Islamic Model of Multi-level Marketing (MLM)

By:
Prof. Dr. Mohd. Ma’sum Billah
masum@applied-islamicfinance.com
masum2001@yahoo.com
+6019-3699542

Central Idea of MLM

MLM is short for Multi level marketing. Multilevel marketing is the movement of products and services from manufacturers directly to the consumer through a network of independent associates. MLM is business partnership with someone, usually a group that has same interest and goal that they share.In order to understand the concept of MLM it is crucial to understand two concept of distribution in conventional way.

First, a little about how multi-level marketing works. Some central corporation provides a line of products or services. These are marketed through members of a network either they buy from the center, and then resell, or they simply act as salesmen, on some sort of commission scheme. The multiple levels and the resemblance to pyramid schemes. When you recruit someone else, not to buy the center's products, but to sell them, you get some kind of reward, a percentage of their sales, or credit from the center, or something of that kind. You therefore have an incentive to get as many people as possible selling things under you. The center has a marketing force for free, or rather for very little.

The next natural thought is that it should be possible to model this. One can imagine MLMs differing in their incentive mechanisms, all competing for the same population of customers and potential chain members. They're actually trying for a tricky piece of multi-objective optimization: first, the center wants to maximize its profits second, a chain which booms and crashes will go extinct, so it wants to have some sort of sustainable growth; and third, people in one chain can presumably switch to another if it offers them a better deal, so you need to optimize profit to chain members. And then of course there are all sorts of issues about how competing MLMs respond to each other's successes and failures.

MLM History

The roots of multilevel marketing are intertwined with those of the Amway Corporation and its Nutrilite product line. The Nutrilite concept is said to have originated about during the early 1930s in the mind of Carl Rehnborg, an American businessman who lived in China from 1917 to 1927. According to Amway publications, this gave Rehnborg "ample opportunity to observe at close range the effects of inadequate diet." He also "became familiar with the nutritional literature of his day." Concluding that a balanced diet was needed for proper bodily function, he began to envision a dietary supplement which could provide people with important nutrients regardless of their eating habits.

After seven years of "experimentation," Rehnborg produced food supplements which he gave to his friends to try. According to his son, Sam, who became Nutrilite's president and chief operating officer:

After a certain length of time, Dad would visit his friends to see what results had been obtained. More often than not, he would find the products sitting on the back shelves, unused and forgotten. It had cost them nothing and was therefore, to them, worth nothing It was at this point that he rediscovered a basic principle-that the answer was merely to charge something for the product. When he did, the friends, having paid for the product, ate it, liked it, and further, wanted their friends to have it also. When they asked my dad to sell the product to their friends, he said, "You sell it to them and I'll pay you a commission."

Multilevel companies that are based on profits from recruiting rather than retailing should be regarded as pyramid schemes or "recruiting MLMs." According to an article by Jon M Taylor he describes five ways to distinguish them from "retail MLMs" in which the company pays generously for retailing products without recruiting a large downline. Recruiting MLMs typically display five features.

1. Recruiting of participants is unlimited in an endless chain of recruiters recruiting recruiters.

2. Advancement in a hierarchy of multiple levels of "distributors" is achieved by recruitment, rather than by appointment.

3. The company offers commissions and/or bonuses to more than five levels of "distributors

4. Pay to play" requirements are satisfied by ongoing "incentives purchases

5. Company payout per sale for each upline participant equals or exceeds that for the person selling the product, creating inadequate incentive to retail and excessive incentive to recruit -- and an extreme concentration of income at the top.

Recruiting: the lifeblood of multi-level marketing.

If there ever were two major buzzwords in multi-level recruiting, they are warm market and cold market. The way this breaks down is very simple. Your warm market consists of people you know. Your cold market is everybody else. Network marketing depends on a network of people you know, your warm market. The only thing that good net workers do with their cold market is turn it into their warm market. This is the reason why a lot of people think of mlm-types as people who are phony and disingenuous. If some strange person in a suit walks up to me at the mall and gives me a firm handshake and a "hello" I run. I mean, it could only be one of two things: a network marketer looking for prospects, or a religious person looking to invite me to Kingdom Hall. (No offense to religion.)

Valid data are available, recent research has demonstrated that when all five of these determinants are found in an MLM, the percentage of participants who lose money is 99.9% even worse than the loss rates for typical no-product pyramid schemes and for games of chance in Las Vegas.

