Islamic finance is a moral financial model based on divine principles, one of the the most important aspects is justice. There are many Quranic verses and Hadiths that deal with this, such as:
"We sent aforetime our messengers with Clear Signs and sent down with them the Book and the Balance (of Right and Wrong), that men may stand forth in justice," [Surat al Hadid; Verse 25].
There is also: "And the Firmament has He raised high, and He has set up the Balance (of Justice)" [Surat al Rahman; Verse 7].
God Almighty also said, "Allah commands justice," [Surat al Nahl; Verse 90].
In a Hadith Qudsi the Prophet [pbuh] narrated the word of God, saying "My servants, I have forbidden injustice for myself and I have made injustice forbidden to you. Do not be unjust to one another." Renowned Islamic scholar al-Izz Ibn Abdul-Salam said that Verse 25 of Surat al Hadid represents the essence of Islam.
It is therefore just that profits should not be inflated to the point that this would invalidate the satisfaction [of the customer]. This is the crux of the matter in Islam, and can be seen in the Quranic verse: "O ye who believe! Squander not your wealth among yourselves in vanity, except it be a trade by mutual consent" [Surat al Nisa; Verse 29] and this is regardless of whether the inflated profit [made by the seller] is known to the buyer such as in the event of purchasing from a monopoly, or whether this increase [on the original price] is not known to the buyer, if the seller conceals the original price of the product.
There are several Hadith that prohibit sellers making large profits on the original price of items or services. In the Sahih Muslim collection of Hadith, it was reported that the Prophet [pbuh] said, "No one hoards but the sinner." Muslim scholars explained the term "hoard" in this instance to mean the hoarding of a commodity that people need in order to sell it later at a higher price. This is something that is forbidden in Islam as it restricts the necessities available to the public.
In addition to this, Prophet Mohammed [pbuh] also said, "Any Muslim who transgresses against another Muslim and is unjust then he is the sinner." In another Hadith, the Prophet [pbuh] is quoted as saying: "Injustice of a buyer is riba [usury]."
Religious scholars had different opinions with regards to the amount of profit that is permissible to make. Some of them define this precisely, while others judge this according to local customs [and other factors], which is more reasonable. Therefore Islamic finance should operate in a just manner with regards to profits, and avoid outrageous [profit] inflation, particularly with regards to long-term financing.