Profit Maximization from the Islamic Perspective review from various authors and articles from Islamic Economy System.

1. Profit Maximization from theProfit Maximization from the
Islamic PerspectiveIslamic Perspective
Presented by:
Musliza Binti Musa G1236556
Siti Maisarah Binti Sewandi G1237154

2. OutlineOutline
 Introduction
 A Review on the Islamic Perspective
 Common Views of Contemporary Scholars
Authors’ Views and Reasoning on the Islamic
Perspective
 Conclusion

3. • The philosophical objective of an Islamic
economic system is to fulfill the internal positions
of satisfaction and motivations
• The operational objectives:
– to spend wealth and materials to
accomplish aim (economic - based objective)
– to achieve cooperation and harmony and to
maximize social interests (social - based
objectives)
(Zaman, A., 2008)
IntroductionIntroduction

4. • In an Islamic framework, it is accepted that a
firm’s behavior must be guided by Islamic
values and ethics
• The motivation of a firm in the Islamic framework
is profit and public good. In mainstream
economics, the firm’s motivation is solely to
maximize profits.
(Ali S.A)
IntroductionIntroduction

5. • In Islam, the market is an institution that
equilibrates the behaviors of consumers and
firms to ensure greater welfare in this world, as
well as the greatest reward in the hereafter
through dealings involving profit maximization.
(Samad, A., 2008)
IntroductionIntroduction

6. A Review on theA Review on the Islamic PerspectiveIslamic Perspective
Central Issues or Objectives
• The real issues in relation to profit-maximization
from the Islamic social justice viewpoint :
– fairness of the firms’ actions towards the
buyers in the product market
– the equitability of the consumers towards the
sellers, especially labor, in the factor market;
and
– the usage of profit from the activity

7. A Review on theA Review on the Islamic PerspectiveIslamic Perspective
• These objectives could be further explained
through (Chaudry, M. S., 2003) :
– Achievement of al-Falah
– Fair and Equitable Distribution
– Provision of Basic Human Needs
– Establishment of Social Justice
– Promotion of Brotherhood and Unity
– Achievement of Moral and Material Development
– Circulation of Wealth
– Elimination of Exploitation

8. A Review on theA Review on the Islamic PerspectiveIslamic Perspective
1) Achievement of al-Falah
Spiritual, moral and socio-economic success in
this world and in the world hereafter.
In Islamic economics, profit is allowed but
maximization of profit is denounced by many
Islamic economists.
It includes reward and sin which means Allah’s
blessing and also His wrath (Al-Qasas: 77)

9. A Review on theA Review on the Islamic PerspectiveIslamic Perspective
2) Fair and Equitable Distribution
(al-Hashr: 7)
Wealth should not be allowed to be
concentrated in only a few hands but instead
should be freely circulated among everyone
The Islamic firm would view profit from a more
socially beneficial perspective.

10. A Review on theA Review on the Islamic PerspectiveIslamic Perspective
3) Provision of Human Basic Needs
It is important that the society is provided with all
basic necessities to live like food, clothing and
shelter.
A hadith narrated by Tirmizi: “The son of Adam
has no better right than that he would have a
house wherein he may live, and a piece of cloth
whereby he may hide his nakedness, and a
piece of bread and some water.”

11. A Review on theA Review on the Islamic PerspectiveIslamic Perspective
4) Establishment of Social Justice
“He (Allah) placed therein firm hills rising above
it, and blessed it and measured therein its
sustenance in four days, alike for (all) who ask”
(Fussilat: 10)
“Never will you attain the good [reward] until you
spend [in the way of Allah] from that which you
love. And whatever you spend – indeed, Allah is
knowing of it” (ali-Imran: 92)

12. A Review on theA Review on the Islamic PerspectiveIslamic Perspective
4) Establishment of Social Justice
 To make economic resources distribution fair
and just, an elaborate system of Zakah and
Sadaqah has been established in the Islamic
economic system.
Many restrictions have been put in place to bar
an individual earning wealth through unfair,
illegal and unjust measures.

13. A Review on theA Review on the Islamic PerspectiveIslamic Perspective
5) Promotion of Brotherhood and Unity
"They ask you, [O Muhammad], what they
should spend. Say, "Whatever you spend of
good is [to be] for parents and relatives and
orphans and the needy and the traveler. And
whatever you do of good - indeed, Allah is
knowing of it." (al-Baqarah: 215)

14. A Review on theA Review on the Islamic PerspectiveIslamic Perspective
5) Promotion of Brotherhood and Unity
Islam sets out the foundations of sympathy,
brotherhood (ikhwan), friendship and love
among all the members of Ummah.
For a firm: it will automatically gear up its motive
towards the interest of the Ummah rather than
just focusing in achieving maximum profit.
Social accord will be attained and full
cooperation will exist between all parties.

