Business and Economic Policies In Islam

Islam is not all about spirituality. It deals with every aspect of human life. Striving for sustenance is required. It is human nature to earn livelihood for oneself as well as for one’s dependents. An individual can’t get anything unless he put in his efforts. Like any other aspect of human life, economies should also be governed by the core concepts of Islam.

How a man earns wealth and where he spends it will be questioned someday. So Islam gives clear directives to be followed for a balanced and sustainable economy. The Following is one of the most important verse from the Qur’an related to the economic policy of Islam.
“What Allah has bestowed on His Messenger (and taken away) from the people of the townships,- belongs to Allah,- to His Messenger and to kindred and orphans, the needy and the wayfarer; In order that it may not (merely) make a circuit between the wealthy among you. so take what the Messenger assigns to you, and deny yourselves that which He withholds from you. and fear Allah. for Allah is strict in punishment.”(sūrat l-ḥashr (The Gathering)  58:7)

It clearly indicates that the wealth should not be confined in some rich hands. It must spread in society so that every individual of the society either rich or poor equally benefits from it. This and the similar verses in the Qur’an indicate that the flow of wealth should not be from poor to rich making the rich richer and the poor poorer. Rather, the flow of wealth should be from the rich to the poor in order to help that segment of society, to empower them, to raise them up to the level where they could be in a position to contribute their part in the welfare of the society and ultimately strengthen the overall economy.

To achieve this noble goal, Islam made ‘interest’ Haram (unlawful), Zakat was made mandatory, voluntary charities were recommended and generosity was appreciated. A considerable proportion of revenue was to be given to the socially and economically deprived people and even to help them to come out from their debt burdens, if any. The law of inheritance was also established to distribute the deceased’s property to the people near him.

Instead of enlisting all permissible business dealings, jurists and scholars have, deducing from Qur’an and Sunnah, laid down some rules and regulations as well as juristic maxims (fundamental principles) to judge the permissibility of any such dealings. These maxims are very much general in nature while some are specific. It helps to evaluate any given situation and to reach any final conclusion in terms of permissibility or impermissibility aligned with the holistic spirit of Islam.

One such maxim is “la dharara wa la dhiraara” (Neither Harming Nor Reciprocating Harm). It is basically a part of Hadeeth narrated by Abu Sa‘eed al Khudri (RA) and taken as a maxim. It is very much general in nature and can be applied in any situation. If any action, dealing or transaction causes any harm or reciprocates harm, it will not be permissible. One may evaluate any business transaction from this point of view.

Another fundamental principle is ‘uncertainty corrupts the business deal’. Prophet Muhammad ﷺ forbade any business that has uncertainty. Anas ibn Malik (RA) has narrated that the Prophet ﷺ forbade the sale of grapes till they became black and the sale of grain till it had become hard. This fundamental principle indicates that any business dealing that has clear uncertainty or speculation is not permitted in Islamic Shari’a because it leads to a number of problems and disputes between the two parties.

Another maxim is ‘Ad Dharooraat Tubeeho al Mahdhooraat’. (Needs permit the forbidden). It is a very common maxim. If need persists and there is no way out but to adopt the forbidden, one has to go for it. And we have evidence for that from Qur’an and Sunnah. This can be applied in any situation even in financial and business dealings. But the ‘NEED’ itself is to be defined; whether really it is a need or not.

“Al-ghunum bil ghurum” is another basic fundamental principle related to business dealings. It means no earning will be legitimized unless the person is involved in the business venture. Only those that share in a business losses should gain from its profits. This is a very much important principle and it plays a big role in all financial dealings of the Islamic banks today.

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