Operating Structure-

The reality of multi-level marketing .

Below you will find a simple diagram telling you how network marketing works.  This is what most product driven mlms will tell you how their product is sold and how many hand touch it. At first glance, it looks great! You get to be the middleman and keep the majority of the profits!  Better yet you get to buy your products directly from the manufacturer.  This is really a beautiful situation. Looks good on paper, but does not actually work!

This is what the diagram really looks like in network marketing:

Now you understand why products from mlm companies seem so expensive. There are many more hands in the pot than you are led to believe. This scenario is fairly accurate for probably 95 % of the network marketing companies out there. Of course, no multi-level marketing company worth its salt would leave out how you can multiply your income by recruiting other distributors.

Recruiting: the lifeblood of multi-level marketing.

In multi-level marketing, you are told that you are not the only person responsible for your income . You can recruit other people to do what you do, which is to buy and sell products for a profit. For every sale that one of your recruits makes, you get a bonus. Not only that, you get bonuses off of all the sales made by their recruits also.

This diagram is an example of a uni-level pay plan.

That means mainly that a person who joins the company, also known as a representative, can sponsor (sign up) as many people as they want on their first level. Why does this matter? Well, as the team of people underneath you buys more products, you get a higher percentage of the income your team generates. However, this is also true for the people underneath you, so if they qualify for a bigger cut you get less. Every person on your first level can be seen as a separate income stream. The more you have the more you can make in theory.

Notice the red dotted line labeled "cut off". It means that the person at the top does not get paid on any sales done beyond that level. The cut off is generally deeper than the third level in most plans. I put it on level three here for illustrative purposes. Why would they cut people off after a certain level? Because you can only split a dollar up so many ways. No matter what a company says about paying out to infinity, in reality they can only give out 100 % and they always keep a percentage for themselves.

Bottom line: You will not maintain the large earnings per distributor ratio that’s displayed in many compressed plan income scenarios.

What is a forced matrix?

The diagram to your left is an example of a forced matrix, specifically a 2x2 forced matrix, or binary matrix. What that means is that a representative can only sponsor two people on their front (first) level. Anyone they sign up after that gets put underneath one of their two front levels. If they already have two they go down to the next available slot.

The advantage of this type of plan is that you are forced to build deep rather than wide, which gives your team more stability. It is also nice to get people spilled over on to your team from your up-line and get credit for sales that you had nothing to do with. Most of the time this type of pay plan pays out to a much deeper level than an open system with unlimited front levels. If you see a company that advertises an infinity bonus, they usually have a forced matrix pay plan.The biggest down side to forced matrix pay plans is that you have a limited amount of income streams. Not all forced matrices are 2x2. I have seen 3x3 plans and even the odd 4x4 plan. The majority of mlm companies using a forced matrix have found a way around this by allowing you to sponsor yourself. That way you can get paid several times for the same work. If you can't picture this, look at the diagram and put yourself in the top position and also in the front left position. All the business your team in the front left position does also counts as team sales for your top position. You receive checks on both positions, doubling your income for the same amount of work.Beware that sponsoring yourself has a major drawback. You are required to meet your personal sales quota on each of these positions every pay period in order to get paid on them. That can really add to your workload and put a strain on your budget because you might have to order twice as many (or more) products. In almost any network marketing company, you don't get a check unless you have enough personal sales volume.

Shari’ah Rulings from Qur’an and Sunnah

Primary rulings of MLM can be derived from Al-Quran and As-Sunnah are based on the concept of Bay’ or trading. In the Quran, Allah has mentioned about the permissible of trade as evidence in the following ayat:

Those who eat Ribâ (usury) will not stand (on the Day of Resurrection) except like the standing of a person beaten by Shaitân (Satan) leading him to insanity. That is because they say: "Trading is only like Ribâ (usury)," whereas Allâh has permitted trading and forbidden Ribâ (usury). So whosoever receives an admonition from his Lord and stops eating Ribâ (usury) shall not be punished for the past; his case is for Allâh (to judge); but whoever returns [to Ribâ (usury)], such are the dwellers of the Fire - they will abide therein

O you who believe! Eat not up your property among yourselves unjustly except it be a trade amongst you, by mutual consent. And do not kill yourselves (nor kill one another). Surely, Allâh is Most Merciful to you

“Verily! Allâh commands that you should render back the trusts to those, to whom they are due; and that when you judge between men, you judge with justice. Verily, how excellent is the teaching which He given you. For Allah is He who heareth and seeth all things.”

