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Islamic Business Ethics

Topic 4

4.0 ISLAMIC BUSINESS ETHICS


4.1

ISLAMIC BUSINESS ETHICS


- The most related term in Islam for Ethics is KHULUQ.
- Other terms:
- khayr (goodness)
- birr (righteouness)
- qist (equity)
- adl (equilibrium and justice)
- Haqq (truth and right)
- Maruf (known and approved)
- Taqwa (piety)

Factors Influencing Ethical Behavior In Islam


1. Legal Interpretation
2. Organizational factors
3. Individual factors
Legal Interpretation
In Secular practices, these factors were based upon contemporary.
The factors often transient value & standards (SV) such as affirmative
action and caveat emptor.
However, in Islam, the standards and value are guided by the syariah
& the collection of previous Fiqh judgments. For instances, there is no
discrimination in Islam.
Organizational factors
These factors consider the degree of commitment of the
organizations leader to ethical conduct. Normally these factors were
based on code of ethics, policy statements, speeches, publications
etc. Islam perceives any organizations involve in haram activities as
unethical.
Individual factors
There are six sub factors that influence individual factors:
i.
ii.
iii.
iv.
v.
vi.

Stages of moral development


Personal Value and Personality
Family Influences
Peer influences
Life Experiences
Situational Factors

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i. Stages of moral development


There are two stages of moral development which are the minor or
prepubescent stage and the adulthood stage.
- The adulthood stage
The Apostle of Allah said: There are three (persons) whose actions
are not recorded: a sleeper till he awakes, an idiot till he is restored
to reason, and a boy till he reaches puberty.
Based on the above hadith, there are 2 guidelines given i.e:
i. There are certain types of people are not responsible for their
behavior.
ii. An individual is not responsible for his actions until the age of
reasons.
Islam scholars have suggested 3 stages of the development of human
soul:
i. Ammarah; prone to evil, will lead to perdition.
ii. Lawwamah; feels consciousness of evil , resist it, ask for Allahs
grace and pardon and tries to amend.
iii. Mutmainnah; the highest stage of all.
Therefore Islam suggests that any person may be more or less prone
towards behaving ethically.
ii. Personal Value and Personality
Islam perceives that the decay and eventual disappearance of
honesty is a sign of the eminence of the Day of Judgment. These
factors can be either internal or external locus of control.
iii.Family Influences
Islam perceives that ethical standards were started in early childhood
upbringing. As emphasized by the Prophet (SAW) on the importance
of family nurturing when he said:
Command your children to pray when they become seven years old,
and discipline them for it (prayer) when they become ten years old;
and arrange beds (to sleep) separately.
iv. Peer influences
From Islam point of view, children can be easily influenced by their
friends. Furthermore, life experiences can affect people ethical beliefs
and behavior.
v. Situational Factors
People may behave unethically in certain situations because they
may see no way out. The discouragement of applying debts as Islam
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perceives debts
unethically.

as

major

reason

why

individuals

behave

Islamic Ethical System


Islam has its view points on other secular ethical systems.
Islam viewpoints on Relativism
Islam perceives the theory was direct contradicted with Islam as it
focuses solely on the individual and excludes any interaction with or
input from outside. Islam stays away from decisions based only ones
perception of a situation but emphasizes on Syura system.
Islam viewpoints on Utilitarianism
i. Who determines what good is for the maximum number of
people? (Wealth? Pleasure? Health?)
ii. What happen to the minority?
iii. How are the costs and benefits to be assessed when no
quantifiable issues such as health are to be dealt with?
iv. Individual rights and responsibilities are ignored in favor of the
collective rights and responsibilities.
v. The danger of pareto optimality.
Islam viewpoints on Universalism (Kants ethics)
The problem of duty as ethical action can be derived only an
individual perform it based on duty.
Islam viewpoints on Rights
The rights approach to ethics can be abused as it suggests that
individual have moral rights that are non-negotiable. Islam is for
freedom and balance yet rejects the notion of liberty without
accountability. Islam perceives human beings bear responsibility for
their actions.
Islam viewpoints on Distributive Justice
Islam is in favor of justice as Islam believes that every person is
entitled to own property individually or in partnership with others.
Islam argues that the poor have a claim on part of wealth
accumulated by the rich to the extent that the basic needs of
everyone in society are met. Islam discuss the concept of infaq and
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zakah, thus any human exploitation at any level, in any shape &
under any circumstances is anti-Islamic and must be ended.
In general, Islam agrees with all the principles of the distributive
justice approach to ethics, but in a balanced manner as Islam does
not endorse blind justice.
Islam viewpoints on Eternal Law
Eternal law refers to other scripture or nature to be used as a
guideline in making the ethical decisions. Some of the philosophers
believe that by studying either the scripture or nature, man will
become ethically aware. However, Islam suggests that Muslim have
to study both items simultaneously.
Seven distinct of Islamic Ethical System:
i.
ii.
iii.
iv.
v.
vi.
vii.

