DefinePK

Abstract

Profit sharing refers to the splitting of profit between two or more business partners. It is a substitute to the interest system where one partner gets a fixed return irrespective of business performance. In the past two decades profit sharing has captured the attention of policy makers and researchers alike. This increased interest has been roused by factors including research interests in the West, practical supremacy of the system and commitment to Islam. Martin Wietzman (1984, 1987, 1990) carried out research work on profit sharing, which gave respectability to the concept. Japan, during its boom era, used profit sharing in a small segment of the labour market. The UK passed legislation to provide tax incentives to encourage the adoption of profit - related pay schemes and following Islamic principles, a few Muslim economies attempted to modify banking practices in line with Islamic principles.