Islamic law regarding business

Islam has permitted and in fact encouraged business. The Quran states,

"Allah has made business lawful for you." (2:175)

The early Muslims were not only engaged in trade but they went to distant lands in connection with business. Islam in fact reached East and West Africa, East Asia through the business people.

Islam has given detail laws of business. Islam has not permitted selling and purchasing of goods, which are prohibited in Islamic law. The Prophet of Islam has said, "When Allah prohibits a thing He prohibits (giving and receiving) the price of it as well." (reported in the books of tradition of Ahmad and Abu Daud)

Islam has also prohibited any kind of transaction involving uncertainty (Garar) as this could lead to quarrel or litigation. The Prophet of Islam has forbidden transaction involving unspecified quantity, acceptance of money for fish in the river or bird in the air as there is element of uncertainty. Similarly the Prophet of Islam has prohibited sale of fruit till they are ripened. (Chapter on Transactions involving uncertainty i.e. Garar in the book of tradition of Muslims).

However, if the element of uncertainty is very small, the transactions are permissible. For example, it is permissible to sell root vegetables while they are still on the ground.

Freedom of trade and operation of market forces are allowed in Islam subject to the limits set by Shari'ah. Islam, however, condemns hoarding to make high profit by withholding the commodity from the market so that it becomes scarce. The Prophet of Islam has said, "If any one withholds goods until the price rises he is a sinner" (Tradition of Muslim)

"The withholding of grain for 40 days out of a desire of high price is prohibited in Islam" (Tradition of Ahmad, Hakim etc)

Islam, however, allows normal trade-buying and selling of goods again and again at a reasonable profit.

Islamic law has prescribed measures to prevent manipulation of market, exploitation of seller or buyer and fraud. The Prophet of Islam prohibited people from going out of town to buy merchandise, which was on its way to city market. The reason for this prohibition is that the market place, where the forces of demand and supply determine prices, is the best place for trading transactions. In the situation of buying on way to market, the seller may not know the real market price and he may be deprived of legitimate price.

Islam prohibits fraud in business dealings. The Prophet (Sm) has said, "It is not permissible to sell an article without making everything clear nor is it permissible for anyone who knows (about its defects) to refrain from mentioning them." (Baihaqi)

The Prophet of Islam has also said, "Sell the good and bad separately. He who deceives us is not of us." (Muslim, Ahmad)

The sin of fraud is greater if the seller supports it by swearing falsely. The Prophet has said, "Swearing produces ready sale but blots out blessing." (Bukhari)

In the same manner deceiving others by withholding full measure is also prohibited. The Quran has emphasized the giving of full measure. It says,

"And give full measure and (full) weight in justice" (6: 152)

Islam has prohibited business transactions on interest. The Quran is explicit about it and says,

"Allah has permitted for you trade and prohibited interest." (2: 275)

In the Muslim world, in the last decade a chain of Islamic Banks has come up to avoid interest in trade.

Islam has permitted and encouraged business subject to the aforesaid principles and restrictions. If these principles are followed, the economy will be greatly purified form injurious practices.