The Islamic Perspective on Online Trade: Halal or Haram?
The Islamic Ruling on Online Trade
This is the age of networking, where the internet is used for many purposes, including trade. There are various forms and types of online trade. The desire to earn more has introduced new methods in the field of trade, many of which involve interest-based transactions, prohibited trade, trade of uncertain goods, and deceptive trade.
In the world of online trade, there are various methods through which trade occurs, both individually and in the form of business-to-business transactions. It can be said that a significant portion of both individual and collective trade today is connected to the internet. It is essential for a Muslim to understand the rules regarding actions and transactions, just as it is necessary to understand the matters of worship. Therefore, I considered it important to explain the ruling on online trade based on the teachings of the Quran and Sunnah so that those involved in such trade may know the Islamic rulings. If this trade is halal, then good, but if it is not, then it should be avoided.
Online trade has provided many conveniences. A buyer can sit at home and order goods from anywhere, and can search for the cheapest and most standard items from different online stores worldwide. This saves time and eliminates the hassle of transportation. Similarly, the seller also benefits from ease, as they do not need to set up a store, pay rent, or deal with travel. Instead, they introduce their products through a website, providing pictures of the items and shipping them upon receiving an order. This is why online trade is becoming increasingly popular today.
Before explaining the Islamic ruling on online trade, I will first mention the basic principles of buying and selling in Islam so that the issue can be easily understood, and any form of online trade that contradicts these principles can be clearly identified.
Three basic elements in buying and selling
There are three basic elements in buying and selling:
(1) The existence of two parties involved in the transaction.
(2) The existence of the goods that are being bought or sold.
(3) The price of the goods.
Key principles in Islamic trade
The following are some key principles in Islamic trade:
(1) The trade should be based on mutual consent between the buyer and seller. The Prophet ﷺ said:
إنَّما البيعُ عَن تراضٍ (صحيح ابن ماجه:1792)
Translation: Trade is only valid when there is mutual consent.
(2) The seller must have ownership of the goods being sold, meaning selling goods that one does not own is prohibited. Hazim bin Hizam ؓ reported:
أتيتُ رسولَ اللَّهِ صلى الله عليه وسلم فقلتُ: يأتيني الرَّجلُ يسألني منَ البيعِ ما ليسَ عندي أبتاعُ لَهُ منَ السُّوقِ ثمَّ أبيعُهُ قالَ: لاَ تبع ما ليسَ عندَكَ. (صحيح الترمذي:1232)
Translation: I came to the Messenger of Allah ﷺ and said, “A person comes to me asking for goods that I do not have. Should I buy them from the market and then sell them?” The Prophet ﷺ replied, “Do not sell what you do not possess.”
(3) Only permissible items can be traded. The Prophet ﷺ said:
إنَّ اللَّهَ إذا حرَّمَ على قومٍ أَكْلَ شيءٍ ، حرَّمَ علَيهِم ثمنَهُ (صحيح أبي داود:3488)
Translation: Indeed, when Allah forbids a people from eating something, He also forbids the price of it.
(4) The price and description of the goods must be clear, and if there is any defect in the item, it must be disclosed. The goal is to protect the buyer from deception. Therefore, any sale that involves deception is not allowed.
عَنْ أَبِي هُرَيْرَةَ، قَالَ:نَهَى رَسُولُ اللهِ صَلَّى اللهُ عَلَيْهِ وَسَلَّمَ عَنْ بَيْعِ الْحَصَاةِ، وَعَنْ بَيْعِ الْغَرَرِ (صحيح مسلم: 1513)
Translation: Abu Huraira ؓ reported that the Messenger of Allah ﷺ forbade the sale of pebbles (a form of gambling) and sales involving uncertainty (gharar).
(5) Trade must be free from interest (riba), as Allah has forbidden riba. Allah Almighty says:
وَأَحَلَّ اللَّهُ الْبَيْعَ وَحَرَّمَ الرِّبَا (البقرة:275)
Translation: Allah has made trade lawful and riba unlawful.
