Introduction
Trading in Islam – Today, we will discuss an essential topic that every Muslim in business should know about and follow to trade honestly and peacefully. As followers of the teachings of Prophet Muhammad (ﷺ), it is crucial for Muslims to understand the rules and regulations that must be followed to trade ethically, as outlined by the Prophet Muhammad (ﷺ). These rules and regulations of trading in Islam will be explained below.
Honesty is one of the key principles in Islamic trade, and the trade must be halal (permissible) and not haram (forbidden). Below, we will provide all the necessary details about this topic with relevant quotes from the Hadith and the Quran.
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Basic Teachings of Islam Regarding Trade
In Islam, honesty is highly valued in trade because Islam guides a person in all aspects of life. Islam prohibits economic exploitation, dishonesty, unfair trade practices, injustice, and political deception. A true Islamic society is based on a strict intolerance towards dishonesty in trade, fraternity, and justice. That is why honesty in business is so privileged in Islam through the teachings of our beloved Prophet Muhammad (ﷺ).
Pre-Islamic societies, such as Hindus, Jews, and Christians, were not as focused on honest trade because they were often mercenaries or greedy for money. The Prophet Muhammad (ﷺ) urged his companions and followers to practice true and honest trade so that no one is cheated.
What Ruins Fortune According to Islam
Islam teaches that wealth or food earned through unlawful means will spoil an individual’s physical and spiritual health, much like how rotten food destroys health. Islam instructs its followers to earn wealth and food through lawful means. These lawful means are mentioned in the Quran, revealed to Prophet Muhammad (ﷺ), and in the Hadith collected by his companions. Read on to learn these laws before you start trading or to get back on track if you are already trading.
Islam strictly condemns commercial dishonesty. If a Muslim decides to pursue trade or set up a business, they must first gain knowledge and understand Islamic Shari’ah laws to earn a lawful fortune and avoid unlawful means.
Basic Laws to Know Before Trading:
The Holy Qur’an emphasizes the importance of honesty in business. One verse states: “And, O my people, give full measure and weight justly, and defraud not men of their things, and act not corruptly in the land making mischief. What remains with Allah is better for you if you are believers” (Surah Hud, Surah: 11, Verse: 86). These words from the Qur’an teach fundamental laws and business principles, which are:
- Give just measure and weight.
- Do not withhold from people what is rightfully theirs.
- Do not commit evil on earth with the intent of making mischief.
- Be content with the profit that is left with you by God after paying others their due.
These verses from the Qur’an suggest that a business can only thrive if conditions of peace and security are followed. It warns against disturbing harmony between lands to ensure business flourishes worldwide. The Qur’an closes the door to all dishonest and unjust transactions, highlighting that honesty is a master virtue.
Some Basic Conditions to Follow:
Here, we will mention some basic laws of trading in Islam as taught by Prophet Muhammad (ﷺ) and outlined in the Holy Qur’an.
The Cost Offered for Selling a Good Must Be Priced Lawfully:
The price set by the seller and offered by the buyer must be fair and lawful, so neither party is deceived or suffers loss. No seller should sell, and no buyer should buy goods acquired through unlawful methods, theft, or fraud. Muslims should not purchase anything with money earned through unlawful means, bribery, or illegal possession. This rule ensures a lawful transaction and possession of goods.
One Must Not Sell Until It Is in Their Possession:
In Islamic trade, honesty and transparency are crucial. A seller cannot sell something they do not possess, nor profit from something they have not provided. This principle ensures that any trade involves the transfer of actual ownership and possession of goods or services, and profits earned are based on this exchange.
It was narrated from ‘Amr bin Shu’aib, from his father, that his grandfather said:
“The Messenger of Allah (ﷺ) said: ‘It is not permissible to sell something that is not with you, nor to profit from what you do not possess.”’ (Sunan Ibn Majah 2188, Book 12, Hadith 52)
Goods Must Be Bought and Sold in the Open Market:
Goods should be sold in an open market to prevent deception. Sellers and agents must be aware of the market conditions before any buyer proposals. This ensures that buyers get goods at the most reasonable price according to Shari’ah law. Buyers should not meet merchants on the way to trade, as this could lead to unfair transactions. Instead, they should wait until the merchant is in the market.
Abu Huraira (Allah be pleased with him) reported Allah’s Messenger (ﷺ) as saying:
Do not meet the merchant in the way and enter into a business transaction with him, and whoever meets him and buys from him (and in case it is done, see) that when the owner of (merchandise) comes into the market (and finds that he has been paid less price) he has the option (to declare the transaction null and void). (Sahih Muslim 1519b, Book 21, Hadith 23)
Do Not Trade Goods Prohibited in Islam:
Muslim merchants must know what is allowed and not allowed in Islam to avoid selling prohibited products. Only goods that are halal (lawful) should be sold. For example, selling clothing to Muslim females that are revealing, dealing with haram meat such as pork, and trading alcohol are prohibited.
Prohibited Forms of Trading and Business
Now, we will discuss the forms of business prohibited in Islam and declared unlawful or haram by Prophet Muhammad (ﷺ).
Mulamasa and Munabadha:
Mulamasa refers to touching or handling goods being sold without the seller’s permission. This practice is unethical because it can damage goods and create an unfair advantage for the buyer. Mulamasa violates honesty and transparency principles in Islamic trade.
