Islamic Ethics in Business

Objective of the write up is to share Islamic stand points on business, importance of business ethics, its practical implications and discuss fundamentals of philosophy behind Islamic business ethics. The areas were never or very less (if ever) explored by western world. The write-up will help business managers in understanding religious importance of business, ethical boundaries defined for all parties involved (directly or indirectly), rights and obligations and bring Islamic culture more close to real business world.

Contents Objective of the write-up. ............................................................................................................................. 1

What is “Ethics” ............................................................................................................................................ 1

General ...................................................................................................................................................... 1

Business Ethics .......................................................................................................................................... 1

Islamic Ethical System; Introduction ............................................................................................................. 1

General ...................................................................................................................................................... 1

Islam & Business ....................................................................................................................................... 3

Islamic Business Ethics; a practical approach! .......................................................................................... 3

Islamic Business Ethics & Modern System ................................................................................................ 4

Freedom of Enterprise .................................................................................................................................. 4

Islamic Laws on Trading ................................................................................................................................ 5

Profit Margin; is there a ceiling for the profit margin? ............................................................................. 5

Gharar; uncertainty ................................................................................................................................... 5

Ihtikaar; monopoly .................................................................................................................................... 6

Exploitation of one’s Ignorance of Market Conditions ............................................................................. 6

Al-Najsh; trickery ....................................................................................................................................... 7

Al-Ghashsh; cheating and fraud in business transactions ........................................................................ 7

Swearing .................................................................................................................................................... 8

Giving Short Measures .............................................................................................................................. 8

Dealing in Stolen Goods ............................................................................................................................ 8

Prohibition of Trading in Haram Goods; means not only ends! ............................................................... 8

Prohibition of Trading “when the call is heard for the prayer of the day of Jumma Congregation” ....... 9

Few Prohibited Form of Business Transactions ........................................................................................ 9

Islam emphasizes on; .............................................................................................................................. 11

The following are some of these basic conditions of Bay (Sale): ............................................................ 11

Employer & Employee Relations ................................................................................................................. 12

Determination of Wages ......................................................................................................................... 14

Obligations on Employees....................................................................................................................... 15

Muslim Contribution in International Trade; Globalization ....................................................................... 16

Reasons behind success of Muslim traders! ............................................................................................... 17

Some practical examples ............................................................................................................................ 18

pg. 1

Islamic Ethics in Business

Objective of the write-up. Objective of the write up is to share Islamic stand points on business, importance of business ethics, its

practical implications and discuss fundamentals of philosophy behind Islamic business ethics. The areas

were never or very less (if ever) explored by western world. The write-up will help business managers in

understanding religious importance of business, ethical boundaries defined for all parties involved

(directly or indirectly), rights and obligations and bring islamic culture more close to real business world.

What is “Ethics”

General Ethics being a formal field bestows on rights and wrongs. Ethics may also be termed established moral

standards to distinguish rights from wrongs and provide best way to achieve ends, through means

justified for all.

A theory or a system of moral values: "An ethic of service is at war with a craving for gain" (Gregg

Easterbrook).

Business Ethics Business ethics, however, limits its scope and moves around organizational & trading issues. Business

ethics may also be termed as applied ethics. Business ethics covers commercial side of ethical standards.

The study of proper business policies and practices regarding potentially controversial issues, such as

corporate governance, bribery, discrimination, corporate social responsibility and fiduciary

responsibilities. Business ethics are often guided by law, while other times provide a basic framework

that businesses may choose to follow in order to gain public acceptance (www.investopedia.com)

History of business ethics is as old as business itself is. Business ethics refers to attitudes and behaviour

which a business organization should adopt during interaction with;

society

customers,

employees,

and other related elements of the horizon.

Islamic Ethical System; Introduction

General Standards, defined in light of Shariah, governing area of specifying and distinguishing rights from

wrongs.

pg. 2

"The believers, men and women, are protectors of each other: they enjoy in what is right and forbid

what is evil."[Tauba, 9:71]

Islamic ethical system is different from humanly developed systems. Later are more myopic, short

sighted, more concerning to ME, MY & MYSELF. When humanly developed system is reviewed in detail it

appears to be made from maker’s point of view (an inherited risk) or simply HAPPINESS FOR THE SAKE

OF HAPPINESS.

But, it would also not be wrong if we say that ethical system which we will discuss later is not limited to

Shariah, Quran, Ahadiths and sayings of Muslims Ulamas, only. Bible, for instance, also has many notions

that can be and have been applied to commercial activities. Hammurabi, the king of Babylon, is known

for setting very detailed commercial laws. Like ways Plato and Aristotle also provided standards on trade

and commercial world. Many Christian scholars for example Thomas Aquinasdi also worked on the area

to provide guide lines in addition to share set of standards provided in Bible.

Islamic business ethics and present day’s modern ethical system shows various similarities. In Islam,

numerous issues, being faced by modern muslim world were discussed and settled out even they were

not realized by the business system. Workplace harassment, discrimination in hiring and promotion,

wages, employment benefits, layoffs, conflict of interest, quality control, misuse of business assets,

environmental pollution, etc., are the areas which were discussed in early ages and have very clear set

of principles. Modern world’s approach, when it is really realistic is very similar to stand point of our

religion (Islam).

Unfortunately, economic activities were separated from religion by the time politics and governance

were set apart from church. Islam, however provide live and practical laws governing all areas of

business and its related parts.

For example, Islam very clearly says, that all enjoy equal dignity. Islam very clearly declares that both

enjoy the same dignity socially and legally. Muslims, by Shariah, are required to like for their fellow men

which they like for themselves.

Abul-Qasim, our Prophet Muhammad (PBUH), has very clearly instructed to cloth our servants like we

do and not to treat them harshly even a fault is committed by them

Applying this to ourselves, being employee and then to our employees as well, just imagine how

idealistic the environment would be.

pg. 3

Islam & Business Business is an integral part of Islam and many verses in Quran and Ahadiths are specially stating set of

practices and defining rights and wrongs. Not only defining, our religion provides practical solutions as

well (see Kitab-ul-Buyu for details).

