Doing business in Islamic countries can be a little complex as compared to any other country. Based on equality, justice, and fairness Islamic law emphasizes an approach to commercial and business transactions. Here, in this article, we are going to discuss the uniqueness of business law of the Islamic world.
- Since the messenger of God, Prophet Muhammad, had worked as a merchant before the revelation of the Quran, perhaps it’s not surprising that Sunnah prescribes strict rules regulating partnerships, loans, leases, currency exchanges, and trading.
- There is a ban on transactions involving prohibited industries because it ensures that contracts and commerce do not encourage activities that are contrary to Islam. For example, the Islamic bank would not finance any transactions involving alcohol. They may not charge interest when lending money to other banks.
- Certain commercial law provisions are unfamiliar to lawyers of other legal systems. For example, though it binds parties to long-term contracts, Islamic law can, however, release parties if they become dissatisfied with the contract. Each party even has the right to unilaterally terminate even if the contract is for a fixed time.
- When a business is in trouble compassion is required. Any country having Islamic influence in its legal structure is in bankruptcy or is experiencing financial reversals, you can’t put pressure on them.
- Speculation is prohibited because it is exploitative according to the teachings of Islam. They don’t at all encourage gambling. It is a major situation you need to be aware of since gambling also relates to futures, it relates to currency hedging.
- The most extensive application of Islamic Law is in Saudi Arabia. In such countries, laws are not written and legal precedent is not always followed. Banking and insurance suits are not enforced. Damages for lost profits are not always awarded because of their speculative nature.
- Islamic banks offer exclusively Halal investments. Since debt and speculative instruments are prohibited, Islamic businesses often use “mark up” financings which imply interest rates similar to those faced in conventional markets. Still, returns on Halal investments are very less as compared to the returns generated elsewhere in the international market.
- But not all Muslims follow the faith in every aspect. When they understand what’s involved in an international transaction, they are more willing to interpret an option without being speculative. There are very few international Muslim business people who are exposed to the vagaries of currency exchanges.