“Woe to Al-Mutaffifin [those who give less in measure and weight (decrease the rights of others)],”

“Verily, Allâh! With Him (Alone) is the knowledge of the Hour, He sends down the rain, and knows that which is in the wombs. No person knows what he will earn tomorrow, and no person knows in what land he will die. Verily, Allâh is All­ Knower, All ­Aware (of things)

In general, multi level marketing is a valid concept of trading as it portrays the contract of sale which is align with the Shari’ah tenets. This activity will be considered as valid as long it comply the principles of buy sale according to Shari’ah

In the MLM concept, we shall observe the elements of principle of buy and sale in details and try to observe if any fraud and void elements that may categories MLM activities to be void and contract. If there are elements that not comply to one of the principle above we shall exclude those transaction.

Shariah Rulings from Fuqaha

Generally, MLM is permissible as long the activity of the company is not contravene with the Shariah rulings such as not involving in riba activity, gambling or gharar transaction that can lead to the void of that particular transaction.

Maisir (Gambling)

“O you who believe! Intoxicants (all kinds of alcoholic drinks), gambling, Al­Ansâb [], and Al­Azlâm (arrows for seeking luck or decision) are an abomination of Shaitân's (Satan) handiwork. So avoid (strictly all) that (abomination) in order that you may be successful.” 

Gharar (Uncertainty or Speculation)

Any transaction entered into should be free from uncertainty and speculation. Contracting parties should have perfect knowledge of the counter values intended to be exchanged as a result of their transactions.

“O you who believe! Intoxicants (all kinds of alcoholic drinks), gambling, Al­Ansâb [], and Al­Azlâm (arrows for seeking luck or decision) are an abomination of Shaitân's (Satan) handiwork. So avoid (strictly all) that (abomination) in order that you may be successful.”

Fixed Interest /Usury (Riba)

Why does Islam prohibit Riba or what is the wisdom behind the prohibition of Riba? The first wisdom deduced from the Al-Qur’an is the elimination of justice. As the name suggests, Riba means excess (ziyadah), augmentation, increase, addition or growth. Thus by practicing Riba, one party would benefit at the expense of another.

The interest earned is without any risk of loss. By removal of the risks altogether, the transaction is no longer one of business and trade, but one of usury.

“And if you do not do it, then take a notice of war from Allâh and His Messenger []but if you repent, you shall have your capital sums. Deal not unjustly (by asking more than your capital sums), and you shall not be dealt with unjustly (by receiving less than your capital sums).

Another wisdom as evident in the Al-Qur’an is call for corporation, charity and Qard al- Hassan (interest free loan). Here the concept of brotherhood prevails, as Riba would bring harm to the society. The collection of wealth through Riba is associated with selfishness, greed, impatience and cruelty.

The third wisdom involved in Riba is the illegitimacy of charging an extra amount on lent money or commodities because of deferred repayment. Time is not a commercial commodity.

Contractual fixed interest derived from loans (Risk Free) = Riba

“O you who believe! Be afraid of Allâh and give up what remains (due to you) from Ribâ (usury) (from now onward), if you are (really) believers.

“Those who eat Ribâ [] (usury) will not stand (on the Day of Resurrection) except like the standing of a person beaten by Shaitân (Satan) leading him to insanity. That is because they say: "Trading is only like Ribâ (usury)," whereas Allâh has permitted trading and forbidden Ribâ (usury). So whosoever receives an admonition from his Lord and stops eating Ribâ (usury) shall not be punished for the past; his case is for Allâh (to judge); but whoever returns [to Ribâ (usury)], such are the dwellers of the Fire - they will abide therein.

“For the wrong­doing of the Jews, We made unlawful to them certain good foods which has been lawful to them, and for their hindering many from Allâh's Way;

And their taking of Ribâ (usury) though they were forbidden from taking it and their devouring of men's substance wrongfully (bribery, etc.). And We have prepared for the disbelievers among them a painful torment.”

“O you who believe! Eat not Ribâ (usury) [] doubled and multiplied, but fear Allâh that you may be successful.”

“When usury and fornication appear in a community the people of that community render themselves deserving the sanction of Allah (swt).”

