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AN ISLAMIC APPROACH TO BUSINESS ETHICS


Islam is a SYSTEM OF LIFE, it guides in every department of life, even in business ethics. Ethics may be defined as the set of moral principles that distinguish what is right from what is wrong.

 

Table of Contents

 

Business Ethics

Business Ethics is the branch of ethics that examines ethical rules and principles within a commercial context; Generally speaking, business ethics is a normative discipline, whereby particular ethical standards are formulated and then applied. It makes specific judgments about what is right or wrong.

 

Ethics in Islam

Islam places the highest emphasis on ethical values in all aspects of human life. In Islam, ethics governs all aspects of life. Moral principles and codes of ethics are repeatedly stressed throughout the Glorious Qur’an. Besides, there are numerous teachings of the Prophet  صلى الله عليه وسلم which cover the area of moral and ethical values and principles.

Islam asks its believers to observe certain norms and moral codes in their family affairs; in dealings with relatives, with neighbours and friends; in their business transactions; in their social affairs, nay in all spheres of private and public life.

 

Qur’an

Allah Said: You are the best nation that has been raised up for mankind; You enjoin right conduct, forbid evil and believe in Allah. Qur’an Surah Al’e Imran 3:110

 

Hadith

The Prophet  صلى الله عليه وسلم also says: I have been sent for the purpose of perfecting good morals. Musnad Ahmad 8595

 

Allah's Messenger  صلى الله عليه وسلم said, "No doubt, it is better for any one of you to cut a bundle of wood and carry it over his back rather than to ask someone who may or may not give him."  Sahih al Bukhari 2074

 

The Prophet  said, "Nobody has ever eaten a better meal than that which one has earned by working with one's own hands. The Prophet of Allah, David used to eat from the earnings of his manual labor."  Sahih Al Bukhari 2072

 

Narrated by Hakim bin Hizam thatthe Prophet  صلى الله عليه وسلم said, "The buyer and the seller have the option to cancel or to confirm the deal, as long as they have not parted or till they part, and if they spoke the truth and told each other the defects of the things, then blessings would be in their deal, and if they hid something and told lies, the blessing of the deal would be lost." Sahih al-Bukhari 2082

 

Narrated by `Aisha(R) that the Allah's Messenger  صلى الله عليه وسلم bought food grains from a Jew on credit and mortgaged his armor to him. Sahih Al Bukhari 2096

 

Narrated Ibn `Umar(R) that the Prophet said, "The buyer and the seller have the option to cancel or confirm the bargain before they separate from each other or if the sale is optional." Nafi` said, "Ibn `Umar used to separate quickly from the seller if he had bought a thing which he liked." Sahih al-Bukhari 2107

 

Below are few points to be taken care of –

Freedom of Enterprise

Islam gives complete freedom to economic enterprise. Each individual in an Islamic society enjoys complete freedom in the earning of his livelihood. He can start, manage and organize any kind of business enterprise within the limits set by the Islamic Shari‘ah.

 

An individual is free to pursue his economic activities provided he respects the code of conduct prescribed for the profession, which broadly means choosing things lawful and shunning matters unlawful. The dictates of the Holy Qur’an and the teachings of the Prophet serve to set a scale in everybody’s mind to distinguish between the lawful and the unlawful means of earning, and to prohibit or disapprove of all things that are either morally wrong or socially unacceptable.

 

Islam, as a matter of principle, prohibits all activities which may cause harm either to the traders or the consumers in the market. It encourages the prevalence of free market where everyone earns his sustenance without government intervention. However, it puts certain restraints in order to eliminate the incidence of injustice and check malpractices and unlawful operations.

 

Islamic Tenets Concerning Business Transactions

An Islamic market is characterized by certain norms that take care of the interests of both the buyer and the seller. In other markets the interest of buyer is given least preference. There are number of rules of ethical discipline in Islamic commercial transactions without which business contract would be regarded as lacking perfection. Some of these tenets are as follows:

 

1.      Keenness to Earn Legitimate (Halal) Earnings

Islam places great emphasis on the code of lawful and unlawful in business transactions. Many Qur’anic aayath disapprove the wrongful taking of the property.