Out Prophet, Abul Qaasim (sws) was a complete ideal personality. He was not only messenger of God;

He (sws) was a best teacher, father, husband, father in law, law implementer, conqueror, commander,

leader, negotiator, neighbor. He was a person having best of all personalities in himself. With all this he

was a good business man also (Maal-e-Tijarat of Hazrat Khadija). As Quran says, Prophet Muhammad

(sws) is a best example to follow (in all areas of life) (Mafhoom_Al-Ahzab 33:21).

Islamic Business Ethics; a practical approach! Islam is a live religion (zinda mazhab) and being a live religion set of practices provided by Islam are also

very much practical without any discrimination in masses.

As out Prophet (sws) said

“The truthful and honest merchant is associated with the Prophets, the upright and the martyrs”

(Al-Tirmidhi).

“God shows mercy to a person who is kindly when he sells, when he buys and when he makes a

claim” (Al-Bukhari).

Our Prophet (sws) teaching are very clear and provide practical laws for commercial activities. His

teaching covers every dimension of commercial world and provides best solutions for all related issues.

Following are only few of the guidelines and instructions provided by the personality. (extracted from

Business Ethics And Corporate Governance By Fernando A.C. - Chapter 2 Concepts and Theories of

Business Ethics page no. 2.17)

1) No fraud or deceit, the Prophet (sws) is reported to have said, “When a sale is held, say,

“There’s no cheating” (Al-Bukhari).

2) Sellers must avoid making too many oaths when selling merchandise. The Prophet (sws) is

reported to have said, “Be careful of excessive oaths in a sale. Though it finds markets, it

reduces abundance” (Muslim).

3) Mutual consent is necessary. The Prophet (sws) is reported to have said, “The sale is complete

when the two parties involved depart with mutual consent” (Al-Bukhari).

4) Be strict in regard to weights and measures. The Prophet (sws) is reported to have said, “When

people cheat in weight and measures, their provision is cut off from them” (Al-Muwatta). He

told the owners of measures and weights, “You have been entrusted with affairs over which

some nations before you were destroyed” (Al-Tirmidhi).

5) The Prophet forbade monopolies. “Whoever monopolizes is a sinner” (Abu Dawud).

6) Free enterprise, the price of the commodities should not be fixed unless there is a situation of

crisis or extreme necessity.

7) Hoarding merchandise in order to increase the prices is forbidden.

pg. 4

8) Transaction of haram items, such as intoxicants, is forbidden.

Islam tells us, what is clear and lawful, as well as unclear and unlawful. Between lawful and unlawful

there are some grey areas or we can say doubtful which must recognized. The doubtful things must be

avoided. The grey areas are also very clearly addressed by our religion, which may be referred in later

part of the write-up.

Islamic Business Ethics & Modern System No doubt, there are very similarities in Islam and modern approach towards various issues but we can

also find various differences as well.

One of the distinguishing features is its nature and source. Islamic business ethics stems from Quran,

Sunnah and Ahadiths of Prophet Muhammad (sws). Any non-conformity to Islamic business ethics or

code of conduct leads to committing of sin and Allah’s displeasure. Whereas, deviation from modern

ethical system do not results in the way.

“Man ghassa falaisa minna”

Hence, even there is no supervisory body a Muslim must have to abide by code of conduct defined by

Islamic ethical structure and comply with all requirements stated by set of principles. Another practical

and attractive aspect of the code of conduct, following justice says that anything prohibited in trade

while trading with Muslims is prohibited while dealing with Non-Muslims as well. As an example we can

see that Islam prohibits dealing in alcohol, drugs, gharar, gambling, monopoly, pork, prostitution, riba,

hoarding, non-muzabah, stolen items etc without any discrimination of doing business with Muslims or

Non-Muslims.

Along with this, a Muslim in true letter and spirit, cannot disregard employee welfare, environmental

issues, social corporate responsibility (a burning issue of today’s corporate world), quality standards,

fulfillments commitments etc. no matter in which country or culture, business is being run (a global

perspective)

Freedom of Enterprise Freedom of enterprise is very important issue of today’s Moral & Social Sciences. Islam prohibits any

control in the area and provides full freedom, as unbiased modern business world do. Any individual in

an Islamic society is free to earn bread & butter, as one like to. Any type of business activity is allowed,

unless until prohibited by Islam, some of which were discussed previously. However, liberty and

freedom makes no sense if not controlled by ethical boundaries. Any individual can freely perform

economic activities, until he ensures conformity and compliance to the prescribed laws. As we can see

that unbridled freedom can lead to disasters, which currently western world is facing (ends not means).

Any business entity is free in business dealings, but within code of conduct defined for the area. As we

know Islam is a living religion and addresses to every aspect of life, even in the modern world. Islam

pg. 5

promotes free market economy in which every individual is free for business activities and government

has no control, other than monitoring any unlawful activity and injustices.

Islam provides concept of free market and restricts government’s interventions. However, freedom of

enterprise in an Islamic market must be regulated by;

o Qur’an

o Sunnah

o Ulamas directions

Quran and Ahadiths provide set of principles to be followed in every area of life and every nature of

business transaction. Detailed discrimination between Halal & Haram and lawful from unlawful have

been provided (details will be provided in later part of the article). However, for a broader based

concept, we can say that our religion prohibits any activity which is harmful on either part i.e. producer,

trader or consumer. Environmental issues are also addressed in detail, which are whooping concerns of

today’s modern world. Any activity harmful for masses is strictly banned.

However, where seems inevitable, to ensure avoidance of inherited risks of the area government is free

to control activities. The control is again not left unbridled, and needs to comply with certain

requirements to ensure elimination injustices, abuses, misuse of the right, and unlawful setups on

government’s part.

Islamic Laws on Trading In the part, we will discuss various activities which are permissible and discriminate Halal from Haram.

