Profit Sharing or Usury? Know the Difference from the Start 

Have you ever heard someone say, “Relax, this is a sharia investment. The profit sharing system, not interest.” It sounds really sweet, like it’s definitely halal, safe, and blessed.

But… wait a minute. Are all those who claim to “profit sharing” automatically free from usury? Not necessarily. Because in fact, there are so many investment practices that claim to be “profit sharing,” but if you check deeper, it turns out to be just a camouflage for the usury system.

The danger? Usury is not an ordinary sin. In the Qur’an, Allah ﷻ even declared war on usurers!

Allah ﷻ says:

يَا أَيُّهَا الَّذِينَ آمَنُوا اتَّقُوا اللَّهَ وَذَرُوا مَا بَقِيَ مِنَ الرِّبَا إِن كُنتُم مُّؤْمِنِينَ

“O you who believe! Fear Allah and leave the remainder of usury uncollected if you really believe.” (QS. Al-Baqarah: 278)

Therefore, it is very important for us to dissect together:

– What exactly is the profit-sharing system in Islam?
– Why do some people say that the system is “sharia” but it still contains usury?
– And how do we avoid getting trapped in a contract that is broken according to sharia?

Come on, let’s review this chapter, because the matter of muamalah is not a matter of taste or good intentions, but a matter of obedience to the rules of our Lord ﷻ.

Profit Sharing System in Islam

In Islam, the profit sharing system is not just about “it will be shared later” and then it’s done. There are clear rules of the game, there are contracts that must be in accordance with sharia, and everything cannot be done carelessly.

There are two main types of contracts that are the foundation of the profit sharing system in sharia:

1. Mudharabah (مضاربة)

This is a cooperation contract between the capital owner (shahibul maal) and the business manager (mudharib). One party provides the capital, the other party runs the business.

➡ Capital: from one party
➡ Work/energy: from the other party
➡ Profit: divided based on the ratio (percentage), which is agreed upon at the beginning
➡ Losses: borne by the capital owner, as long as it is not due to the negligence of the manager

For example:

You provide capital of IDR 10 million, it is agreed that the profit is divided 60:40 (60% for you, 40% for him).

If the business makes a profit of IDR 2 million, you get IDR 1.2 million and he gets IDR 800 thousand.

If the business loses, you are the one who bears the capital loss (for example, it becomes IDR 9 million), as long as there is no negligence from him.

Important notes:

– You may not set a certain nominal profit (for example: “I want IDR 500 thousand per month, fixed.” → this is void)
– The type of business and how it works must be clear
– There must be no guarantee from the mudharib to bear the loss, except due to his negligence

2. Musyarakah (مشاركة)

In this case, both parties contribute capital and can both actively manage it.

➡ Capital: from two or more parties
➡ Work: can be one or all parties
➡ Profit: divided based on a percentage of profit
➡ Loss: borne according to the proportion of capital

For example:
You and your friend each contribute IDR 5 million for a joint business.

If the business profits Rp4 million and you agree to split it 50:50, that means each gets Rp2 million.
If you lose Rp2 million, then each is responsible for Rp1 million.

Interestingly, this musyarakah is more flexible because both parties can actively make decisions and manage the business. But there must still be a clear agreement at the beginning: proportion of capital, profit ratio, division of labor, and also how to close the agreement if the business is dissolved.

Also read: Sharia Compliant Investments for Beginners

Why Use a Ratio?

Because in Islam, profit cannot be guaranteed. Profit is the result of effort, and because effort is full of risks, no one party can be guaranteed to “always get this much”.

That is why sharia contracts must use a ratio (percentage of profit) not a fixed figure of capital.

In other words, as long as you:

– Have a clear written contract
– Share the results using a ratio of profit
– Are ready to bear the risk according to sharia rules
– Do not provide a guarantee of profit

… then God willing, your profit sharing system is on track according to sharia. And it is not only a matter of halal-haram legality, but also a matter of blessing. Because Allah ﷻ will not bless transactions that are full of usury, even though in the law of the world it seems “profitable”.

So now how do you distinguish which investments are sharia and which are just sharia “claims”?

Also read: How to Manage Personal Finances of the Prophet Muhammad’s Companions

“Profit Sharing” System That Turns Out to Be Usury

Now, this is a bit tricky. Many people think that if a system uses the term “profit sharing”, then it is automatically free from usury. In fact, not everything that uses the term sharia is truly sharia. Sometimes only the packaging is sharia, the contents? Still usury.

For example, like this. Someone offers you an investment:

“Put in Rp1 million in capital, later you will get Rp600 thousand per year, fixed, no matter the profit or loss.”

At first glance it sounds like mudharabah or syirkah, right? But if you pay close attention, this is not profit sharing. This is sharing a fixed number.

Why is this problematic? Because in Islam, mudharabah means that profits are divided based on a ratio (percentage of profit), not a fixed number. So for example, you agree to 20% for the capital owner and 80% for the manager. Now, 20% from how much? Yes, from the business profit, not from the initial capital.

