“When Muslim merchants traveled to distant lands, the inhabitants of those lands were impressed by the traders’ social and business conduct and so became curious about their beliefs. Many of these inhabitants subsequently became Muslims.”
In an era when there is an increased and renewed emphasis on teaching and learning business ethics, the highly pertinent question being raised is the role of faith and religious beliefs in business practices. Do religious beliefs help produce more ethical organizations and consumers? As a major world religion with clearly defined rules, restrictions, and behavioral guidelines, what are Islam’s teachings regarding ethical practices in commerce, and what are their implications? We aim to continue by casting light on the Islamic teachings on business conduct, or what has been known since the early Islamic periods fourteen centuries ago as the ‘rules of sales and commerce’. It identifies the Islamic business ideals and their practical implications which organizations dealing with consumers need to adopt.
The Islamic perspective on commerce is increasingly gaining momentum and importance in today’s global economy for many reasons. First, Islam, being a practical religion with clear daily procedures to follow, shapes the attitudes and behaviors of its adherents, the Muslim consumers, who represent more than a fifth of the world population. Second, the financial crises of 2008/9 shattered the world markets which had followed conventional financial wisdom, while allowing those practicing Islamic finance to prosper and make significant gains. In the September 2008 quarter, when share markets in London and New York were a third of their peaks, Dow Jones’s Islamic financials index, in contrast, rose 4.75 percent. Third, as a result of the oil boom, as well as other factors, many Muslim countries are becoming the most affluent consumers in the world. Fourth, the level of foreign investment in Muslim countries is increasing. Fifth, there is a movement towards forming a Muslim trading block, although such a block might take some time to materialize. Finally, sixth, there is a strong push towards the Islamization of countries where Muslims are a majority through laying down clear Islamic codes of conduct in all walks of life, and commerce is no exception to this (Saeed et al. 2001).
Moreover, the globalization of the world economy makes it a requirement for world businesses to be familiar with the Islamic perspective on commerce in order to understand the factors shaping the behaviors of consumers. Businesses that neglect the acquisition and utilization of such knowledge risk alienating a large proportion of their Muslim target market (Saeed et al. 2001). The Islamic religion has a finely tuned set of rules concerning all aspects of life. By recognizing these rules, the knowledgeable firm can not only serve the spiritual needs of the Muslim community but also capture a truly unique position in the Islamic marketplace (Sacharow 1995).
The Right Trade Strategy with Islamic Law
Islam provides general or detailed instructions about what is permissible and what is not. Detailed instructions are provided on the acts of pure worship such as prayer, pilgrimage, fasting, and charity, as well as a multitude of other aspects of life. However, general guidelines are provided in what is referred to by Prophet Mohammad (SAW) as ‘the affairs of your worldly life. For example, some rules, like forbidding the use of interest rates as a method of making money, represent a general guideline. The responsibility of Muslim scholars throughout the ages is to identify which trade practices fall under this category and to advise Muslims against them or, in addition, provide alternative Shariah-compliant practices.
Companies seeking to engage in business with Muslim consumers need to know these underlying beliefs that drive the Muslim consumers’ behavior. Multinational corporations should be multicultural as well and not simply impose their own culture; they need to adapt their operations to make their Muslim customers, employees, and suppliers comfortable with their practices (Pomeranz 2004). These companies can constructively use the power of religion through accommodating and harnessing Muslim values more effectively when conducting their businesses in the Muslim marketplace (Rice 1999). In general, all Muslim practices and acts are classified under the following categories.
Halal, or permissible
It has three levels:
Duty; obligatory acts. Failure to perform them is a sin. Duty can be described as the Core Halal, without which a firm can’t be seen as Shariah-compliant. Implications: firms must perform Wajib. Examples include being honest and transparent.
Likeable; preferable but not obligatory. Not performing Mandoob is not a sin. Likeable can be described as the Supplementary Halal. Implications: do if possible. Examples include being helpful and going the extra mile.
Despised; not preferable, discouraged by religion and usually seen as a last resort. Engaging in Makrooh doesn’t result in a sin unless it leads to one. The most obvious example of Makrooh in Islam is divorce! Although it is Shariah-Islamic Business Ideals compliant, it represents the border between compliance and non-compliance. It is loathed by society. Implications: avoid if possible.
Mushtabeh, or doubted
It is an act that a Muslim should refrain from because they might be Haram themselves or they might lead to Haram. Businesses should refrain as much as they can from engaging in doubted activities for the fear of being perceived to be unscrupulous by Muslim consumers. Firms engaging in these activities risk a Fatwa being issued against them.
Haram, or not permissible
All haram acts are condemned explicitly or implicitly by the Islamic religion. Engaging in them or in activities leading to them is a sin. These categories have obvious implications on what companies planning to engage the Muslim marketplace should and shouldn’t do. It is of no relevance whether these companies are Muslim or not, what is of relevance is what they should do, i.e., value maximization, and how they do it – by fair play and just dealing. To illustrate, the duty of Wajib of a company in Islam is to maximize the good of the society as a whole, not profit maximization.
Therefore, a company (its personnel) will be committing a sin if it doesn’t actively seek societal value maximization. A company however is at ease in choosing the means to do that, as long as those means are not Haram (as long as they are permissible or not a sin). Although profit maximization is not the ultimate goal of trade in Islam, Islam accepts profits and trade and does not aim to remove all differences in income and wealth that may result in various social and economic classes (Beekun 1996).
In fact, Islam acknowledges that people will differ and that this difference is for a purpose ‘It is We Who portion out between them their livelihood in this world, and We raised some of them above others in ranks, so that some may employ others in their work. But the Mercy of your Lord is better than the (wealth of this world) which they amass.’ (Quran 43:32).
The implications of these categories on the marketing aspect of business are very thorough and encompass the entire marketing mix for both services and goods. The first component of the conventional marketing mix, e.g., is the product. In Islamic marketing, however, it is the Halal product, and the difference between the two is huge. From an Islamic marketing perspective, the product that a company sells must be entirely Halal. This means that all inputs, processes, and outputs must be Islamic law based compliant, i.e., the product and all that has been involved in its creation, delivery, and consumption must be environmentally friendly and totally harmless, as Islam clearly prohibits causing harm to anything that God created (all-embracing harmony in the universe). An un-Halal or Haram product will be very difficult to sell to the Muslim consumer because the Muslim consumer’s behavior is obedient to the common understanding of what is permissible and what is prohibited under the Shariah law. Being Shariah-compliant is the quickest way to promote the company and its products.