 

Allah Says in the Qur’an: Do not devour one another’s property wrongfully, nor throw it before the judges in order to devour a portion of other’s property sinfully and knowingly. Qur’an 2:188

 

Do not devour another’s property wrongfully – unless it be by trade based on mutual consent. Qur’an 4:29

 

The Prophet  صلى الله عليه وسلم said, "Nobody has ever eaten a better meal than that which one has earned by working with one's own hands. The Prophetof Allah, David used to eat from the earnings of his manual labor."  Sahih Al Bukhari 2072

 

A true Muslim businessman should be wary of the doubtful things in order to keep himself clear in regard to his faith and his honour because one who falls into doubtful matters is sure to fall into that which is unlawful (Haram). A tradition of the Prophet states:   A time will come upon the people when one will not care as to how he gets his money whether legally or illegally. Sahih Al Bukhari, 1941

 

Foremost among the unacceptable business practices strongly condemned in Islam is Riba. Riba (interest), by definition, is the extra sum the moneylender charges from the borrower for deferred payment. Allah has permitted trading and forbidden Riba (usury). Qur’an 2:275

 

2.      Trade through Mutual Consent

Mutual consent between the parties is a necessary condition for the validity of a business transaction. It, therefore, follows that a sale under coercion is not acceptable in Islam.

 

Qur’an says: O you who believe! eat not up your property among yourselves in vanities: but let there be amongst you traffic and trade by mutual goodwill: nor kill [or destroy] yourselves: for verily Allah has been to you Most Merciful. Qur’an 4:29

 

Thus two key elements of general theory of contract are endorsed emphatically in these aayath: mutual consent and gainful exchange. One can also find importance of mutual consent for legality of a business deal. The Prophet is reported to have said: A sale is a sale only if it is made through mutual consent. (Ibn Majah, No: 2176)

 

3.      Truthfulness in Business Transactions

The Prophet  صلى الله عليه وسلم has also exhorted the believers to strictly adhere to truthfulness in business transactions. He says: The seller and the buyer have the right to keep or return the goods as long as they have not parted or till they part; and if both the parties spoke the truth and described the defects and qualities [of the goods], then they would be blessed in their transaction, and if they told lies or hid something, then the blessings of their transaction would be lost. (Sahih Al Bukhari, 1937)

 

The tradition implies that Allah blesses business dealings if both the buyer and the seller are true to each other. Telling lies and hiding facts will result in the loss of divine blessing.

 

4.      Trustworthiness in Business Transactions

Trustworthiness is one of the most important principles of ethical discipline in commercial transactions.  A true Muslim trader will not, therefore, barter his Akhirah(hereafter) for worldly gains. He will avoid fraud, deception, and other dubious means in selling his merchandise. The sense of mutual trust demands that the pros and cons of commodity be revealed to the buyer so that he purchases the commodity in full satisfaction. Says the Qur’an: O you believers! Do not betray Allah and the Messenger, nor knowingly, betray your trusts. (Qur’an 8:27)

 

5.      Generosity and Leniency in Business Transactions

One should be lenient and generous in bargaining. Therefore, whoever demands his debt back from the debtor should do so in a decent manner. The Prophet  صلى الله عليه وسلم invokes Allah’s mercy thus:May Allah’s mercy be on him who is lenient in his buying, selling, and in demanding back his money [or debts]. (Sahih Al Bukhari, No: 1934)

 

6.      Honouring and fulfilling Business Obligations

Islam attaches great importance to the fulfilment of contract and promises. Islamic teachings require a Muslim trader to keep up his trusts, promises and contracts. The basic principles of truth, honesty, integrity and trust are involved in all business dealings. The Qur’an emphasizes the moral obligation to fulfil one’s contracts and undertakings. A ayath states thus:

 

O you who believe! Fulfil [your] obligations. (Qur’an 5:1)

 

A tradition of the Prophet states thus: The Muslims are bound by their stipulations. (Abu Da’ud, No: 3120)

 

7.      Fair Treatment of Workers

Islam puts certain conditions and restrictions to obviate the chances of bitterness between the employer and employees. Islam encourages and promotes the spirit of love and brotherhood between them. According to the Islamic teachings 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, suitable work and excellent brotherly treatment should be provided to the workers.

 

Those are your brothers [workers under you] who are around you, Allah has placed them under you. So, if anyone of you has someone under him, he should feed him out of what he himself eats, clothe him like what he himself puts on, and let him not put so much burden on him that he is not able to bear, [and if that be the case], then lend your help to him. Sahih Al Bukhari 2359

 

Prohibited Matters in Business Transactions

So far we have focused on one aspect of the business ethics – guidelines prescribed by Islam for conducting business transactions. Another aspect of business ethics is the various forms of unethical business practices a Muslim businessman must avoid in his business dealings. Some of these prohibited and undesirable business practices are as follows:

 

1.      Dealing in Prohibited (Haram) Items

Dealing in unlawful items such as carrion (dead meat), pigs and idols is strongly prohibited in Islam. Dead meat would mean the flesh of any bird or animal dead from natural causes, without being properly slaughtered in an Islamic way. 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)

 

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. (Qur’an 5:90)

 

The Prophet  is also reported to have said: Allah and His Messenger made illegal the trade of alcoholic liquors, dead animals, pigs and idols. (Sahih Al Bukhari, 2082)

