The Ethics of Brokerage in Islamic Finance: Fair Practices and Market Competition #
Original Question: In a regular business environment, brokers often gain their riches by acquiring relatively low-priced produce and selling them on a mark-up. On the flip side, when the producers (i.e., farmers and fishermen) decide to sell their produce by themselves, they are usually hindered by various obstacles. This results in a disproportionate wealth disparity between the brokers and the hard-working producer.
Due to “sharks” oppressively and purposefully fixing low purchase prices on agricultural and fishery produce, farmers and fishermen work extremely hard to barely earn a living.
In principle, if there is fraud and deception involved in the abovementioned arrangement, then there is no question that this business practice is haram.
However, it is permissible, and it is not wrong or unethical to work as a broker. Nevertheless, the business arrangements must be just, and neither transacting parties should be coerced or oppressed.
It was narrated from Jabir bin ‘Abdullah that the Prophet (ï·º) said:”A townsman should not sell on behalf of a Bedouin. Leave people to (engage in trade), and Allah will grant them provision through one another”.
Our Shariah gives importance to fairness in business dealings and the free market competition.
The prohibition of a townsman acting as an unfair broker for the foreign seller is one of the factors that enable a market to be competitive and for the price of goods to be determined purely by the law of supply and demand.
