BUSINESS IN ISLAM

The significance of business is deeply entrenched in the Islamic tradition and reaffirmed by Sunnah. The Prophet (SWS) urged ‘Be involved in business as nine out of ten sources of income lie in business’ (Ihya).^[511] Shari’ah, however, has imposed a range of restrictions that a business should comply with.

The Holy Qur’an provides: ‘[do] not devour one another’s property wrongfully, nor throw it before the judges in order to devour a portion of other’s property sinfully and knowingly.’^[513] The Prophet (SWS) said, ‘A man’s work with his hands, and every legitimate sale.’^[514]

Consequently, business must avoid exploitation, ‘usury’ (Riba^[515] or interest), manipulation of the market, taking excessive advancement, speculative selling, and investing in forbidden goods and services such as alcohol, drugs and gambling.^[516] Shari’ah strictly condemns all forms of interest since these involve both oppression and exploitation.^[517] Providing loans without the condition of interest is rewarding; many ahadith (refers to actions and habits of the Prophet Muhammad (pbuh) constituting the major source of guidance for Muslims) stipulate that ‘the reward for giving charity is multiplied ten times whereas the reward for giving an interest-free loan is multiplied eighteen times’.^[518] By prohibiting interest­based transactions and discouraging speculative economic growth Islamic business not only fosters religious and social goals but also a stable and accountable financial system.^[519]

The transition in financial thinking in conformity with Shari’ah heavily influenced the mid-1980s banking policy and framework across nations and became institutionalised via the emergence of Islamic bank (IB) in the late twentieth century. Progressive developments in devising new modes of financing such as Mudarabah made IB very profitable, galvanised the economy and arguably injected greater market dis- cipline.^[520] In brief, these Shari’ah based modes of financing theoretically aim to stimulate a banking practice in which emphasis is given to developing various projects and trading relationship based on talent, expertise and prospects where returns are not fixed in advance instead are dependent upon the real economic outcome.

Building on some investment techniques of financing while IB resem­bling conventional banking (CB) in several key aspects, it is notionally and spiritually different in its objectives and vision.^[523] Unlike CB, the participatory and interest-free approaches to business, for example, dominate the production, economic and financial behaviour of IB. Shari’ah compliance, pursuing religious and social goals through empow­ering the disadvantaged, reliance on the profit-loss sharing (PLS) strat­egies and the absence of a predetermined rate of interest and collateral, and speculative transactions are some distinguished features of IB.^[524] Another distinguished feature of IB is the ownership-oriented selling, that is, an ownership is required to give effect to any transaction; a financier can only sell those products and services that it owns. Financing extended by these Islamic modes can thus expand only in step with the rise of the real economy and thereby help curb excessive credit expan­sion, which is one of the major causes of instability in the international financial markets.^[525] All these provide powerful impetus for changes in investment techniques of IB. Yet, IB in Bangladesh has promoted a different practice, perhaps as elsewhere, which is addressed in the following discussion.

III.