 

2.      Sale of Al-Gharar (Uncertainty, Risks, Speculation)

In Islamic terminology, this refers to the sale of a commodity or good which is not present at hand; or the sale of an article or good, the consequences or outcome of which is not yet known; or a sale involving risks or hazards where one does not know whether at all the commodity will later come into existence. Such a sale is strictly prohibited in Islam because the quality, whether good or bad, is not known to the buyer at the time of the deal and there is every possibility that the contract may give rise to disputes and disagreements between the concerned parties. The Prophet  صلى الله عليه وسلم, therefore, prohibited the sale of what is still in the loins of the male; or sale of whatever is in the womb of a she–camel; or sale of birds in the air; or the sale of fish in the water, and any transaction which involves Gharar. (i.e. anything that involves deception).

 

3.      Arbitrarily Fixing the Prices

Islam grants absolute freedom to traders provided they adhere to the code of lawfulness. It does not, therefore, encourage the practice of price–fixing and leaves the traders to earn the profits from each other within the lawful limits. As a matter of principle public authorities are not allowed to fix the prices of commodities by force. This is because rise and fall in the prices are linked to various factors other than the greediness of the traders and fixing the prices may endanger both public and private interests.

 

4.      Hoarding of Foodstuff

The Arabic word for hoarding is Ihtikar. 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, rice for example, and store it up with the object of selling it later at the time of scarcity to draw maximum profit out of it and to dictate the prices. The consumers are left with no choice but to purchase the article concerned from the one who hoards, as he is the only one in the market who holds it.

 

He is, therefore, in a position to dictate his terms in the market and sell them at an exorbitantly high price to the needy people. This is an unjust practice and a clear case of exploitation and deservedly condemned by Islam. The Prophet 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)

 

5.      Exploitation of one’s Ignorance of Market Conditions

One of the most common unethical practices in modern business is to exploit one’s ignorance of market conditions. 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.

 

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. The Prophet  صلى الله عليه وسلم has prohibited this practice through a number of instructions. A tradition reads:  A town dweller should not sell the goods of a desert dweller. (Sahih Al Bukhari, 2006)

 

6.      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 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. (Sahih Muslim, 4650)

 

7.      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 Prophet  صلى الله عليه وسلم has strongly condemned all such practices in a number of traditions and the believer to abstain from them.

 

The Prophet  صلى الله عليه وسلم 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. (Sahih Al Bukhari, 1937)

 

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.

 

The Prophet  صلى الله عليه وسلم 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. (Sahih Al Bukhari, 1945)

 

9.      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.

 

One of the aayath says: And give full measure when you measure, and weigh with a just balance. That is good and better in the end. (Qur’an 17:35)

 

10.  Dealing in Stolen Goods

Buying from the thief is helping him in sin and transgression, and is encouraging the thief to carry on with what he is doing as well as failing to denounce evil. One of the conditions of a sale being valid is that the seller should be the owner of what he is selling. If he is a thief then he is not the owner, which implies that the transaction is not valid. Shaykh al-Islam Ibn Taymiyah (may Allah have mercy on him) said: With regard to property that has been stolen or seized by illegitimate means and then sold in a proper manner, it does not become permissible for the one who bought it. If the Muslim knows about it then he should avoid it. If I know that a person stole some property, or he betrayed a trust or usurped it and took it from someone by force and unlawfully, then it is not permissible for me to take it from him, whether as a gift or in payment when buying or as payment of wages or as payment of a debt. This wealth is the property of the one who has been wronged. Majmoo’ al-Fataawa (29/323)


Anas (may Allah be pleased with him) narrated that the Messenger of Allah  صلى الله عليه وسلم said: “Support your brother whether he is a wrongdoer or the one who is wronged.” They said: O Messenger of Allah, we can support him if he is wronged, but how can we support him if he is the wrongdoer? He said: “By stopping him.” Sahih al-Bukhari 2444 (Vol 3:624)


Allah says (interpretation of the meaning):  “Help you one another in Al Birr and At Taqwa (virtue, righteousness and piety); but do not help one another in sin and transgression” Qur’an Surah Maidah 5:2
 

Conclusion

The Islamic ethical codes, on the contrary, are humane rather than utilitarian or relative. They are good for all times and absolute. Ethical and moral codes in Islam are part of the overall Islamic faith and observing them will not only lead to a happy state of affairs in this world but also holds the promise of manifold returns in the Hereafter. Islamic ethical and moral codes thus create a sense of responsibility and accountability in the minds of the believers, be they buyers or sellers.

 

References

Book of An Islamic Approach to Business Ethics by Dr. Sabahuddin Azmi, Ph. D. (Economics), Lecturer, College of Islamic Banking, World Al-Lootah University (Internet), Dubai.

 

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