University Islamic Finance Project: Wheat Miller Business Plan

This project presents a detailed business plan for a wheat miller, adhering to Islamic finance principles and utilizing a Mudaraba contract. The assignment includes a thorough financial analysis, projecting monthly revenue, cost of goods sold, and operational expenses, with an initial investment of AED 500,000. The plan outlines the roles of Rab al Maal (investor) and Mudrib (manager), with profit/loss sharing arrangements. It also addresses risk management through Takaful insurance and provides a SWOT analysis highlighting the business's strengths, weaknesses, opportunities, and threats. The financial projections show an initial period of negative profitability transitioning to positive returns with increased revenue, demonstrating the project's viability within the UAE market. The project explores key aspects of Islamic finance and its application in a real-world business scenario.

Running head: ISLAMIC FINANCE
Islamic Finance
Name of the Student:
Name of the University:
Author’s Note:

1ISLAMIC FINANCE
Table of Contents
Financial Analysis...........................................................................................................................2
Share of Profit/Loss and Responsibilities........................................................................................4
Risk Management............................................................................................................................5
SWOT Analysis...............................................................................................................................5
References........................................................................................................................................7

2ISLAMIC FINANCE
Financial Analysis
The financial analysis has been specifically performed for the business plan proposed
whereby relevant cash flows that would be flowing to the company has been specifically taken
into consideration for the purpose of analysis. The forecasting of the financials has been well
done by drawing up the monthly cash flow income statement for the business project. The initial
starting capital for the business would be around AED500000 and the same will be well provided
by the Rab al Maal. While the Mudrib or Ammel, the other partner of the business would be
providing his key expertise and base of knowledge in the management and day to day operations
of the company. The sales of the company would be around AED35000 in the first month and
the same is expected to well increase by around 5% on a monthly basis as the company would be
increasing their base of business operations and marketing activities thereby reaching consumers
and retailers with the offered range of products (Al-Bashir 2019).
The cost of goods sold for the company would be around 65% of the sales value that has
been reported by the company on a monthly basis. While on the other hand, the other key
operational expenses that the company would be incurring in the business line on a monthly
basis or has been projected will be incurred in the form of fixed cost for the company. Expenses
like Salaries &Wages, Rent & Rates, General Expenses, Sales and Marketing Expenses,
Insurance Fees and Provision for Normal business loss. The provision for normal business loss
has been kept in respect to negligence from the Mudarab which can happen in the form of
improper care of raw materials and storage of inventory in the premises. The loss amount has
been projected to be around 1% of the total sales amount that the company would be making and
the same would be deducted from the profitability of the Mudarab on a monthly basis. Since, the

3ISLAMIC FINANCE
company would be operating in the grounds of UAE the company would not be entitled to pay
any amount of taxes, so taxes has been ignored while projecting the financials of the company.
The financial projections planned out for the company well shows out that in the initial set of
months whereby the business would be having considerably a lesser amount of revenue base in
comparison to the fixed cost that the company would be incurring however with the increase in
the revenue base of the company, the company would soon be resulting a positive profitability
base with increased set of operations base.
It is important to note that the sales base of the company has been directly linked with the
amount of marketing and selling activity or expenses that the company would be incurring for
the given set of time period. The same can be well shown with the help of graph shown below:
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
AED 0.00
AED 10,000.00
AED 20,000.00
AED 30,000.00
AED 40,000.00
AED 50,000.00
AED 60,000.00
AED 70,000.00
Sales and Marketing Activity
Revenue Marketing Expenses
On the other hand, it is important to note that the normal business loss has also been
accounted for while projecting the financials of the company, which would be around 1% of the
total sales value that will be reported by the business (Noor et al., 2018). The same as discussed
will be borne by the Mudarib and the same will be adjusted well from his share of profitability.

