Advisory on Multi-Level Marketing (MLM) (English)

Background

1. MUIS is currently monitoring the emerging concerns on commercial transactions in the form of multi-level marketing (hereupon MLM), specifically within the Singapore context. We have also received questions on the Islamic position on such transactions.

Islamic position on Multi-level Marketing

2. In addressing this issue, MUIS refers to our scholarly traditions in laying down the general guidelines for all MLM transactions. Muslims who would like to participate in MLM transactions should ensure that such transactions adhere to the following elements:

• Participants must participate willingly, and are not coerced or pressured into becoming a member or an agent.

• The Prophet (s.a.w) stated in a hadith: It is unlawful to benefit from a property of a Muslim, except on the basis of willingness (Al-Baihaqi).

• Transactions must include products that are of tangible and inherent value, and which the product benefits are independent from the MLM scheme. The price paid should thus be appropriate for the products transacted, and not something one would normally not buy at that price. In Islam, transactions which involve products that have no tangible value are considered Bay’ Gharar or ambiguous transactions.

• Products involved should also be permissible from the legal and Islamic aspects (halal). The Prophet (s.a.w) said: If Allah makes something unlawful, He makes its sale unlawful (Abu Dawud).

• Bonuses and incentives received by all parties involved in the scheme should be made known and agreed upon by all members and agents.
  
  The Prophet (s.a.w) has also exhorted Muslims to strictly adhere to truthfulness in business transactions. “…and if both the parties spoke the truth and described the defects and qualities [of the goods], then they would be blessed in their transaction, and if they told lies or hid something, then the blessings of their transaction would be lost (Bukhari). Hence all conditions pertaining to a transaction must be clearly specified and clarified upfront.

3. Muslims should also be cautious of the following:

• Schemes that involve promising its members payment or services primarily through enrolling other people into the schemes, rather than supplying any real investment or sale of products or services.

• Schemes that will collapse in the long-run, hence causing later participants to lose their upfront payments. Those who are most vulnerable are those towards the bottom of the pyramid, where it becomes nearly impossible to recruit new members required to pay off the previous layer of recruiters.

• There is a compulsory purchase of goods and services, or required investment whether in the form of a joining fee or buying inventory, as a requirement before one is entitled to the bonuses and benefits offered in the scheme.

• Elements of manipulation, exploitation, injustice, unfairness and deceit.

• Elements that contradict what have been underscored in the shari’ah with regard to commercial transactions.

Legal prohibition

4. In Singapore, the Ministry of Trade and Industry administers the Multi-Level Marketing and Pyramid Selling (Prohibition) Act. Any MLM activities will thus be governed by this Act. The products offered will also be subjected to all prevailing laws of Singapore. There are exclusions to this Act, and they are captured in the revised Multi-Level Marketing and Pyramid Selling (Excluded Schemes and Arrangements) Order.

Conclusion

5. MUIS would thus like to advise Muslims who are considering participating in any investment schemes to be cautious and to observe the above mentioned guidelines. They should also ensure that they do not contradict any religious principles or the law of the land prior to joining any schemes.

Office of the Mufti
Islamic Religious Council of Singapore