5 Islamic Principles for Business

5 Islamic Principles for Business

Islam has given guidance for every part of life.  Every guidance has some underlying benefit and moral value. Business is no exception. Islam gives us an entire framework to conduct business in a just, fair and ethical manner. These teachings are not solely for Muslims, everyone who believes in fair trading and moral values is encouraged to adhere and promote these principles.

1. Sell lawful items

A business should trade only that which is lawful. Items such as alcohol, tobacco, pork, pornographic material and services, interest-based debts should not be traded. The data exhibiting the harms of each to oneself, the society, the economy and taxpayers’ is easily accessible.

NHS estimates that the treatment from alcohol abuse costs £3.5bn a year. The harms of continuous alcohol consumption to the body is known to all. Smoking causes cancer, heart disease, stroke, lung diseases and many other severe illnesses. These are just two case studies, but whatever unlawful items in Islam are known to cause harm to individuals and the society physiologically, economically, psychologically, morally and spiritually. 

2. Honesty

Islam has strong guidance on being honest and upholding integrity in all walks of life. However, there is an extra emphasis of upholding honesty and integrity in business as the stakes are higher.

Due to the information asymmetry between the vendor and buyer, trust plays a big role.

Many of the corporate scandals in the past several years — think Volkswagen or Wells Fargo — have been cases of wide-scale dishonesty. Accenture’s Competitive Agility Index — a 7,000-company, 20-industry analysis, for the first time tangibly quantified how a decline in stakeholder trust impacts a company’s financial performance. The analysis reveals more than half (54%) of companies on the index experienced a material drop in trust — from incidents such as product recalls, fraud, data breaches and c-suite missteps — which equates to a minimum of $180 billion in missed revenues. Worse, following a drop in trust, a company’s index score drops 2 points on average, negatively impacting revenue growth by 6% and EBITDA by 10% on average [Harvard Business Review].

The Prophet, peace and blessings be upon him, said, “The honest and trustworthy merchant will be with the prophets, the truthful, and the martyrs.” [Source: Sunan al-Tirmidhi]

3. Good treatment of staff

A fundamental rule of Islamic business is the good treatment and timely payments to employees. The Prophet (peace be upon him said) said: “Give the worker his wage before his sweat dries.” [Ibn Majah] In another statement, the Prophet said: “Whoever employs someone to work for him, he must specify for him his wage in advance.” [Musannaf ‘Abdur-Razzaq]

Almighty God states: “O you who have believed, fulfil your contractual obligations.” [Quran 5:1] This verse highlights the importance of both parties abiding by their side of the bargain.

On one occasion, the Prophet reports that God said: “I will be the opponent to three types of people on the Day of Judgment:…and one who hires staff, takes full work from them and does not pay them their wages.” [Sahih al-Bukhari]

Beyond just timely payments, staff should be served well. Studies have shown that if employees are treated well, it results in:

o    Increased productivity and employee loyalty, which ultimately leads to more production, growth and profits.

o    Stronger customer relationships

o    Less sick days and hence, less opportunity costs

o    Higher employee retention and a low staff turnover rate

o    A greater pool of talent to select for your workforce

4. No deception or fraud

Valuing the counterparty and upholding their integrity is a key principle of Islamic business. Deception and fraudulent behaviour are completely prohibited. This principle ensures that we not only be honourable in our transactions, but we value and respect the people we trade with too.

God says: “O you who have believed, do not consume one another’s wealth unjustly but only [in lawful] business by mutual consent.” [Quran 4:29]

The Prophetic narration states:

“Whoever cheats us, is not one of us.” [Sahih Muslim]

According to another report, the Prophet (peace be upon him) passed by a pile of food in the market. He put his hand inside it and felt dampness, although the surface was dry. He said:

“O owner of the food, what is this?’

The man said, ‘It was damaged by rain, O Messenger of God.’

He said, ‘Why did you not put the rain-damaged food on top so that people could see it!  Whoever cheats us is not one of us.” [Sahih Muslim] 

5. Charity

The Prophet advised traders and businesses to give charity. He said: “O Businessmen, transactions carry lies and false oaths, so add charitable giving to your businesses [to mitigate wrongdoing].” [al-Nasa’i]

Charity in this sense does not only mean monetary payments to the needy and poor, but charity is also committing to climate change, trying to minimise waste and adopting a zero-waste economic model. Charity also encompasses caring for the ocean and the blue economy, being concerned for the green economy and ultimately, operating a business model which works towards the Sustainable Development Goals (SDGs).

Mufti Faraz Adam
Mufti Faraz Adam is a well known UK-based Islamic finance & fintech consultant and heads the global Shariah advisory firm Amanah Advisors. He is the advisor to a number of well-known global Islamic financial institutions and serves across the Islamic economy in Islamic banking, SME financing, Zakat, Waqf and estate planning. He is on a number of global Shariah boards in countries such as Switzerland, Bahrain, Canada, Singapore, Dubai, Saudi Arabia, Canada and the United States. He has published over a dozen research papers in contemporary Islamic Finance matters and has published many chapters in Islamic fintech. He holds a Masters Degree in Islamic Finance, Banking and Management from Newman University and has attained various finance-industry qualifications. Mufti Faraz completed a six-year Alimiyyah program in the UK after which he went on to complete the Iftaa course in South Africa. He holds a Master’s Degree in Islamic Finance, Banking and Management at Newman University, UK in 2017. He has attained various finance-industry qualifications such as the IFQ, CIFE and is a Certified Shariah Advisor and Auditor (CSAA). He has completed an MBA diploma and has completed a Fintech specialisation from the University of Michigan. He is currently an ACCA candidate and studying to become a qualified Independent Financial Advisor with the CISI.