According to Dr. Monzer Kahf in his Fatwa, chain business is permitted provided there is complete disclosure and transparency of the business in term of products, commissions and persons involve in the contract and aqd to conclude the contract.

Dr. Monzer again stress that if the idea of MLM is to sell the marketing plan abd not the products than the contract is null and void due to ther fact that hilah is taken place.

The Shari’ah does not permit Muslims to invest in any business or activity that involves the production of items or the pursuit of activities the Shari’ah considers haram, or impermissible. Therefore, it is not permissible to acquire the shares of the companies providing financial services on interest, like conventional banks, insurance companies, selling or serving liquor, pork, involved in gambling, night club activities, pornography and etc.

Mufti Taqi Uthmani issued a Fatwa, which rules out that:

“If the main business of a company is not Halal (lawful) in terms of Shari’ah, it is not Halal (lawful) for one to purchase, hold, or sell its shares, because, it will entail the direct involvement of the shareholders in that Haram (prohibited) business”.

“When Holy Prophet (saw) said: When Allah (swt) prohibits a thing, He prohibits (giving and receiving) the price of it as well.”

Shariah Reason for opposition of MLM under conventional practice (Maisir, riba and gharar elements and non Shariah subjects matter)

In the Quran, Allah prohibited the consumption through the way usury as stated in many verses in the Quran and Hadith. In fact the permissibility of trade or Al Bay’ is advocated.

Fixed Interest /Usury (Riba)

In the Quran Allah has mentioned regarding the prohibition of Riba in many Surah. This can be observed in th following ayah as Allah mentioned:

“And if you do not do it, then take a notice of war from Allâh and His Messenger []but if you repent, you shall have your capital sums. Deal not unjustly (by asking more than your capital sums), and you shall not be dealt with unjustly (by receiving less than your capital sums).

Contractual fixed interest derived from loans (Risk Free) = Riba

“O you who believe! Be afraid of Allâh and give up what remains (due to you) from Ribâ (usury) (from now onward), if you are (really) believers.

“Those who eat Ribâ [] (usury) will not stand (on the Day of Resurrection) except like the standing of a person beaten by Shaitân (Satan) leading him to insanity. That is because they say: "Trading is only like Ribâ (usury)," whereas Allâh has permitted trading and forbidden Ribâ (usury). So whosoever receives an admonition from his Lord and stops eating Ribâ (usury) shall not be punished for the past; his case is for Allâh (to judge); but whoever returns [to Ribâ (usury)], such are the dwellers of the Fire - they will abide therein.

“For the wrong­doing of the Jews, We made unlawful to them certain good foods which has been lawful to them, and for their hindering many from Allâh's Way;

And their taking of Ribâ (usury) though they were forbidden from taking it and their devouring of men's substance wrongfully (bribery, etc.). And We have prepared for the disbelievers among them a painful torment.”

“O you who believe! Eat not Ribâ (usury) [] doubled and multiplied, but fear Allâh that you may be successful.”

“When usury and fornication appear in a community the people of that community render themselves deserving the sanction of Allah (swt).”

In the Quran, Allah also mentioned the prohibition of gambling and alcohol consumption as those acts will lead to great sins and need to be avoided.

Maisir (Gambling)

“O you who believe! Intoxicants (all kinds of alcoholic drinks), gambling, Al­Ansâb [], and Al­Azlâm (arrows for seeking luck or decision) are an abomination of Shaitân's (Satan) handiwork. So avoid (strictly all) that (abomination) in order that you may be successful.” 

“Those who believe and do righteous good deeds, there is no sin on them for what they ate (in the past), if they fear Allâh (by keeping away from His forbidden things), and believe and do righteous good deeds, and again fear Allâh and believe, and once again fear Allâh and do good deeds with Ihsân (perfection). And Allâh loves the good doers.”

Contract that has element of gharar is deemed to null and void. Transaction involving gharar is prohibited in the Hadith to this effect;

Gharar (Uncertainty or Speculation)

Any transaction entered into should be free from uncertainty and speculation. Contracting parties should have perfect knowledge of the counter values intended to be exchanged as a result of their transactions.

“O you who believe! Intoxicants (all kinds of alcoholic drinks), gambling, Al­Ansâb [], and Al­Azlâm (arrows for seeking luck or decision) are an abomination of Shaitân's (Satan) handiwork. So avoid (strictly all) that (abomination) in order that you may be successful.”