As we are again and again emphasizing that Islam is a living religion and provides complete guidance on

every dimension of one’s life and addresses to every nitty-gritty.

Here are some of the major concerns which may arise in one’s mind involved in commercial activities.

Profit Margin; is there a ceiling for the profit margin? No! there is nothing defined as ceiling of profit margin. Trade conditions, costs incurred, risks

associated, extent of labor involved are few of the important elements for setting price or determining

profit margin. But again, an individual is free to set, till compliance of “Husn-e-Muamala”.

However, monopoly, interest, swindling, theft, fraud are strictly prohibited and any non-compliance

leads to commuting of sin.

“A truthful and honest merchant will be with the Prophets, the most truthful people and martyrs.”

(Reported by At-Tirmidhi)

Gharar; uncertainty Islam strictly prohibits gambling and “bay al-gharar”. Gharrar means any dealing in uncertainty.

Different school of thoughts has differing interpretations, of which the three major interpretations are:

pg. 6

a) The Hanafi madhab (legal school) in Islam defines “gharar” as “that whose consequences are

hidden”

b) The Shafi legal school defined “gharar” as “that whose nature and consequences are hidden” or

“that which admits two possibilities, with the less desirable one being more likely”

c) undeliverable, whether it exists or not”

Generally speaking, gharar is sale of any commodity which is not sure to be existing or its characteristics

cannot be defined clearly. Gambling, being of same nature is also prohibited.

Ihtikaar; monopoly Ihtikaar in Arabic or monopoly is also ban because it leads to unfairness, malpractices and disregard free

market concept.

i. "Whoever withholds food (in order to raise its price), has certainly erred!" [Muslim]

ii. Also: "Whoever strives to increase the cost (of products) for Muslims, Allaah, the Exalted, will

seat him in the center of the Fire on the Day of Resurrection." [Ahmad and al-Haakim]

iii. "What an evil person is the one who withholds! If Allaah causes the prices to drop, he would be

saddened, and if He causes them to climb, he would be excited." [Al-Bayhaqi]

Imam Abu Haneefa’ and many other Islamic scholars have disallowed to form a cartel especially with

intentions of controlling market(s), unethically raising prices and controlling supply of goods & services

to earn higher profits, which otherwise is not possible.

Hoarding of Foodstuff

Ihtikaar can also be used to refer hoarding, especially food related stuff. Hoarding food stuff, with

intentions of raising price or controlling market artificially to decrease supply is strictly disliked and

disallowed.

For example if some traders buy entire or even large quantity of wheat with intentions of stocking and

selling when prices gets high due to decrease in supply is not allowed. Because, in the situation, buyer

has no other option other than to pay for high price. It is not limited to food stuff only, creating artificial

scarcity of any product or service and selling it for raised prices is unlawful and declared Haram.

Hoarding is an unjust practice mutually agreed by Islamic code of conduct as well as modern business

ethics. Allah Subhan a Ta’allah and his Prophet (sws) has cursed hoarder and declared them sinners.

No one hoards but the traitors (i.e. the sinners). (Abu Dawud, No. 2990)

The importer [of an essential commodity] into the town will be fed [by Allah], and the hoarder

will have [Allah’s+ curse upon him. (Ibn Majah, No: 2144)

Exploitation of one’s Ignorance of Market Conditions Modern business practices, with many other drawbacks do not disallow exploitation of one who is not

well aware of market conditions. Even if they condemn, not as Islam do! Our Prophet (sws) has

prohibited this practice through a number of instructions. A tradition reads:

pg. 7

A town dweller should not sell the goods of a desert dweller. (Bukhari, No: 2006)

Sometimes it may happen that a buyer arrives in a town with objects of prime and general necessity for

selling them in the market. A local trader may persuade the new-comer to transfer all of the goods to

him so that he will sell them on his behalf in the market. He obtains the commodities on a price that is

lower than market price and then sells them at a high or exorbitant price. Islam condemns this act of

intermediary intervention which involves exploitation of one’s ignorance of market conditions. The

practice was prevalent in pre-Islamic society.

Al-Najsh; trickery The term Al-Najsh means an action in which a person offers a high price for something, without

intending to buy it, but just to cheat or defraud another person who really means to buy it. The person

practising it may collaborate with the seller to offer high prices in front of the buyers merely as a means

to cheat them. This type of fraudulent transaction is totally prohibited in Islam. The Prophet (sws) is

reported to have said:

Do not harbour envy against one another; do not outbid one another [with a view to raising the price];

do not bear aversion against one another; do not bear enmity against one another; one of you should

not enter into a transaction when the other has already entered into it; and be fellow brothers and true

servants of Allah. (Muslim, No: 4650)

As is clear from the above, Islam also forbids the practice of sale over sale and purchase over purchase.

This means that it forbids someone to offer a higher price for a commodity after the deal has been

accomplished between the parties. Obviously he is offering a higher price in order to spoil the

agreement reached between the parties. As a result of this offer the buyer may feel tempted to cancel

his contract to sell it at a higher price. It may give rise to disputes and disagreements between brothers.

Hence it is strictly prohibited in Islam.

Al-Ghashsh; cheating and fraud in business transactions The traders and businessmen generally have a tendency to motivate the customers by adopting

fraudulent business practices. Islam strongly condemns all such practices in business transactions (Al-

Ghashsh). The Messenger of Allah has commanded the believers not to indulge in cheating and

fraudulent practices in business transactions. Sale of dead animal, dubious and vague transactions,

manipulating the prices, selling the items belonging to a desert dweller by a townsman Al-Najsh

(trickery), false eulogy and concealment of defects are all examples of cheating and fraud i.e. Al-Gashsh.

The Prophet (sws) has strongly condemned all such practices in a number of traditions and the believer

to abstain from them.

The Prophet (sws) is reported to have said: The seller and the buyer have the right to keep the goods or

return them as long as they have not parted. He also said that if both the parties have spoken the truth

and described the defects as well as the merits thereof (the goods), they would be blessed in their deal.

