Business Ethics from an Islamic Perspective

Posted on January 19, 2012


Dr. Jamal Badawi, Fiqh Council of North America


There are nearly 1.3 Billion Muslims worldwide; about one fifth of the total world population. As is the case with any universal religion, a great cultural diversity does exist among them. Similarly, the extent of religious commitment and practice varies considerably between individuals and cultures. This poses a major challenge in attempting to deal with business ethics from a religious perspective. While cultural-specific or country-specific studies are needed, a “linking pin” connecting them may be helpful. That “pin” is normative Islam based on its universally accepted sources and teachings. An implicit assumption here is that such teachings are likely to influence the mindset and actions of their adherents in some degree or the other. As most readers may not be fully familiar with Islam, a brief introduction about it may be helpful.

The term “Islam” is derived from the Arabic root [SLM] which means peace, submission, and acceptance. Religiously, the term means to achieve peace; with Allah [Allah] 1 ; with oneself [inner peace] and with the creation of Allah through submission to Allah; putting one’s trust in Him and acceptance of His guidance and injunctions. This broad definition explains why Islam is more than a “religion” in the commonly limited meaning, which concerns itself mainly with the spiritual and ritual aspects of life. In fact, the term “religion” is an imperfect translation of the Arabic term “deen” which means literally a way of living. That way of living embraces the creedal, spiritual, moral, social, educational, economic and political aspects of life. A topic like business ethics is an integral part of the normative religious practice. If this is the case, then it is essential to be clear about the sources of such normative practices, sources which will be frequently referred to in this chapter.

There are two primary sources of normative Islamic teachings. The first and most important source is the Qur’an [commonly misspelled Koran]. Muslims accept the Qur’an as the verbatim word of Allah, revealed to Prophet Muhammad [p] over a period of 22 years [610-632 C.E.]2 and dictated word-for-word by Archangel Gabriel. The second primary source is called “Sunnah” or “Hadeeth”, which means the words, actions and approvals of Prophet Muhammad [p]3. While the words of Hadeeth are not those of Allah [verbatim], they are believed, however, to be another form of revelation to the Prophet [p], in meaning only. Both primary sources provide broad principles and guidelines in conducting the normative Islamic life. These broad principles and precepts, such as social justice, mutual consultation [shura] or moral conduct are not subject to nullification or change. They are presumed to be valid for all times and places. The human endeavor is limited to understanding and implementing them in a manner that is suited to the needs of time, place and circumstances. While these sources focus on broader and guiding principles, they also contain injunctions that are more specific due to their importance.

The growing complexity and diversity of business dealings and of life in general, a legitimate question: what defines a normative Islamic position in respect to a new issue or problem which is not directly addressed in the two primary sources of Islam?. A built-in mechanism to deal with this is called Ijtihad or the exertion of effort by a learned scholar so as to find answers to new questions or solutions to new problems. In the process of Ijtihad, the scholar is guided by the principles and spirit of Islamic law in arriving at his opinion. As Ijtihad is a human endeavor, influenced by the needs of time, place and circumstances, such opinions may vary as well. They may vary even under the same circumstances. However, a cardinal rule is that if there is a clear and conclusive text in the Qur’an or Hadeeth on any issue, it can not be replaced or supplanted by any scholar’s opinion. This chapter focuses mainly on widely accepted principles and norms relating to business ethics as stipulated in the two primary sources of Islam.

These principles and norms, however, do not exist in vacuum, apart from the Islamic worldview and the role of ethics in such worldview. At the center of this worldview is belief in and devotion to Allah, who is the source of all bounties and the ultimate authority in defining what is ethical and what is not. This belief is examined in the next section. [Please click here to read the remainder of this chapter.]