What is the Islamic Ruling on Trade (Business)?

Religious Ruling on Trade

Trade or commerce has been inseparable from human society since ancient times. This is because individuals and communities have needs that can only be fulfilled through cooperation and interaction. Therefore, people must engage in trade and supply their basic materials to facilitate life and promote the progress of their society.

Trade is so important and deeply rooted that one of the Infallibles said: The permissibility of transactions and fulfilling societal needs on a broad scale is only valid when corruption and invalidity are not mixed within it. Various factors such as the public nature of commerce and the possibility of disputes and conflicts have made legislation in this area necessary and essential.

Trade laws are generally common among societies and are legislated based on the principles of commerce of each government. The customary and spiritual laws enacted on this matter are mostly inherent in human nature and stem from human practical reason, without much need for harmonizing laws in most cases.

The most important law that must be observed in commercial relations is the humanity and spirituality of the law because most enacted laws tend toward selfishness and power-seeking and are implemented with non-divine and inhumane thinking. The etiquette of Islamic trade differs significantly from worldly trade in many countries, and the details mentioned in Islam are incomparable with other religions.

Meaning of Trade According to Jurists

The term "trade" in jurists’ texts is used in all three meanings mentioned in the linguistic definition, but the third meaning (exchange with the intention of profit) is the one agreed upon by custom, language, commentators, and narrations praising and encouraging trade. For example, the meaning of trade in the issue of zakat (almsgiving) on trade goods refers to this meaning.

Therefore, some jurists have considered the intention of earning profit necessary for the realization of trade.

Others have disagreed, stating that the jurists’ use of the definition of trade in zakat discussions is to define and limit the subject of the religious ruling — i.e., an individual among traders as the subject of the ruling (obligation of zakat) — and not a definition of trade itself.

Some jurists interpret the Quranic verse “except that it be a trade by mutual consent among you” as referring to the second meaning of trade — i.e., all forms of earning and exchange including rent, contracts of reconciliation, and others.

In fiqh (Islamic jurisprudence) books, some jurists have established independent chapters for the title of trade or traders and have explained the rules of business in general and sales in detail, while others have placed separate chapters for other types of businesses like rent and partnership. Some use the terms “businesses” or “business and traders” interchangeably with trade and traders, discussing rules and etiquette of business under those headings, and then detail different kinds of businesses (sale, rent, partnership, investment) under separate chapters. Due to differences in organizing these chapters, there has been some mixing of subjects. Hence, some have suggested it is better to have a separate chapter for general business rules and etiquette, then individual chapters for each type of business.

This article focuses on explaining the rulings and etiquette discussed in fiqh under the topic of trade.

Principles Governing Islamic Trade

Islam considers profitability in trade not only for the individual and society but also for the Hereafter. Unlike most worldly descriptions of trade that focus only on this life, Islam views trade with a comprehensive perspective encompassing both this world and the afterlife. It does not limit profit to worldly gain alone. With this outlook, individual decisions in many matters become more correct and humane, as one acts not only for this world but also for their eternal life, striving to do the best. This attitude helps people progress in every matter.

For example, the Prophet Muhammad (peace be upon him) said:
"Seek lawful provision for yourself and your family, for verily this is a form of Jihad in the way of Allah, and know that Allah’s help is with honest trade."

Islamic trade laws and rulings originate from this comprehensive approach, considering all aspects of this social framework. Some key goals and criteria of Islam in this regard are:

• Strengthening the Culture of Friendship and Social Relations:
  The main goal of trade is to facilitate the functioning of the social system and meet the material needs of individuals in society. Trade should promote unity and strengthen social ties between one nation and others, not merely focus on personal gain. Islam regards trade as so sacred that if one party regrets or withdraws from a deal, the others should also desist, as in this verse:
  "Whoever accepts a Muslim’s request to annul a sale, Allah will forgive his faults on the Day of Resurrection."
  Islam values love and winning the heart of a fellow Muslim higher than worldly money and wealth. The effects of forgiveness in trade extend to eternal life and forgiveness of sins by Allah. Also, Islam discourages meddling in others’ trade as it causes negative feelings, division, loss of friendship, and dissatisfaction.

• Prevention of Moral and Economic Corruption:
  Selfish interests in trade have made marketplaces prone to ethical harms related to commerce. These initial harms, if unchecked, lead to serious societal problems. Islam’s general approach is to avoid all possible harm. Recommendations include:

  • Identifying harms and corruption

  • Preventing them

  • Avoiding involvement and knowing ways to counteract them

Serious harms threatening societal destruction include:

• Usury (riba)

• Shortchanging

• Betrayal

• Lying

• Fraud in trade

• Concealing defects

• Cheating and swearing falsely

Some Issues Related to Trade

• Issue 2059: A merchant should learn the rulings on buying and selling, especially in problematic situations. Ignorance leading to forbidden acts or neglect of duties makes learning necessary. Imam Sadiq (AS) said: Anyone who wants to trade must learn its rulings; if they trade before learning, they are doomed due to invalid and dubious transactions.

• Issue 2061: Someone without money but with family responsibilities (like wife and children) must earn a livelihood. Earning for voluntary acts such as supporting family or helping the poor is recommended.