If they have told lies or concealed something, then blessings of their transaction would be lost. (Bukhari,

No: 1937)

pg. 8

Swearing The traders often take 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 in business for such purposes is forbidden in Islam, be it

false or true. False swearing is an act of sin punishable by hellfire. Swearing by Almighty Allah is too

great a thing to be used as a means to sell a commodity. The desirable thing in business transaction is

that both the buyer and the seller remain straightforward and truthful in their dealings, so that no one

will feel the need to swear by Allah in order to create conviction in the mind of the other party. The

Prophet (sws) 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 deceit 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. Giving short measures was a

common malaise plaguing the pre-Islamic days. The community of the Prophet Shu‘ayb (sws) was known

for practising it with impunity. Consequently, they were destroyed for their persistence in deceit and

disbelief in Allah and His Messenger. Allah the Almighty has repeatedly commanded exactitude in

weights and measures. One of the verses says: And give full measure when you measure, and weigh

with a just balance. That is good and better in the end. (17:35)

Dealing in Stolen Goods Almighty Allah has declared thievery unlawful and warned of severe punishment such as cutting the

hand of the thief from the wrist joint if the necessary legal conditions for the award of punishment are

met. Even if the thief escapes worldly punishment and gets away with stolen goods, 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 (sws) made the person knowingly buying a stolen

commodity a partner to the crime. He said: The one, who knowingly purchases a stolen good, is a

partner to the act of sin and the shame. (Kanz Al-‘Ammal, No: 9258)

Prohibition of Trading in Haram Goods; means not only ends! Any Muslim cannot trade in goods declared Haram are also Haram. Dead meat would mean the flesh of

any bird or animal dead from natural causes, without being properly slaughtered in an Islamic way. A

Muslim, therefore, will not eat the flesh of such an animal or bird. Flesh of an electrocuted animal, or of

an animal killed by the blow of a blunt weapon, and of the strangled one is also proscribed in Islam. Also

proscribed is the flesh of the animal that has been killed or slaughtered in ways other than Islamic. It is,

therefore, not permissible for a Muslim to trade in dead meat. Likewise, trading in pork, intoxicants,

sale of idols and statues, selling alcohol, drugs, pornography, prostitution, theft items etc is not

permitted in Islam.

Qur’an says: Forbidden to you *for food+ are: dead meat, the blood, the flesh of swine and that

on which name of other than Allah has been mentioned. (5:1)

pg. 9

Qur’an also says: O you who believe! intoxicants and gambling [dedication of] stones and

*divination by+ arrows are an abomination of Satan’s handiwork: so avoid it in order that you

may prosper. (5:90)

The Prophet (sws) is also reported to have said; Allah and His Messenger made illegal the trade

of alcoholic liquors, dead animals, pigs and idols. (Bukhari, No: 2082)

The Prophet (sws) also said; If Allah makes something unlawful, he makes its price also unlawful.

(Ahmad, No: 2546)

Prohibition of Trading “when the call is heard for the prayer of the day of

Jumma Congregation”

When the call is heard for the prayer of the day of congregation, hasten to remembrance of Allah and

leave your trading (selling and buying). Surat al-Jumuah (42:9)

Few Prohibited Form of Business Transactions

Islam being a complete code of conduct has eliminated any possibility of dishonesty, injustice,

malpractice, fraud, cheating and harms to masses. It has disallowed any form of dealing which can lead

to fraud or trickeries. Traders, following Islamic code of conduct cannot sell defective, high-priced,

harmful products or services. Islamic laws of business say that any defect in goods should be pointed

out before selling. Like ways; it describes that seller or buyer can cancel a contract till they are

separated.

The Messenger of Allah (sws) said: "The buyer and the seller have the option of cancelling the contract

as long as they have not separated; then. if they both speak the truth and make manifest, their

transaction shall be blessed, and it they conceal and tell lies, the blessing of their transaction shall be

obliterated".

pg. 10

Munabadha and Mulamasa. Islam has discussed various possibilities in nature of transaction In

addition to providing laws on all forms of transaction Above stated terms refers to forms of sale

where purchaser enters into a contract without examining a product.

Munabadha and Mulamasa! Purchaser, in any of the transaction type gets no opportunity of

examining product being purchased. Munabadha means that the seller throws the cloth to the

buyer before he has carefully examined it. The very act of throwing the cloth will mean that the

bargain has been struck. Mulamasa means touching the cloth without examining it, i.e. the

buyer was just supposed to touch the cloth to strike the bargain. Both these forms of

transaction are prohibited because in either case the purchaser got no opportunity to examine

the things sold to him, and the bargain is likely to prove unduly disadvantageous to one side.

In fact, Islam demands that goods and commodities for we should go to the open market and

the seller or his agents must be aware of the state of the market before proposals are made for

the purchase of goods or communities in bulk. He should not be taken unawares lest advantage

be taken of his ignorance of the state of the market, and the prevailing prices. All this is very

clearly laid down by the Prophet (sws).

As mentioned above, Islam tries to be fair to both parties to a transaction. Any step on the part

of one, that is advantageous to him and disadvantageous to the other, is not permissible. The

seller is expected to make the defects (if any) in the goods manifest to the buyer, nor is the

buyer expected to take undue advantage of the ignorance of the seller.

Mozabana. It is the exchange of fresh fruits for dry ones in a way that the quantity of the dry

fruit is actually measured and fixed, but the quantity of the fresh fruit to be given in exchange is

guessed while it is still on the trees (Mishkat, 2710). The Holy Prophet (sws) has forbidden this

exchange because the quantity of the fruit on the trees cannot be definitely Determined and the

transaction is just a leap into the dark.

Mu'awama. It consists in selling the fruit on the trees for a period of one, two or three years

even before it has made its appearance. It is prohibited because like Muzabana it is also a leap

into the dark. Such transactions may result in bitterness and frustration.

