csr in islamic perspective
TRANSCRIPT
Investment Function Specifications for the TSR Case
Asset Valuation Process CSR Model for the TSR Case
TSR for Better Civilization
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
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.
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.
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?
Investment in Islam
Investment
Free from Subhat (mix between halal and haram)
Free from Gharar (uncertainty
Free from Maysir
(sepculation/gambling
Free from Riba
Free from haram
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”
“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.
“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.
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:-
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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
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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/manufacturers. Reserving adequate capital.
Structure payment on progressive basis against timeline / work schedule.
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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.
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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: Lessorand 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.
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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 adequatecapital. Proposerestrictive covenants
Payment structure onseveral presetinstalments.
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RISK Mitigation on Each Investments
Investment in Islamic Bank and Risk
Contract Stage 1 Stage 2 Stage 3
Mudharabah: Risks Business riskOperational risk
Liquidity riskCredit 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 businessperformance,financials.Reserving adequatecapital.
Payment structure onseveral presetinstalments.
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 ?
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
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
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
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
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
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Fastabiqul Khairat
Race in the good things
Maslahat Investment M
asla
ha
t a
nd
In
ve
stm
en
t
“Al-Ghorm bil Ghonm”
“Al-Kharaj bil Daman”
Zakat, Infaq, Shodaqoh and Waqaf
Asset Valuation Process CSR Model for the TSR Case
What is Asset Valuation?
What is CSR Process ?
How the Implementation ?
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
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.
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..
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Valuation Asset (highlight in mainstream economics)
Market Value Insurable value
Value-in-use
Liquidation value
Investment Value
1
2
3
4
5
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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.
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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)
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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.
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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.
CSR in TSR
CSR in TSR
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