Electronic Commerce Research and Applications 3 (2004) 280–293
www.elsevier.com/locate/ecra
E-Commerce from an Islamic perspective q
Norazlina Zainul *, Fauziah Osman, Siti Hartini Mazlan
Department of Information System, Faculty of Information and Communication Technology, International Islamic University Malaysia,
Jalan Gombak, Gombak, 53100 Kuala Lumpur, Malaysia
Received 12 August 2003; received in revised form 15 January 2004; accepted 19 January 2004
Available online 6 February 2004
Abstract
Whilst E-Commerce is spreading world-wide, many Muslims are wondering whether this new form of commerce is
acceptable from the Syariah (Islamic Law) point of view. Thus, this research paper is meant to study the Islamic
perspectives in e-commerce, particularly in its transaction, as well as the rights of the producers and customers. Issues
on the legality of E-Commerce in Islam are examined to expose to Muslims around the world so that they could benefit
from this new technology if it is proved legal and acceptable in Islam. Regarding transactions, the issues of payment
through credit card will be studied to clear the Muslims doubt on the Islamic prospect of E-Commerce. Moreover, the
paper discussed about E-Commerce and Transaction, Business in Islam, E-Commerce in Islamic Perspective which will
cover the legality of E-Commerce, Islamic Business Ethics in E-Commerce, Legitimacy of E-Commerce Contract,
Types of Contract in Islam, The Validity of E-Commerce From Islamic View, and Payment for E-Commerce Transaction, Characteristics of Producers, Rights of Producer, and Rights of Consumer. This research paper concludes the
above mentioned area with the support mainly from the Holy Book (The Quran) and the practices of Prophet
Muhammad (peace be upon him).
Ó 2004 Elsevier B.V. All rights reserved.
1. Introduction
In the last two decades, the information technology has been reshaping how the world com-
q
This paper is also presented at the ‘‘knowledge into
practice’’ by British Academy of Management Annual Conference 2003 in association with Leeds Business School held in the
Majestic Hotel, Harrogate, UK, September 15–17, 2003, and
published as the conference proceedings in CD-rom.
*
Corresponding author. Tel.: +603-2056-5182/+601-23878905; fax: +603-2056-5179.
E-mail address: norazlinaz@iiu.edu.my (N. Zainul).
municated and received information. Evidence of
the eagerness on the part of some Muslims to
embrace such technology, has been the proliferation of Islamic sites on the Internet, some of which
are devoted to Islamic education and propagation,
while others being of a more commercial or entertainment nature [9].
Before going any further, what is the relationship between IT and Islam? The Quran is a book
of guidance, which contained general principles
applicable to all times and places. The Quran
contained principles and guidance pertaining to all
spheres of lives, including the domain of IT (by
analogy). Implicitly, there is a direct link between
1567-4223/$ - see front matter Ó 2004 Elsevier B.V. All rights reserved.
doi:10.1016/j.elerap.2004.01.002
N. Zainul et al. / Electronic Commerce Research and Applications 3 (2004) 280–293
IT and the acquisition of knowledge. The importance of seeking both the divine and worldly
knowledge in Islam is stressed since the first revelation. As stated in the Quran:
‘‘Read in the name of your Lord and Cherisher, Who
created- Created man out of a clot of congealed blood’’
(96:1–2).
Accordingly, IT is one of the knowledge that
must be explored by Muslims and utilized its potential for good purposes.
The development of IT has brought the most
essential revolution to our lives, which is the
transition to an Internet–based society. One of
the major areas that is significantly affected is the
way people conducted transaction, business and
commerce in this new and competitive environment [7]. The global availability of the Internet
for the exchange of transactions between buyers
and sellers has fueled the growth of what is
known as Electronic Commerce. Electronic
Commerce, or e-commerce, is the process of
buying and selling goods and services electronically with computerized business transactions
using the Internet, networks and other digital
technologies [4].
Even though e-commerce is spreading worldwide, many Muslims still did not know about the
status of their transactions according to the Islamic perspective and Islamic business ethics.
Therefore, this research paper is meant to study
the Islamic perspectives in e-commerce, particularly in its transaction, as well as the rights of the
producers and customers.
Issues on the legality of E-Commerce in Islam
are examined to expose to Muslims around the
world so that they could benefit from this new
technology if it is proved legal and acceptable in
Islam. Regarding transactions, the issues of payment through credit card will be studied to clear
the Muslims doubt on the Islamic prospect of
E-Commerce.
In Section 2, the paper discussed about ECommerce and Transaction, in Section 3 covered
on Business in Islam, Section 4 is E-Commerce in
Islamic Perspective which will cover the legality of
E-Commerce, Islamic Business Ethics in E-Commerce, Legitimacy of E-Commerce Contract,
281
Types of Contract in Islam, The Validity of ECommerce From Islamic View, and Payment for
E-Commerce Transaction, Section 5 discussed on
Characteristics of Producers, and Section 6 covered Rights of Producer, while Section 7 covered
Rights of Consumer, Section 8 is the conclusion of
the whole paper, followed by references, and Appendices A, B, C.
2. E-Commerce and transaction
The growth of E-Commerce in the past few
years has generated considerable diversity and
complexity in its structure and applications. ECommerce referred to the use of information and
communication technologies to network economic
activities and processes, in order to reduce information related to transaction costs to gain a strategic, information advantage [5].
From Islamic point of view, e-commerce has a
similar definition with the conventional commerce,
but some rules and obligations must be aligned
with the need of Islamic principles and permissible
by Islam. As mentioned in Holy Quran:
‘‘And when the prayer is finished, then you disperse
through the land, and seek the Bounty of God, and remember God much, that you will prosper’’ (62:10).
