Islamic Guidelines on Permissibility of Various Business Practices New

Islamic Rulings on Economic Practices and Business Ethics

Question (1): A certain company provides commission for selling legitimate products. For example, if you sell products worth one lakh, you receive a 25% commission, and if you sell products worth five lakh, you receive a 40% commission. To join this company, a fee of 70,000 is charged in cash or 77,000 in installments. According to the company’s founder, this fee is an investment, and after joining, training is provided. Additionally, more than half of the 70,000 is refunded. Is there any impermissible aspect in this process? Can you guide us?

Answer: In any trade, it is important not only to consider the legitimacy of the products but also the terms and the method of gaining profits. In the case mentioned above, if there were no entrance fee, then joining this trade as a seller or agent and making a profit would not have been problematic. However, with the entrance fee involved, the amount of profit remains ambiguous, which makes this trade akin to gambling. Even if part of the 70,000 is refunded, the profit is still uncertain, which is characteristic of gambling. Therefore, it is not permissible for a Muslim to participate in such a trade. However, if you purchase products worth 70,000 and trade them to make a profit, there would be no issue.

Question (2): I make gold and silver rings, which include some artificial metals and gemstones. I sell these rings on credit to traders and later receive the equivalent weight in pure gold and silver. The gold and silver I receive includes the cost of my labor and the price of the artificial metals and gemstones. Is this business permissible?

Answer: This business is not permissible. One reason is that gold and silver are being sold on credit, which is not allowed. The trade of gold and silver should be conducted on a cash basis. Another issue is that the rings contain artificial materials, meaning the amount of gold and silver used is less than the amount being received. According to Sharia, when gold is exchanged for gold or silver for silver, the exchange should be in the same quantity. As for the labor, receiving it in the form of gold or silver in this manner is not allowed. A permissible alternative would be to sell your goods to traders for cash, not on credit. Another permissible option would be to receive the actual amount of gold and silver used and then collect payment for the labor and artificial metals separately, all in cash. A third option could be to appoint the traders as your agents, while you remain the owner of the goods and pay them a commission for selling.

Question (3): Farmers in our area work for traders by planting onions and other crops. Before planting, they receive an advance payment from the traders and later sell the crops at a lower price because of the advance they have received. Is this method correct?

Answer: It is unclear in what capacity the advance is being given. If it is a loan, then selling the crops at a lower price afterward would constitute usury (riba). However, if the advance is part of a pre-purchase agreement, then it is a valid form of Bay’ Salam (advance sale). In this case, the trader would pay the full price of the crops in advance, and once the crops are harvested, the farmer would provide the agreed quantity at the previously determined price, regardless of market fluctuations at the time of sale.

Question (4): Some people take images of books from bookstores and promote them on the internet with the intention to sell. When a customer expresses interest, they purchase the books from the bookstore and then sell them online at a higher price. What is the ruling on this?

Answer: There are three legitimate ways to sell books. First, you can buy the books, take possession of them, and then sell them. Second, you can act as an agent for the seller, meaning the seller tells you they will give you a book at a specific price, and you can sell it at a higher price or with a predetermined commission. The third way is to act as an agent for the buyer and sell the book on their behalf for a commission. The situation described here is not permissible because the person selling the books is not the rightful owner of them when they promote and sell them. Islam forbids selling something that you do not possess.

Question (5): Several cricket teams participate in a tournament where all teams pay an entrance fee, and the winning team receives the prize from the collected fees. Is this correct?

Answer: This type of tournament resembles gambling. On one side, the amount is fixed, but on the other, the benefit is uncertain. The team paying the fee may lose the money or win several times its stake, which is the essence of gambling. Therefore, this practice is not permissible.

Question (6): What is the ruling on the business of betel nut (supari) used in paan (betel leaf) consumption?

Answer: Betel nut (supari) is commonly used in paan and other types of gutkha, both of which cause various diseases and are harmful, even leading to death. Betel nut consumption can cause bad breath, increase the risk of tooth decay, and is linked to many harmful substances that contribute to fatalities. Therefore, selling betel nut is not permissible for a Muslim. However, if betel nut is used for medicinal purposes, it may be permissible in limited amounts.

Question (7): I have opened a clothing store and want to operate according to Islamic principles. How much profit can I take on the clothes? Has Islam set any limits?

Answer: I pray that Allah blesses your business and gives all Muslims the ability to engage in halal trade and consume halal earnings. As for your question, Islam has not set any specific limit on the profit margin of goods. The profit you make depends on the market conditions, and there is no issue in adjusting your prices accordingly. The key is to ensure that your trade is conducted honestly, without deceit, and that you do not sell defective or haram items, and avoid waiting for prices to rise unfairly. The Prophet (peace be upon him) said that it is Allah who determines the pricing and provision, not humans.

Question (8): Is it permissible for a pharmacist to lease out their certificate? This certificate is required to operate a medical store, and the pharmacist can work for someone else’s pharmacy with their certificate but does not perform any actual duties, merely leasing the certificate for a fixed fee.

Answer: A pharmacist who has completed the required diploma is authorized to open a pharmacy. However, it is common in many countries for pharmacists to lease out their certificates without actually working. This is not permissible because the certificate represents the pharmacist’s personal qualification and cannot be leased out to someone else. This action involves deception, and the Prophet (peace be upon him) said that whoever deceives others is not among us.

Question (9): People often participate in committees where one person is responsible for managing accounts. Is it permissible for this person to take a fee for their services, which is deducted from the collected funds, as long as everyone agrees?

Answer: If all members of the committee agree that the person managing the accounts will receive a monthly or annual fee, and the fee is deducted from the funds with their knowledge and consent, then there is no harm in it.

Question (10): There are many online companies where you can earn profits by becoming a member. Every new member recruits others, and the profits are distributed among all members, with each member purchasing products at inflated prices. Is it permissible to join such a company and earn money?

Answer: The company described operates on a multi-level marketing (MLM) structure, which is not permissible. In such companies, membership requires purchasing products at inflated prices, and the profit is uncertain. It is not permissible to join these companies or earn from the efforts of others in such a manner, as there is no clear benefit, and it is essentially a form of deception. Therefore, participation in such companies is not allowed in Islam.