western theories, the Islamic view of CSR (consiousness Social Responsibilities) takes a rather holistic approach. It offers an integrality spiritual view based on the teachings of the Our‘an and the Sunnah of providing a better alternative philosophical framework for man's interaction with nature as well as his fellowmen. In fact, the moral and ethical principles derived from divine revelations are more enduring, eternal, and absolute, thus may serve as better guidelines for corporations when exercising their business and social responsibilities simultaneously.
- 33. CSR in TSR
- 34. CSR in TSR
- 35. Human dignity Free will Equality and rights Maslahah 1 2 3 Qur’an, Hadith and Ijtihad Based on Islamic CSR/Taqwa Maslahah and Maqhasid Sharia in CSR Trust and responsibility 4 fundamentals of Islam such as aqidah (belief and faith), ibadah (worship) and akhlaq (morality and ethics) are not subject to change Need of Reports to measures of Islamic CSR such as Islamic Social Reporting Index