Bai' al-Gharar. It is to sell a thing which one doesn't have in one's possession, nor expects to

bring it under one's control, e g. fish in the river, or birds in the air. Possession is one of the basic

conditions of a sale. One cannot sell a thing which is not in one's possession.

Bai' al-'Uryan. It is getting a thing against a nominal advance on the condition that if the bargain

is struck, the advance will be adjusted and if the bargain is cancelled, the seller will not return

the advance. The advance being nominal, the buyer has practically no liability. He will abide by

the contract if he finds it advantageous to him and will withdraw himself from it otherwise.

Bai' al-Mudtar. It is to buy a thing forcibly or to purchase a thing when its owner is compelled

under stress of want to dispose it off. Instead of purchasing the thing, and taking undue

advantage of the seller's helplessness, one should help him.

Bai' alal-Bai' (sale over and above the sale of another). When one person has sold goods to

another, a third Person should not upset the bargain trying to sell his own goods to the latter,

offering them at lower rates or pointing out the defect in the goods already sold to him by the

pg. 11

former. "A Muslim should not purchase in opposition to his brother, nor should he send a

marriage proposal over and above the proposal of another."

Bai' al-Hast (i.e. sale by means of pebbles). The purchaser will tell the seller that when he will

throw a pebble on his goods, the sale contract will be confirmed or the seller tell the purchaser

that on whatever thing a pebble thrown by him falls will be sold to him. Sale contract is a serious

matter and it should not be accomplished by such hit-and-miss methods like throwing the

pebbles on the goods. A sale completed in this way may lead to injustice and hardship to one

side and is consequently prohibited.

Sale of unripe fruit and unripe corn. The Holy Prophet (sws), according to Hadrat Anas (Allah

be pleased with him), has prohibited the sale of grapes before they become dark and that of the

corn before it ripens. Similarly, he has forbidden the sale of raw dates. The fruit of the date

palms should not be sold until it becomes red or yellow.

Islam emphasizes on; 1. Keenness to earn legitimate (halal) earnings

2. Trade through mutual consent

3. Truthfulness in business transactions

4. Trustworthiness in business transactions

5. Generosity and leniency in business transactions

6. Honoring and fulfilling business obligations

7. Fair treatment of workers

The following are some of these basic conditions of Bay (Sale):

1. Things sold and money offered as their price to be lawfully acquired. The things sold and

the money to be offered as their price should both be lawfully acquired and clearly specified.

This condition demands that the goods sold should have been lawfully obtained. One has no

business to sell goods which one has stolen or which one has acquired in a fraudulent manner

nor should one purchase anything with the money which one has accepted as illegal

gratification or has acquired in some other deceitful way. This condition holds the buyer and

the seller responsible for lawful possession of the goods on the part of one and of the money on

the part of other.

2. Goods not to be sold before obtaining their possession. The Holy Prophet (sws) has warned

the Muslims against indulging in forward transactions which means selling goods before

obtaining their possession. "Whoever buys cereals shall not tell them until he has obtained their

possession," says the Holy Prophet (sws). According to Ibn 'Abbas, what applies to cereals also

applies to other categories of goods. On another occasion the Holy Prophet (sws) has said:

"Bargain not about that which is not with you."

3. Goods to be bought in the open market. Goods and commodities for sale should go into the

open market, and the seller or his agents must be aware of the state of the market before

proposals are made for the purchase by the buyers. The seller should not be taken unawares

pg. 12

lest the buyers should take undue advantage of his ignorance of the conditions and prices

prevailing in the market.

4. No trade and traffic in things, the use of which is prohibited by Islam. A Muslim can trade

in those goods and commodities only the use of which has been declared to be Halal (lawful).

There can be no trade and traffic in things the use of which is prohibited by Islam. For example,

there can be no trade in wine, swine, dead bodies of animals and idols. A devout Muslim

merchant would not even traffic in thin and transparent stuff for ladies because the use of such

stuff by ladies is unlawful. One cannot sell the carcass of an animal. He can, however, flay its

skin which can be used for making shoes and which can therefore, be sold, but not the flesh of

the dead animal. What is true of the usable skin of animals is also true of the tusks of an

elephant.

5. Disclosure of Facts – Defects. Goods should not be sold unless defects have been

communicated to potential buyer in proper and understandable way. The seller must clearly

inform buyer about any defect of product in question.

Employer & Employee Relations Worker’s rights! a very important topic and have been discussed in detail by Muslim scholars. There is a

great need for developing specific rules and legislations for governments and corporations in the Muslim

world. Among Muslim countries, to my knowledge, Pakistan and Iran have some specific rules in this

area. The full and proper implementation of these rules is also needed. To explain briefly some basic

values and principles related to worker’s rights, let me say the following;

Justice and fair dealings are basic values of Islam and they must be always emphasized. No peace and

harmony in the society can exist without justice. Justice should be done to all people.

1. High Regard for Work and Workers; Islam has given high regard for work. Those who work

and earn their living by their own labor must be respected. Of course, the work has to be lawful

and it should be done in an honest and sincere manner. All anti-social works, irresponsible

behavior, and work done with cheating and deception are forbidden in Islam. Employers and

employees all must be honest and must deal with each other justly. On the treatment of

workers there are general and specific teachings in Islam. The following five points must be

emphasized:

2. Clear and proper agreements; All agreements, whether oral or written, must be clear and

transparent. The agreements must be just and lawful. Employees should know their duties and

responsibilities and they should be told their rights in terms of vacations, leaves, compensations,

etc.

o Allah says in the Qur'an {O you who believe, fulfill your contracts.} (Al-Ma'idah 5: 1)

pg. 13

o The Prophet (sws) said, "Muslims must abide by their agreements, unless there is an

agreement that makes halal what is haram or makes haram what is halal." (At-Tirmidhi)

This means that illegal terms and conditions are not valid under Islamic law. It is the duty of both

the employers and the employees to fulfill their agreements to the best of their capacities.