So,it is clear to see that any kind of sale conduct must observe the Shariah tenets in order to validate any transaction that need to be concluded. Failing to observe the Shariah will lead to void in transacting the contract.

Structure of MLM under Syariah

It is important to test any business concept either it is valid or not. In the MLM system we can identify the legality of the business by conducting a test to trace down the legality of a business entity namely MLM. Under the Shariah principle, the structure must be added in such a way that it must follow the orders regarding purchase and saleor Shariah compliant. We will discuss the issue under the orders regarding purchase and sale section later.

In this section I try to look at MLM structure that exist in the current practices. The idea of MLM is much alike to pyramid scheme in the sense that in the pure pyramid schemes no objects of sale is in existence rather MLM has the object of Sales which crucial to differentiate between the two.

In the MLM, there are much failure rather than winner. This is due to the fact that the system itself is pyramid in nature. A pyramid scheme is a fraudulent system of making money which requires an endless stream of recruits for success. Recruits (a) give money to recruiters and (b) enlist fresh recruits to give them money.

A pyramid scheme is called a pyramid scheme because of the shape of a pyramid: a three dimensional triangle. If a pyramid were started by a human being at the top with just 10 people beneath him, and 100 beneath them, and 1000 beneath them, etc., the pyramid would involve everyone on earth in just ten layers of people with one con man on top. The human pyramid would be about 60 feet high and the bottom layer would have more than 4.5 billion people!

A diagram might help see this:

Thus, in very short order, 10 recruiting 10 and so on would reach 10 billion, well in excess of the earth's population. If the entire population of earth were 5 billion and we all got involved in a pyramid scheme, the bottom layer would consist of about 90 percent of the planet, i.e., about 4.5 billion people. Thus, for 500 million people to be WINNERS, 4.5 billion must be LOSERS.

In a straightforward pyramid scheme, a recruit is asked to give a sum of money, say $100, to a recruiter. The new recruit then enlists, say, 10 more recruits, to give up $100 each. In the simplest example, the recruiter keeps all the money he gets from his recruits. In our example, each recruit gives up $100 in exchange for $900 ($100 from each of his 10 recruits minus the $100 he gave his own recruiter). In order for no one to lose money, the recruiting must go on forever. On a planet with a limited number of people, even if the planet is as large as Earth and has almost 6 billion potential recruits, one runs out of new recruits rather quickly.

The MLM system should be altered in a way that it will not fraud those people in the 4.5 billion categories as it will give injustice treatment among them. Allah mentioned in Quran:

O you who believe! Eat not up your property among yourselves unjustly except it be a trade amongst you, by mutual consent. And do not kill yourselves (nor kill one another). Surely, Allâh is Most Merciful to you

The idea of trade that permissible in Islam is observed in the MLM structure, but the justice element is lacking as the top people has the advantages of getting the most wealth from the business in the expense of the down line distributors. The mechanism of distribution of wealth is crucial to be addressed as it will ensure the strength of Ummah will prevail. The role of zakah and sadaqah can be placed in the distribution of profits from the upper layer to the bottom part in order to make sure that the concepts of solidarity, brotherhood mutual help prevail in the Islamic MLM system that will differentiate between the conventional MLM and Islamic MLM.

Following are the steps that can be taken out in order to find out either MLM is legal in practice.

MLM LEGALITY TEST

There are many characteristics, or "red flags" that distinguish an illegal pyramid from a legitimate multi-level business opportunity, (often shortened to MLM.) They have been written about often in many publications and by necessity often contain legal terms and industry jargon. Also, danger signs of a few years ago may have been camouflaged or fixed by the newest drafters of plans so one needs to be on guard for new and different twists. Is there a simple, easy to apply, test one can give to a business opportunity, that addresses the pyramid law risk without all the pyramid law legal terminology? There is. What follows addresses that need. It is the single-level test for the multi-level business opportunity.

It goes like this: Can one make some money SINGLE-LEVEL, that is, without sponsoring another business opportunity seeker? Note the specific use of the word "can", not the word "would". It is usually a given that the business opportunity prospect is urged to sponsor, and that the business opportunity presenter will say or imply that the "real money" is in building a group. But that is O.K., SO LONG AS - those who choose not to sponsor at all, CAN STILL MAKE MONEY. Note also the use of the word "MAKE". It's "MAKE MONEY" not "SPEND MONEY", meaning paying income taxes if the gross income exceeds expenses associated with producing the income. Buying for personal use at distributor prices rather than customer prices, while a savings, does not generate income upon which one is required to pay taxes. Buying for personal use by itself is not an income opportunity. If the proposed business opportunity consists only of buying for personal use and sponsoring more representatives, with no provision for sales to customers, it is flawed.

