Decency, Morality and Fairness in Islamic Commercial Transactions


Business ethics is a field of study that analyzes all the moral and ethical principles that govern the conduct of all the involved parties in commercial relations. This implies that business ethics is normative and it requires the formulation and application of certain standards which establish ways of deciding between right and wrong. This essay seeks to analyze the concept of business ethics in the Islamic religion as an indication of how decency, morality and fairness have been reflected in Islamic commercial transactions. An evaluation of what is allowed and what is disallowed in the religion will be conducted as a way of explaining why business transactions involving Muslims have to be conducted with certain levels of specificity. To this end, the research will be focus on writings by various scholars on the fundamentals of Islam as pertains to business transactions. Most of the research will be guided by studies of different forms of literature. However, most of the consultations will be from the Qur’an and the Teachings of the Prophets. Each and every one of the items identified shall be presented with its justification.

A mixed method of both qualitative and quantitative research shall be used to for this task. The research will be based on secondary data collection. According to Creswell (2003), the mixed method is most ideal for research as it provides for exhaustive collection and analysis of information. The criteria of selection for the literature will be the relevance to the research topic as well as the year of publication. Both public and private libraries as well as online libraries will be visited to access the data. This research will be partly evidence based and partly founded on professional research by professionals in the field. Various articles will be studied to provide background information which will essentially give credibility to the final essay.

Ethics in Islam

Islam is one of the religions that greatly emphasize ethical values in all elements of living. Moral codes and ethical codes are entrenched in all elements of a practitioner’s life, and these are substantiated by scriptural presence in verses of the Islamic Holy Book, the Qur’an. From Islamic teachings, individuals are encouraged to be conscious of how they carry themselves both in private and public as this will determine the nature of their relationship with fellow human beings. Rules are governing personal life, other social dealings. When it comes to business relations Islam has a categorical value-based system that dictates how individuals on either side of the transaction will behave for fairness to be attained as well as for the relation to be genuinely ethical. The tenets of Islam as a religion outline specific principles that have to be maintained in regards to business transactions. These elements have been explained below.

Freedom of Enterprise

Muslims are allowed to choose make their own decisions when it comes to economic enterprise. Every practitioner of the faith is subject to the freedom of earning a livelihood and this, as spelt by the requirements of the religion can be attained through entrepreneurship or employment. However, each and every undertaking that an individual involves him/herself in must reflect a sense of responsibility. Persons are allowed to take up any career or business as long as works in tandem with the code of conduct outlined by the specific profession that the Individual chooses. This implies that the individual chooses to do things that are allowed by law and stays away from those things that are considered illegal as per provisions of the law. The Qur’an and the teachings of the Prophet are used to establish the parameters that distinguish what is allowed and what is illegal whenever it comes to distinguishing means of earning livelihoods. These stipulations also ban everything that is by average social standards considered illegal or unacceptable. The religion disapproves everything that harms both traders and consumers in a market. This makes the element of a free market prevalent such that individuals can earn decent livelihoods without the government’s involvement. The tenets of the religion also set the boundaries needed to ensure that incidents of injustice and malpractice are well punished. To a great extent, Islam tries to avoid any ties with states and regulations established by politically/religiously established governments. Individuals are left to take guidance from the Qur’an in matters related to business and it is only when they fail to abide by its teachings that Islamic states take measures to structure the market transactions based on Islamic principles. In this regard, freedom of enterprise in Islamic markets is modulated by teachings found in the Holy Qur’an as well as by the precincts of the temporal authority. In the early days of the Islamic religion, the aspect of market control was fundamentally carried out by the institution of the Muhasbah (Ayub 2009). The setup of the Muhasbah bore various functions with the topmost role is maintaining an eye on negative deeds that prevailed the market and society, as well as assessing the incidence of unfairness and other malpractices in the market.

Tenets relating to commercial transactions

Islam as a religion has established a framework that modulates the conduct of both producers and consumers of economic products. A typical Islamic market has rules and regulations that address the securities of both the purchaser and the seller. In addition, there are various forms of ethical discipline in commercial transactions involving practitioners of Islam, without which any business undertakings will be viewed as imperfect in the light of ethical excellence. The section below describes some of these tenets:

Earning Legitimately

Islam emphasizes the code of legal and illegal in business relationships. Some of the verses in the Qur’an that indicate the religions rejection of the unlawful acquisition of property include:

“Do not devour one another’s property wrongfully, nor throw it before the judges to devour a portion of other’s property sinfully and knowingly”, (Qur’an 2:188). Another verse that supports the same is, “Do not devour another’s property wrongfully – unless it is by trade based on mutual consent”, (Qur’an 4:29). The two verses above indicate Islam’s ban against the illegal acquisition of property. This code was emphasized by Prophet Mohamed who when queried about the best way to attain prosperity answered, “a man’s work with his hands, and every legitimate sale” (Ahmad No: 1576). The Prophet’s teachings also advice individuals to steer clear of paths that may appear uncertain (Tirmidhi No: 2442). One of the business practices that are extremely condemned in Islam is the charging of interest for lent money. Teachings from the Qur’an see interest as a form of exploitation and oppression, and strictly forbid it.

Mutual Consent

In Islam, for a business transaction to be considered valid, all of the involved parties must consent to the deal. As such, any transaction that is sealed as a result of coercion is considered unlawful. The practise of taking advantage of another person’s despair and overcharging them is regarded as exploitation and is strictly forbidden. This is an ethical aspect as it guides what individuals can and cannot do.


Islam teaches its faithful to always be truthful in any business transaction that they are involved in. Any trader that truthfully conducts himself is highly regarded and is held in the same esteem as martyrs. From teachings in the Qur’an it is said that Allah only approves business transactions where both the buyer and seller maintain truthfulness to each other (El-Gamal 2006). Wholesome lies and omission of certain truths to gain business advantage results in automatic loss of divine blessing.


