The Basis for the Legitimate Entitlement to Profit in Islamic Law

Abstract

This paper is intended to investigate the basis for legitimate profit in Islamic law and compare it to the theories held by modern conventional economics regarding the cause of profit. This study shall use the theoretical framework of the Hanafi concept of damān (guarantee) and apply it to the cases of fixed revenue and profit. Finally, this paper aims at exposing how the Hanafi formulation of damān, along with capital and labor, can be useful in explaining and determining the basis for a legitimate profit in Islamic law.