The Basis for the Legitimate Entitlement to Profit in Islamic Law


This paper is aimed at investigating the basis for legitimate profit in Islamic law thoroughly and providing a concise summary of the theories found in moder n conventional economics regarding the cause of profit. Among the Islamic schools of law, the Hanafis have proposed the most comprehensive theory of profit. They have recognized money (māl), work (‘amal) and assuming liability (damān) as three factors for profit entitlement. The employment of one or more of these three factors is the condition for permissible revenue. While money and work are independent sources of profit, damān is applicable in connection with either money or work. It is also applicable to fixed revenue and profit-generating enterprises if understood in a broader sense. On the other hand, risk as a separate source for gain is impermissible since it leads either to qimār or gharar. This study shall use the broader theoretical framework of the Hanafi concept of damān (liability, guarantee) and apply it to the cases of fixed revenue and profit. Eventually, this paper aims at exploring how the Hanafi formulation of damān, along with capital and labour, can be useful in explaining and determining the basis for a legitimate profit in Islamic law.