A shari’a maxim which bases the legitimization of earning profit on the condition of risk-sharing and engaging in a business endeavor or enterprise which contributes to the broader economy. This maxim provides the rationale and the principle of profit and loss sharing in sharika contracts and other types of Islamic finance transactions in which risk and reward (control) are in the hands of an owner of assets or businesses.
Al-ghunm (earning a profit or gaining a benefit, or broadly a return) comes with bearing the risk involved (e.g., in musharakah ventures, risk sharing by all partners is the norm and the basic principle). This means the party that enjoys, or is expected to enjoy, the ultimate outcome of a business endeavor shall also be the party that stands ready to cover any costs or losses that may result from that (i.e., al-ghurm). Al-ghurm stands for risk taking or liability for loss or damage. In its first meaning, al-ghurm denotes bearing the responsibility for loss which provides the basis for entitlement to gain or profit (al-ghunm). Al-ghunm may also denote liability of a debtor (madeen), i.e., al-gharim, for any loss (khasarah– خسارة) or damage caused by any factor other than dishonesty or fraudulent by the debtor.
Al-ghunm bil ghurm is similar to the notion of risk-return trade-off in conventional finance.
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