Prophet Muhammad (may Allah bless and greet him) belonged to a traders’ clan. He engaged in trading before prophethood was bestowed upon him. He married a prominent tradeswoman of Makkah. As a man who had practical exposure of business, he is a role model for business as foe other fields of life. His teachings pertaining to businessmen and women and the way he translated these teachings into practice in his time are relevant even today. His traditions relating to business and trade are not mere collections of moral teachings. He has shown the way commercial activities should be undertaken so that these may be both profitable for the persons engaged in and useful, at least not harmful, for the society.
The salient features of the traditions of Prophet Muhammad (may Allah bless and greet him) include transparency in dealings, riba-free economy, banning trade in items that one does not possess, and prohibition of certain modes of income and manner of consumption. All these traditions are relevant for all time to come.
TRANSPARANCY: Prophet Muhammad was very specific that all dealings should be transparent. He dissuaded the traders’ instinct of withholding material information. Further, he has instructed the buyers to thoroughly inspect the items they are purchasing. A deal that is done in absence of full information may become void ab initio, depending upon the materiality of the information.
RIBA-FREE ECONOMY: Riba means addition that is not justified. Interest is a form of riba. In fact, it covers more than what interest signifies. Any additional return that cannot be justified is forbidden. For example, a person takes undue advantage of a person who is his debtor, then this advantage in cash or kind is riba and it is forbidden. Hence, capital as such is not entitled to any payment more than the principal amount. Entrepreneur or creditor providing the amount as capital is economically entitled to take agreed share of profit but no additional payment. If this principle is followed in letter and spirit, a major portion of the ills of economy and the resulting sufferings would vanish. While announcing the prohibition of riba Prophet Muhammad announced the abrogation of all addition amounts due to his uncle who was a prominent businessman.
NO TRADE IN ITEMS NOT POSSESSED: The Prophet categorically said that one cannot trade in items that he does not possess at the time of dealing in its disposal. This principle, if applied today, will do away with forward trading, both in stock and commodity markets. This tendency of selling something that one does not possess in anticipation of acquiring before delivery leads to speculative trading that is not in consonance with the commercial activities approved by the Prophet. Another form of speculative trading where no delivery is intended as such and the differential amount is transacted on the agreed date is a fraud for which there is no scope in the traditions of the Prophet.
PROHIBITION OF IMMORAL TRADING: The Prophet has very clearly pointed out the immoral items that cannot be traded. There is a very small list of such prohibited items leaving the vast majority of items free for trading. Commercial activities so prohibited include trading in alcohol, flesh trade and immoral traffic, gambling, etc. Healthy commercial activities that the Prophet preached can ensure healthy atmosphere even today. Unhealthy business practices are the major source of corruption we are witnessing all around us.
The Prophet used to visit market and inspect items being traded. He ensured removal of all wrong practices and corruptions and then let the market function freely. At several occasions he was given the suggestion to fix prices but he disagreed. Free the market from wrong practices and corruption and then leave the market free to adjust accordingly. This principled free market ensured all round growth that we witness in market at that time. The Prophet’s companions became the torch bearers of this healthy economic system that bore its fruits for more than a millennium. It continued till the capitalist economy took its roots in recent centuries and ushered in interest based corrupt system that is meant for serving a handful at the cost of the vast majority of the masses. The solution lies in reverting to the time tested and healthy system that the Prophet had ushered in. There and there alone lies the utopia.