ETHICS IN TRADING / BUSINESS

Bismillahir-Rahmanir-Rahim Alhamdulillahi rabbil-‘alamin was-Salatu was-Salam ‘ala Sayyidil-Mursalin wa ‘ala ‘Alihi wa Sahbihi Ajma’in. As Salamu 'alaikum wa rahmatullah wa barakatuh.

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Q1: What does business ethics mean to you? Which ethical values do we need to pay attention to as a customer when doing business? (You can also explain with an example from your life.)

Islam is more than just a religion; it is a way of life. As a result, ethics apply to all aspects of Muslim life, including administration. In Islam, ethics has two dimensions: first, ethics toward Allah, the creator; and second, ethics toward oneself. A Muslim is required to believe in and worship Allah. The second aspect is ethics toward others; a Muslim businessperson must deal with others ethically by providing good treatment and maintaining good relationships.

The concept of ethics has been extensively described in the holy Qur'an within the Islamic context. Terms like goodness, rightness, justice, truth, right, and piety have been described as Salihat or goodness, and impious actions are described as Sayyi’at or evil.

There are some guidelines for us, Muslims, within the light of the quran and hadith;

• Be truthful: Allah (s.w.t.) says in Surah Az Zumar (39:33) “And the one who has brought the truth and those who embrace it—it is they who are the righteous.”

• Be honest: Allah (s.w.t.) says in Surah Al Mutafaffin (83:1-3) “Woe to the defrauders! Those who take full measure ˹when they buy˺ from people, but give less when they measure or weigh for buyers.”

• Love Allah (s.w.t.) more than your trade: Allah (s.w.t.) says in Surah At Tawbah (9:24) “Say, ˹O Prophet,˺ “If your parents and children and siblings and spouses and extended family and the wealth you have acquired and the trade you fear will decline and the homes you cherish—˹if all these˺ are more beloved to you than Allah and His Messenger and struggling in His Way, then wait until Allah brings about His Will. Allah does not guide the rebellious people.”

• Be patient: Allah (s.w.t.) says in Surah Al Al’i Imran (3:134) “˹They are˺ those who donate in prosperity and adversity, control their anger, and pardon others. And Allah loves the good-doers.”

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Q2: Can we put everything in a written contract when trading? Does loyalty have a place in relationships and business? Can you give an example from the lives of our Prophet or companions?

Generally speaking, in trade it is needed to have contract in hand to protect rights of a person. In Islamic finance there are five types of contract in trade, and those are;

• Profit and loss sharing (Mudarabah): It is a contract between two parties in which one provides capital and the other provides labor in order to form a partnership and share profits in certain agreed-upon proportions.

• Joint venture (Musharakah): It is a financial agreement entered into by two or more parties to establish a commercial enterprise based on capital and labor. Profit and loss are shared in an agreed-upon proportion based on the amount contributed.

• Cost plus (Murabahah): It refers to the sale of a good or property for an agreed-upon profit in exchange for a deferred or lump sum payment. Murabahah has two contracts: the first is between the client and the bank, and the second is between the bank and the supplier. The client (purchaser) orders a commodity through the bank, and the bank then purchases the commodity from the supplier and sells it to the client at a specified profit, with the client having the option of making a lump sum or deferred payment to the bank.

• Leasing (Ijarah): which involves two parties: the lessee and the leaser The real owner of the asset or property is the leaser (bank), and it is rented to the lessee until full payment is received. At contract maturity, the lessee has the option of keeping the asset or returning it to the bank. If all payments are received, the lessee has the option to keep the asset, but at a higher price than the normal asset price.

• Salam: It is a contract in which full payment for a good is made in advance, but the good is delivered at a later date agreed upon.

Having said all of these, it should also be highlighted that in Islam “paper contract” is not obligatory. In the times of Prophet (p.b.u.h.), “spoken contract” was commonly used by the companions and prophet (p.b.u.h.) himself. Yet, they let at least two people hear about the contract.

In addition, it would be great to finish by Prophet’s (p.b.u.h.) one of the most beautiful advises on trading cited from Bukhari and Muslim which is “The Prophet (p) was asked which was the best kind of earning, he replied: That for which a man works with his hands. And honest trading.”