This simple test needs to be applied to two aspects of a business opportunity. The first aspect is the design. What do the company documents say about how one makes money? How does the compensation plan work? Not all the fine details of every commission, bonus or reward need be understood, but simply, can one make some money without sponsoring. Remember, one does not make money when one buys any product or service for personal use. The application of this test should in no way imply that there is anything wrong or illegal about personal consumption. It is just that it alone cannot be the sole basis for a business opportunity.

The second aspect of the application of the test is the plan implementation. Some plans are designed correctly but are flawed in the implementation. Can one make money, even without sponsoring, as the plan is being taught and implemented by the prospective sponsor and the distributors closely associated with him or her? If there is no acknowledgment or support for the non-sponsoring participant in the business opportunity, something is wrong, maybe not in the design, but surely in the implementation. Reputable and legally designed and implemented multi-level business opportunities provide a money making opportunity single level to those who choose not to sponsor. Of course, if one sponsors others, then additional money making opportunities exist when those sponsored generate sales.

Apply this test to multi-level business opportunities. Look at the plan design, and look at the way the plan is being implemented by the prospective sponsor and associates. If the only way to make money is by sponsoring, stay away, the plan is fatally flawed.

On top of all this tests, in Islamic MLM there are Shariah requirements that needs to addressed and justify accordingly.

Shariah Requirements for MLM

Shariah Board

The Shari’ah Committee (Shari’ah Control and Fatwa Body that is independent of the MLM company) consists of learned and honest Shari’ah scholars. The Committee is responsible for expanding the Shari’ah provisions with respect to the issues that are put forward before it and to control the activities of the MLM company pursuant to the provisions of Islamic Shari’ah. The committee carries out its activities in total independence. The MLM company is committed to the application of the fatwas and decisions passed by the Committee.

Shariah Board is important to have in the MLM business in order to observes the compliant of MLM activities that may not deviate from the Shariah boundary. There should be a Shari’ah supervisory board for any institutional Islamic investment body, and that Board should consist of trustworthy scholars who are highly qualified to issue fatwa (religious rulings) on financial transactions. In addition, they ought to have considerable experience with knowledge of modern dealings and transactions. The Board should be independent and free to give opinions on proposed contracts and transactions.

Government Regulation - Direct Sales Act 1993

In its effort to regulate the direct selling industry in Malaysia, the Malaysian Government has implemented the Direct Sales Act 1993, with three main objectives:

Under the Direct Sales Act 1993, only companies with a valid license from the Ministry of Domestic Trade and Consumer Affairs are allowed to engage in a direct selling business.

Orders Regarding Purchase And Sale

(Shariah-Compliance products)

It is proper for a business man to learn the rules with regard to matters with which one is confronted frequently in connection with various transactions. Imam Ja'far Sadiq is quoted to have said: "A person desirous of engaging himself in business should learn its rules and orders and in case he makes any transaction without learning them he will suffer On account of entering into a void or doubtful transaction

If a person is not aware, on account of being ignorant of the relevant orders of the transaction made by him being valid or void, he cannot appropriate the property which he has acquired

If a person does not possess wealth and it is obligatory on him to meet some expenses (e.g. of his wife and children), he should engage himself in business. Moreover, business is recommended for recommended acts like providing better means of livelihood to one's family and helping the indigent persons

Recommended Acts

 The following four things are recommended in connection with sale and purchase:

 (i) One should not discriminate between various Muslim buyers in connection with the price of a commodity.

 (ii) One should not be greedy in the matter of the price of a commodity ie. one should not sell it for high price.

 (iii) One should give a little more of the thing which one sells and should take a little less of the thing which one buys.

 (iv) If the buyer regrets having purchased something and wishes to return it, the seller should take it back.

Abominable Transactions

 The following are some particular abominable transactions:

 (i) To sell one's property, except that one may purchase some other property with its sale proceeds.

 (ii) To adopt the profession of a butcher.

 (iii) To sell shrouds.

 (iv) To enter into transaction with vulgar people.