Four types of sales
There are four types of sales:
- Exchange of one item for another, for example, land for a house. This is called barter in English or muqayadah in Arabic. The permissibility of this type of sale depends on details.
- Buying something with money. This is the most common type of sale in the market.
- Exchange of cash for cash, known as bay’ al-sarf or currency exchange.
- One party offers labor, and the other offers payment, known as ijarah or employment.
There are also four types of sales based on the payment of the price:
- Cash sales, where the buyer pays the full price and receives the goods immediately.
- Sales where the goods are received immediately but payment is made at a later date (credit sale). This is allowed.
- Sales where the price is paid in advance, but the delivery of goods is deferred (advance payment for future delivery). This is also allowed.
- Sales where both the price and the delivery of goods are deferred. This is bay’ al-kali bil kali and is not allowed.
Now, let’s analyze how online trade occurs and compare it with Islamic trade principles.
(1) Forex trading is quite popular online. The process is such that one deposits $1000 in a Forex company and opens an account. The person is then able to buy up to $100,000 worth of goods using that $1000. Various items are advertised with their prices on the internet, and the person, who has the ability to buy up to $100,000 with just $1000, looks for items at a cheaper price online. As the price increases, the person sells them to make a profit. However, if the price decreases, they incur a loss. The company takes a commission on each trade, regardless of whether there is a profit or loss, and if the trade is not completed on time, the company charges an additional fee. In this type of trade, the company acts as a broker, and the account holder does not engage in direct buying and selling, but submits trade requests.
This type of trade has several issues in terms of Islamic law. A person who gains purchasing power of $100,000 with just $1000 is engaging in a transaction involving riba. Furthermore, if they purchase any goods online using this riba money and sell them before taking possession, this is not permissible. The company’s commission on every trade, whether the trade is profitable or not, is also not allowed. Additionally, this type of trade involves bay’ al-kali bil kali (an exchange of debts) and gambling-like behavior, as there is no real asset being traded—only speculation on price movements.
(2) Some online companies sell goods where the buyer pays for the goods first, and the goods are delivered later. If the transaction is clear and there is no deception, this type of trade is permissible. However, in the online world, many risks are involved. For example, the company might take the money and not send the goods, or the goods delivered may not match the description or may be defective. There is also the possibility that the payment might not reach the company due to hackers, or the buyer might not receive the goods. Therefore, dealing with reliable companies that have been operating for many years is advisable.
(3) It is not problematic for the buyer to pay the price in advance and receive the goods later, or to pay a deposit in advance. This arrangement is permissible as long as there is no deception. Alternatively, a company can provide goods without payment upfront, with the option for the buyer to approve or reject the product, making the transaction more secure for both parties.
In summary, online trade should be conducted according to Islamic principles. Goods must exist, and when a buyer requests an item and pays the agreed-upon price, the seller must deliver the goods with the specified qualities. If the buyer does not find the goods satisfactory, they should have the option to return them. If the seller only has advertisements and sells goods that they do not own, or buys from a third-party market to fulfill the order, this is prohibited. The Prophet ﷺ forbade such sales.
Two major issues often found in online trade should be avoided:
- A person buys goods online and resells them before taking possession. This type of trade is not permissible.
- The existence of a fraudulent company that only has a name and no real goods, instead taking orders online and buying goods from other companies to fulfill those orders. This is also not allowed. However, if someone honestly states that they do not have a particular item in stock and will buy it from another source for the customer, charging a fee for this service is permissible.
The best method of online trade is for the seller to introduce their goods on the internet with accurate descriptions and clear qualities. When a buyer requests an item, the seller can deliver it through an agent, allowing the buyer to inspect it and either proceed with the purchase or return it if they are dissatisfied. Payment can be made in advance, or a deposit can be taken, but there are risks due to hackers, and the buyer may worry about receiving the wrong item. Therefore, both the buyer and seller should be confident and trustworthy in the transaction to ensure a successful trade.