Islamic finance does not require commercial institutions to work as charities. Lawful profit is possible, but its basis must be a genuine Shari‘ah-compliant transaction.
Profit may arise through partnership, sale, leasing, manufacturing or other valid structures. What is rejected is a guaranteed increase merely because money was lent for a period of time.
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The Basic Idea of Islamic Financing
Islamic finance does not require commercial institutions to work as charities. Lawful profit is possible, but its basis must be a genuine Shari‘ah-compliant transaction.
Profit may arise through partnership, sale, leasing, manufacturing or other valid structures. What is rejected is a guaranteed increase merely because money was lent for a period of time.