Actions & decisions are judged to be ethical depending on the


intention of the individual.
Good intentions followed by good actions are considered as
acts of worship. Halal intentions cannot make haram actions
halal.
Islam allows an individual the freedom to believe and act
however he/she desires, but not at the expense of
accountability and justice.
Belief in Allah endows the individual with complete freedom
from anything or anybody except Allah.
Decisions that benefit the majority or a minority are not
necessarily ethical in themselves. Ethics is not a numbers
game.
Islam uses an open system approach to ethics, not a closed,
self-oriented system. Egoism has no place in Islam.
Ethical decisions are based on a simultaneous reading of the
Quran and the natural universe.

Islamic Ethical Philosophies


There are 5 axioms of Islamic Ethical Philosophy
i.
ii.
iii.
iv.
v.

Unity
Equilibrium
Free Will
Responsibility
Benevolence

Unity
This axiom is related to the concept of tawhid. The political economic,
social & religious aspects of mans life form a homogeneous whole
(economic, political, religious & social), which is consistent from
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within, as well as integrated with the vast universe without. This is


the vertical dimension of Islam. It holds with the following ideas:
i. Muslim cannot be biased in his thinking and behavior.
ii. Muslim is not overawed by anybodys greatness, and will not allow
himself to be coerced into performing unethical acts by anybody.
iii. Muslim never despairs of Allahs Help and Mercy. He will act
bravely in doing what is ethical and Islamic.
iv. Muslim will obey and observe Allahs law as the effect of La ilaha
illallah.
The application of the Unity Axiom to Business Ethics.
A Muslim businessman will not:
i. Discriminate among his employees, suppliers, buyers, or any other
stake-holder on the basis of race, colour, sex or religion.
ii. Be coerced into unethical practice.
iii. Hoard his wealth avariciously. The concept of amanah is of critical
importance to him because he knows that any worldly merit is
transient, and must be used wisely.
Equilibrium
In Islam, this term refers to adl, describes the horizontal dimension of
Islam, and relates to the all-embracing harmony in the universe. This
sense of balance is achieved through conscious purpose.
The application of the Equilibrium Axiom to Business Ethics.
i. This principle applies both figuratively and literally to business.
ii. Allah admonishes Muslim businessmen to:
Give full measure when you measure and weigh with balance that
is straight: that is the most fitting and the most advantageous in
the final determination.
iii. Islam does not aim to create a society of martyr-like merchants,
doing business for purely philanthropic reason.
Free Will
This axiom means humans ability to act without external coercion
within the parameters of Allahs creation and as Allahs trustee on
earth.
The application of the Free Will Axiom to Business Ethics.
i. A Muslim will honor all contracts.
ii. A Muslim must curb his free will to act according to the moral code
laid out by Allah.

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iii. Islam rejects the principles of laissez faire and the western
reliance on the concept of the Invisible Hand.
Responsibility
Islam perceives that humans need to be accountable for his actions.
Islam also draws a distinction between fard al ayn and fard al
kifayah.

The application of the Responsibility Axiom to Business Ethics


Allah S.W.T:
Every soul will be (held) in pledge for its deeds.
The above Al-Quran verse explained that all obligations must be
honored unless morally wrong.
Benevolence
This term refer to an action that benefits persons other than those
from whom the actions proceeds without any obligation.
The application of the Benevolence Axiom to Business Ethics
According to Al-Ghazali, there are 6 kinds of benevolence:
i. If a person needs a thing, one should give it to him, making as
little profit as possible. If the giver forgoes the profit, it will be
better for him.
ii. If a man purchases anything from a poor person, it will be more
graceful on his part to suffer a little loss by paying him more than
what he considers to be the proper price.
iii. In realizing ones dues and loans one must act benevolently by
giving the debtors more time to pay than is due and, if necessary,
one should make reductions in loans to provide relief to the
debtors.
iv. It is only proper that people who want to return the goods they
have purchased should be permitted to do so as a matter of
benevolence.
v. It is graceful act on the part of a debtor if he pays his debts
without being asked to do so, if possible long before they are due.
vi. When selling things on credit one should be generous enough, not
to press

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