This verse clearly shown that Allah allowed
His servants to do whatever activities on earth as
long as it did not contradict with the Islamic
principles. In Islam there is no isolation between
the spiritual and material (ritual and ordinary
actions), for all actions performed in obedience to
the command of God are considered as the acts of
virtue and half of the religious duty including e
commerce.
Rights carried many definitions in Islam. Classical Islamic jurist Ibn Nujaiym, defined rights as
‘‘the entitlement of a person to a thing and an
exclusive assignment’’, which is the basic ingredient of the general concept of rights for the rights
bearer.
Modern scholars have made advancement on
several definitions for the concept of rights in various perspectives. Some of the definitions, viewed
rights from the Islamic laws, while others tend to
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emphasize the concept of interest. To avoid engaging in technicalities to overlap, the author, [6]
made a conclusion to define rights as ‘‘an exclusive
appropriation or power over something, or demand
addressed to another party, which the Islamic laws
has validated in order to realize a certain benefit’’.
In the e-commerce, the example of rights which
concerned here are the rights of privacy, consumer
data protection, rights to be secure in dealing with
the transactions, rights to know the detailed of the
product, rights of producer to get information
from customer, rights to get the payment when the
products are delivered and many more.
3. Business in Islam
The fundamental teachings of Islam derived
from four sources; the Quran and the Sunnah
(practices of the Holy Prophet), intellect (wisdom),
and consensus of religious scientist. The Quran
viewed the life of man as a continuous process.
Man had to work for success and comforts not
only for this world but also for the hereafter.
Therefore, the Quran not only permitted and encouraged man to involve in all sorts of productive
work (such as business), but also enjoined it as a
duty upon Muslims.
In Islamic business concept, Muslims should be
very faithful and God-fearing in any kind of
business or trade. As stated in the Quran:
‘‘... God has permitted trade and forbidden usury. Those
who after receiving direction from their Lord, desist,
shall be pardoned for the past; their case is for God;
but those who repeat the offence are Companions of
the Fire: they will abide therein forever’’ (2:275).
Hence, the Quran regarded business as lawful,
good and beneficial for both the individual and the
society. Fair trade and honest business are praised,
recommended and strongly exhorted to by the
Quran.
4. E-Commerce in Islamic perspective
As far as Muslims’ welfare is concerned, Islam
accords a paramount importance to the Trading
sector as a major source of wealth and gale force
wheel of the economy.
In this respect, the holy Quran abounds with
many references to the trade and commercial activities. For example, the Quranic ayats that support this statement are:
‘‘Woe to Al-Mutaffifin [those who give less in measure
and weight (decrease the rights of others)]’’ (83:1).
‘‘O you who believe! Eat not up your property among
yourselves unjustly except it be a trade amongst you, by
mutual consent.And do not kill yourselves (nor kill one
another).Surely, All^ah is Most Merciful to you’’ (4:29).
What is more striking for a Prophetic authority
dated backward to as long as fourteen centuries
ago, is that Islamic teachings had been even aware
of what is conventionally known as ‘‘Trading Data
Management’’. This is justified by the fact that the
religion of Islam is broken into four major legalistic
sections, among which is ‘‘Islamic Business Transactions’’ (Fiqh al-Mu’amalat). Needless to speak
about the very ample provisions set by Islamic laws
in regard to the efficient treatment of wealth.
However, this research drew on the means of the
smooth functioning of business transactions and
commercial activities from the Islamic prospect.
More particularly, what does Islam cater for the
‘‘E-Commerce’’? Rights from the very outset, our
eminent Sunnah (act of Prophet SAW), in some
aspects, preached for the same quality-values offered by ‘‘E-Commerce’’, particularly, accuracy
and veracity, flexibility, convenience, contract
standardization, speed, cost effectiveness, and others. In this connection, our Prophet (SAW) said:
‘‘Allah showers his mercy and compassion upon the one
who is tolerantly flexible, both when buying and selling’’.
Nonetheless, there are a number of serious legal
drawbacks that are likely to arise in the field of
‘‘E-Commerce’’, particularly, short selling, and
absence of concrete (hand to hand) delivery, uncertainty (Gharar), juridical authentication’s
problems, and much more.
According to the analysis done by [3] in her
research, she found that Islam accepted the conduct of E-Commerce as a new way or technology
to facilitate economic transactions. This is based
on the Syariah (Islamic Law) legal values, namely
N. Zainul et al. / Electronic Commerce Research and Applications 3 (2004) 280–293
the obligatory (Wajib), recommended (Mandub),
permissible (Mubah), reprehensible (Makruh), and
forbidden (Haram). In an interview with Ustaz
Mustafa Omar (please refer to 10.1 Appendix A),
he also mentioned that Islam is not against ECommerce; instead Islam basically encouraged ECommerce as one of the new way of conducting
business. He further explained that traditionally,
business was conducted verbally face to face but
today the two contracting parties are connected
together via computer. However, [3] added that
what is much of a consent in conducting E-Commerce is the moral perspectives that lead to a more
accountable and responsible trader. As such, a few
Syariah issues may be referenced while discussing
some matters related to the ethical principles in
Islamic business.
