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05 Islamic Foundations Of A Business

Islamic Foundations of a 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 to and promote these principles.

Sell and Serve Only Lawful Items

A business should trade only that which is lawful by Shariah. Services that are unlawful like interest-based contracts/debts are not allowed. Similarly, any asset that is not in the ownership or possession of one should not be sold. (Please refer to basic conditions for sale and purchase).

Prohibition of interest. Islam prohibits all interest-based transactions, whether giving or receiving, and whether dealing with Muslims or non-Muslims. Prophet Mohammad says that Allah curses those who pay interest, those who receive it, those who write a contract based on it and those who witness such a contract.

Prohibition of certain earnings. Islam prohibits making earnings from gambling, lotteries, and the production, sale and distribution of alcohol.


Islam stresses the importance of honesty and warns sellers against exaggerating or lying about their products or services. It is forbidden to gain property or wealth by fraud, deceit, theft or other falsehoods. Sellers involved in fraud are committing a sin.

Chapter 83 in the Quran (The Dealers in Fraud) contains the following verses:

  1. ‘Woe to those who deal in fraud.’ 2.
  2. ‘Those who, when they have to receive by measure from men, exact full measure.’
  3. ‘But when they have to give by measure or weight to men, give less than due.’

Other clear Islamic teachings in this regard include:

1. ‘God permits selling but forbids usurious gain’ (Quran 2:275).

2. ‘O my people! Give full measure and full weight in justice, and wrong not people in respect of their goods’ (Quran 11:85).

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]

Good Treatment Of Staff

A fundamental rule of Islamic business is 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, fulfill 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]

No Deception or Fraud

Valuing the counterparty and upholding their integrity is a key principle of Islamic business. Deception and fraudulent behavior are completely prohibited. This principle ensures that we not only be honorable 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:

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]


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 minimize 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)

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