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The Financial Management Perspective of Islamic Social Enterprise
Date Issued
2016
Abstract
It is undeniable that a non-profit sector as the third sector plays important roles in the economy nowadays. As a non-profit sector born from loopholes of public and private sectors, its impacts is believed to fulfill society’s interests that cannot be fulfilled by these two previous sectors. The third sector concept is derived from accumulation of public wealth and designed to distribute the wealth back to the society wisely.
Non-profit organizations have been earning income by themselves traditionally (Zimmerman & Dart, 2000). Despite dependency on public for its sustainability and continuity, some of non-profit organizations developed into stronger entities by generating revenues by themselves. This ‘new’ trading activity by non-profit organization which is known as Social Enterprise (SE) are not just to reduce dependency on public support, it also creates other issues and challenges for these non-profit organizations. The issues and challenges include matters relating to financial management. The accounting and financial management of SE consume as many issues and challenges as corporations with profit-seeking motives.
This chapter aims to present financial management perspective in SE, particularly related to Islamic Social Enterprise (iSE). As an iSE, the organization also needs to consider the Islamic principles in its operation and management, including in the financial aspects. The paper is based on a review of professional documents and comprehensive literature review. The review aims to synthesize previous research findings and views, thus capsulizing the structural overview for this topic. The structural overview of this chapter, therefore could be oriented to identify the gaps and direction for future research.
This chapter begins with an overview of the SE including its differences with other entities which are profit-based organizations and nonprofit organizations. The definition of iSE is also established in this section. Next, the discussion on financial management concepts are presented in Section 2, where key elements for financial management such as internal control system, financial planning and decision making, financial reporting and disclosure and financial performance measurement are being elaborated. Further, the chapter highlighted Islamic principles and views relating financial management that iSE have to take into consideration. Finally, the chapter is concluded by highlighting the gaps and direction for future research.
Non-profit organizations have been earning income by themselves traditionally (Zimmerman & Dart, 2000). Despite dependency on public for its sustainability and continuity, some of non-profit organizations developed into stronger entities by generating revenues by themselves. This ‘new’ trading activity by non-profit organization which is known as Social Enterprise (SE) are not just to reduce dependency on public support, it also creates other issues and challenges for these non-profit organizations. The issues and challenges include matters relating to financial management. The accounting and financial management of SE consume as many issues and challenges as corporations with profit-seeking motives.
This chapter aims to present financial management perspective in SE, particularly related to Islamic Social Enterprise (iSE). As an iSE, the organization also needs to consider the Islamic principles in its operation and management, including in the financial aspects. The paper is based on a review of professional documents and comprehensive literature review. The review aims to synthesize previous research findings and views, thus capsulizing the structural overview for this topic. The structural overview of this chapter, therefore could be oriented to identify the gaps and direction for future research.
This chapter begins with an overview of the SE including its differences with other entities which are profit-based organizations and nonprofit organizations. The definition of iSE is also established in this section. Next, the discussion on financial management concepts are presented in Section 2, where key elements for financial management such as internal control system, financial planning and decision making, financial reporting and disclosure and financial performance measurement are being elaborated. Further, the chapter highlighted Islamic principles and views relating financial management that iSE have to take into consideration. Finally, the chapter is concluded by highlighting the gaps and direction for future research.
Subjects