4.1. Legality of E-Commerce
Based on earlier discussion, it is clear that
Quran (Holy book) not only permitted but also
encouraged the Muslims to engage in an honest
and mutually beneficial trade. Related to commerce, Quran revealed two prerequisite for the
validity of any given transaction; namely, permissibility and harmlessness. Permissibility means
that the commodity and service in question must
be permissible by the Syariah (Islamic Law); while
harmless means that the commodity or the service
must not be harmful for the contracting parties or
the general public. Hence, regardless of whether
the transaction is conducted in the traditional
commerce or electronically, the above prerequisites must be fulfilled by all Muslim businessmen.
Since E-Commerce is conducted using computers and networks, there are certain conditions
that must be observed to ensure the legality of ECommerce in Islam. First, there should be clarity
in the communication and the products offered
must be clearly defined, for example, the pictures
of the products must be clearly displayed on the
screen, give detailed specifications, the prices, the
mode of delivery and the mode of payment must
be clearly stated. Second, both contracting parties
must receive the message in order to achieve conformity in the agreement (concluding the contract). Third, there must be continuity in the
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communication, whether in the transmission of
message or in consulting between one another via
e-mail [Ustaz Mustafa Omar].
4.2. Islamic business ethics in E-Commerce
Truthfulness, sincerity and honesty are basic
ethical value of Islam. A businessman has to be
honest, truthful and straightforward in all his
business dealings. There is no scope of cheating,
speaking lies, swearing too much and false advertising in Islamic framework of business. Even in
the Hadith, the Prophet said:
‘‘He who has reinforced the truth with his tongue, his reward will continue growing until the Day of Resurrection where Allah will pay him his full reward.’’
While effort put to persuade people to buy their
products, advertisers are prone to exploit ambiguity, conceal facts, exaggerate and use psychological approach to persuade customers to buy
according to their emotional needs, not to reasons.
These tricks are especially effective and put the
customers in more vulnerable position under the
E-Commerce environment, as customers only rely
on Web information to make purchasing decision.
Thus, confidence of customers played an important role in the advancement of any business
concern. As stated in the Quran:
‘‘Allah do command you to render back your trust to
those to whom they are due; and when you judge between
man and man, that you judge with justice...’’ (4:58).
The concept of trust is very important because
without trust, development of E-Commerce could
not reach its potential.
4.3. Legitimacy of E-Commerce contract
Islam defined contract as an agreement of both
parties to the fulfillment of a certain things rising
from the agreement and the concurrence of the
offer and acceptance, according to Mahmood
Sanussi. As stated in the Quran:
‘‘O you who believe! Fulfill (all) obligations...’’ (5:1).
According to most Muslim scholars, there are
four pillars of contract that must be fulfilled,
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which are offer (ijab) and acceptance (qabul),
two contracting parties, subject matter and
the mode of expression (sigha) [Ustaz Mustafa
Omar].
First, the offer is made by the first party to
the contract. Then, it gave and confirmed the
freedom of acceptance from the second party.
The offer and acceptance must be clear to both
parties, confirmed by both parties and there
must be continuity from the offer to the acceptance (there is a connection between offer and
acceptance). Second, the capacity of the two
contracting parties to enter into a valid contract
is majority, the age of puberty and has a sound
mind. Third, the subject matter is the object of
the sale and it must be beneficial, lawful in Islam (halal), valuable, under possession, in existence and deliverable. Fourth, the mode of
expression is the utterance of both contracting
parties expressing their wills and it could be
through words (act) or in writing, but it should
be clear to both parties [2]. In Quran mentioned:
‘‘O you who believe! When you contract a debt for a fixed
period, write it down. Let a scribe write it down in justice
between you. Let not the scribe refuse to write as Allah
has taught him, so let him write. Let him (the debtor)
who incurs the liability dictate, and he must fear Allah,
his Lord, and diminish not anything of what he owes.
But if the debtor is of poor understanding, or weak, or
is unable himself to dictate, then let his guardian dictate
in justice. And get two witnesses out of your own men.
And if there are not two men (available), then a man
and two women, such as you agree for witnesses, so that
if one of them (two women) errs, the other can remind
her. And the witnesses should not refuse when they are
called on (for evidence). You should not become weary
to write it (your contract), whether it be small or big,
for its fixed term, that is more just with Allah; more solid
as evidence, and more convenient to prevent doubts
among yourselves, save when it is a present trade which
you carry out on the spot among yourselves, then there
is no sin on you if you do not write it down. But take witnesses whenever you make a commercial contract. Let
neither scribe nor witness suffer any harm, but if you
do (such harm); it would be wickedness in you. So be
afraid of All
ah; and Allah teaches you. And Allah is
the All-Knower of each and everything’’ (2:282).
Based on the Syariah, contract in E-Commerce
is legitimate because all the four pillars of Islamic
contract are fulfilled.
4.4. Types of contract in Islam
There are various types of Islamic contract.
Some of them which related to E-Commerce are
Ordered Sale (Bai’ Al-Salam), Manufacturing
Sale (Bai’ Al-Istisna’) and Deferred Sale (Bai’
Muajjal).
Ordered Sale (Bai’ Al-Salam) is a contract of
sale in which the price is fully paid in advance
while the product will be delivered in future [2].
The Ordered Sale is legal in Islam and there are
verses in the Quran which proved the legality of
this contract. Besides, there is one Hadith narrated
by Ibn Abbas that stated:
When the Prophet came to Madinah, the people
were making salam (ordered) sale of the future
harvest of their fruits (in one, two and three years).
Prophet then said:
‘‘Whoever wants to make salam sale, do so upon specified weight and for a specified duration of time’’.
