Islamic Banking: If Muslims Ran Wall Street, America Could Have Avoided the 2008 Economic Crisis


With the coming Muslim festival of Eid, this is perhaps a good week to see what lessons Islam can teach us about business.

Most of what we read about Islam in business is about finance and morals. However, did you know that many parts of the Qur’an are actually written in the metaphor of business? This is supported by the Hadiths made up of lessons taken from the life of the Messenger Muhammad. Yes, Islam is the only religion that directly guides us about how we should conduct our business.

Islam recognizes that humankind is both capable of reaching great spiritual heights and disintegrating into total immorality. Consequently, humans in a moral society need a guide to assist them in being less materialistic and more spiritual. The absence of spirituality within us will most likely lead a business into immoral activities such as stealing, lying, fraud, and deceit, etc. Without this moral bedrock within society, others will see that the only way to get ahead is by following others with these bad practices. Islam urges individuals to strive their utmost to earn large monetary rewards and spiritual profits, while at the same time being inspired to be successful and honest people. Islam encourages people to strive for success and it is certainly the responsibility of the individual to do so. However, involvement in business should also carry with it benevolent intentions for others while seeking success for oneself.

Now how do we do this? Islam also prescribes many ways to be successful. First, the concept of Tawhid is both the essence of the individual and the society he or she lives in. Tawhid implies both the mission and morality of humankind in both social and spiritual contexts, where our responsibilities fall into two categories, fard’ain which is an individual’s obligation to perform his or her religious duties and fard kifayah, which is an obligation for man to serve the entire community, through services to each other, necessary for the community to live safely and comfortably. Thus, we all have an obligation to serve and benefit the community. Business is the principal method of improving the economy and community through ethical organizations.

The building blocks of Tawhid, and therefore any business, are the concepts of al-iman (belief), al-ilm (knowledge), and al-amal (pious acts and efforts). One needs faith in themselves and Allah (SWT) to succeed, and our success depends upon our knowledge and wisdom, and the effort and acts we perform as the consequence of our faith and knowledge. This means courage, tact, and wisdom in the strategies we employ.

Islamic teachings therefore espouse that our firm should value R&D and seek to empower people to be creative and innovative. Many methods, such as exercising a sense of mutual assistance (al-ta’awun), fairness (amanah), equity (adab), and collaboration (shura) within the firm, are mentioned in great detail. The concepts of Halal and Toyyibaan specify what materials, products and processes are allowed. This governs goodness, nutrition, and sustainability. Islamic enterprises should be sustainable enterprises. These concepts in most cases closely align with industry practices of HACCP, GMP, and Fair-trade, where incidentally Halal, ethical, and Fair-trade products are now the fastest growing markets in the world with approximately 35-40% growth per annum.

In Islam, the individual’s vision, mission, and objectives in business is to achieve both success in this world and the hereafter. This is al-falah. Islam puts very little restriction upon the scale of worldly success, except specifying it must be reasonable, provides the comforts of worldly life, with consideration to the poor and suffering, and within the balance of worldly and spiritual life. Man's success must also serve the legitimate needs of the ummah. This is in great contrast to the singular objective of profit maximization in contemporary business thinking. 

Man has a free choice in what he chooses. Opposition and straying from his true nature (fitrah) will bring discord to the individual, where negative attributes will distort his true nature, which could lead him into doing evil deeds. The individual has his al-iman and al-ilm to keep him from this path of self destruction (al-fasad), which would manifest itself through nepotism, favoritism, envy, greed, corruption, injustice, and ignorance. This in Islam is the influence of satan, manifested in many different ways to man to lure him away from God’s chosen path for him. Man becomes unfocused through ignorance and lack of knowledge.

Achieving al-falah means that man has lived up to God’s trust placed upon him, through performing his ibadah, while obeying all the laws of the syar’iah, the basic law of Allah. This is where man has overcome his weaknesses in the service of Allahthrough righteous deeds (amal), in his obligation of fard kifayah. Man has reached the state of amanah, fulfilling the trust God has put in him. 

Over the last few decades, ‘Western’ management ideas and ethics have moved closer to Islamic principles and ethics. Commercially, the Islamic model is increasing in importance today. There is a growing awareness among Muslims about their duties and responsibilities to adhere to the Tawhid. As Muslim consumers require more Islamic goods and services, Islamic compliant supply chain development is a major growth industry in itself, and is becoming a feature within conventional supply chains internationally. Therefore, any person who recognizes the lessons that Islam can provide in business has the opportunity to develop a firm that can be truly competitive within the international arena.