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Islam & Business

Islamic Business Principles

In addition to normal business principles of being fair and honest, the Shariah lays down clear laws and ethics for conducting business. 

Followers or Shariah law are God’s vicegerent on earth entrusted with stewardship based on sincerity (obey God for being fair and honest), piety (fear God for your actions) and righteousness.

 

Financial products to be Shariah compliant need to adhere to the Shariah business principles and these are:

· Honesty and fair trade - manipulation, malpractices like hoarding black markets, concealing and adulteration are all prohibited.

 

· Disclose Faults

· Avoid misrepresentations  (The prophet has said, “the one who misrepresents is not amongst us”,  a very strong warning to Muslims.

 

· Avoid riba - that is usury or interest. This is one the major prohibitions.

 

· Avoid gharar -  a transaction is either uncertain or contingent, consideration is not known and of course this includes deceit and fraud. And contract that has significant element of gharar is invalid in Sharia irrespective of mutual agreement between parties concerned. A great protection from scrupulous dealings. Example is  buying something where the price or specification is specified in the future.

 

· Bai-alal-Bai - breaking an existing transaction between other parties by interfering with offers of lower price or bad publicity, similar to legal concept of tortoise interference.

 

· Dealing in prohibited items e.g. alcohol, gambling.

 

· Avoid hoarding and excessive love of wealth

 

· Sale in the open market.

 

· Avoid Bai-al-Mudtar - that is taking undue advantage of the seller, transaction done under duress or false pretence.

 

· Major prohibitions are riba and gharar, effectively a cardinal sin.