Halal business?

In a globalized world, its increasingly difficult for any business to be 100% halal. What is a "halal" business? A business that complies to the principles of Islamic law. In business the most common principles involved can be divided into a few areas:

1. Type of business -- any business involves the buying and selling of a product or a service. The particular product or service being sold and/or bought determines the halal-ness of the business e.g. prostitution is unlawful sex, therefore prostitutes who offer sex as a service are participating in a non-halal type of business.

2. Banking/Finance -- the lifeblood and heart of any business is how it manages and organizes its finances, normally via the banking system. A lot of pitfalls here due to the intricate nature in which interest (riba is haram in Islam; riba is defined here) plays a large role in keeping things moving. Islamic banking systems nowadays swap the word "riba" for "profits from investments" -- banks take your deposits then invest it and share the profits with their customers (that's exactly the same thing that normal banks do, but they call it "interest" instead). The only difference lies in the "guarantee" of returns -- an Islamic bank doesn't guarantee a fixed return; it could be more or less depending on the performance of the bank's investment portfolio. But i don't buy this difference; when a fund manager approaches you to invest in an "Islamic fund", they make all sorts of promises to entice you to invest, and this often includes performance promises. Of course, contractually, they are not bonded by these promises, after all it is Islamic banking thus such "promises of profit" are not allowed -- but that's even worse: banks are therefore allowed to make promises that they don't have to keep when attracting new customers.

3. No business exists in a vaccum -- your business may be halal but without other businesses to support you, some of which may be less halal than you, your profits can easily be tainted. In order to get around this, most ustaz advise donating a portion of the "tainted" profits to charity. That sounds very sensible.

Back to the original premise of this post: taking into consideration the three areas above, its virtually impossible for a modern business to be 100% halal.

Let's take a simple scenario, Pak Ali the pisang goreng seller by the road in Bandar Tun Razak, Cheras.

Pak Ali has a stall. He sells pisang goreng daily and every morning he takes the previous day's sales and banks it into his account at the local bank.

(Problem 1) Depending on the type of account he uses, there is an immediate danger of his money being tainted with riba from his bank's investment practices.

(Problem 2) Even if he opens an "Islamic bank account", the bank is therefore obliged to use his money to invest in only halal businesses and to share the profits of said investment with him. The problem is that banks will therefore have a diversified portfolio of investments that will include some blue chip organizations e.g. Shell, or perhaps ExxonMobil, or perhaps Astro or whatever. On the surface these organizations are halal but banks have very little control over their exact business operations therefore profits from said investments could be tainted too. For example, a large portion of the international oil & gas business involves futures and options -- simply put this means buying and selling oil that doesn't exist yet. Such speculative behaviour is considered haram.

So just from the simple selling of his goreng pisang, Pak Ali's business already has two potential halal/haram problems. Let's look at the other parts of Pak Ali's business.

Pak Ali is a forward thinker. He realizes that the tropical storms in Central America and also the coming end-of-year storms in Malaysia may reduce the supply of raw bananas in the market. He speculates that the price of bananas will increase so he buys future options from his supplier; basically agreeing now on a set price to buy bananas in the future (bananas that don't exist yet).

He guesses right. The price of bananas goes up and he stockpiles them at a cheap price. He begins selling his cheaper bananas to his friends who also sell goreng pisang (he can afford to do so since he bought the bananas at a cheap price).

(Problem 3) Speculation -- buying and selling of products that do not exist yet -- that's clearly haram. But if he doesn't do it, then his business will falter if he's forced to buy bananas at a higher price in the future eventhough he could forsee the problem and did nothing to address it. Worse still, let's say one of his competitors speculated as he did and bought bananas at a cheap price before the prices increased -- his business would then be at the mercy of his competitor, Pak Abu who sells goreng pisang across the street from him. Pak Abu can now afford to sell goreng pisang at a cheap price while Pak Ali (who didn't speculate and buy futures options when he had the chance) has to increase his prices. Customers flock to Pak Abu, Pak Ali is ruined.

Pak Ali's business grows. He hires help in the form of Amin and Ah Kow (Pak Ali is an equal opportunity employer). Amin and Ah Kow are now his employees and therefore draw a salary from the profits of Pak Ali's goreng pisang stall.

(Problem 4) Are Amin's and Ah Kow's salaries now tainted with haram money? (Assuming that Pak Ali does not address any of the 3 prior problems). Amin says yes, he believes that Pak Ali's business is haram and quits. He tells all his Muslim friens not to work for Pak Ali because he buys futures options on bananas from Central America. Pak Ali still needs help and hires Samivelu. Amin is jobless and becomes a street vagrant.

Pak Ali's business is going well. So well in fact that he needs to grow it. He takes a bank loan with interest repayments of 3% per annum. Furthermore, he trades 20% of his goreng pisang business with Pak Salleh for a further cash injection.

(Problem 5) Bank loans require interest repayments. This is a grey area -- if your business contributes to a haram practice (i.e. interest payments to the customers of the bank that gave Pak Ali the loan), does that make your business haram?

(Problem 6) Pak Salleh decides to sell his 20% of Pak Ali's business to Ah Beng who participates in other business activities, none of which are halal. This is another grey area -- 20% of the profits from Pak Ali's business now go to Ah Beng who in turn uses the money for non-halal purposes. What impact, if any, does this have on the halal/haram of Pak Ali's business?

One day, Pak Ali is asked to cater goreng pisang at a very big event -- the marketing exposure to his business is fantastic since a lot of the people at the event are goreng pisang-crazy; they love goreng pisang, and if Pak Ali gets a chance to introduce them to his goreng pisang this could mean a lot of repeat business.

(Problem 7) The event itself is a non-halal environment. Alcoholic drinks and other non-halal food will be served to the guests. This is a grey area -- is it permissible for Pak Ali to participate in a largely non-halal event? Will he be branded guilty by association, eventhough his business is perfectly halal?

Even a goreng pisang business is not easy; there are many problems associated to the halal and haram of the business. This is a major, major concern to discerning Muslims, including myself, and its definitely something i give lots of thought to. Its so easy for a business to become haram and so difficult to ensure its halal.

Perhaps at the end of the day, God will judge us on the virtue of our intentions and what we actually do rather than all the possibilities of all the things that could go wrong.