Islamic business ethics

In this era of capitalism and globalization, we can see that global economy appears to be inherently
unjust. There are huge wealth disparities and exploitation is happening at all levels. Effort and reward
are often too unrelated in businesses. Legal loopholes are knowingly embedded in the contracts which
are later exploited and the price is being paid by the innocent who is oblivious to such practices. All of
this is happening because the mankind has left the principles of morality behind and is wholly consumed
by the capitalism. An immoral core is too evident at the heart of capitalism.

Although, there have been a growing interest in business ethics from the past two or three decades,
with courses being offered as an integral part of degree programs. But the problem is that the business
ethics being taught are primarily based upon social construct, and there is too much relative and
secularist element rather than being based on religious moral authority. The absence of higher moral
authority leads toward reliance on individual moral conscience, which further leads towards individuals
determining their own rules, moral uncertainty and even chaos. And this is what we can see is
happening in today’s era. Although, Muslims have a huge advantage in turning towards religious
teachings for guidance in their business dealings, they themselves have abandoned their religious values
for the sake of material wealth. Islamic ethical values are not a substitute for universal values and
virtues, but rather build on these by stressing compassion, tolerance, leniency, benevolence and
hospitality.

Islamic ideology stands on the ground of basic moral principles which are applied through all areas of
life. The foundation of an Islamic society is built upon an ethical system which is eternally divine and is
presented in the light of Shariah – the Islamic social/legal system. This system is derived through the
teachings of Quran and Sunnah. The concept of morality in Islam is quiet simple, it focuses on the
welfare of the society or the individual. And anything that harms in any way is defined as morally bad.
The basic ethics that Islam provides to its followers are to guard your behavior, words, thoughts and
even intentions. It asks us to observe certain ethical norms and moral codes in dealings with family and
relatives, friends and neighbors, in social affairs or in business transactions, in public or in private life.
This is the unique feature of Islamic ethical system, that it covers all spheres of life. Similarly, Islam has
its own distinctive value-based ethical system for business dealings which provides the basic guidelines
for the right and wrong, which are primarily dictated by the notion of halal and haram as per Islamic
jurisprudence.

The highest emphasis placed by Islam are on the ethical values in all aspect of human life. Similarly,
business ethics provided by Islam are the moral principles that guide the way a business behave. The
same principles that determine an individual’s actions also apply to business. In order to act ethically, it
is important to distinguish between right and wrong and then making the right choice in the business
dealings. Therefore, it is important to know the principles of business ethics defined by Islam according
to the shariah law. The following are the principles of business ethics in Islam;

 Freedom of enterprise
There is complete freedom in starting, managing and organizing an economic enterprise as long as it is
within the limits set by the Islamic shariah (i.e. the economic enterprise is not involved in anything
haram)

 Intensity to earn halal earnings

The code of conduct with respect to lawful and unlawful earnings is greatly emphasized by islam. There
are multiple Quranic verses that disapprove unlawful earnings.

“And do not consume one another’s wealth unjustly or send it (in bribery) to the rulers in order that
(they might aid) you (to) consume a portion of the wealth of the people in sin, while you know (it is
Unlawful)” (2:188 Surah AL’ Baqarah)

A Muslim businessman should be wary of the doubtful things in order to keep himself clear in regard to
his faith and his honor.

The Prophet (P.B.U.H) endorsed the importance of legitimate ways of earning “Leave what makes you
doubt for things that do not make you doubt” ( Tirmidhi, No:2442)

“Asked ‘what form of gain is the best? [The Prophet] said, ‘A man’s work with his hands, and every
legitimate sale’”. (Ahmad, No: 1576)

Foremost among the unacceptable business practice strongly condemned in Islam is Riba (Interest).
“Allah has permitted trading and forbidden Riba” (2:275 Surah AL’ Baqarah)

 Trade through mutual consent

Islam condemns a sale under coercion, therefore, mutual consent is a necessary condition for the
validity of a business transaction.

The Holy Qur’an says: ““O you who have believed, do not consume one another’s wealth unjustly but
only (in lawful) business by mutual consent” (4:29 Surah AN’ Nisa)

The Prophet (P.B.U.H) is reported to have said: “A sale is a sale only if it is made through mutual
consent” (Ibn Majah, No: 2176)

 Truthfulness in business transactions

Honesty is a key virtue in Islamic business ethics.