If you get Rp600 thousand fixed every year, it means that you are giving a loan with a fixed return. And that is the definition of usury.

In the book Nizhamul Iqtishadi fil Islam, Syaikh Taqiyuddin an-Nabhani explains:

“It is not permissible in a mudharabah contract to determine the nominal profit, because that makes it like an interest-bearing debt.”

In line with that, KH. M. Shiddiq Al Jawi also emphasized:

“If the distribution of profits is determined in a fixed nominal, not based on a percentage of the profit, then the contract becomes fasid (damaged). This is no longer mudharabah, but a ruse of usury.”

Not only that, the international standard issued by AAOIFI (Accounting and Auditing Organization for Islamic Financial Institutions) also states that:

“Profits in mudharabah must be divided based on a certain ratio of net profit. It cannot be determined as a certain nominal of capital.”

So, now you understand that if the profit is determined at the beginning without following the profit and loss of the business, then it is outside the corridor of sharia. Also known as: hidden usury.

Also read: Syawal Fasting: A Small Investment, Big Rewards!

Tips to Avoid Mistakes: Don’t Just Invest, Even if It’s Called “Sharia”

Nowadays, the word “sharia” is like a marketing label. As long as the word is there, people will immediately believe it. In fact, not everything that carries the sharia label is actually in accordance with sharia.

That’s why it’s very important for us to be vigilant and observant before joining in investing or cooperating in a profit-sharing business model.

Here are some tips to avoid making the wrong move:

1. Understand the Contract, Don’t Just Agree

Before entering a business or investment, ask first:

• Is this a mudharabah or musyarakah contract?
• Who is the investor? Who is the worker?
• How is the profit shared? Using a ratio or a fixed number?

If it turns out that the profit is guaranteed to be fixed, for example “investment of IDR 10 million, guaranteed to get IDR 500 thousand per month”, well… be careful, that’s already in the realm of usury, not profit sharing.

Imam Malik once said:

“Every loan that produces benefits is usury.” (al-Muwaththa’, Malik bin Anas)

2. Don’t Want Guaranteed Profit

One of the characteristics of the sharia system is that there is no guarantee of profit. If there is a party that gives a guarantee of profit even though the business is not running yet, it is no longer appropriate.

The Messenger of Allah ﷺ said:

“There should be no profit without risk.” (Narrated by Ahmad and Abu Dawud)

This means that profit is only halal if there is risk. If everything is safe and you just sit back and wait for the profit, it is worth suspecting that it is not profit sharing, but usury camouflage.

3. Look at the Type of Business

Halal investment is not just about the contract, but also the object of the business. For example:

• Halal business: trading in necessities, culinary, educational services
• Haram business: liquor, gambling, usury (for example, high-interest savings and loan cooperatives), or anything that contains elements of sin

If the business model is “profit sharing” but is used to sell liquor, it is still haram even though the contract is correct.

4. There Must Be Financial Transparency

Profit sharing can only be fair if the finances are open. If you invest but are never given a profit report and are only given a transfer of “that much”, that is suspicious. It could be that it is not profit, but interest under cover.

Transparency is part of the mandate. And mandate is part of Islamic morals.

Also read: Smart Money Management Tips For Homemakers

Khatimah: Investment is Not Just Profit, But Worship

Finally, back to our mindset about wealth and business: why are we looking for profit?

If it’s just to get rich, everyone can pursue that. But if our intention is to do business that is halal, blessed, and approved by Allah ﷻ, then we must be willing to obey the sharia, even though sometimes the results are not instant.

Because in Islam, blessing is more important than just profit.

The Messenger of Allah ﷺ said:

“Indeed, Allah is good and does not accept anything but that which is good.” (HR. Muslim)

This means that the wealth we earn must also come from a good path.

Don’t let us think that we have “migrated financially”, when in fact it is just a change of label – from “interest” to “profit sharing”, but the content is the same: usury wrapped in sharia.

May we all be among those whom Allah ﷻ has given guidance to guard wealth, guard efforts, and guard hearts to always be straight on His path.

“Whoever fears Allah, He will surely make a way out for him, and provide for him from where he does not expect.” (QS. At-Talaq: 2–3)

Aamiin ya Rabbal ‘alamin.

Let’s Visit, Zeed and join for halal investment with Zeed.

References:

Al-Qur’an Al-Karim. Accessed from https://tafsirweb.com 
Muslim, Abu al-Husain. Sahih Muslim. Accessed from https://www.hadits.id/hadits/muslim.
Malik bin Anas. Al-Muwaththa’
Ahmad bin Hanbal. Musnad Ahmad. Beirut: Al-Resalah, 1999.
Siddiq Al jawi. Fissilmi Kaffah Article. “Recognizing Profit Sharing Which Turns Out to Be Usury.” Retrieved from:  https://fissilmi-kaffah.com/frontend/artikel/detail_tanyajawab/370
An-Nabhani, Taqiyuddin. Nizhamul Islam. Beirut: Darul Ummah.
An-Nabhani, Taqiyuddin. Asy-Syakhshiyyah Al-Islamiyyah. Beirut: Darul Ummah