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What Islamic Business Ethics are?

Updated on October 19, 2013

Human activities can be broadly divided into two categories within the Islamic Social System. Activities in which the man, the servant is related to his Lord (Rab), and these are grouped under the protocol of worship (Ibadat). Examples are offering of prayer, fasting, payment of Zakat and pilgrimage (Hajj). In contrast, the activities in which one person (or a group) is related to another fellow being (or a group) are called interactions or exchange (Muamalat). These include all social, economic and political interaction among members of the society. Although Islam excepts its followers to abide by the rules and regulations provided by Shariah for both kinds of activities, however more emphasis is laid on righteousness in muamalat, since any injustice inflected by the actions of a person (party) on the other can only be written off by the affected party. The society, courts or the state can directly intervene to resolve the conflicts and restore tranquility.

Islam stresses on straight forward and fair dealing. One has to be truthful and while dealing with others (in any aspect of life). He is obliged to abide by his verdict, i.e. the pledges and contracts made with the counterparts, The terms and conditions ought to be clearly laid down in advance and no room be left for ambiguity. It is advisable to write down (bring on record) all the terms of contract, except in the case of minor and hand to hand transaction. The objective is to ensure justice in the society and to eradicate oppression. This is expressed in a simple but very comprehensive sentence in the Holy Quran: ‘neither do wrong (to anyone) nor be wronged (by anybody)’ Surah 2 and verse 279. It is advised repeatedly to maintain justice in weights and measures so that the rights of contracting parties could be preserved. It may be carefully noted that the injunction is not limited to contracts in the commodity market but also applies to labour market, where an employee is required to do justice with the duty assigned to him/her against which he/she derives remuneration.

Islam stands for the protection of property rights of all members of the society and strongly opposes transgression and malpractices that damage the rights of others, particularly the weak. It discourages all fraudulent practices such as adulteration, cheating and concealment of facts, taking oath to deceive others and hoarding; all meant for making undue profits. However, Islam does not contend merely on good advices to individuals, given that proper guidance to individuals is utmost necessary, but invoke the conscious of the society to be vigilant and stand against cruelty and also devises a full-fledged legal system, particularly the institution of magistracy (hisbah), to take notice of malpractices and ensure smooth running of the markets. The sale of certain items like wine, narcotics, ping, dead animals, idols, earning by singing and prostitution etc., is strictly prohibited. An Islamic System gives protection to both sellers and buyers. On the one hand, it advises the individuals (particularly the sellers) to be lenient in dealing and on the other hand, it discourages intervention in the sales contract between two parties, when the negotiation are going on and not yet finalized.

There are two main fundamental and ultimate sources of knowledge in Islam are:

1. The Quran and,

2. The Hadith

The Qur'an tells people how to live and how to deal with others, let see first, what Quran says about it and afterward the Hadith.

  • ‘O you who believe! when you deal with each other in contracting a debt for a fixed time, then write it down; and let a scribe write it down between you with fairness; and the scribe should not refuse to write as Allah has taught him, so he should write; and let him who owes the debt dictate, and he should be careful of (his duty to) Allah, his Lord, and not diminish anything from it; but if he who owes the debt is unsound in understanding, or weak, or (if) he is not able to dictate himself, let his guardian dictate with fairness; and call in to witness from among your men two witnesses; but if there are not two men, then one man and two women from among those whom you choose to be witnesses, so that if one of the two errs, the second of the two may remind the other; and the witnesses should not refuse when they are summoned; and be not averse to writing it (whether it is) small or large, with the time of its falling due; this is more equitable in the sight of Allah and assures greater accuracy in testimony, and the nearest (way) that you may not entertain doubts (afterwards), except when it is ready merchandise which you give and take among yourselves from hand to hand, then there is no blame on you in not writing it down; and have witnesses when you barter with one another, and let no harm be done to the scribe or to the witness; and if you do (it) then surely it will be a transgression in you, and be careful of (your duty) to Allah, Allah teaches you, and Allah knows all things.’ ( Al-Quran, Surah 2, verse 282.)
  • This Truthfulness in dealing and avoidance of false statement is clearly ordidained by the Holy Quran. For instance, see Surah 9-verse 119, Surah 22-verse 30, Surah 25-verse 72, Surah 33-verse 70, Surah 6-verse 152, Surah 7-verse 85, Surah 11-verse 84and85, Surah 17-verse 35, Surah 26-verse 181-83, Surah 55-verse 8and9, Surah 83-verse 1-3, Surah 88-verse 2.

Let's see what Hadith says about Business Ethics.

  • On the authority of Abdullah bin Umar, the Holy Prophet said, ‘the honest and truthful Muslim merchant shall be with martyrs on the day of judgment’ – Ibn Majah, Tirmizi.
  • On the authority of Abu Hurairah, the Holy Prophet is reported to have said, ‘the signs of a hypocrite are three whenever he speaks, he tells a lie; and whenever he promises, he breaks it, and whenever he is entrusted with something/duty, he betrays (proves to be dishonest)’ – Bukhari.
  • On the authority of Abu Hurairah, the Messenger of Allah (peace be upon him) passed by a heap of eatables (corns) in the market. He thrust his hands ibn the heap and his fingers were moistened. He asked the seller, “What is this”. He replied, “Messenger of Allah, this (corn) has been drenched by rainfall”. On this, the Holy Prophet remarked, “why don’t you place this (the moistened grain) on top of the heap so that people (buyers) could see the condition. He who adulterates (and deceives) is not of me (my followers)’ – Muslim.

  • On the authority of Qatadah al-Ansari that he has heard the Messenger of Allah saying, “keep away from swearing in selling, since it brings about some immediate benefit but blots out the blessing of Allah” – Muslim.
  • On the authority of Ma’mar bin Abdullah, the prophet (peace be upon him) is reported to have said, “No one hoards but the sinner” – Muslim, Tirmizi.
  • On the authority of Jabir bin Abdullah, the Holy Prophet is reported to have said, “May Allah have mercy on the person who shows magnanimity while selling, buying and meeting his obligations” – Bukhari.
  • On the authority of Abdullah bin Umar, the Holy prophet is reported to have said, “A person should not enter into a transaction when his brother (another Muslim) is already making a transaction (of the same thing), and he should not place a proposal of marriage (to a lady) when his brother has already made a proposal (yet to be considered) expect when he is given permission (by his brother) to do so”. – Muslim, Tirmizi.


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