ISLAMIC WAYS

AND
OF TRADE
PROFIT
By: Group 4 Section-C
Instructor: Khadija Ejaz Khan
Islamic Studies
 Agenda
ABSTRACT & INTRODUCTION

OBJECTIVE & METHODOLOGY

LITERATURE REVIEW

ANALYSIS OF OBJECTIVE

SUMMARY

Islamic Ways of Trade & Profit 2

ABSTRACT
1. Trade is considered noble and important in Islam.
2. Profit in trade must be earned through fair and ethical
means.
3. Islamic teachings emphasize honesty, transparency, and
mutual consent in business transactions.
4. Interest-based transactions are prohibited, and profit-
sharing arrangements and partnerships are encouraged.
5. The goal is to ensure trade and profit align with
principles of justice, fairness, and social responsibility.
INTRODUCTI
ON
1. Islamic economics incorporates profit theory and emphasizes moral and social values.
2. The Qur'an provides guidance on various economic aspects, such as trade and wealth

INTRODUCTI
distribution.
3. Islam shares similarities with capitalism but also emphasizes mutual cooperation and
social gain.
4. Islamic economics takes into account the goals and purpose of individuals in their
economic activities.

ON
Islamic Ways of Trade & Profit 4
OBJECTIVE
• The research project aims to explore and understand the principles and practices of Islamic
trade and finance.
• It highlights how Islamic principles can be applied in modern business and finance, promoting
ethical and socially responsible practices.
• The project also identifies challenges and opportunities in implementing Islamic trade and
finance principles in different contexts.
• It compares Islamic finance with conventional finance, examining differences in trade, profit
generation, risk-sharing, and ethical considerations.
• The article explores the ethical implications of Islamic trade practices on societal well-being,
fairness, social justice, and wealth distribution.
• It discusses the potential impact of Islamic trade principles on global trade dynamics and cross-
cultural business interactions.
METHODOL
OGY
- We have used articles from late 2000s and early 2010s, based on trade and profit
by Islamic countries.
- This includes the banks, large firms and even trade between two Islamic countries
to get a better idea on Islamic ways of trade and profit.
- We have examined different Islamic approach to conducting business, as our
audience of general traders would come across.
- In Islamic finance, both parties share the risk and have a common objective of
creating a successful enterprise.
- Islamic finance aims to address conflicts of interest and promote fairness in
financial transactions.
METHODOLOGY
CONTINUED
In Quran, Chapter Two, verse 275, Allah says: 'those who devour riba (interest) will stand except
as stands one who the evil one by his touch has driven to madness. That is because they say
exchange is like riba; but Allah has permitted exchange and forbidden riba.' In Chapter Two,
verse 276, 'Allah will des troy riba; but will increase charity'. In verses 278-279, Chapter Two,
'Oh you who believe fear Allah and give up what remains of riba; if you do it not, take notice of
war from Allah and His Apostle’.
As can be observed from the last part of the quoted verses, there is no rule violation in the Quran
that has been treated as seriously as the charging of interest which is considered a paramount act
of injustice.
Islam recognizes the importance of risk in transactions. It doesn't endorse risk aversion or
speculation, but it also doesn't support gambling. Transactions with an element of risk are
accepted, as long as the risk is shared between the lender and the borrower.
This is the central idea around which the article report is made.
 LITERATURE REVIEW
PT-1
Islamic partnership structures, such as Musharakah and Mudarabah, are used in Islamic finance to
provide funding opportunities
Musharakah is a joint venture where multiple partners come together to contribute capital, skills, and
knowledge to a business venture. This partnership allows for shared ownership and decision-making
among the partners.
In Musharakah, profits and losses are shared among the partners based on their capital contribution.
This means that the distribution of profits is proportional to the amount of capital each partner has
invested in the venture.
Mudarabah is a passive partnership where one partner, known as the "Rabb-ul-Mal," provides the
capital, and the other partner, known as the "Mudarib," manages the venture. The Mudarib is
responsible for the day-to-day operations and decision-making.
In Mudarabah, the profits generated from the venture are shared between the partners based on a pre-
agreed ratio. This ratio is determined at the beginning of the partnership and is typically based on
negotiations between the partners.
However, in Mudarabah, the losses are borne by the capital provider (Rabb-ul-Mal). This means that if
the venture incurs losses, the Mudarib does not bear any financial liability.
LITERATURE REVIEW
PT-2
These partnership structures in Islamic finance promote fairness and risk-sharing.
Both parties have a stake in the success of the venture, and the distribution of profits
and losses reflects this shared responsibility.