 (v) To transact between the call to dawn prayers and sunrise.

 (vi) To make it one's profession to buy or sell wheat or barley or other similar commodities.

 (vii) To intervene while a person is purchasing some commodity and to express one's own desire to purchase that commodity.

Unlawful Transactions -Recognition of subjects matter

 The following six kinds of transactions are unlawful:

 (i) To sale and purchase basically impure (najis) things, e.g. intoxicating beverages, non-hunting dogs, a dead body era pig. As regards other impure things, their sale and purchase is permissible only if it is proposed to obtain lawful gain from them (e.g. manufacturing manure from faeces), although, as a precaution, their sale and purchase should also be avoided.

 (ii) Sale and purchase of usurped property.

 (iii) On the basis of precaution sale and purchase of those things which are not usually considered, to be merchandise is unlawful (for example, the sale and purchase of ferocious beasts).

 (iv) Any transaction which involves interest.

Those who eat Ribâ [] (usury) will not stand (on the Day of Resurrection) except like the standing of a person beaten by Shaitân (Satan) leading him to insanity. That is because they say: "Trading is only like Ribâ (usury)," whereas Allâh has permitted trading and forbidden Ribâ (usury). So whosoever receives an admonition from his Lord and stops eating Ribâ (usury) shall not be punished for the past; his case is for Allâh (to judge); but whoever returns [to Ribâ (usury)], such are the dwellers of the Fire - they will abide therein

(v) Sale and purchase of those things which are usually utilized for an unlawful act only (e.g. gambling tools).

“O you who believe! Intoxicants (all kinds of alcoholic drinks), gambling, Al­Ansâb [], and Al­Azlâm (arrows for seeking luck or decision) are an abomination of Shaitân's (Satan) handiwork. So avoid (strictly all) that (abomination) in order that you may be successful.”

(vi) To sell a thing in which something else is mixed and it is neither possible to detect the adulteration nor the seller informs the buyer about it (e.g. to sell ghee mixed with fat). This act is called cheating (ghash) or adulteration. The holy Prophet of Islam has said: "If a person sells something to the Muslims or harms them, or practices deceit upon them, he is not one of my' followers. And as and when a person cheats his brother Muslim (i.e. sells him an adulterated commodity) Allah deprives him of his livelihood, closes the means of his earnings and leaves him to himself (i.e. deprives him of His blessings).

 Legal Issue- Mahallul Aqd

In the MLM, people can make money in an MLM, undeniably. The legal issue is: Where is the money coming from? Selling product? Then why not sell the same product in the "real world"?

But everyone knows that the real incentive is the pyramid aspect, and the product just the excuse to make it legal, or at least the MLM promoter would like you to believe it is legal

The issue of object of sale (Mahallul Aqd) is crucial to be explained in the MLM system whereby, the use of hilah may lead to null and void contract.

Pyramid Structure: An Organizational Problem

The Un-Pyramid

For most MLMs, the product is really a mere diversion from the real profit-making dynamic. To anyone familiar with MLMs, may seem to miss the point.The product is not the incentive to join an MLM. Otherwise people might have shown an interest in selling this particular product or service before in the real world. The product is the excuse to attempt to legitimate the real money-making engine. It's "the cover."

Intuitively, we all know what is really going on with MLMs. Just don't use the word "pyramid"!

"You see, if you can convince ten people that everyone needs this product or service, even though they aren't buying similar products available in the market, and they can convince ten people, and so on, that's how you make the real money. And as long as you sell to a few people along the way, it is all legal." Maybe...

But the way to make money in all this is clearly not by only selling product, otherwise you might have shown an interest in it before, through conventional market opportunities. No, the "hook" is selling others on selling others on "the dream."

ADVANTAGES OF MLM AS A BUSINESS MODEL

Personal Growth and Development

The nature of the form of selling you will be doing in this business puts you in contact with many and varied individuals. Over time, your leadership and motivational skills will become ever more finely honed. You will derive a great deal of personal satisfaction from helping others make a success of their businesses.

Brotherhood Cooperation and Solidarity

The interaction between fellow Muslim can create the sense of brotherhood, cooperation and love and give solidarity to the Ummah

Reduction in Poverty - Residual Income

Because you're earning commissions on sales generated by your downline as well as your own sales, you will continue to make an income as long as your downline works hard. Your job as sponsor is to motivate your downline so this actually happens.

