ETHICS IN RELATION TO ISLAMIC FINANCE ACTIVITIES

Abdul Ghafar Ismail Islamic Research and Training Institute Islamic Development Bank Jeddah, Kingdom of Saudi Arabia e-mail:AgIsmail@isdb.org Nor Azmidah Zali Institut Islam Hadhari Universiti Kebangsaan Malaysia

Paper presented at SEMINAR ON ETHICS AND RELIGIONS FOR A FAIR ECONOMY, SINGER-POLIGNAC FOUNDATION, PARIS 23-24 JANUARY 2014
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INTRODUCTION
The establishment of Islamic financial institutions and shariah-compliant companies attracts an interest among researchers to revisit the ethical theory
The current practice is to screen out the financial activities so that these activities are in line with shariah It is not enough to say that the company complies shariah, but the business

behaviour does not have the ethical values similarly to say that they are two contrasting views: first, the business behaviour are attacked for disregarding the freedom of business owner and, second critics are saying that business owner is supporting the capitalist This paper wants to explain the Islamic ethical philosophy which will come up with ethical axioms and characteristics-hence it will be used to produce the ethical business principles that can be utilised to derive the business ethics for Islamic finance activities

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AN INSIGHT INTO THE ETHICAL THEORY IN BUSINESS ETHICS

What does the theory say? What are the Issues in Business Ethics?

Fundamental Ethical Issues Accommodating diversity Decision-Making Issues Compliance and Governance Issue

Personal and Social Analysis of Business Ethics

Individual that posses own behaviour will creates the personal

relationship between company stakeholders. It is shows the interacting between agents is exist. This governed by contractual theory and property theory. This called normative theories.
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ETHICAL THEORY IN ISLAMIC BUSINESS Ethical theory in Islam ETHICS Business ethics is derived from Al-Quran and Al-Hadith
Islamic law does not allow; to achieve the purpose, anything is allowed), or a

principle that says (to be able to acquire a good thing, can be done to wander in falsehood Business ethics cannot be separated from ethics because it deals with all aspects of a Muslims daily life Rice (1999), Islam also promotes human harmony in daily life, strong element of brotherhood and establish justice in the socioeconomic and also try in balancing the material aspects and spiritual aspects of humankind.

Ethics in Islamic Financial Transactions

Islamic ethics must at least have three important characteristics - adl (justice),

amanah (trust) and ihsan (benevolence) to legitimize the ideal Islamic business behavior. In Islam, man is as a trustee of the earth and the Gods as the trust owner that obligate man to care all that is on this earth Ihsan or virtue (benevolent) is do the right things that beneficial to others without any obligation to do those things Muslim is encouraged to behave justly towards all. Allah has force people to respect each other and not hatred another party.
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A MODIFIED MODEL OF ETHICS FOR ISLAMIC FINANCE ACTIVITIES

BOX B Ethical axioms Unity Equilibrium Free will responsibility BOX E BOX D Islamic ethical in finance activities permitted/ haram activities usufruct responsible to stakeholders good behaviour

BOX A Philosophy of business ethics Al falah Obey to Shariah reasoning

BOX C Ethical characteristics Justice Trust benevolence

Ethical Business principles Balancing life Less harm Human freedom responsible

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