The concept of 'no risk, no gain' in Islamic finance

Leaving out the element of risk could lead to interest-based transactions, which are prohibited in Islam.

IN one of his sayings, the Prophet asserted that entitlement to the return on an asset relates to the risk of ownership or al-kharaj bi al-dhaman. Based on this hadith, Muslim jurists developed a legal maxim al-ghurm bi al-ghunm or “gain is justified with risk”.