Ethics and Business Dealings in Islam

Business dealings in Islam are not simply a matter of getting ahead in this world. They are not cutthroat competition or taking advantage of others. Instead, they are based on a very strong ethical basis. A Muslim realizes that every business transaction is a question of morals and ethics.

Business transactions are an essential aspect of any developed society. The Prophet (peace be upon him) gave a great deal of guidance concerning business transactions. Muslims must heed this guidance. This guidance will, Allah willing, go a great way in removing many problems and feelings of hatred that are the result of unjust or improper business practices. Furthermore, the feeling of brotherhood loving for one’s brother what one loves for oneself should permeate all business transactions. How can brothers be considered true brothers to one another when they are willing to cheat each other or lie to each other simply for the sake of the dollar?

Thus, the Prophet (peace and blessings of Allah be upon him) stated in a hadith that stresses both brotherhood and fair business practices: “Do not be envious of one another; do not artificially raise prices against one another; do not hate one another; do not turn one’s back on each other; and do not undercut one another in business transactions. And be, [O] servants of Allah, brethren. A Muslim is the brother of a Muslim. He does not wrong him. He does not fail him [when he needs him]. He does not lie to him. And he does not show contempt for him. Piety is here” and he pointed to his chest three times. “It is enough of evil for a person to hold his brother Muslim in contempt. All of a Muslim is inviolable to another Muslim: his blood, his wealth and his honor.”323

The Prophet (peace be upon him) also said, “May Allah have mercy on the one who is easy-going and generous while buying, while selling and when demanding his rights.”324

In fact, the key to blessed business transactions, in which both parties please Allah and receive blessings, is honesty and straightforwardness. The Prophet (peace be upon him) said, “The buyer and seller have the right of option as long as they do not part from one another. If they were honest and clear, they would be blessed in their transaction. If they concealed facts and lied, the blessings of their transaction would be destroyed.”325

If a person is ethical and morally conscious in his business dealings, this is a good sign that he is preferring the Hereafter to this world. He is not willing to risk Allah’s punishment and anger for a measly gain. He is also strengthening the trust among the Muslim brethren. Allah willing, his reward with Allah will be great.

A general principle with respect to business transactions is that they must be the result of the mutual consent or approval of the contracting parties: Allah says, “O you who believe! Eat not up your property among yourselves unjustly except it be a trade amongst you, by mutual consent” (4:29). During the Farewell Pilgrimage, the Prophet (peace and blessings of Allah be upon him) also announced, “The wealth of a person is not permissible except through willing consent.”326 In other words, no one can be coerced into giving up part of his wealth or entering into a business dealing. Such coercion is illegal and would void the contract. At the same time, the Muslim is free to enter into any business transaction that does not violate Islamic law. In general, he is a “free actor,” neither compelled by the state nor any other force. In this sense, the Islamic economic system has some characteristics in common with free market capitalism.

Another general principle with respect to business transactions is that they are permissible unless there is evidence to demonstrate that they are forbidden; only if it is found that it contains some forbidden aspect will it be deemed forbidden. Thus, Islamic Law has laid down some principle guidelines while delineating particular forbidden aspects that must be avoided. The matters that should be avoided include unstated or undetermined terms, speculative or overly risky conditions, interest, gambling and fraud or deception. If any one of these factors is found in a contract, the contract, depending on the extent to which they are present, may be rendered null, void and impermissible. It is essential that Muslims be aware of these forbidden characteristics so 2009 that they may live off of pure and permissible sources. Thus, some of them are discussed in some detail below.

323 Recorded by Muslim.
324 Recorded by al-Bukhari.
325 Recorded by al-Bukhari and Muslim.
326 Recorded by al-Bukhari and Muslim.