Governing the Islamic Social Enterprise (iSE)

Abstract

Islam encourages Muslims to take care of their brothers and sisters by sharing and distributing their wealth to the different levels of the community. There are a few types of mechanisms that can be used to achieve this purpose. Nowadays, Islamic philanthropic institutions are known for the activities of collecting, managing and distributing either zakat, waqf, sadaqah, hibah and other types of Islamic charity funds. These funds are entrusted to these institutions as part of amal jariah (good deeds) as encouraged by Islam itself.

However, as the world economy develops, including Islamic economics itself, the roles and functions of all sectors including Islamic philanthropic institution also have been demanded to change. From basic activities that stress on management of Islamic charity funds, Islamic philanthropic institutions are now demanded to create a new focus on generating sustainability and continuous contributions to Islamic community and Islamic economy at large. The term of Islamic social enterprise (iSE) is currently known and used to fit with the current needs to ensure the sustainability of the philantrophic institutions and to maintain the continuous donations and services to the third parties.

Its development is consistent with social enterprise (SE) that is established worldwide, even though in practice it may relatively be left behind in terms of the structured governance. SE is defined as a hybrid form of profit and social benefit-seeking organization whereby traditional profit organization pursues both its social mission and business opportunity (Lian & Ko 2011). SE deviates from the regular charity perspective by embedding the elements of modern business entity in charity institutions and involving in trading activities for the purpose of generating revenues.

Thus, this study aims to identify the selected iSE approaches that draw its root from Islamic charitable funds, specifically the sadaqah. This chapter begins with an overview of the Islamic philanthropic institutions and later focuses on current iSE practices in Malaysia.

Keywords: Goverance, Islamic Social Enterprise