Time value of money from islamic

Suppose you can purchase a bicycle today for Rs.


Islamic principles differ from the capitalist theory as money and commodity have different characteristics, for instance money has no intrinsic value but is only a measure of value or a medium of exchange, it is not capable of fulfilling human needs by itself, unless converted into a commodity. In every investment, there must be a probability to get a positive return, negative return and no return.

As believers we must never waste or abuse time, rather we must value it as a blessing from God. In contrast, the increment from riba loans is contractual and set by creditor. What is the accumulated interest at the end of the 2nd year?

Anis at 35, IDR retail. For most individuals, the present consumption is preferred over future consumption. Actual existence of uncertainty, inflation, and alternative investment opportunities serve to prove a positive time preference.

Time Value of Money in Islamic Finance

Making profit is not prohibited in Islam but it is rather prohibited with the use of interest. The debtor should thankfully for the loans he gets. The rent of a structure could be higher than the depreciation cost and any tax paid on it.


Murabaha and the time value of money in Islamic finance Even though the way Islamic banks operate should by now be well understood, I still come across people who contend that there is no concept of the time value of money in Islamic finance. Actually Islam forbids riba but it does not mean it is against the concept of positive time preference.

Islam treats money as unit of account to determine the relative worth of goods and services. According to capitalist theory, there is no difference between money and commodity in so far as commercial transactions are concerned. Religious obligations must be a first priority, however God is generous and time that seems so fleeting when we are flittering it becomes filled with blessing when we are using it to please our Creator.

The Value of Time

Extra payment shall be given if the business is profitable through the use of loans. An entrepreneur who decides to run a business may employ the services of labor and land on a fixed payment basis or through a profit and loss sharing arrangement. Any gain from the sale and purchase is allowed.

It is quite frequently observed that every trader whether large multinational trading corporations or a roadside store decide on their profit margin rates based on various factors of which a major variable is the competitive environment in which the trader operates his business.

In fact, the traditional welfare economic criterion used to be 53 and still seems to be the simple utilitarian one, judging success by size of the sum total of utility created — nothing else being taken to be of intrinsic value. But why this is not true for interest-bearing debt?

The words of God in the Quran and the message of Prophet Muhammad to the believers are clear, we, humankind are told to be conscious of time.

Narrated by Bukhari and Muslim. Business risk does not guarantee anything. Verily the Prophet said: Can she get the same yield if he uses this money to run her own business? In June the State Bank allowed banks to provide finance on mark-up and on buy-back agreements basis.

This is a simple outcome of the abolition of Riba in Islam, which in turn prevents the development of speculation in any market.

This website uses cookies to improve services, analyse traffic to our site, deliver content and provide tailored ads.The Money Value of Time “It has been argued by some Muslims that the rate at which installment sales are based is the same as the rate of interest.

The time value of money in Islamic finance

This has become another source of confusion in some Islamic countries. Time Value of money is a fundamental financial theory and a basic element in the monetary system. This concept serves as the foundation for all other notions in finance.

Feb 25,  · THE TIME VALUE OF MONEY IN ISLAMIC PERSPECTIVE. Faiza Husnayeni Nahar N.I.M: Khairunnisa N.I.M: Ary Sugma Pratama N.I.M: ABSTRACT. Islam has a lot of sale and purchase contract that not only direct contract such as transaction between buyer and seller at that time.

Time Value of Money in Islamic Finance

Does the issue of time value of many carry the priority or some other issues faced by Muslims. Poverty among Muslims is now creeping into hunger, starvation, extreme malnutrition in growing percent of Muslim population.

Time Value of money is a fundamental financial theory and a basic element in the monetary system. This concept serves as the foundation for all other notions in finance. It impacts consumer finance, business finance, and government finance.

Basically the Conventional Time value of money results from the concept of interest that prohibited in Islamic principle. September, The Concept Of The Time Value Of Money: A Shari‘Ah Viewpoint International Journal of Islamic Banking & Finance – Vol.

3, Issue 2 Page 2 price of a commodity: deferment (ajal), acceleration (ajal) and spot (hal).

Time value of money from islamic
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