An Analysis of Islamic Ethics in Small and Medium Enterprises (SMEs)

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a result, employees may experience ethical dilemmas. According to Ferrell & Fraedrich (as citedin Bateman & Snell, 2002), an ethical issue is a situation, problem or opportunity in which anindividual must choose among several actions that must be evaluated as right or wrong.From the Islamic context, the dimensions of ethics are numerous, far-reaching andcomprehensive. Ethical system in Islam derived from the teachings of the Quran and from theSunnah (i.e. recorded saying and behavior of Prophet Muhammad, peace be upon him). Islamicethics deals with all aspects of human life. It deals with relationships between man and Allah,man and his fellowmen man and other elements and creatures of the universe, and man hisinnermost self (Hanafi & Sallam, 1997). Furthermore, the goals of Islam itself are not primarilymaterialistic. They are based on Islamic concepts of human well-being and good life thatemphasize brotherhood and socioeconomic justice and require a balanced satisfaction of bothmaterial and spiritual needs of all humans.Furthermore, Islam considers ethics as an offshoot of imam (a Muslim belief system), and itemerges from the Islamic worldview of human life. Ethics also is known as akhlak. Akhlak is a setof Islamic moral values which have been prescribed fundamentally in the Quran and implementedby Prophet Muhammad (p.b.u.h) during his life.Principally, there are two (2) types of akhlak, good or mahmudah and bad or mazmumah. Islamemphasizes the important of practicing good akhlak (mahmudah) in all aspect of human life andrecognizes it as one of the purpose of sending His messengers (Shaharuddin, 2005). ProphetMuhammad (p.b.u.h) said: “I have been sent only for the purpose of perfecting the qualities ofgood akhlak” (Imam Malik). Beekun (1997) mentioned that the term most closely related to ethicsin the Quran is khuluq. Allah says in the Quran:“And thou (standest) on an exalted standard of character.” (68:4).The Quran also uses a whole array of terms to describe the concept of goodness such as khayr(goodness), birr (righteousness), qist (equity), ‘adl (equilibrium and justice), haqq (truth and right),ma’ruf (known and approved) and taqwa (piety). Pious actions are described as salihat andimpious actions are described as sayyiat.Small and Medium Enterprises (SMEs)According to Small and Medium Industries Development Corporation (SMIDEC), an enterprise isconsidered an SME in each of the representative sectors based on the Annual Sales Turnover orNumber of Full Time Employees. SMEs are divided into two sectors; manufacturing,manufacturing related services and agriculture industries; and services (including ICT) andprimary agriculture.UNITAR E-JOURNAL Vol. 4, No. 1, January 2008 49
Table 1Category of Small and Medium Enterprises (SMEs)Category Sector DefinitionMicromanufacturing, manufacturing Sales Turnover less than RMEnterprisesrelated services and 250,000 OR less than 5SmallEnterprisesMediumEnterprisesagriculture industriesservices (including ICT) andprimary agriculturemanufacturing, manufacturingrelated services andagriculture industriesservices (including ICT) andprimary agriculturemanufacturing, manufacturingrelated services andagriculture industries;services (including ICT) andprimary agricultureemployeesSales Turnover less than RM200,000 OR less than 5employeesSales Turnover between RM250,000 to less than RM 10million OR employeesbetween 5 – 50Sales Turnover between RM200,000 to less than RM 1million OR employeesbetween 5 - 19Sales Turnover between RM10 million to RM 25 million ORemployees between 51 – 150Sales Turnover between RM 1million to RM 5 million ORemployees between 20 - 50Furthermore, according to Department of Statistics, Malaysia; the distribution, establishment bysector are divided into three; manufacturing, services and agriculture. The most highestdistribution is from service (87.9%), followed by agriculture (7.1%) and manufacturing (5%).Table 2Distribution of establishments by sectorsSectorNo. of%establishmentsManufacturing 85,946 5.0Services 1,523,842 87.9Agriculture 123,762 7.1Total 1,733,550 100.0Small and Medium Enterprise (SMEs) and BusinessThis study attempts to explore the concept and the approach of business ethics in Islamicperspective focusing especially in Small and Medium Enterprises (SMEs). It is important toqualitatively analyse the important of business ethics for Small and Medium Enterprises (SMEs).According to United Nations Economics Commission for Europe (2004), the advantages ofbusiness ethics in Small and Medium Enterprises (SMEs) activities is business leadersincreasingly recognize the direct relationship between fulfilling a company’s responsibilities andcorporate survival. When a business is clear of its core purpose and values and aligns its brand, itis more likely to attract and keeps talented people, reduce inefficiency and stress caused byconflicting messages and also attract more clients, customers and also supplier who delivergoods to the same high standards. Perhaps, the clear of the important of business ethics willassist the business leaders to implement and practice ethical business and management.UNITAR E-JOURNAL Vol. 4, No. 1, January 2008 50
Page 1 and 2: AN ANALYSIS OF ISLAMIC ETHICS IN SM
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An Analysis of Islamic Ethics in Small and Medium Enterprises (SMEs)

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