There are necessary conditions for the subject
matter of Ordered Sale:
1. Must be able to be specified.
2. Must be delayed in its delivery.
3. Must be available in the market.
The rulings on Ordered Sale is that the ownership of the ordered subject matter is established
to the buyer (upon receipt of the subject matter
due to the buyer later and obligatory upon the
seller until he delivered the ordered subject matter)
[2].
Manufacturing Sale (Bai’ Al-Istisna’) is a contract of sale where the buyer gave an order to a
workman (seller) to make a definite thing with an
agreement to pay definite wage or price for that
thing when it is made. It is similar to Ordered Sale
since it is also something non-existence; but the
price need not be paid in advance; no specification
of delivery and the subject matter is not available
in the market [2].
Deferred Sale (Bai’ Muajjal) is a contract of sale
in which both contracting parties agree that the
payment of price for the product shall be deferred
[2]. The Deferred Sale is legal in Islam and there
are verses in the Quran which proved the legality
of the contract. There are Syariah rules of sales
which are applicable to the Deferred Sale:
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1. Subject matter must be in existence.
2. Subject matter must be owned and possessed by
the seller.
3. Sale is instant and absolute. It is not pending on
future date.
4. The price is certain.
5. No conditions attached.
So, E-Commerce falls under which type of contract? ECommerce may fall under any of the three types of Islamic contract mentioned above, depending on the mode
of communication and the type of business being conducted. When a company which is conducting sales online took the money first from the customer and
delivered the product in the future, it is an Ordered Sale.
If the company made an agreement with the customer to
produce the product ordered and take money from the
customer only after the product is made, it is a Manufacturing Sale. And if the company agreed to sell the product to the customer in deferred price or in installment,
then it is a Deferred Sale.
4.5. The validity of E-Commerce from Islamic view
According to Ustaz Mustafa Omar, initially
there are five stages that were recommended by
Islam to ensure the validity of the e-commerce.
There are:
4.5.1. Initiating a contract (Al-Ta’aqut)
This is the first stage of initiating the contract
where both parties checked whether all four pillars
to bind the contract are present. Usually there are
offer and acceptance, two contracting parties,
subject matter, and the mode of expression must
be met. If the owner of the product is not able to
present, there should be an agent to ensure that the
company is exist. Even if the agent acted as the
representative of the company, he or she should
produce an authentication certificate to ensure
that he or she is the entitled person to act on behalf
of that company.
Regarding the subject matter, other than the
conditions mentioned before, which must be
something permissible, deliverable, and owned
by people, the subject matter must be available
somewhere in the market (global market). Regarding the mode of expression, since the contract is performed online, the communication
must be clear and the system worked properly
285
without any interruption such as server down
and virus attack.
The most important thing in that initiating
stage is that the contract should meet the Islamic
requirements. For example, the contracting parties must be sound mind, and sound judgment to
make sure that one dealt with the rights person.
Thus, the possibilities they would be exploited is
reduced.
4.5.2. Confirming the validity (Sihha)
During the process of negotiation, the contract
must be free from the following elements:
1. Interest (Riba’) is defined as ‘‘an increase or excess in an exchange or sale of commodities,
which accrues to the owner without giving in
return any equivalent counter value’’ [8]. Islam
strictly prohibited interest, as stated in the
Quran:
‘‘O you who believe! Devour not usury, doubled and
multiplied; but fear Allah; that you may (really) prosper’’ (3:130).
2. Uncertainty (Gharar) in business means ‘‘to undertake anything blindly without sufficient
knowledge and there is an element of risk’’ [8].
For example, during the negotiation, the subject
matter is concealed from the buyer without the
buyer knowing exactly its future result; and
Quran has clearly forbidden this kind of business transaction.
3. Deceit or fraud is ‘‘a statement by which one
party is induced to enter into the contract with
the expectations that he could get profit or gain
out of the contract; but unfortunately it was
otherwise’’ [8].
4. Duress is defined as ‘‘threat of something disagreeable for getting an act done by the person
without his consent’’ [8].
5. Any elements of gambling (Maisir).
4.5.3. Implementation (Nafath)
In this stage, two things must be ensured:
a. The person offering the product is the real owner
of the product sold and has the absolute rights
over the product (has authority).
b. The product is free from any liabilities.
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4.5.4. Binding (Ilzham)
In this stage, both contracting parties have to
sign a contract which is binding (lawful contract).
Before signing the contract, the buyer must verify
the company (seller) and the product sold through
agents or any other people to confirm its existence.
The reason is that the buyer could only see the
company through it’s’ website (on the computer
screen) and websites could be developed by anybody. So the real existence of such a company is
actually a question mark. After signing the contract, the buyer must keep the contract copy of
the agreement in any format, paper or electronic
for later reference to avoid any manipulation or
exploitation.
4.5.5. Delivery (state of exchange)
This is the final stage where both contracting
parties have to exchange the counter values that
are the price and the product. Normally, E-Commerce use credit card as the mode of payment, but
Muslims should avoid using credit card because it
involves interest (Riba’). Muslims may used other
alternatives such as payment through bank (will be
explained in the next section). Once the buyer received the product, the buyer has to check and
confirm whether the product met the buyer’s
conditions and specifications. Here, the buyer
could practice the option of condition if there are
certain conditions did not meet, but it must be
stipulated before in the contract. In Islamic contract, there are also other options that could be
practiced by both the contracting parties accordingly such as the option of defect, option of sight,
option of determination and option of meeting
(Majlis).
However, the issue of Islamicity of E-Commerce
is in question when the customer only pays the
15% minimum requirement where the issuing
bank would charge him or her 2% monthly interest rate on the remaining balance [3]. Regarding this issue, Ustaz Mustafa, while
highlighting that there is still not exist any Islamic credit card system, suggested using the
Murabahah System.
