Publication:
The concept of the time value of money: a Shari'ah viewpoint
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Date
2013
Authors
SDG:
Abstract
The purpose of this study is to examine the legal authority of the time value of money in Islam and its application in contemporary Islamic finance. The study aims to establish the Islamic conceptual foundations of TVM and differentiate it from that of conventional finance particularly in relation to the concept of time preference that constitutes essential basis for TVM in conventional finance. This study undertakes a library research where the literature on Islamic jurisprudence in the area of Islamic financial transactions as well as Islamic economics, both in Arabic and English is reviewed critically to construct the conceptual framework of TVM from an Islamic perspective. The findings indicate that Islam recognizes the legitimacy of the time value of money emanating from deferral (ajal) and acceleration ('ajal) in Islamic financial transactions such as deferred sale and bilateral rebate (da' wata'ajjal) but its application must be in conformity with specific guidelines laid down by the Shari'ah to avert unfair economic effects of financial transactions such as interest (riba). The application of TVM in accordance with its fundamental rules can actually remove Riba from the economy and prevent from making of money out of money.
Keywords
Time preference , Time value of money , Al-bay' bi al-taqsit , Deferment , Money , Parameter
Citation
Abdul Khir, M. F. (2013). The concept of the time value of money: a Shari'ah viewpoint. International Journal of Excellence in Islamic Banking and Finance, 3 (2), pp. 1-15.
Publisher
Hamdan Bin Mohammed e-University