3. The dignity of workers; Islamic law allows all human beings the right to enter upon any lawful

profession or occupation and to conduct any lawful trade or business. The workers should be

treated with dignity and honor. No work is menial or degrading.

Our Prophet (peace and blessings be upon him) kissed the hands of a laborer who showed him

his rough hands due to his hard labor. He prayed for him and spoke very highly of those who

labor over against those who sit idle or go begging. Islam teaches that workers should be

treated with kindness.

o Allah says {Serve Allah, and make not any partners with Him in His divinity. Do good to

parents, kinsfolk, orphans, those in need, neighbors who are near, neighbors who are

strangers, the companion by your side, the way-farer (you meet) and those whom your

right hands possess (your workers): for Allah loves not the arrogant, the vainglorious.

(Nor) those who are stingy, or enjoin stinginess on others, or hide the bounties which

Allah has bestowed on them; for We have prepared, for those who are ungrateful, a

humiliating punishment.} (An-Nisaa' 4:36-37)

4. Kindness to workers; Workers are our brothers and sisters. They are our helpers. We need

them; we depend on them for many things that we cannot do for ourselves. Workers should not

be given work beyond their capacity. They should have a humane and safe environment for

work. They should be compensated if they are injured on the job. They should have time for

work and time for themselves and their families. Children or minors should not be used for

labor.

Women should have proper environment for hijab without jeopardizing the rules of khalwah

(privacy). They should not be employed in vocations that are unsuitable to their gender, and

they must be ensured maternity benefits in their employment.

o The Prophet Muhammad (peace and blessings be upon him) said, "Your brothers are

your responsibility. Allah has made them under your hands. So whosoever has a brother

under his hand, let him give him food as he eats and dress as he dresses. Do not give

them work that will overburden them and if you give them such task then provide them

assistance." (Al-Bukhari)

5. Proper and timely wages; Workers should be given proper and just wages. Exploitation of any

person is not allowed in Islam.

o Allah says, {To the Madyan people We sent Shu`aib, one of their own brethren. He said:

"O my people worship Allah; you have no other god but Him. Now has come unto you a

Clear (Sign) from your Lord. Give just measure and weight, nor withhold from the people

pg. 14

the things that are their due; and do no mischief on the earth after it has been set in

order: that will be best for you, if you have Faith.} (Al-A`raf 7: 85)

Allah warns those who take full measure but give less to others: {Woe to those that deal in

fraud. Those who, when they have to receive by measure from men, exact full measure. But

when they have to give by measure or weight to men, give less than due. Do they not think that

they will be called to account?

o On a Mighty Day. A Day when (all) mankind will stand before the Lord of the Worlds.}

(Al-Mutaffifin 83:1-6)

Workers should also be paid on time!

o The Prophet Muhammad (sws) said, "Give to the worker his wages before his sweat

dries." (Ibn Majah)

Determination of Wages An employee is entitled to a 'just' wage for his contribution to output and it is unlawful for a Muslim

employer to exploit his employee'. The Prophet declared that three persons who will certainly face

God's displeasure on the Day of Judgment are: one who dies without fulfilling his commitment to God;

one who sells a free person and enjoys the price; and one who engages a laborer, receives due work

from him but does not pay him his wage. (Bukhari. v. 3. p.112.) This hadith, by placing the exploitation of

labor and the enslaving of a free person on an equal footing, suggests how averse Islam is to exploitation

of labor.

It could be argued theoretically that 'just' wage should be equal to the value of the contribution to

output made by laborer. But this is difficult to determine and would have little practical value in

regulating wages. There are however a number of hadith from which may be inferred qualitatively the

level of 'minimum' and 'ideal' wages. According to the Prophet, 'an employee (male or female) is

entitled to at least moderately good food and clothing and to not being burdened with labor except

what he (or she) can bear. (Malik Muwatta). From this hadith it may be inferred that 'minimum' wage

should be such that it resembles an employee to get a sufficient quantity of reasonably good food and

clothing for himself and his family without overburdening himself. This was considered by the Prophet's

Companions to be the minimum even to maintain the spiritual standard of Muslim society. 'Uthman, the

third Caliph, is reported to have said: Do not overburden your unskilled female employee in her pursuit

of a living, because if you do so, she may resort to immorality; and do not overburden a male

subordinate, for if you do so, he may resort to stealing. Be considerate with your employees and God

will be considerate with you. It is Incumbent upon you to provide them good and lawful food.

The ideal wage may be inferred from the following hadilh to be a wage that would enable the employee

to eat food and wear clothing just like the employer is himself capable of: Your employees are your

brothers whom God had made your subordinates. So he who has his brother under, him, let him feed

with what i.e. feeds himself and clothed him with what he clothes himself.

pg. 15

Besides being paid at least minimum wages and preferably ideal wages, Islam requires that labor should

not be made to work so hard or in such miserable conditions that their health deteriorates or their

ability to enjoy income or participate in family life gets impaired.8 It they are made to perform a task

which is beyond their capacity they should be provided with sufficient help to enable them to do the job

without undue hardship.

While this is the treatment expected of an employer for his employees, Islam, because of its

commitment to justice, protects the employer by placing certain moral obligations on the employee as

well.

The most common violation of an employee’s right is the delay of their payment, or not paying them at

all. Such oppressive practices are particularly rampant in the trade industry where agreements are often

made informally, but also happen elsewhere. The equation is quite simple: you get work done or a

service provided and you pay for it. Sadly, this is not always the case. Many workers, young and old, are

usually left in an undesirable position where they are promised payment by their employers within a

certain time-frame but keep delaying it citing laughable excuses. Other times, dodgy employers refuse

to pay altogether. This is oppression and theft at its best. One does not need to rob their local milk-bar

to be considered a thief. The oppressed workers are often left without proper recourse as access to legal

aid is either too expensive, or the whole process of applying to the courts or tribunals, which can be

lengthy, is simply not worth the hassle. Regarding delaying payment, the Prophet (saw) said:

“Give the worker his wages before his sweat dries.” (Ibn Maajah 2443)

Obligations on Employees First; to do the job conscientiously and diligently with maximum possible, degree of care and skill. The

Prophet exhorted: 'God has made beneficence obligatory upon you10 and that 'God loves that when any

one of you does a job, he does it perfectly.11 There can be no question that social and economic justice,

which Islam stresses unambiguously, requires the efficient performance of the function for which one

has been employed. On another occasion the! Prophet said: An employee who excels in his devotion to

God and also renders to his master what is due to him of duty, sincerity and obedience, for him there is

double rewards (with God).