Murabahah is generally defined as a sale with
Mark-up or a cost plus profit sale. It is the sale of a
product for the price at which the seller has purchased it, with the addition of stated profit to be
known to both parties-the buyer and the seller.
Murabahah is used as an Islamic contract of financing because it allowed the bank to use it as a
credit vehicle to finance the buyer against a predetermined profit without bearing any risk [2]. The
Murabahah System is considered legal in Islam
based on evidence from the Quran:
‘‘O you who believe! When you deal with each other, in
transactions involving future obligations in a fixed period of time, reduce them to writing...’’ (2:282).
Even in one Hadith, it is stated that the
Prophet bought a camel from Jabil and the
payment was made in Madinah after arrival; and
when asked regarding the matter, the Prophet
answered:
‘‘A sale for a deferred payment by installment is good’’.
Therefore, in E-Commerce transaction, the
Murabahah System could be used as the alternative method of payment replacing the credit card.
Moreover, there exist different ways to online
payments such as payments via electronic checks,
and debit cards.
4.6. Payment for E-Commerce transaction
The most debatable issue in E-Commerce is
the method of payment. The core concept is that
the customer should be able to make payment
over the network easily and in secure. Today, the
most common method of payment for purchasing
on the Web is via credit cards. Assume that using
credit cards to settle payments in E-Commerce is
permissible or halal. It could be halal if the
customer paid the whole bill before the due date.
5. Characteristics of producers
There are some guidelines that the seller or
producer must know when they involved in commerce regardless of whether it is traditional or
electronics commerce.
Islam said that the first goal of a Muslim doing
business is to seek the pleasure of Allah and they
should aim higher goal when they do business.
N. Zainul et al. / Electronic Commerce Research and Applications 3 (2004) 280–293
287
Higher goal is meant by, improving the inventory,
the types of product in it and strived to find ways
to improve services and profit margin. Therefore
making profit is the secondary aim for them but it
must be balance between seeking profit and for
achieving the pleasure of Allah in here and here
after.
Secondly, they should be truthful and honest.
Prophet Muhammad said:
communication indirectly lead to the mishandling
the information, exploitation of consumers’ data
and many other issues. When something bad
happened, people tend to point to the producers of
the products. Therefore, to be on the safe side,
Islam suggested them to practice the concept of
justice. Justice means placing things in the rights
place where they belonged. As Allah mentioned in
the holy Quran:
‘‘The honest and truthful businessmen will be in paradise
amongst the prophets, the truthful, and the mytyrs’’.
‘‘God doth command you to render back your trusts to
those to whom they are due; and when ye judge between
man and man, that ye judge with justice: verily how excellent is the teaching which he giveth you! For God is
He Who heareth and seeth all things’’ (4:58).
In the case of e commerce these two elements
are essential to gain costumers’ confident to deal
through the Internet.
Thirdly, seller should open to the critics, scrutiny and to be clean. By practicing these three
elements indirectly lead other people to respect
such businessmen. Here, clean did not just meant
by the products should be permissible, but also
clean in all aspects of business such as not exploiting customers for private interest and not
practicing usury. This included the ingredients of
the products which should be permissible and it
should not contain anything that lead to ambiguous conditions. For example as prophet Muhammad said:
‘‘Cleanliness invites towards faith (Iman) and faith leads
its possessor to paradise’’ (Tabarani).
Furthermore, Islam encouraged Muslim businessmen to work with others in the market (aiming
to market the same product). This may be hard to
practice but in Islam brotherhood in the society
should not be forgotten. By cooperating with each
other they would share the experience and learnt
how to cooperate, as well as and built a bigger
business.
6. Rights of producer
Similar to the consumers, producers also played
important roles to ensure the e-commerce progress
efficiently. They are the one who supplied products
and advertised them on the Internet.
Basically in Islam, producers must possess the
elements of justice because in dealing with virtual
This verse clearly showed that Allah commanded Muslim to practice justice on the rights
place and to whom they would deal with. They
should not be bias in making decision. At the
same time they have to know their rights, such as
the rights to get the payments when goods are
delivered, and the rights to force consumers to
buy the products when they met all the requirements at the time contract is bound between both
parties.
Furthermore Islam said that if the producers
wanted to practice the concept of agent, they
should clearly define the condition, which entitled
the agent to be on behalf of the producers. This
removed the ambiguous situation when a consumer dealt with the related company. Indirectly,
the consumers could gain confidence in buying the
products.
Besides, Islam also suggested few replacements of using credit card as a method of
payment such as letter of credit, bank draft and
many more. Muslim producers should think
any alternatives to improve the efficiency of
payment system in e-commerce. This is because
in Islam, anything that involved in usury
should be avoided as we have covered in
Section 4.5.
7. Rights of consumer
Consumer is one of the important elements
which lead to the successful of e-commerce.
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Muslim should alert with the changes of the
technologies around them especially the growth
of e-commerce. Otherwise they would be left
behind. The main reasons which lead to the lack
of knowledge about e-commerce are; the attitude
of Muslim community themselves, lack of
publicity, campaigns and exposures about the
consumer rights, which result to less understanding from consumer perspectives concerning
these issues. Some famous issues which always
been highlighted are privacy, data protection,
and the rights to know the details of the
products which are discussed more in Appendices A, B, C.