Poverty in a way can be reduced as people will get extra income or job so the living standard of the poor can be up lifted.

Strengthening the Islamic Economy

The overall of Muslim economy can be better off if the MLM business is successful.

Low Barriers to Entry

MLM is a very egalitarian industry to get into. It doesn't have any pretentious entry requirements, you don't need a college degree, nor do you need any particular experience.

Financially, MLM generally has relatively low set-up costs compared to other small business/franchise start-ups. Actual costs will vary by program. Some may require a substantial monthly investment in the products or services that form the substance of the business so be sure you understand exactly what will be required of you before you join.

Fortunately, there are also plenty of programs out there that only require a modest financial investment to get started. If you are new to MLM, start with one of these.

MLM Company Manufactures and Drop-Ships the Products

You are selling an already manufactured product and the company will drop-ship the product to your customer. This means you don't need to worry about anything but making the sale.

Flexible Hours

You can work the hours you choose. If you have a full-time job, you can work your MLM business in the evenings and on weekends. If you're a stay-at-home mom, you can run it when the kids are at school. You can still take vacations and if your child gets sick you can take a day off.

Work from Home

For Muslim women who are not working, MLM can be an avenue for them to improve their income. In MLM there is no need a corporate office for this sort of business. We can run it right out of our home.

Can be run Part-Time

Because of the residual income nature of MLM, good money can be made running an MLM business properly only part-time.

Pre-Existing Business and Marketing Plans

You don't need to come up with your own business or marketing plans. These are taken care of by the company.

Pre-Existing System

Similarly, you don't need to reinvent the wheel when it comes to systems for recruiting, motivating and training your downline. These are pre-established by the MLM company you are representing. This means you can hit the ground running and start making money quickly.

DISADVANTAGES OF MLM AS A BUSINESS MODEL

Potential to Alienate "Warm Market"

MLM programs generally have you start by marketing to your so-called "warm market". Your warm market is basically everyone you know: friends, family, colleagues, advisers, teachers, doctor, lawyer, neighbors, acquaintances ... Your sponsor will probably ask you to make a list of 200 or so of these people and have you contact each and every one of them about your MLM program.

Reactions to such an approach will vary. Close friends and family will probably humor you even if they have no intention whatsoever of joining your program. Others who don't know you well may be dismissive or even downright hostile to your approaches. Some MLMers have reported people crossing the street to avoid them when they see them coming! So you need a thick hide in this business.

And think also about what happens if someone you care about DOES proceed with your program and loses money. Close relationships have been destroyed as a result.

Takes Effort, Energy and Motivation

Not only must you actively recruit your own direct downline, you must stay on top of them to ensure that they are actively recruiting and supporting THEIR downline. Remember, this is the way you make money in this industry. It's all about residual income.

So understand going in that this is a business that will require real effort on your part. And sustained effort at that. But what in life that's worthwhile doesn't, right?

Also, plan to have to motivate yourself. Ideally, you should be being "worked" by your up line to keep you motivated. They, after all, are earning their residual income from you Not all sponsors are necessarily as diligent as you, however, so don't count on someone above you being there to motivate you. Develop personal motivational habits to keep yourself moving. If your sponsor helps you, that's just bonus.

Financial Commitment

More likely than not, you will have to commit to purchasing a certain volume of product each month to remain eligible to participate in the program. Be sure you understand your monthly financial commitment going in. And, while you're at it, make sure that what you'll be buying is a quality product that you have a genuine interest in purchasing. If you're just going to stash it away in a cupboard somewhere, look around until you find a product that you actually want and will use.

Recommendation for the successful Of MLM in the sounds Islamic economy

As we can observe from the above facts about MLM business concept, there are few area that need to be tackle in order to Islamize the concept of MLM. There are need to improve and change in term of mechanism of leveraging the human factors that need to be addressed.

The idea of trade that permissible in Islam is observed in the MLM structure, but the justice element is lacking as the top people has the advantages of getting the most wealth from the business in the expense of the down line distributors. The mechanism of distribution of wealth is crucial to be addressed as it will ensure the strength of Ummah will prevail. The role of zakah and sadaqah can be placed in the distribution of profits from the upper layer to the bottom part in order to make sure that the concepts of solidarity, brotherhood mutual help prevail in the Islamic MLM system that will differentiate between the conventional MLM and Islamic MLM.