Volume 2 Issue 2 2006


Shamim Ahmad Siddiqui
Department of Economics University of Brunei Darussalam

Abstract This paper looks at the issue of time value of money in general and its relevance to Islamic economics and finance in particular. After a brief overview of some of the key ideas related to this concept in conventional economics, the paper attempts to investigate the basic reality of time value of money. It suggests that, in general, people do not prefer present consumption over future consumption. Instead, there are some other factors which influence their decision to receive, if possible, present income (and not present consumption) sooner than later. It is then argued that, from an Islamic point of view, neither a positive time preference nor a preference for realizing an income sooner than later, justifies a reward for consumption loan. It is emphasized that although the case of loans for consumer durables appears to be different from those given for necessities, the severe condemnation of the later requires a very careful look at the permissibility of sale on deferred payments. The paper concludes that devising a solution to sale and purchase of consumer durables without involving riba in any form will be a unique contribution of Islamic finance.
Keywords Interest, Time value of money, Bai Muajjal
Year 2006
Volume 2
Issue 2
Type Research paper, manuscript, article
Recognized by Higher Education Commission of Pakistan, HEC
Category "Y"
Journal Name IBT Journal of Business Studies
Publisher Name ILMA University
Jel Classification -
ISSN no (E, Electronic) 2409-6520
ISSN no (P, Print) 2416-8393
Country Pakistan
City Karachi
Institution Type University
Journal Type Open Access
Manuscript Processing Blind Peer Reviewed
Format PDF
Paper Link