Second; on the employer is to be honest and trustworthy. The Qur'an says that the best person anyone

can hire is the strong (able) and the honest (28:26), and the Prophet has said: He whom we have

appointed for a job and have provided with livelihood, then whatever he appropriates beyond this is ill-

gotten.

A person once asked the Prophet (sws): “Can a believer be a coward?”

The Prophet (sws) replied: “Yes”.

The person then asked: “Can he be stingy?”

The Prophet (sws) replied: “Yes”.

pg. 16

He then asked: “Can he be a liar?”

To this the Prophet (sws) replied: “No.” (Sunan al-Bayhaqî)

Third; Employees have a duty to abide by their contractual relationships and fulfil the tasks required

from them by their employer, as Allah commands us in the Qur’an: “O you who have believed, fulfill *all+

contracts...” (Al-Mā'idah: 1)

Thus; if Islam has placed a number of obligations on the employer, the employee is also expected to do

the job conscientiously and diligently, and be honest and trustworthy. The goal is justice to both

employers and employees in all economic relationships. It is only by such a harmonious regulations of

mutual responsibilities emphasizing co-operation and conscientious fulfilment of one's obligations, in an

environment of brotherhood, justice, and supremacy of moral values, that there can be hope of

eliminating labor-employer conflict and friction and establishing industrial peace.

Muslim Contribution in International Trade; Globalization Trade has a long tradition in Islam. The Prophet (PBUH) and many of his companions were tradesmen,

thus trade has an important place in Islamic tradition and there exists a body of legislation governing

contracts, exchange, loans, market conduct and the like. Trade thrived from all shores of the Islamic

world. 'The Arab's,' Lopez writes, 'masters of an empire extending from the Gulf of Gascony to beyond

the Indus, involved in commercial enterprises reaching into Africa and Baltic Europe, brought East and

West together, as never before.' Great roads radiating from Baghdad led through Rayy, Nishapur, Merv,

Bukhara, and Samarkand to Kashgar and the Chinese frontier; through Basra to Shiraz; through Kufa to

Medina, Mecca, and Aden; through Mosul or Damascus to the Syrian coast. Muslim tradesmen could be

found as far as China, and we have early accounts of such a country from tradesmen. Caravans bound

China and India to Persia, Syria, and Egypt; and as Durant states, ports like Baghdad, Basra, Aden, Cairo,

and Alexandria sent Arab merchantmen out to sea. Durant also notes how Muslim commerce

dominated the Mediterranean till the Crusades, plying between Syria and Egypt at one end, Tunis, Sicily,

Morocco, and Spain at the other, and touching Greece, Italy, and Gaul; it captured control of the Red

Sea from Ethiopia; it reached over the Caspian into Mongolia, and up the Volga from Astrakhan to

Novgorod, Finland, Scandinavia, and Germany, where it left thousands of Muslim coins; it answered the

Chinese junks that visited Basra by sending Arab dhows out from the Persian Gulf to India and Ceylon,

through the Straits and up the Chinese coast to Khanfu (Canton), a colony of Muslim and Jewish

merchants being established in Canton in the eighth century. Muslim caravans, for their part, reached

the furthest horizons in the African continent. The Muslim merchants from the Maghrib travelled

several months' journey to the south and generally passed through Awdagosht, an oasis situated

fourteen days' journey to the North of Ghana.

The Muslim trading network was not just vast geographically; it was sustained by a number of policies

and measures, which are outlined by Durant. Caravanserais or inns, hospices and cisterns helped the

traveller and his beasts. Much in-land traffic was borne on rivers and canals. Harun al-Rashid (9th

pg. 17

Century) planned a Suez Canal, but his vizier, Yahya, for unknown reasons, probably financial,

discouraged the idea. The Tigris at Baghdad, 750 feet wide, was spanned by three bridges built upon

boats. Over these arteries a busy commerce passed. It was an economic advantage to western Asia that

one government united a region formerly divided among four states; customs dues and other trade

barriers were removed, and the flow of commodities was further eased by unity of language and faith.

The Muslims, moreover, did not share the European aristocrat's scorn of the merchant; soon they joined

Christians, Jews, and Persians in the business of getting goods from producer to consumer. Cities and

towns swelled and hummed with transport, barter, and sale; peddlers cried their wares, shops dangled

their stock and resounded with haggling; fairs, markets, and bazaars gathered merchandise, merchants,

buyers, and poets. In the words of Durant, this 'vitalizing commercial activity reached its peak in the

tenth century, when western Europe was at nadir; and when it subsided it left its mark upon many

European languages in such words as tariff, traffic, magazine, caravan, and bazaar. The state left

industry and commerce free, and aided it with a relatively stable currency; the early caliphs used

Byzantine and Persian money, but in 695 Abd-al-Malik struck an Arab coinage of gold dinars and silver

dirhams.'

One of the great commercial centres of Islam was Spain. African boats also used to visit in great

regularity the Spanish ports delivering and carrying both goods and travelers. The port of Malaga in

southern Spain, for instance, was a centre of immense traffic, and was visited by traders from all

countries, especially those from the mercantile republics of Italy, the Genoese in particular. The tolerant

and enlightened policy of the Muslims had assigned the enterprising Genoese a suburb which was

designated by their name. The great factories of the merchants of the Adriatic, who at that time

possessed the larger share of the carrying trade of the world, lined the crowded quays of Malaga, and

their flag was always the most conspicuous among the ensigns of the maritime nations, whose vessels

rode the anchor in the bay. Through the port of Malaga constantly passed a vast and growing traffic,

which bartered the commodities of every country for the silks, the weapons, the jeweler, the gilded

pottery, and the delicious fruits of Spain.

