Permissible profits and its regulations according to the Islamic legislation

The aim of any investor or trader is to obtain a profit. This is the primary aim for such sales dealers. But it is important for any investor or trader to be careful not to consume anything which is prohibited. The Messenger of Allah (peace be upon him) said, “Oh Ka’ab ibn Ajrah,  any flesh nourished by prohibited earnings, the fire has more right to it” (related by Tirmidhi).

How can profit be permissible?

The basic rule for any profit is that it is permissible unless it was obtained through prohibited means

- anything which causes harm to people, for example, bad food, contaminated drinks, harmful substances etc. intoxicating drinks or drugs, and selling meat that has not been slaughtered Islamically or swine flesh.

- All profit resulting from forbidden professions are evil gains that result from corrupt contracts.

- Profit gained from unfair over-pricing, monopolizing goods, exploiting the buyer by making use of his ignorance about matters connected with the sale or his unfortunate circumstances and needs.

- Profit gained from cheating, not being straight forward, hiding defects in the goods or displaying it for it to appear different than its true state in a way to deceive the buyer and confuse him.

- The sale of forbidden items, such as trafficking in

The righteous predecessors (may Allah be pleased with them) used to consider displaying the defects of the goods as being the advice which is a basic characteristic of the religion. This is what the Prophet (peace be upon him) used to ask his companions to make a pledge about, and they did not consider this difficult for them to fulfill.

- Tameem Ad-Dari (may Allah be pleased with him) reported that the Prophet (peace be upon him) said, “The religion is advice” three times. The Companions said, “To who, Oh Messenger of Allah.” He (peace be upon him) replied, “To Allah, to His Book, to His Messenger and to the Muslims in general” (related by Muslim).

Is there a limit in Islam to how much profit one can set?

No certain percentage of profit which is forbidden to exceed has been laid down in the Islamic legislation, but this amount has been left for people to determine according to the laws of supply and demand,  without violating the basic principle of being lenient and easy with the people

So no certain percentage of profit which is forbidden to exceed has been laid down as a general rule for all goods in all times and places.

Do you not notice there is a difference in goods with regard to how quick or slow their turnover is. This is because when the turnover is quick, less profit is usually gained, but when it is slow, greater profit is gained.

Is an immediate sale different from a deferred sale? Usually there is little profit in the first type of sale but much profit in the second one.

Are there not some goods that are indispensable and others that are necessities, so less profit is taken when selling them in order to be lenient with those who are weak and in need? Similarly, are some goods not luxuries for which more profit is usually taken in order to make it easy for people to do without them?

In fact, there is evidence in the Sunnah of Prophet Muhammad (peace be upon him) that it is permissible, in some situations, to take double the profit, or even more than this.

- In Imam Bukhari’s book of authentic hadith, Urwah Al-Bariqi (may Allah be pleased with him) is narrated to have said that the Prophet (peace be upon him) gave him a dinar to buy an sacrificial animal or sheep, so he (Urwah) bought two sheep and later sold one of them for a dinar. As a result, he returned to the Prophet with a sheep and one dinar. Consequently, the Prophet (peace be upon him) supplicated Allah to give him blessings in his business transactions, and (after that) if he had bought dust, he would have obtain profit from it.

- Imam Ahmed narrated in his Musnad that the Prophet (peace be upon him) supplicated Allah saying, “Oh Allah, give him blessings in the sales transactions (he carries out) with his hand(s).” Urwah said, “Truly, I saw myself (i.e. I was) staying at Kanasah in Kufa (a place in Kufa), gaining profit of forty thousand before returning to my family.”

- An authentic hadith relates that Az-Zubair ibn Al-Uwwam bought forest-land which was in the highest part of Madina for one hundred and seventy thousand. Later, Ibn Abdullah ibn Az-Zubair sold it for a million; that is, he sold it for much more than the price his father bought it for.

General regulations concerning profit:

- Avoid mixing the profit with any type of prohibited actions, like cheating, not being straight forward, monopolizing goods, exploiting the buyer’s ignorance about the product etc. or exploiting the difficult circumstances he is experiencing or his need by increasing the price of the goods, and similar unfair practices.

- The general principle in setting the profit is leniency, easiness and being satisfied with a small amount of profit, thereby being similar to the ways of the righteous predecessors and the spirit of the Islamic legislation. Who is satisfied with a small amount of profit, there will be blessings in his efforts. Ali (my Allah be pleased with him) used to go around the markets in Kufa holding something to hit people with and saying, “Merchant traders, act properly to be far from sinning. Do not refuse to accept a small amount of profit waiting for a larger amount which you may never receive” (related in Labourers’ Treasures: 29451).

- The trader has a right to set what profit he wants within the limits of the general rules of the Islamic legislation.

- This does not prohibit the ruler from setting a price for any goods for the trader and obliging him to take only a certain percentage in profit whenever the need arises and the situation calls for this pricing.

The decisions of the Islamic Jurisprudence Council concerning the profits of traders which were drawn up in the fifth session of the conference in Kuwait from 1 - 6 Jamada Al-Oula, 1409 A.H. (10 – 15 December, 1988), decision number: (5/8) 46, states:

First: The basic principle which the religious texts and rules in the Islamic legislation lay down is that the people are allowed to freely sell, buyer and dispose of their wealth and money as they like within the limits of the Islamic legislation and its regulations, according to the orders in Allah’s Saying, “O Believers! Do not devour one another's possessions wrongfully; rather than that, let there be trading by mutual consent” (Surah Al-Nisa’: 29).

Second: No percentage of profit has been set which has to be observed by traders in their transactions. On the contrary, this matter is left to be decided according to the conditions of trade in general and also the conditions of the trader and the goods, taking into consideration what is required of Islamic manners that entail gentleness, satisfaction, leniency and ease.

Third: Islamic texts agree on the obligation of making dealings free from anything or an action which is prohibited, like cheating, deceit, not being straight forward, fraud, lying about the profit, and monopolization which results in harming both the general public as well as specific individuals

Fourth: The ruler does not interfere in setting prices unless there is a clear flaw in the market rising from unusual factors. At such a time, the ruler may intervene using any possible just means to eliminate such unusual factors and the reasons for the flaws, high prices and unfair over-pricing.