Trustworthiness is among the fundamental principles of ethical conduct in business transactions involving individuals of the Islamic faith (Morris and Salam 2008, 87). Trust is considered as a prima moral virtue and is expected of all Muslims in all their endeavors. Individuals are expected to be sincere in the dispensation of their duties and at the same time maintain clean intentions. Persons are encouraged to avoid fraud and deception as means of acquiring wealth. The seller of a product is expected to reveal both the strengths and weaknesses of a product to the buyer, so that the latter can make informed consent when purchasing the item.

Generosity and mercy

According to the Islamic faith individuals are expected to be lenient and generous in commercial relationships. Persons claiming debts are expected to do so in ways that will not embarrass the debtor. In this regard, the debtor is supposed to be polite and generous when asking for his money. The debtor on his part is required to pay back all debts on time, as well as show appreciation to the creditor for allowing him time to repay the debt.

Fulfilment of business obligations

Islam gives a lot of prominence to fulfilling of promises and contractual agreements. Muslims are expected to maintain their business transactions truth, honesty and integrity. The Qur’an teaches that all persons have a moral responsibility to fulfill all their undertakings. One of the verse that clearly emphasizes this message states, “If he makes a promise, he breaks it, and if he makes a compact, he acts treacherously,” (Bukhari, No: 32). For the interests of both parties in a business transaction to be well safeguarded, all the pertinent details of a deal need to be well spelt out including the quantity and quality of deliverables, as well as the timeframes of contractual fulfillment. Therefore, the buyer must have the commodity for sale with him and an exchange should occur with the buyer without any disputes.

Prohibited business

Aside from stipulating the basic ethical practices governing fair trade, there are a number of items that are outlawed in both the Qur’an and prophetic teachings. These are briefly explained below:

Sale and purchase of prohibited items

There are certain things such as carrion, pig meat and any other animal or bird that either died of natural causes or was not properly slaughtered are listed as prohibited items and individuals are banned from trading in them (Visser and Visser 2009). Stolen items are also considered as illegal and persons who sell or purchase them are seen to act in unethical behaviour.

Sale of items bearing high risk potential

In Islam, individuals are only expected to sell only commodities that are present at hand. In the same way, traders are forbidden from selling items whose consequence is not clear or those whose purchase is considered risky (Hassan and Lewis 2007). For instance, the sale of fruits before they fully mature or ripen, or fish that have not yet been caught is disallowed.

Fixing of prices

In Islam, traders are allowed to make profits to certain justifiable amounts. It therefore goes that taking advantage of monopoly in the market, or the shortage of certain commodities to increase one’s profits is considered illegal. Public authorities are allowed to intervene in markets that have been infiltrated with traders involved in unfair practices. This is an ethical aspect of the religion as individuals who decide to contravene its speculation are seen as law breakers and therefore subjects to punishment.

Hoarding of food items

The storage of foodstuffs while waiting to sell it when prices rise so that one gets the maximum level of profit is disallowed in Islam and anyone involved in such practices is seen to be involved in unjust financial conduct, hence contravening the code of ethics (Hassan and Lewis 2007).


Each and every society has a number of ethical and moral standards determining how individuals relate with each other when conducting business transactions. However, Islamic societies are more humane and less utilitarian than those of most secular states. The rules guiding commercial transactions for Muslims have remained unchanged since the prehistoric times and they are bound to be in operational for all time. This paper has analyzed the rules governing business transactions in Islam. To this end, various items that have been recommended by the religion and those that have been illegalized in Islam have been given a critical mention. It has been found out that all business practices that are considered illegal by conventions of general law are also disallowed by the tenets of Islam. This includes things such as the sale and purchase of stolen items. The research has also found out that a number of basic moral elements when it comes to trade are emphasized in Islamic teachings. For instance, the fulfilment of pledges and business obligations, trustworthiness, generosity and mercy are some of the practices that have been encouraged in the religion. Islam, being a religion that guides every lifestyle element of its practitioners also has some items that are considered outlawed and therefore are considered unfair game when it comes to commercial transactions. Items such as pork and carrion (dead meat), whose consumption is not allowed in Islam cannot be traded in. Finally, personal choice when it comes to business involvement has also been encouraged in the teachings of Islam. In this regard, individuals are given the freedom to decide what business practice they can involve themselves in provided it does not contravene the other tenets of Islam. From the discussion, it is only appropriate to conclude that if followers of Islam follow all teachings that pertain to business to the letter, society will be more just and fair. Consequently, cases of oppression on the part of the buyer will be reduced.

Reference List

Ahmad, Teachings of the prophets, n.d, in Hadith Encyclopaedia Version 2.1, College of Islamic Banking, World Al-Lootah University, Dubai.

Ayub, M 2009, Understanding Islamic Finance, John Wiley and Sons, United States.

El-Gamal, MA 2006, Islamic finance: law, economics, and practice, Cambridge University Press, Oxford.

Creswell, JW 2003, Research design: Qualitative, quantitative, and mixed method Approaches, Sage Publications, Thousand Oaks, CA.

Hassan, K & Lewis, MK 2007, Islamic finance, Edward Elgar Publishing, Massachusetts.

Morris, VB & Salam, M 2008, A Muslim’s guide to investing & personal finance, Lightbulb Press, Inc, New York. Qur’an 2:188; 4:29.

Tirmidhi, Teachings of the prophets, n.d, in Azmi, Sabahuddin(Ed) Hadith Encyclopaedia Version 2.1, College of Islamic Banking, World Al-Lootah University, Dubai.

Visser, H & Visser, H 2009. Islamic finance: principles and practice, Edward Elgar Publishing, Massachusetts.

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