Reasons behind success of Muslim traders! Basic reason which history have explored till to date if following trails of Quran, Sunnah & Ahadith. They

were not only traders they became a big source of preaching Islam. Thomas Arnold in "The preaching of

Islam"

Thomas Arnold in his famous book “The preaching of Islam” has very clearly that merchants and Sufi’s

were two prime sources of spreading Islam. South west of Asia & the West of Africa, were most

influenced parts of the world. Traders & Sufis, thorough practical demonstration of Islamic code of

conduct and complying with ethical standards defined for domestic and commercial activities make

swift increase in followers of Islam. Fundamental reason behind their success was being ethical in all

dealings.

pg. 18

Some practical examples Imam Abu Hanifa joined his father's business, where he showed scrupulous honesty and

fairness. His agent in another country once sold some silk cloth on his behalf but forgot to point

out a slight defect to the customers. When Abu Hanifa learnt of this, he was greatly distressed

because he had no means of returning the money to the customers. So he immediately ordered

the entire proceeds of the sale of the consignment of silk to be distributed to the poor.

Imam Bukhari threw all drums of olive oil when he came to know that rat was coming out of one

of the drums.

TABLE I

Examples of ethical principles in Islam relating to business practices

Ethical principle Relevant business practice(s)

Unity

“No Arab has superiority over any non-Arab and no non-

Arab has any superiority over an Arab; no dark person has

superiority over a white person and no white person has any

superiority over a dark person. The criterion of honor in the

sight of God is righteousness and honest living.” Saying of

Muhammad (Sallam and Hanafy, 1988).

“O mankind! We created from you from a single (pair) of a

male and a female, and made you into nations and tribes, that

you may know each other . . .” (Qur‟an 49:13).

“. . . man can have nothing but what he strives for . . .”

(Qur‟an 53:39).

“God likes that when someone does anything, it must be

done perfectly well.” Saying of Muhammad (Sallam and

Hanafy, 1988).

“. . . say, „O my Lord! increase me in knowledge.‟ ”

(Qur‟an 20:114).

“The acquisition of knowledge is a duty incumbent on every

Muslim, male and female.” Saying of Muhammad (Sallam and

Hanafy, 1988).

Trusteeship

“God does command you to render back your trusts to those to

whom they are due . . .” (Qur‟an 4:58)

“. . . wear your beautiful apparel at every time and place of

prayer: eat and drink: but waste not by excess . . .”

(Qur‟an 7:31).

“. . . to God belongs all that is in the heavens and on

earth . . .” (Qur‟an 3:129).

Justice

“. . . God loves not the arrogant, the vainglorious (nor) those who

are niggardly, enjoin niggardliness on others . . .”

(Qur‟an 4:36-7).

“. . . and spend of your substance in the cause of God, and

make not your own hands contribute to your destruction; but

do good . . .” (Qur‟an 2:195).

Equal opportunity and non-discriminatory

behavior in hiring, buying and selling.

Teamwork. International business.

Rewards should be received only after

expending efforts.

Excellence and quality of work.

Importance of knowledge-seeking, research

and development, scientific activity,

training programs, executive training,

technology transfer.

Fulfilling obligations and trust in business

relationships and the workplace.

It is acceptable to have wealth and to

consume but not to waste resources.

Care for the environment.

There is no unlimited right to private

property.

Prohibition of hoarding. Encouragement of

spending, investment in business enterprise

and circulation of wealth.

Condemnation of ostentatious consumption.

Table I (continued)

Ethical principle Relevant business practice(s)

Justice continued. . .

“. . . wealth and children are allurements of the life of this

world . . .” (Qur‟an 18:46).

“. . . He has raised you in ranks, some above others: that He

may try you in the gifts that He has given you” (Qur‟an 6:165).

“. . . it is We (God) who portion out between them their

livelihood in the life of this world: and We raise some of

them in ranks so that some may command work of others.

But the Mercy of your Lord is better than the (wealth)

which they amass.” (Qur‟an 43:32).

“. . . of their wealth take alms, so that you might purify and

sanctify . . .” (Qur‟an 9:103).

“God permits trade but forbids usurious gain*.”

(Qur‟an 2:275).

“. . . give just measure and weight, nor withhold from the

people the things that are their due . . .” (Qur‟an 11:85).

“He who cheats is not one of us.” Saying of Muhammad

(Keller, 1994).

“. . . don‟t outbid one another in order to raise the price,

. don‟t enter into a transaction when others have already

entered into that transaction and be as brothers one to

another.” Saying of Muhammad (Hanafy and Sallam, 1988).

“. . . make your utterance straightforward . . .” (Qur‟an 33:70).

“On the day of judgment, the honest Muslim merchant will

stand side by side with the martyrs.” Saying of Muhammad

(Ali, 1992).

“. . . stand out firmly for justice, as witnesses to God, even

against yourselves, or your parents, or your kin, and whether it be

(against) rich and poor.”

“. . . nor shall We (God) deprive them (of the fruit) of aught of

their works: (yet) is each individual in pledge for his deeds.” (Qur‟an

52:21).

Acquisition of wealth is given reduced

consideration in the scale of human values.

Income inequality is permitted.

Distinction between managers, workers,

professionals, etc. is acceptable.

Income redistribution: wealth should be

shared with those less fortunate.

Unlawfulness of loans by which lender

obtains benefit.

Give full measure and weight.

Whoever knows of a defect in something is

obliged to disclose it.

Fairness in contract negotiation.

Truthfulness and directness in negotiation.

Non-discriminatory workplace practices.

Protection for “whistle-blowers.” No

special privileges for those with wealth or

status.

Importance of individual responsibility.

* In the Qur‟an, the Arabic word used is “riba” which lexically means “increment” (Keller, 1994).