The Prophet (P.B.U.H) is reported to have said: “The truthful merchant [is rewarded by being ranked] on
the Day of Judgement with prophets, martyrs and pious people”. (Tirmidhi, No: 1130)

 Trustworthiness in business transactions

Trustworthiness is one of the most important principles of ethical discipline in commercial transactions.
Trust is a moral virtue and duty mandatory on a Muslim in the performance of his affairs.

“O you believers! Do not betray Allah and the Messenger, nor knowingly, betray your trusts ”. (8:27 Surah
AL’ Anfal)

 Fair treatment with workers

Islam puts certain conditions and restrictions to prevent the chances of bitterness between the
employer and employees.

• Islam encourages and promotes the spirit of love and brotherhood between them.

• It is the religious and moral responsibility of the employer to take care of the overall welfare and
betterment of his employees.

• Fair wages, good working conditions and excellent brotherly treatment should be provided to the
workers.

The last Prophet (P.B.U.H) of Allah said: “The wages of laborer must be paid to him before the sweat
dries upon his body”. (Ibn Maajah, No: 2434)

 Not to deal in prohibited items

Dealing in unlawful items such as dead meat, pigs and idols (statue) is strongly prohibited in Islam.

• Dead meat would mean the flesh of any bird or animal dead from natural causes, without being
slaughtered in an Islamic way.

• A verse of Holy Qur’an says: “Prohibited to you [for food] are: dead meat, the blood, the flesh (soft
tissues) of swine (pig) and that on which name of other than Allah has been mentioned ”. (5:1 Surah AL
’Ma’idah)

• Prophet (P.B.U.H) said: “Allah and His Messenger made illegal the trade of alcoholic liquors, dead
animals, pigs and idols”. (Bukhari, No: 2082)

 Sale of Al-Gharar (uncertainty, risks, speculations)

In Islamic terminology, this refers to;

• The sale of a commodity or good which is not present at hand;

• Or the sale of a good, the consequences or outcome of which is not yet known;

• Or sale involving risks or hazards where one does not know whether at all the commodity will
later come into existence.
Basic conditions for the validity of a sale in Shari’ah are existence, ownership and possession of goods by
seller or his agent.

 Hoarding of foodstuff
It means storing foodstuffs or withholding them in expectation of rise in their prices.

Sometimes, a handful of traders operating in the market buy the entire quantity of an item, for example
Sugar, and store it up with the object of selling it later at the time of scarcity to draw maximum profit
out of it.

This is unjust practice and a clear case of exploitation and condemned by Islam.

The Prophet (P.B.U.H) is reported to have condemned the hoarders when he said: “No one hoards, but
the traitors (i.e. the sinners)”. (Abu Da’ud, No: 2990) “Whoever hoards food away from the Muslims,
then Allah will affect him with and poverty”. (Sunnan Ibn Ma’jah, No: 2155)

 Swearing (Qasam)
The traders often recourse to swearing to emphasize that their items are of good quality. They claim
qualities in the merchandise, which don’t exist.

They try to persuade the buyers to purchase their commodity by invoking Allah’s name. Swearing for
such purposes is forbidden in Islam.

The Prophet (P.B.U.H) is reported to have said: “Swearing [by the seller] may persuade the customer to
purchase the goods but the deal will be deprived of Allah’s blessing. (Bukhari, No: 1945)

 Giving short measures

Another form of dishonesty is to manipulate weights and measures. It refers to the act of taking full
measures from others and giving them short measures in your turn.

Allah, the Almighty has repeatedly commanded exactitude in weights and measures.one of the verses
says: “And give full measures when you measure, and weigh with a just balance. That is the best [way]
and best in result”. (17:35 Surah AL’ Isra)

 Dealing in stolen goods

Almighty Allah has declared stealing unlawful and warned of severe punishment, it is not permissible for
a Muslim to knowingly purchase or sell these items.
The stolen items are neither to be bought nor sold by those who know the reality.

The Prophet (P.B.U.H) made the person knowingly buying a stolen commodity a partner to the crime. He
said: “The one who knowingly purchase a stolen good, is a partner to the act of sin and the shame”.
(Kanz al Ummal, No: 9258)