8. Conclusion
E-Commerce is a new fundamental business
paradigm that went against the traditional business
paradigm. It emerged from the convergence of
several major information technologies and business practices. The ability of E-Commerce to reduce the transaction cost that is inherent in the
traditional way of doing business is one of the determinant factors that cause e-commerce to evaporate in its success continuously. On the other
hand, issues such as the legality of E-Commerce,
the legitimacy of the contract and its transaction
have become the major concerns of many Muslims.
Islam encourages E-Commerce as a new way or
technology of doing business. However, Muslim
businessmen must ensure that he strictly followed
the Islamic principles of conducting business. The
transactions should be conducted in the truthful
manner, there should be clarity in communication,
avoid interest (Riba’) and ensured all the pillars of
Islamic contract are met. Islam also gave equal
rights to the producers of the products and consumers to exercise their rights when it is needed.
Regardless of the mode of conducting business,
every Muslim must be faithful and God-fearing in
conducting business. He must ensure he is in lined
with the Quran and Sunnah and most importantly
is his intention should be for the sake of Allah, not
merely for the worldly gained.
Appendix A. Interview session with Ustaz Mustafa
Omar, lecturer from kulliyyah of economics and
MGT Sciences, IIUM
Basically, what Islam says about E-Commerce?
What are the Islamic Perspectives of E-Commerce?
Islam is not against E-Commerce. Islam basically encourages E-Commerce as a new way of
conducting business. Traditionally, business was
conducted verbally face to face but today the two
contracting parties are connected together via
computer. However, there are conditions that need
to be observed for the validity of E-Commerce in
Islam. According to most scholars, there are four
pillars of Islamic contract, namely ijab and qabul,
two contracting parties, the subject matter and
sigha (the mode of expressions). Traditionally,
when two contracting parties involved in a contract, the place is called ‘majlis’ (meeting) where
both parties communicate face to face. Today,
with the emergence of E-Commerce, we have to
redefine ‘majlis’ as the communication which takes
place via computers.
Since E-Commerce is conducted using computers
and networks and this is a new mode of conducting
business, how about its legality in Islam? Can you
explain it from the Syariah point of view?
There are certain conditions that must be observed to ensure the legality of E-Commerce in
Islam. First, there should be clarity in the communication and the products offered must be
clearly defined, for example, the pictures of the
products must be clearly displayed on the screen,
give detailed specifications, the prices, the mode of
delivery and the mode of payment must be clearly
stated. Second, both contracting parties must receive the message in order to achieve conformity in
the agreement (concluding the contract). Third,
there must be continuity in the communication,
whether in the transmission of message or in consulting between one another via e-mail.
What are the drawbacks of E-Commerce according to Islam? (the problems that arise from ECommerce)
There must be much concern on the mode
of payment and the delivery. First, the mode of
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payment must be Islamic. Second, the mode of delivery-the product must reach the buyer. This two, I
could say, are problems that the buyer always faced
when purchasing online (through E-Commerce).
The most common method of payment in ECommerce is via credit card. When customer use
credit card, he/she only pays the 15% minimum requirement where the issuing bank will charge him/
her 2% monthly interest rate on the remaining balance. Here, the issue of Islamicity of E-Commerce is
in question. So, can you give some explanation regarding this issue? Is there any halal credit card
system for such transaction or is there any other
alternative method of payment for E-Commerce
transaction?
Credit card involves the element of Riba’ and
as I know, there is still not exist any Islamic credit
card system. So, I would suggest using the
Murabahah system where the buyer can ask any
Islamic bank to purchase the product on behalf of
him and he buys back the product and does
payment in installment. The form is called Letter
of Credit.
How can a Muslim who conducts business online
ensure he is doing halal business and making profit
in halal or correct way?
There are five stages that a Muslim businessman should follow to ensure he is doing business
online in a correct way:
1. Initiating a contract (Al-Ta’aqut)
In this stage, all the four pillars of Islamic
contract, namely offer and acceptance, two contracting parties, subject matter and the mode of
expression must be met. Regarding the subject
matter, other than the conditions mentioned before, the subject matter must be available somewhere in the market (global market). Regarding
the mode of expression, since the contract is performed online, the communication must be clear
and smooth without any interruption such as server down and virus attack.
2. Confirming the validity (Sihha)
During the process of negotiation, the contract
must be free from the following elements: interest
(Riba’), uncertainty (Gharar), deceit, duress and
any elements of gambling (Maisir).
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3. Implementation (Nafath)
In this stage, two things must be ensured:
a. The person offering the product is the real owner of the product.
b. The product is free from any liabilities.
4. Binding (Ilzham)
In this stage, both contracting parties have to
sign a contract which is binding (lawful contract).
Before signing the contract, the buyer must verify
the company (seller) and the product sold through
agents or any other people to confirm its existence.
After signing the contract, the buyer must keep the
hardcopy of the agreement for later reference to
avoid any manipulation or exploitation.
5. Delivery (state of exchange)
This is the final stage where both contracting
parties have to exchange the counter values that are
the price and the product. Once the buyer received
the product, the buyer has to check and confirm
whether the product met the buyer’s conditions and
specifications. Here, the buyer can practice the option of condition if there are certain conditions not
met, but it must be stipulated before in the contract.
On the consumer side, how can they ensure that
the products sold online are halal? For example,
selling chocolate online, the chocolate must be made
from halal milk; or selling leather products like
shoes, the shoes must be made from halal animal
skin; the animal is slaughtered correctly and so on.
Can you explain on this issue?
The consumer can verify about the ingredients
of the product from any Muslim organizations
that is in that country. For example, the consumer
buys product from US, he can go to any Islamic
websites that is also at US to verify the product.