Munabadha refers to offering a price for goods without any intention of buying them. This practice is unethical because it creates confusion in the market and disrupts pricing. Munabadha violates the principles of fair exchange and honesty.
Abu Huraira (Allah be pleased with him) reported:
Two types of transactions have been forbidden (by the Holy Prophet), al-Mulamasa and al-Munabadha. As far as Mulamasa transaction is concerned, it is that every one of them (the parties entering into the transaction) should touch the garment of the other without careful consideration, and al-Munabadha is that every one of them should throw his cloth to the other and one of them should not see the cloth of his friend. (Sahih Muslim 1511e, Book 21, Hadith 5)
Monopoly of Business:
Monopoly means that access to a good is controlled by one entity. This leads to exploitation and is prohibited in Islam. No large trusts, monopolies, or cartels should be entertained in an Islamic society because they destroy peace and harmony.
It was narrated from Ma’mar bin’ Abdullah bin Nadlah that the Messenger of Allah (ﷺ) said:
“No one hoards but a sinner.”’ (Sunan Ibn Majah 2154, Book 12, Hadith 18)
Speculative Business for Personal Benefits:
Speculation means buying a good cheaply in bulk and selling it at a high price. This practice benefits only the speculator and not society. Speculators create artificial scarcity and then sell their goods at high prices. Islam condemns this form of trading.
Salim b. ‘Abdullah (Allah be pleased with them) reported his father having said:
I saw people being beaten during the lifetime of Allah’s Messenger (ﷺ) if they bought food grain in bulk and sold it at the same spot before taking it to their places. (Sahih Muslim 1527d, Book 21, Hadith 46)
Taking Interest in Transactions:
Interest-based transactions are haram and forbidden in Islam. There is a difference between interest and profit. Profit involves a risk of loss, but interest is fixed and involves no risk. Profit comes from hardship and labor, while interest comes from keeping money in the bank without effort. Islam allows lawful and halal methods to earn money through trade.
Abu Huraira (Allah be pleased with him) is reported to have said to Marwan:
Have you made lawful the transactions involving interest? Thereupon Marwan said: I have not done that. (Sahih Muslim 1528b, Book 21, Hadith 48)
Trading Alcohol:
The trade of alcohol is strictly forbidden in Islam. Both the consumption and production of alcohol are major sins. Prophet Muhammad (ﷺ) also prohibited any trade related to alcohol. Thus, Muslims cannot engage in any alcohol-related trade, and any profits from such trade are considered ill-gotten gains.
They ask you ˹O Prophet˺ about intoxicants and gambling. Say, “There is great evil in both, as well as some benefit for people—but the evil outweighs the benefit.” (Al-Baqara, Surah: 2, Verse: 219)
Narrated `Aisha:
When the last verses of Surat-al-Baqara were revealed, the Prophet (ﷺ) went out (of his house to the Mosque) and said, “The trade of alcohol has become illegal.” (Sahih al-Bukhari 2226, Book 34, Hadith 173)
Transactions Involving Gambling:
Gambling, equivalent to Maisir, means “getting something too easily” or “getting a profit without working for it.” This describes why gambling is haram for Muslims. Profit without effort is unlawful and unjust. In Prophet Muhammad’s (ﷺ) time, Arabs used to cast arrows from a bag to decide their fortune, which is now haram for Muslims.
O believers! Intoxicants, gambling, idols, and drawing lots for decisions are all evils of Satan’s handiwork. So shun them so you may be successful. (Al-Ma'idah, Surah:5, Verse: 90)
Conclusion
Islam is the only religion that strictly instructs its followers to avoid dishonesty in trade. There are many rules and regulations for those who wish to pursue trading or business. There are also specific rules for female traders. For more information, you can visit the link provided above or consult Islamic scholars. It is essential for every trader who believes in Allah and His Prophet Muhammad (ﷺ) to follow these rules to ensure their trade is halal and not haram.
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Frequently Asked Questions
Here are some of the most frequently asked questions related to trading in Islam:
If the invested amount is equal, then is it necessary to share an equal amount of profit?
No, it is not necessary to share the profit equally unless all partners are working equally in the business. For example, if two friends or relatives enter into a business and both have invested the same amount of money, but one is handling the business alone, the one managing the business can enjoy 75% of the profit, and the one who only invested money can have 25%. It depends on how well the partners participate in the business.
Is it allowed to take wages or salaries in advance?
It is allowed if both parties agree on giving the wage or salary in advance without holding anything back. If the terms were made that the wage should be given in advance, then you can take the salary in advance.
Is it allowed to buy meat from a non-Muslim shop owner?
No, you cannot buy meat from a non-Muslim shop owner as they do not perform the necessary rituals to butcher an animal for consumption. Thus, you would be consuming haram meat, which is prohibited in Islam.
What is the Islamic view on trade?
A Muslim can only engage in trades that are considered lawful and halal. One must avoid trades prohibited by Islamic laws and not declared halal for Muslims to perform.
What are the things considered haram in Islam to trade?
Before starting a business, you must consider several things, such as dealing in haram meat (like pigs, carcasses, and all types of impurities) and trading with interest-based businesses (like gambling).