15. A Review on theA Review on the Islamic PerspectiveIslamic Perspective
6) Achievement of Moral and Material
Development
It can be achieved particularly through Zakah.
Through the paying out of Zakah particularly in
regards to firms who obtains profit, consumption
and investment would be boosted. Through the
multiplier effect, there will be a greater growth of
national income.
Unemployment will be minimized and resources
would be fully and efficiently utilized

16. A Review on theA Review on the Islamic PerspectiveIslamic Perspective
6) Achievement of Moral and Material
Development
“And whatever you give for interest to increase
within the wealth of people will not increase with
Allah . But what you give in zakah, desiring the
countenance of Allah - those are the multipliers”
(ar-Rum: 39)
The human soul and wealth are purified via
Zakah and Sadaqah

17. A Review on theA Review on the Islamic PerspectiveIslamic Perspective
7) Circulation of Wealth
"This is what you hoarded for yourselves, so
taste what you used to hoard" (at-Taubah: 34–
35)
As with points 2 and 4, keeping wealth for one’s
oneself is discouraged.
Allah threatens that there will be calamitous
penalty for the persons responsible for this
dreadful offense.

18. A Review on theA Review on the Islamic PerspectiveIslamic Perspective
8) Elimination of Exploitation
Firstly is the abolition of interest or usury as it
is the worst form of human exploitation.
For those who have only profit-maximization as
motivation, they would totally disregard this.
Allah wages war against those who are involved
in this crime.

19. A Review on theA Review on the Islamic PerspectiveIslamic Perspective
8) Elimination of Exploitation
2nd measure: Stop the exploitation of human in
relation to slavery.
To maximize its profit, a firm might pay its
workers less than they are worth or pay the
wages late or may not pay at all.
A hadith “Pay the labourer his wages before his
sweat dries up” (Ibn Majah)

20. Common Views of ContemporaryCommon Views of Contemporary
ScholarsScholars
Majority of the Contemporary Scholars or the
Islamic Economists seem to agree that profit is
allowed in the Islamic economic system
However, profit-maximization conflicts with the
other objective of a firm in the Islamic economy
which is the upholding of human welfare or
public interest.

21. Common Views of ContemporaryCommon Views of Contemporary
ScholarsScholars
Hasan (2002) states that the concept of
maximization in itself conflicts with the moral
code of Islam.
Amin et al (2003) on the other hand is in view
that profit maximization can still be applied in an
Islamic framework to achieve the desired
outcomes of an Islamic economy, provided that
Islamic values are explicitly incorporated
particularly in the measurement of the cost of
production of an Islamic firm

22. Common Views of ContemporaryCommon Views of Contemporary
ScholarsScholars
Hasan (2011) stated that scarcity, self-interest
and maximization can be incorporated in Islamic
economics with advantage after interpretative
modifications to meet the Shari’ah norms
Samad (2008), parties in the Islamic markets will
combine twin objectives:
• maximization of profits/utility, i.e. welfare in
this world
• maximization of success in the world
hereafter, i.e. achievement of Paradise

23. AuthorsAuthors’’ Views and Reasoning on theViews and Reasoning on the
Islamic PerspectiveIslamic Perspective
From our point view, this topic is relevant in
providing society’s benefits.
Islam has its own prescriptions in order to tackle
this issue. This is because in Islam there are
also economic activities and participation in
business that have spiritual beliefs.
“Eat not up your property among yourselves in
vanities; but let there be amongst you trade by
mutual good-will” (an-Nisa’: 29)

24. AuthorsAuthors’’ Views and Reasoning on theViews and Reasoning on the
Islamic PerspectiveIslamic Perspective
Rasulullah (pbuh) made engaging in business
affairs an obligation, “Seeking earning is a duty
for every Muslim” and “Some sins can be
abolished only by working hard to get earnings”.
The elevation of participation in business
activities bring important factors toward social
stability, coherence and development and
growth besides strengthening the spirituality
and civilization of society.

25. AuthorsAuthors’’ Views and Reasoning on theViews and Reasoning on the
Islamic PerspectiveIslamic Perspective
Entrepreneurial framework according to the
Islamic Worldview is not only profit-oriented for
this world but it crosses the boundaries of the
physical world to a dimension that cannot be
seen with the normal human senses, namely the
Hereafter (Hasan, Z., 2011).
The concept of profit (gains) and losses (loss)
should be viewed in the medium and not just
based on the theory of rational human reason
alone.

26. AuthorsAuthors’’ Views and Reasoning on theViews and Reasoning on the
Islamic PerspectiveIslamic Perspective
Thus, without the guidance of revelation
resulted in man being ta’sub and fascinated to
live in a world full of lies
Result in oppression, tyranny & the practice of
riba'
Islamic guidance consists of a balance between
individuals’ rights and their responsibilities
towards others in opposition to self-interest and
altruism (Dusuki, A. W., & Abdullah, N. I., 2007).

27. ConclusionConclusion
We believe that profit maximization can still be
applied in order to achieve the desired
outcomes of an Islamic economy system.
Although the present economic environment and
the values of mainstream economy may not
completely imitate the ideal values of Islam, we
do hope that the analysis of this paper provides
valuable knowledge in supporting our Islamic
economic framework.

28. ConclusionConclusion
 The government must undertake this
responsibility to ensure that the goal is attained
and coincide with the market of society.
We believe that economic and social justice
values of the firm need to be in same
discussion.
Islam via the concept of vicegerency visualizes
shareholders’ financial resources plus society’s
economic resources, holding their property in
trust for the benefit of the whole society with
ultimate goal to gain the blessing of Allah.

29. Q&A SessionQ&A Session