As a prophet, Prophet Muhammad (pbuh) taught people to follow ethical standards in their daily lives. This includes trading, business transactions and entrepreneurship. The ethical values he followed are clearly noted in the Quran.
“When a sale is held, say, “There’s no cheating.” (Book: Al-Bukhari).
“Be careful of excessive oaths in a sale. Though it finds markets, it reduces abundance.” (Book: Muslim).
“The sale is complete when the two parties involved depart with mutual consent.” (Book: Al-Bukhari).
“When people cheat in weight and measures, their provision is cut off from them” (Book: Al-Muwatta). “You (Business people) have been entrusted with affairs over which some nations before you were destroyed” (Book: Al-Tirmidhi).
“Whoever monopolizes is a sinner”(Book: Abu Dawud).
Prophet Muhammad said that in the case of free enterprise, the price of a commodity should be flexible because there might situational crises so with regards to that, the prophet prohibited hoarding merchandise in order to increase prices. He also said that alcohol, intoxicants and drugs are prohibited.
Business Ethics of Prophet Mohammed
Prophet Muhammad refused to meddle in the free and fair operation of real market forces. Also in his life, he regulated market demand by not allowing the monopoly purchasers to dictate terms and arbitrary pricing and imposed moral restrictions on product advertising involving exaggeration, pomposity, the use of puns, digression and unrealistic sales pitches. He condemned traders who sell products with the help of false information and hope. He also regulated the activities of brokers and intermediaries and this help prevent manipulation of market prices.
Practices of haggling was condemned this means that the conditional and partial acceptance of the deal by the customer. To a large extent, he advocated the virtue of safeguarding other’s secret, whether implicit or express.
The Entrepreneur Values
Prophet Muhammad believed that entrepreneurs, investors and traders should be motivated. Their utility should be maximized without getting themselves into unethical activity. Prophet Muhammad put strong emphasis on leniency, good manners and courtesy. In his teaching, he said that a trader should have complete autonomy over maximizing profits through the optimum use of accurate anticipation, managerial efficiency, optimized resources and proper planning mechanisms.