Regulating Profits

The following question and answer by Sheikh Yusuf Talal DeLorenzo attendees of the Dow Jones University Courses on Islamic Investement.Question:: Is there any restriction in the extent of profits we can take from our customers in halal business transactions in order not to violate Islamic law? I heard it must be less than 30%, is it true? what is the reason?Answer: Generally speaking, profits may be taken to the extent that the market will allow. Nonetheless, if prices are inflated by artificial means, through exploitation of advantages, or through monopolies, then Islamic law allows for the intervention of the market authorities. Likewise, if profit margins are so high as to be detrimental to the welfare of society, the market authorities will have the right to intervene. The classical jurists of Islam have discussed these subjects, and their opinions have guided modern Islamic financial institutions in setting rates and margins of profit. Earlier this year, a thorough study of the subject by Dr. Shamsiah Mohamad was published by the Dar al Nafais in Jordan (in Arabic).

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