Abstract

Businesses are intended to generate profits for the investors by engaging in economic activities. However, the fairness and legitimacy of business activities in terms of their contractual arrangements, margins of profit, and the underlying asset of trade have been a subject of debate. Over 1.5 Billion Muslims across the world and 52 Muslim countries look towards Islamic injunctions as the ultimate truth, and divine guidance to define a framework for conceptualizing profit and loss generation in a business. This paper reviews four sources of Islamic knowledge i.e. (i) qur’anic verses, (ii) sayings and practices of the Prophet (PBUH), (iii) commercial contracts, trade arrangements, and transactions as practiced in the Prophets era, and (iv) religious opinion drew on the major school of thoughts. Finally, this paper examines the profit-creation in contemporary Islamic banking practices through the lens of Islamic knowledge to address the contesting views and criticism on the profit-making and sharing arrangements instituted in present-day Islamic Banks.  The findings of this paper demarcate the guiding principles to steer general business & commerce activities and specifically the profit-making arrangements for businesses for operationalizing their role in driving the overarching socio-economic welfare in a society.