Alhamdulillah, now we have a lot of Muslim
websites which deals with different area of business. So there is no problem.
E-Commerce falls under what type of Islamic
contract?
E-Commerce is a mode of production that can
interact with so many types of Islamic contract. It
depends on the mode of communication and the
type of business being conduct. For example, ECommerce may be categorized as Bai’ Al-Salam
(Ordered Sale), Bai’ Al-Istisna’ (Manufacturing
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Sale) or Bai’ Muajjal (Deferred Sale). So, there is
no specific type.
From Islamic perspectives, what are the rights
that both parties must know when they involved in e
commerce?
Islam has provided rights for both parties.
Among the rights of consumers are the rights to
know about the goods, prices, time of delivery, and
also the rights to exercise to option (to accept or to
reject the product if it meet the certain requirement).
Beside that consumer also has the rights to get privacy when they get involved with the e commerce.
Beside, the seller has the rights to receive the
price and also the rights of option to force the
buyer to buy the products if it fulfills the requirements that is needed.
Regarding the issues of privacy and data protections, what is your comment?
If we look to the situation, e commerce is a global
market and when people engaged in this new system, the will automatically are open to the global
market. Internet is not secured, although we have
the rules that everybody should follow but at the
same time the system is not guaranteed the security
of the technology. Therefore, the failure of the system to provide the security and privacy is the subject
matter not the laws. As long as the system does not
provide a strong and reliable mechanism in the e
commerce the privacy and data protection issues
cannot be settle.
What consumer should do in order to know that
products available in the website is made from permissible ingredients?
According to my knowledge, there are a lot of
Muslim website in Western countries and some of
them will provide the information if we ask about
the ingredients of the products and the related
information that is required by the user especially
Muslim consumer. Therefore, we will use that facilities or services in order to have clear pictures
about the product and the most important things
is that the product is permissible by Islam.
Regarding the methods of payment (payment
through credit cards) and the methods of delivery,
what Islam says about it and is it permissible by Islamic laws and what is the appropriate way to deal with
the company that sent the product not in proper way?
Actually credit cards are one of the methods of
payment and as we know the credit card involved
in usury. As a Muslim we should avoid anything
that related to usury. If possible, Muslim should
try to keep away from getting involved with this
method of payment and use other options such as
bank draft, letter of credit and many more.
Appendix B. Islamic business ethics
There are many principles that governed the
Islamic business ethics. According to F.R Faridi,
there are nine specific principles but only the first
four related to the conduct of E-Commerce which
is:
1. Adherence to contract. Islam attached extraordinary importance to the fulfillment of contracts and promises. A Muslim trader should be
truthful, kept up his trusts, promises and contracts. According to Islam it is desirable to put in
black and white all the business contracts and
dealings. As stated in the Quran:
‘‘O you believers! Fulfill your contracts’’ (5:1).
2. False advertising and misrepresentation. One
of the most common unethical practices in modern
business is to deceive customers by launching
misleading advertisements and publicity campaigns. Islam strongly condemned all these practices and urged its followers to avoid them. As
stated in the Quran:
‘‘And do not withhold from people the things that are
their due and commit not evil in land with interest to
spread disorder’’ (11:85).
3. Accurate measurement and weights. Defrauding in weight is a very old type of exploitation. It was due to such fraud that the people of
Shuaib were annihilated. The Quran has emphasized the ethical responsibility of business regarding weight and measurement.
‘‘Give full measure when you measure and weight with a
balance that is straight...’’ (17:35).
4. Interest and unlawful trade. Islam declared the
interest (Riba) as the one of root causes of some
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economic evils. Islam offered an interest-free
business system based on Islamic principles. There
are many Quranic verses revealed on the prohibition of Riba such as:
‘‘Those who eat Rib
a (usury) will not stand (on the Day
of Resurrection) except like the standing of a person beaten by Shait^
an (Satan) leading him to insanity. That is because they say: ‘‘Trading is only like Riba (usury),’’
whereas All
ah has permitted trading and forbidden Riba
(usury). So whosoever receives an admonition from his
Lord and stops eating Riba (usury) shall not be punished
for the past; his case is for Allah (to judge); but whoever
returns [to Rib
a (usury)], such are the dwellers of the Fire
– they will abide therein’’ (2:275).
‘‘O you who believe! Be afraid of Allah and give up what
remains (due to you) from Riba (usury) (from now onward), if you are (really) believers’’ (2:278).
5. Hoarding and profiteering. The lust for money
and the overemphasis on profit maximization
leads to hoarding of essential commodities during
the periods of scarcity or crises, with a view to sell
the same at high prices. Islam strongly condemns
hoarding and speculative buying and warns businessman about the dreadful consequences on this
behaviour. This is supported by one Hadith narrated by Ibn Majah that stated:
‘‘The one who brings food to the market, Allah will help
him, provide well for his family and the one who hoards
is cursed by Allah’’.
6. Destruction of surplus produce. One of the
‘‘modern’’ methods of maximization adopted by
western business organizations is to destroy the
surplus produce with a view to create artificial
scarcity of goods and increase price by artificial
excess in demand. Islam strictly prohibits this
practice of trade. In one Hadith, the Prophet
said:
‘‘I dislike three things of you: useless argumentation,
wasting goods, and excessive questioning’’.
7. Fair recruitment practices. One of the most
important areas of public concern is the employment practices in organizations. Islam urges
Muslim traders to practice fair recruitment and
avoid discrimination, nepotism, corruption, and
bribery which are very common in big organizations. As stated in the Quran:
291
‘‘Allah do command you to render back your trust to
this to whom they are due; and when you judge between
man and man, that you judge with justice...’’ (4:58).
