In brief
In Islam, transactions are lawful by default, except for what a text forbids: riba, gharar, maysir and trading in unlawful things. Gain must come from work, from an asset or from a risk that is genuinely shared; anything that comes from an unlawful source is returned to its owner or given away.
Seeking what is lawful
The Qur’an invites people to eat of what is lawful and good on earth (al-Baqarah 2:168), forbids taking other people’s property unjustly (2:188, an-Nisa’ 4:29) and, after the Friday prayer, encourages believers to disperse through the land and seek the bounty of Allah (al-Jumuʿah 62:10). The Prophet ﷺ said that Allah is good and accepts only what is good (Muslim 1015), and that no one eats better food than what he earns with his own hands (al-Bukhari 2072). He also warned that a time would come when people would no longer care whether what they earn is lawful or not (al-Bukhari 2083).
The main principles
- Lawfulness by default: in transactions, everything is permitted except what a text or an established principle forbids. This is why new contracts can be accepted if they respect the rules.
- Gain goes with risk (al-ghunm bi-l-ghurm) and income follows liability (al-kharaj bi-d-daman): whoever wants the profit from an asset must bear its risk. A lender who takes no risk is entitled only to his capital.
- The three prohibitions: riba, gharar and maysir, to which is added trading in what is unlawful (alcohol, pork, gambling, etc.).
- Necessity and need: “necessity makes the prohibited permissible”, strictly to the extent needed, and “a general need is treated like a necessity”. Scholars differ sharply on which situations fall under these rules, for example housing: see mortgages.
Dealing with mixed income
Diyanet recalls the rule set out by classical jurists: it is forbidden to deal with someone whose earnings are all unlawful, disliked to deal with someone whose earnings are mostly unlawful, and permitted to deal with someone whose earnings are mostly lawful. This majority logic underlies the thresholds applied to the shares of “mixed” companies: see the Shariah stock screener.
Getting rid of unlawful gains
Unlawful income (interest, gambling, the non-compliant part of a dividend) may not be used for oneself or one’s family. If its owner is known, it is returned to them; otherwise, it is given to the poor or to works of public benefit, without expecting any reward. Diyanet adds that it must not be used for mosques (2024). See the interest purification and dividend purification tools.
The verses
يَٰٓأَيُّهَا ٱلنَّاسُ كُلُوا۟ مِمَّا فِى ٱلْأَرْضِ حَلَٰلًا طَيِّبًا وَلَا تَتَّبِعُوا۟ خُطُوَٰتِ ٱلشَّيْطَٰنِ إِنَّهُۥ لَكُمْ عَدُوٌّ مُّبِينٌ ١٦٨
O mankind, eat from whatever is on earth [that is] lawful and good and do not follow the footsteps of Satan. Indeed, he is to you a clear enemy.
وَلَا تَأْكُلُوٓا۟ أَمْوَٰلَكُم بَيْنَكُم بِٱلْبَٰطِلِ وَتُدْلُوا۟ بِهَآ إِلَى ٱلْحُكَّامِ لِتَأْكُلُوا۟ فَرِيقًا مِّنْ أَمْوَٰلِ ٱلنَّاسِ بِٱلْإِثْمِ وَأَنتُمْ تَعْلَمُونَ ١٨٨
And do not consume one another's wealth unjustly or send it [in bribery] to the rulers in order that [they might aid] you [to] consume a portion of the wealth of the people in sin, while you know [it is unlawful].
يَٰٓأَيُّهَا ٱلَّذِينَ ءَامَنُوا۟ لَا تَأْكُلُوٓا۟ أَمْوَٰلَكُم بَيْنَكُم بِٱلْبَٰطِلِ إِلَّآ أَن تَكُونَ تِجَٰرَةً عَن تَرَاضٍ مِّنكُمْ وَلَا تَقْتُلُوٓا۟ أَنفُسَكُمْ إِنَّ ٱللَّهَ كَانَ بِكُمْ رَحِيمًا ٢٩
O you who have believed, do not consume one another's wealth unjustly but only [in lawful] business by mutual consent. And do not kill yourselves [or one another]. Indeed, Allāh is to you ever Merciful.
فَإِذَا قُضِيَتِ ٱلصَّلَوٰةُ فَٱنتَشِرُوا۟ فِى ٱلْأَرْضِ وَٱبْتَغُوا۟ مِن فَضْلِ ٱللَّهِ وَٱذْكُرُوا۟ ٱللَّهَ كَثِيرًا لَّعَلَّكُمْ تُفْلِحُونَ ١٠
And when the prayer has been concluded, disperse within the land and seek from the bounty of Allāh, and remember Allāh often that you may succeed.
The hadiths
O people, indeed, Allah is good and does not accept except what is good. Indeed, Allah has commanded the believers with what he commanded the messengers
"O people, indeed, Allah is good and does not accept except what is good. Indeed, Allah has commanded the believers with what he commanded the messengers. He says: {O messengers, eat from the lawful things and act righteously, for I am All-Knowing of what you do.} [Surat al-Mu’minūn: 51] And He…
أَيُّهَا النَّاسُ إِنَّ اللَّهَ طَيِّبٌ لاَ يَقْبَلُ إِلاَّ طَيِّبًا وَإِنَّ اللَّهَ أَمَرَ الْمُؤْمِنِينَ بِمَا أَمَرَ بِهِ الْمُرْسَلِينَ فَقَالَ { يَا أَيُّهَا الرُّسُلُ كُلُوا مِنَ الطَّيِّبَاتِ وَاعْمَلُوا…
No one has ever eaten food better than that which his hands have earned. Indeed, Prophet Dawūd (peace be upon him) used to eat from the earnings of his own hands
Abu Hurayrah (may Allah be pleased with him) reported that the Messenger of Allah (may Allah's peace and blessings be upon him) said: "Dawūd (peace be upon him) used to eat only from the earnings of his own hands." Al-Miqdām ibn Ma‘d Yakrab (may Allah be pleased with him) reported that the Prophet…
مَا أَكَلَ أَحَدٌ طَعَامًا قَطُّ خَيْرًا مِنْ أَنْ يَأْكُلَ مِنْ عَمَلِ يَدِهِ، وَإِنَّ نَبِيَّ اللَّهِ دَاوُدَ ـ عَلَيْهِ السَّلاَمُ ـ كَانَ يَأْكُلُ مِنْ عَمَلِ يَدِهِ "
The Prophet (ﷺ) said "Certainly a time will come when people will not bother to know from where they earned the money, by lawful means or unlawful means." (See Hadith no. 2050)
لَيَأْتِيَنَّ عَلَى النَّاسِ زَمَانٌ لاَ يُبَالِي الْمَرْءُ بِمَا أَخَذَ الْمَالَ، أَمِنْ حَلاَلٍ أَمْ مِنْ حَرَامٍ "
Frequently asked questions
Can I work in a conventional bank?
Most institutions that forbid interest hold that one should not take a direct part in interest-based transactions (drafting them, witnessing them, selling them), relying on the hadith that curses the scribe and the witnesses of riba (Muslim 1598). For a specific case, consult a scholar.
Is the return on an Islamic investment guaranteed?
No, and that is in fact a condition: a guaranteed return on capital that is also guaranteed resembles interest. In a mudarabah or a compliant fund, the return depends on actual results.