Islamic banks and banks with Islamic windows offer these partnership contracts to
align with Islamic principles. This allows individuals and businesses to access
funding options that are in line with their religious beliefs.
Islamic finance aims to create a more inclusive financial system that adheres to
Islamic values and principles. It provides an ethical and equitable approach to
financial transactions, focusing on fairness, transparency, and social responsibility.
These partnership structures have gained popularity globally, offering viable funding
options for businesses and individuals. They provide an alternative to conventional
financing methods and have proven to be successful in various industries.
LITERATURE REVIEW
PT-3
Growing cooperation: The proposed preferential trade agreement (PTA) between Pakistan and
Turkey aims to strengthen the historically good relations between both countries.
Trade opportunities: The paper evaluates potential trade opportunities using descriptive
statistics and three trade indices: trade complementarity, export similarity, and interindustry
trade.
Trade surplus and export similarities: Pakistan has a trade surplus with Turkey and strong
export similarities, which create opportunities for firm synergies between the two countries.
Intra-industry trade: The presence of intra-industry trade indicates potential for greater value
addition and a broader market base for Pakistan's exports.
The Government of Pakistan should advocate for the proposed PTA and leverage the
agreement to maximize potential benefits.
The Islamic way of trade and profit encourages long-term sustainability and economic stability,
as it discourages speculative practices and excessive risk-taking. Islamic finance promotes the
concept of shared prosperity, where wealth is distributed in a more equitable manner, reducing
income inequality and promoting social cohesion.
LITERATURE REVIEW
PT-4
There are two main categories of research on corporate profitability: structure-conduct
performance models and firm effect models.
The first category focuses on industry effects like concentration, while the second category
looks at variations in firms' characteristics.
Some studies suggest that higher industry concentration can give firms more monopoly
power and the opportunity to earn higher profits.
Additionally, barriers to entry and firms' productivity or efficiency can also impact
profitability.
It's interesting to see how firm size can affect profitability, with some studies showing a
negative correlation between size and variance in returns on equity.
And exporting activity doesn't always guarantee higher profitability, according to Grazzi's
research.
However, In Islamic perspective, monopoly is generally discouraged as it goes against the
principles of fair competition and economic justice. Islam promotes a free and competitive
market where individuals and businesses have equal opportunities to participate.
ANALYSIS OF
OBJECTIVE
According to Islamic teachings, there are certain items that are considered
haram, or forbidden. This includes alcohol, dead meat, pork, idols, dogs, cats,
and blood. The sale and purchase of alcohol, for example, is explicitly
forbidden in the Shari'ah. In a hadith, the Prophet Muhammad (PBUH)
prohibited its trade, comparing it to the trade of carcasses, pigs, and idols.
Those who are involved in the alcohol business, whether as a buyer, seller, or
even someone who has anything to do with it, are considered sinful. Similarly,
substances that have intoxicating properties, such as narcotics, are also
considered haram.
The buying and selling of dead meat, except for fish and locusts, is also
prohibited. However, it's important to note that there are different opinions
among scholars regarding the use of haram items for other purposes. For
example, taking advantage of something that is haram to buy and sell may not
be prohibited.
ANALYSIS OF
OBJECTIVE PT-2
Islamic banking has gained popularity worldwide, with more and more
customers opting for interest-free banking products. It's great to see that Islamic
banking is not only embraced by Muslims but also by non-Muslims in many
countries.
In Pakistan, Islamic banking has been growing steadily since the 1970s, with
several full-fledged Islamic banks and conventional banks offering Islamic
banking branches. The State Bank of Pakistan has been actively promoting
Islamic banking and was recognized globally for its efforts. It's worth noting
that the global financial crisis has highlighted the flaws of interest-based
economies.
Islamic banking provides an alternative system that aligns with the principles of
Shariah.
The growth and recognition of Islamic banking globally is substantial.
“
The Prophet (‫ )ﷺ‬said,
"The buyer and the seller have the option of cancelling or
confirming the bargain unless they separate, and if they spoke
the truth and made clear the defects of the goods, them they
would be blessed in their bargain, and if they told lies and hid
some facts, their bargain would be deprived of Allah's
blessings."

Narrated ; Haklm bin Hizam

Sahih Bukhari Volume 3,
Book 34, Number 321
DEVISED QUESTIONS
 What are the key principles of Islamic trade and profit?
 How does Islamic trade promote fairness and justice in business
transactions?
 What are some prohibited means of earning money according to Islamic
teachings?
 How does Islamic finance differ from conventional finance in terms of
profit-sharing and interest?
 Are there any specific guidelines or restrictions on the types of goods and
services that can be traded in Islamic business practices?
 Answers to details and effects of islamic ways of trade and profit.

SUMMARY
• Fairness, transparency, and ethical conduct are key principles in Islamic trade, ensuring that all
parties involved are treated fairly and that there is no exploitation or deception.
• Islamic teachings also discourage earning money through prohibited means and encourage
productive and ethical economic activities.
• Islamic finance plays a significant role in promoting these principles, with alternative financial
instruments that comply with Islamic teachings.
• By following these principles, businesses can create an environment of trust and integrity,
contributing positively to the community and achieving long-term sustainability.
• It's important for businesses to seek guidance from Islamic scholars to ensure compliance with

SUMMARY
these teachings.
• Overall, Islamic ways of trade and profit promote fairness, ethical conduct, and social
responsibility.

Islamic Ways of Trade & Profit 16

THANK
YOU
Huzaifa Saqib
Ahmed Sadiq
Khuzayma Mushtaq
Abdul Ahad