Q. It is said that excessive profit is forbidden in Islam. What percentage of profit is considered excessive? How much profit can one make without violating Islamic rules?
Muhammad Aslam
A. Profiteering is certainly forbidden in Islam. But profiteering is defined as making excessive profits out of people’s needs, especially in times of scarcity. This defines for us what is permitted and what is not. If a trader holds on to his goods to create an air of scarcity that compels people to try to secure their needs, even at a higher price, then the extra profit he makes as a result is not lawful, or at least highly reprehensible.
He may protest that he does not force anyone to come and buy at this high price, but then it is his action that created the element of uncertainty and generated extra demand, causing the price to go up. Monopoly is another way that pushes prices up, and it is forbidden. The important thing to remember is that exploitation of other people’s needs is unacceptable from the Islamic point of view.
Having said that, I should add that there is no standard formula to define rates of profits, because reasonable rates of profit vary a great deal according to how frequently different goods are sold. For example, rates of profit on fruits and vegetables are very small, but they may exceed 100 percent on large furniture items.
If the rates on consumable food are to be applied to furniture, then there will be no one to make furniture and furniture shops will have to close down. Similarly, if a greengrocer applies to his fruits and vegetables the same rates of profit as furniture, his goods will perish before anyone buys anything from him. Hence Islam allows business people to determine their reasonable rate of profit, provided they abide by the Islamic principles that forbid exploitation, monopoly and cheating.