8. Fair treatment of workers. Employers should
not treat workers as machines or tools, but as
human beings. Fair wages, good working environments, suitable work and excellent brotherly
treatment should be provided to workers. Even in
the Hadith, Prophet said:
‘‘Give the laborer wages before his perspiration be dry’’.
9. Protection of environment. According to Islam, no individual or organization has the rights to
utilize its resources in such a way that damage or
cause inconveniences to people or society in general. This is mentioned in one Hadith that stated:
‘‘There is no scope for causing damage in Islam neither
in the case of independent action nor as a reaction’’.
Appendix C. Rights of consumer
Some famous issues which always been highlighted are privacy, data protection, and the rights
to know the details of the products.
C.1. Privacy
The CEO of Jagat ICT law consulting stated that
‘‘Internet is not only as a means of by which people
can communicate but also providing opportunities
for the marketing of data and information within a
second at negligible cost’’. Parallel with the growth
of the e-commerce, the CEO added that this fact has
given rise to growing concern about the rights to
privacy of more than 655 million people worldwide,
including 5.7 million internet users in Malaysia,
South-East Asia’s largest Internet center.
The recognition of privacy in general deeply
ingrained in history and the religious teachings.
This clearly shown in the Holy Quran:
‘‘O ye who believe! Enter not houses other than your
own, until ye have asked permission and saluted those
in them: that is the best for you, in order that ye may
heed (what is seemly). If ye find no one in the house, enter not until permission is given to you: if ye are asked to
go back, go back: that makes for greater purity for your-
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selves: and Allah knows well all that ye do’’ (24:24).
The above verse clearly highlighted the important of one to respect the privacy of other people.
The similar concept is applied in e-commerce
where the unauthorized parties should not intercept others’ secret information when they dealt
through the Internet. According to Ustaz Mustafa
Omar, when the consumers started using the internet or e-commerce as the medium of transactions, it is impossible for them to get any privacy
because e commerce is open market which leads
them to be exposed to the global situations.
According to Prof. Abu Bakar, the aspects that
have always been highlighted in privacy related to
e-commerce are, privacy of information which involved the establishment of rules governing the
collection and handling of personal data such as
credit information, and also the privacy of communications which covering the security and privacy of mail, telephones, email and other forms of
communication.
Ustaz Mustafa Omar stated that, the issue of
privacy is being discussed from time to time but it
remained unsettled. According to him although
the laws and regulations were legislated, these situations did not show any signals to reach an end.
This is because the nature of the system which is
opened and it enabled the hackers to take the
opportunities to gain an unauthorized access to
others’ information.
C.2. Data protection
Personal data is defined as any information recorded in a document in which it could practically
be processed wholly or partly by any automatic
means, which direct to a living individual who is
identifiable in the possession of the data user [1].
Data protection is one of the rights that must be
taken into considerations when consumers made a
transaction through the Internet. Upon submitting
or fulfilling the purchasing form, the consumer
expected that the personal information remained
confidential (not broadcasted on the Internet).
Moreover, they expected that information would
not be stolen or used by internal personnel for
private or commercial use, not to be traded to the
third parties, and the system must be strong enough to protect the data from unauthorized access.
These are the basic ingredients lead to the success
of e-commerce in gaining the consumers’ confidence that their secret information are not being
exploited by other people.
C.3. Rights to know the details of the products
It is common for individuals to know the details
of the products. According to Ustaz Mustafa
Omar, Islam has set the requirements that the
person must fulfilled before they could engage with
the transactions through the Internet. The requirements that should be taken into considerations are related to the price, time of delivery,
how the products being delivered, the ingredients
of the products, and many more. The reason is,
when all requirements are fulfilled, and then the
probabilities that one party is being exploited by
another could be eliminated.
For example, a consumer who wanted to buy
Al-Quran from an online bookshop. During the
process of completing the form and binding
the purchasing contract, the buyer might stated
the conditions that the company should observe
when they wanted to deliver the product to the
consumer. After the holy Quran is delivered, the
consumer noticed that the company delivered it
in unacceptable manner, such as it was not
wrapping properly, or the product is dusty.
Therefore, as a consumer one has the rights to
reject that good because the conditions that were
stated in the contract have not being fulfilled by
the company.
According to Ustaz Mustafa Omar, this
case fundamentally focused on the issue of
morality.
References
[1] Abu Bakar Munir, E commerce and The Law on Privacy,
Thomson, Sweet and Maxwell, Asia, 2003.
[2] Ahmad, Dr. Dziauddin, The Theory of Riba, 2001.
[3] Hussin, Dr. Husnayati, E-Commerce: Exploring Some
Issues from the Islamic Perspective, 2002.
[4] Kenneth C. Laudon, Jane P. Laudon, Management
Information Systems, sixth ed., Prentice Hall International,
2001.
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[5] Thomas R. Leinbach, Stanley D. Brunn, Worlds of ECommerce: Economic, Geographical and Social Dimensions, Wiley, England, 2001.
[6] Mohammad Hashim Kamali, Freedom of Expression in
Islam, first ed., Berita Publishing Sdn Bhd, Kuala Lumpur,
1994.
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[7] Muhammad, Muhd Rosydi, An E-Commerce Framework
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[8] Sanussi, Mahmood, Gharar, 2000.
[9] Yousif, Dr. Ahmad F, Information Technology in 21st
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