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The total cost that would be incurred in terms of purchase of the machinery would be around
AED250000 and the expected life period of the machinery is estimated to be around 5 years of
life time and would be depreciated using a straight line method whereby a depreciation rate of
10% would be charged. The profitability projected for the business can be well shown as below:
Monthly Income Statement
Particulars Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Revenue
3500
0
3675
0
3858
8
4051
7
4254
3
4467
0
4690
3
4924
9
5171
1
5429
6
5701
1
5986
2
Cost of sales
2275
0
2388
8
2508
2
2633
6
2765
3
2903
5
3048
7
3201
2
3361
2
3529
3
3705
7
3891
0
Gross profit
1225
0
1286
3
1350
6
1418
1
1489
0
1563
4
1641
6
1723
7
1809
9
1900
4
1995
4
2095
2
Margin (%) 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% 35%
Expenses/Overheads
Premises (Rent, rates) 4500 4500 4500 4500 4500 4500 4500 4500 4500 4500 4500 4500
Wages and salaries 3500 3500 3500 3500 3500 3500 3500 3500 3500 3500 3500 3500
General Expenses 1750 1838 1929 2026 2127 2233 2345 2462 2586 2715 2851 2993
Accountant Fees 100 100 100 100 100 100 100 100 100 100 100 100
Utilities 250 250 250 250 250 250 250 250 250 250 250 250
Sales and Marketing 1750 1838 1929 2026 2127 2233 2345 2462 2586 2715 2851 2993
Postage & Telephone [phone] 50 50 50 50 50
Repairs and
Maintenance 750 750 750 750 750 750 750 750 750 750 750 750
Business Loss 350 368 386 405 425 447 469 492 517 543 570 599
Depreciation 2083 2083 2083 2083 2083 2083 2083 2083 2083 2083 2083 2083
Total Expenses
1508
3
1527
6
1547
8
1569
0
1591
3
1614
7
1639
3
1665
1
1692
2
1720
6
1750
5
1781
8
Net Profit -2833 -2413 -1972 -1509 -1023 -513 23 586 1177 1798 2449 3134
Share of Profit/Loss and Responsibilities
The share of profit/loss would be done equally except the fact that the Mudarabh will be
incurring extra amount of losses that the business would be incurring in terms of improper

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management of inventory and raw materials (Visser 2019). It will be the responsibility of the
Mudarabh to well oversee the business operations and business activities so that the company
earns a consistent and a stable business profit. On the other hand, it will be the responsibility of
Rab-Al-Mal to assess whether the allocated funds are utilized properly and the business
operations are sound (Bhatti, Al Rahahleh and Qadri, 2019).
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
-AED 2,000
-AED 1,500
-AED 1,000
-AED 500
AED 0
AED 500
AED 1,000
AED 1,500
AED 2,000
Profit/(Loss) Share
Mudarabh Rab-Al-Mal
Risk Management
The risk management activity will be well carried out by the company with the help of
the business abnormal loss that can occur in the company due to fire. In such case in order to
well mitigate the risk the company will be opting out for Takaful. Takaful s basically a type of
insurance system that is well used to devise or comply with the sharia laws, so that the money
can be well pooled and then be reinvested. This would well ensure that the company well
mitigates its business abnormal risks effectively (Chambers and Humble 2017).

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SWOT Analysis
The SWOT Analysis of the business can be well shown with the help of the diagram shown
highlighting the competitive features of the company:
SWOT:
1)Established Wheat Miller
Industry
2) Sufficient & Adequate
Knowledge of Business.
Weakness:
1) Increasing Operation Cost
2) Limited Budget
Opportunities:
1) Increasing Global
Opportunities
2) Government Support
Threats:
1) Increasing Competition
2) Economic Downturn &
Cycles

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References
Al-Bashir, M.A.A.M., 2019. CROWDFUNDING IN ISLAMIC FINANCE. Fintech in Islamic
Finance: Theory and Practice.
Bhatti, M.I., Al Rahahleh, N. and Qadri, H.M.U.D., 2019. 2 Recent development in Islamic
finance and financial products. The Growth of Islamic Finance and Banking: Innovation,
Governance and Risk Mitigation, p.32.
Chambers, I. and Humble, J., 2017. Developing a Plan for the Planet: A Business Plan for
Sustainable Living. Routledge.
McKeever, M., 2016. How to write a business plan. Nolo.
Noor, M.N.A.M., Muhammad, J., Awang, M.D., Abdullah, A. and Abd Rahman, S., 2018.
Knowledge And Application Of Islamic Financial Planning Among Small And Medium
Enterprises Halal Operators In Peninsular Of Malaysia. Journal of Business Innovation, 2(1),
pp.14-24.
Visser, H., 2019. Islamic finance: Principles and practice. Edward Elgar Publishing.