How does Islam view profit maximization?

Islamic teaching generally approves lawful earnings and profit levels which do not lead to exploitation. Thus, profit maximization is accepted in Islam with certain conditions. The article of ‘Islamic Perspectives on Profit Maximization’ discussed the Islamic prescriptions on profit maximization into two major discussions;
                    i.            Islamic Ethics and Business Conduct
Businesses should prioritize ethical value and conduct in earning profits. Thus it is expected for the business to apply and create an ethical environment in the business by referring to Islamic ethics. Four foundations of Islamic ethics[1] is emphasized is ihsan, relationship with others, equity, and accountability. Ihsan means goodness and generosity in business activities or management. Ihsan also includes the values of mercy, justice, forgiveness, tolerance and attentiveness. These values are interconnected with the second foundation which is relationship with people which is succinctly related by the Prophet’s saying: “Al-Din Al maamala” (Religion is found in the way of dealing with other people). On the other hand, equity means businesses have to keep the fairness in dealings and equal opportunity in the market. Lastly, accountability should be able to enhance market trust and strengthens commitment to business promises and contracts. In the context of ethics, two important factors that influence business accountability and conduct which are fardh (duty) and multiplication factors.


Muslim jurist identify two types of fardh: kifia and ayen. Ethical conduct is part of fardh ayen which is an obligatory duty for each person to be observed and violation results to a disobedience of Islamic prescriptions. These duties of fardh kifia or ayen, is to ensure community well-being. Moreover, these duties when performed with the value of Ihsan are more likely to ameliorate the welfare of the community.  Thus, business people should understand the economic objectives of a business must be integrated with ethical concern and aligned their activities with sanctioned practices to be legitimate and rewarded.
The multiplication factor explains the act of generosity and ethical will be rewarded as it is in line with the concept of ihsan. The Quran (42:33) stating, “And if anyone earns  any good, we shall give him increase of good in respect thereof.” The Prophet restated the value of responsibility, stating that God has “mercy on the man who is generous when he buys and when sells and when he demands” (Quoted in Muhammad Ali 1997, p. 294). Multiplication of reward encompasses four significant issues:
1.      Investing of capital for economic growth and the creation of wealth[2].
2.      Engaging in business is critical for the continuity and thriving of a community[3].
3.      Business activities must be guided by the purpose of easing burden and avoidance of harmful activities.
4.      Profit is an outcome, but should not be the overriding factor in business affairs[4].

                  ii.            Profit Earning Level in Islamic Teaching
Muslims scholars argued that when the purpose of a business does not serve the society, the business loses its legitimacy[5]. Many contemporary economist and jurists agree that the concept of profit maximization may not be consistent with the overriding objective of optimally serving society and avoiding exploitation[6]. Their argument postulates that maximization may be result of monopolistic behavior and hoarding in the market which lead to manipulation in the market[7]. The preceding discussion emphasize business people should adhere Islamic ethics and not treating profit maximization as a goal.
The Prophet identified three conditions for market to be just[8]. These are as follows: In marketing exchange, there should be “No harm or harm-doer”; “Those who declare things frankly will not lead to each other’s destruction”; and “It is prohibited for anyone to take over the property of another without consent”. These conditions, along with Quranic instructions, set certain limitations on profit levels and the need to engage in free exchange and stimulating economic activities. It is clear that profit in Islamic teaching does not only emphasize on economic matter but also integrated with ethical system. Islam encourages business people to grow and gain profit without creating difficulties for others.



[1] Refer to Ali, A. (2011a). Islamic ethics and marketing. In O ¨ . Sandıkcı & G. Rice (Eds.),     Handbook of islamic marketing (pp. 17–34). Cheltenham: Edward Elgar.
[2] Refer to al-Maki, A. T. (1995). Guot al-Gwlob (Nourishment of hearts). Part 2. Beirut: Dar Sader.
[3] Refer to Ibn Khaldun, A. al-R. (1989). The Magaddimah (N. J. Dawood, Ed.,F. Rosenthal, Trans.). Princeton, NJ: Princeton University Press.
[4] Raghib, H. (1995). Islamic values and beliefs and their impact on marketing policy: Comparative analysis study. In M. Al-Barai & M. Marcy (Eds.), Management in Islam (pp. 307–355). Jeddah: Islamic Institute for Training and Research.
[5] Refer to Al-Sadr, B. (1982). Islam and school of economics. New York:Islamic Seminary.
[6] Refer to Chapra, M. (2001). What is Islamic economics?. Jeddah: IslamicResearch and Training Institute.
[7] Refer to Glaachi, M. (2000). Studies in Islamic economy. Kuwait: Dar An-Nafaes.
[8] Refer to Ali, A. (2011b). Marketing and ethics: What have Islamic ethicscontributed and challenges ahead? Paper presented at GlobalIslamic Marketing Conference, Dubai, March 20–22.

Comments

Popular posts from this blog

Profitability of Islamic Bank

Article Review: Riba and Islamic banking