Understanding Halal Profit Margins

It is said that Islam does not dictate the price or profit of a particular good/ service. It however encourages non-monopolistic free markets. This is where demand and supply of the good dictates the price. It is based on demand and supply that one will be able to charge as much or as little price (which profit will be attained from). This will then enable the producer to trade his/her products to his/her satisfaction in a free market.

Al-Muwatta Hadith 31.56

Yahya related from Malik that he had heard that Umar ibn al-Khattab said, “There is no hoarding in our market, and men who have excess gold (wealth) in their hands should not buy up one of Allah’s provisions which he has sent to our courtyard and then hoard it up against us (so as to create a false demand and sell the commodity to them later at an unusually inflated price). Someone who brings imported goods through great fatigue to himself in the summer and winter, that person is the guest of Umar. Let him sell what Allah wills and keep what Allah wills.”

The Prophet (saws) said: Hoarding up food (to sell it at a high price) in the sacred territory is a deviation (from right to wrong).  Sunan of Abu-Dawood Hadith 2015 Narrated by Ya’la ibn Umayyah

One thing Islam prohibits is that a trader or a group of traders intentionally hoard basic necessities such as medicine, food etc. This is done to create an artificial or an unusual demand so that prices would rise.

In a non-monopolistic marketplace, there is no such thing as a maximum or a minimum price or profit limit as it is determined by the interactions of demand and supply

It is also said that in doing business, one should be precise in weights and measures. This is because any profit that is made from tampering with measure or weights is considered “Haram”,

With regards to this issue, “When people cheat in weight and measures, their provision is cut off from them” (Al-Muwatta). He also told the owners of measures and weights, you have been entrusted with affairs over which some nations before you were destroyed” (Al-Tirmidhi).” The Prophet (PBUH)

Islam also says that in doing business, we should never deceive any client or customer. As a matter of fact, Islam forbids dishonesty. Businesses grow when it is blessed by Allah and one can’t have Allah’s blessings when they are swindling, misleading, and dupe. Lie or rip off other people to attain profits.

Be honest as it always pays off. The Prophet (S.A.W) is reported to have said, “When a sale is held, say, “There is no cheating” (Al-Bukhari).

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