Introduction
Islamic business is an entrepreneurial system that is consistent with Islamic laws and principles such as prohibition of interest charges alongside application of Islamic economics. The Islamic law does not allow practices such as those in banking and private commercial institutions; however, sharing of profits is permitted.
Western banks have opened branches in Islamic regions due to increased international trade. Generally, multinational banking has played a major role in evolving the Islamic banking sector with respect to new Islamic laws on lending, accounting, and bank governance principles. Moreover, Islamic organizations have structured Islamic banks to enable right sharing of revenue between shareholders and customers.
Islamic laws in business place a lot of emphasis on business ethics in forbidding wrong business practices and promoting what is right before Allah. This is championed in business environments with regards to rampant ethical issues being faced everyday by all employees in all works of life. Employees normally find themselves in a dilemma on how to deal with unethical issues such as fraud, deceit and sexual behavior in their places of work.
Management of organizations has to deal with unethical practices such as: business closure and downsizing; pollution of the environment; abuse of drugs and substances, fraud; conflicts of interest and misappropriation of funds among many other issues. However, ethical values may vary among businesses due to differences in frequency of occurrence in the international scene.
Internationally, individuals have varying opinions concerning Islamic ethical behavior in the competitive business environment around the world. Muslims uphold ethical behavior with regards to Allah’s definition of successful individuals as those who bring out what is good together with what is right and rejecting wrong practices and intentions in business and in general works of life.
Currency Notes and Debt Certificates
In Islamic business, currency notes and debt certificates in exchange of homogeneous currencies are not valid subjects of sale as they represent purchasing powers with respect to the different denominations they are in. Currency notes and debt certificates are legal tenders that have the characteristics of negotiable instruments and promissory notes delivered in place of money by banks to the bearer on for payment.
Currency notes carry the time value of money and are therefore illegal and invalid subjects of sale according to Islamic Law. Interest charges on loans and leases are illegal business practices according to Islamic law whereas arguments invalid subjects of sale arise from the similar characteristics that currency notes and debt certificates have with sale and lease of common goods and assets. More so, savings certificates and treasury bonds are equated to money as they bear similar characteristics and initiates value like value of gold (Ayub 161).
Islamic societies place their emphasis on just governance and practices with respect to the teachings of the holy Quran that directs people to commercial morality in the presence of the almighty. The Quran have clear cut laws and guidelines with respect to every day life situations such as transactions with future obligations and fixed time limits where agreements are written own to provide a basis for reference.
The laws state that anybody who incurs liability must fear his Lord Allah and make sure not forfeit paying back unless he is insane or evidently incapable of meeting the obligations. In cases where the debtor lacks the mental capacity to fulfill such obligations, his guardian needs to take over and deal faithfully in the presence of two men witnesses and if not so one man and two women should witness the dealings and must be readily available in case they are called upon to testify.
The implication of reducing such agreements to writing is to promote justice in sight of Allah and act as points of reference when parties have doubts with sincerity of the other party.
Persons who engage themselves in commercial contracts must avail witnesses and ensure that those who provide themselves as witnesses are not subjected to any form of suffering as these would imply wickedness to the contractor. However, agreements must not be written down incase of transactions where delivery and payments are made on the spot but there must be existence of witnesses to safeguard against conflicts that may arise in the absence of documentation.
According to Islamic law, loans and valuables should be granted and paid back in the same value they were given out such that the borrower is the only person who benefits and not the lender. The practices of borrowing and lending are acceptable in Islam as they are generally unavoidable in human life but they must not be taken as a means of extravagant lifestyles as anything borrowed must be paid back due to the unforgivable nature of debts.
Repayment of loans in excess of the principle is unlawful irrespective of whether a Muslim transacts with a non-Muslim or not. The debtor has an obligation to repay the loan as agreed upon with the creditor as intentional default or postponement of the act of fulfilling a contract with a creditor is equated to injustice by the holy prophet.
In situations where a debt is left after death and there is no second party to fulfill the debt, the Islamic law terms it as the greatest sin. The debtor should confide to the creditor and regret his failure to fulfill his obligation under unavoidable circumstances. The laws of the holy Quran uphold that the best person of all human beings is good in fulfillment of obligations.
Aspect of Charity Services in Muslim Organizations
There are varying opinions about practical applications of Islamic law in the business environment as to why Islamic businesses should offer services free of charge as though it were a charity services. This aspect basically refers to non profit making organizations that receive funding from donors.
Muslims organizations are generally working hard to achieve generosity and in their charitable contributions. However, these Muslim desires are getting complicated and unattainable with time as a result of limited funds because of the growing suspicion that donor funds offered to Islamic organizations are being channeled to terrorist endeavors. In this case, management of charitable organizations is rendered impossible as lack the finances of maintaining there operations.
Managing a charitable organization is financial unrealistic in case there is no revenue collection to finance operations. All organizations need to charge a certain fee on its goods and services to be able to sustain there operation even if there are no profits being made. Likewise, Muslim organizations that emphasize on the Islamic law in business dealings cannot survive without generating any revenue to sustain their operations.
Banks particularly maintain there operations and existence using the revenue they generate through charging interests on Loans and charging fees for the services of maintaining accounts of customers. Interest charges on loans is the main source of funds to Banks therefore incase banks fail to charge interest, they are likely to fall out of operation.
Islamic banking refers banking operations as intermediation of financial practices and services that are free from interest charges incase of loans, and funding advanced to clients. Islamic banking have for a long period placed emphasis on profit sharing among shareholders and customers as a replacement of interest charges on loans.
However, the concept of profit sharing in Islamic banking has been developed an innovated in such a way to develop livelihood interdependencies and individual concerns through practices that influence customer behavior. Creation of interdependencies in Islamic banking goes a long way in integrating social, moral concerns alongside economic development (Iqbal 214).
Conclusion
Islamic businesses abide by laws outlined in the Quran to offer direction with respect to individuals rewards in there dealings in enterprises. Islamic business is generally focused on improving economic backgrounds of humanity while maintaining laws and principles of the almighty. The law forbids unfair practices and discrimination of individuals during business dealings with the aim of making profit.
Business individuals are forbidden to undertake business dealings to foster their own selfish gains at the expense of other individuals, the community and the environment. Islam law has the strictest and detailed ethical values touching on all works of human life. Islamic codes of conduct and ethical norms are outlined in specific verses of the Qur’an and the Prophet’s teachings that stresses on acceptable behaviour on all aspects of humanity.
Works Cited
Ayub, Muhammad. Understanding Islamic finance. NY: John Wiley and Sons, 2007.
Iqbal, Munawar. Islamic Banking and Finance: New perspectives of profit sharing and Risks. Massachusetts: Edward Elgar Publishing, 2002.