Islamic Business Ethics

Just as Islam regulate and influences all aspects of life, also governs the
conduct of usiness and commerce.
Muslims should conduct their business acc. to Islam which requires them
to be fair, honest and just.
Rahman (1994) notes there are loads of Islamic concept and values which
define the extent and nature of business activity.
Iqtisad MODERATON
Adl JUSTICE
Ihsan KINDNESS PAR EXCELLENCE
Amanah HONESTY
Infaq SPENDING TO MEET SOCIAL OBLIGATIONS
Sabr PATIENCE
Istislah PUBLIC INTEREST
Negative values to be avoided:
Zulm TYRANNY
Bukhl MISERLINESS
Hirs GREED
Iktinaz HOARDING OF WEALTH
Israf EXTRAVAGANCE
Economic activity within the parameters of haram and halal.

TRADE AND COMMERCE

Many verses encourage trade and commerce.

Legit trade and business to earn halal living and support family, give
charity is encouraged
Business activities should not dominate so that profit becomes the first
priority.
Trading to cease during Friday prayers.
Permanent contribution to benefit community, source of income for poor
leave behind a family who continue the word and law of God.

PRODUCTION

Islam rquires everyone to work and produce. Taught in sunnah never to be

lazy.
Unproductive hand is an impure hand.
Econ achievement is thru hard work and assumption of risk not
inheritance.
Is the reason why Islamic law defines exactly how a walth is distributed
after death with shares not just for next of kin like wives and children, but
also for the fathers and mothers and if necessary, for the society as well.

DISTRIBUTION
Islam preaches moderato and a balanced pattern of consumption.
Luxury and over-indulgence is condemned, as is poverty.
Every being has the minimum requirement to live in dignity.
This is why zakat is an essential part of the faith.
If zakat not enough, govt would apply a temporary tax on the rich and
affluent to balance the budget as a religious duty (fard kefaya).

SOCIAL RESPONSIBILITIES

Individuals expected to be socially responsible for others and community.

One cannot enjoy life while the other is in pain.
Earn your living without exploitation of others.
Islam also emphasises on welfare of community over individuals.
Zakat must still be collected under a non muslin govt and spent for good
of society.

BUSINESS PRINCIPLES

Paramount rule is honesty and fair dealing.

Muslim business person of high moral and ethical values
Free market - monopoly and price fixing prohibited.
Those engaging in trade and commerce should behave equitably.
Dealing in stolen goods prohibited.
Hoarding to sell when prices are high is prohibited.
Products produced should be useful and not harmful and not prohibited
like gambling, pork, porno etc.
Dignity of labour and prompt payment of fair wage is encouraged

PROPERTY RIGHTS

God is absolute, eternal owner of everything and man is His vice-regent on

earth.
Man trusted with stewardship of Gods possessions- ownership is therefore
a trust (amanah) to be enjoyed conditionally as long as following shariah
and sunnah
People have right to use natural resources for the benefit of mankind but
should be looked after as its a trust from God.

CONTRACT LAW

General principle of Islamic contract law is contained in verse OH YOU

WHO BELIEVE, FULFILL ALL OBLIGATIONS (S5.1).
The definition of contract AL-AQD is similar to that in common law but is
wider in that it includes dispositions which are gratuitous as well as
endowments.
Islamic law provides freedom of contract as long as it does not conflict
with shariah.
(IQBAL AND MIRAKHOR 1992) Islamic law permits all contracts as long as
the shares and agreed upon an uncertain gain. Shariah condemn any
guarantee as this removes the element of uncertainty.
Basic principles of law are laid down by 4 root transactions:
Sale (BAY), transfer of ownership or corpus of property for
consideration
Hire (IJARA), transfer of usufruct (right to use) of property for a
consideration
Gift (HIBA), gratuitous transfer of the corpus of property
Loan (ARIYAH), gratuitous transfer of the usufruct of property.
These basic principles are applied to various transactions like for pledge,
deposit, guarantee, land tenancy etc.

BUSINESS ORGANIZATIONS

P/ships play an important role in Islamic accounting and the law is very
complex (NYAZEE 1999).
Shirkah al inan LIITED P/SHIP
MUSHARAKA
MUDARAA or QIRAD

ISLAMIC FINANCING PRINCIPLES

1.
2.
3.
4.
5.

5 religious features must be followed which give Islamic banking its

distinctive religious identity
RIBA
ZAKAT
HARAM
GHAYAR/MAYSIR
TAKAFUL