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Time Value of Money in Islamic Perspective and the Practice in Islamic Banking Implications

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  • Nurrachmi, Rininta
  • Fathia , Mia
  • Mad-ahdin, Ashanee
  • Radenarmad, Ninasrin
  • Akhtar , Rulia
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    Abstract

    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. Moreover, there are several basic principles that caused the Conventional theory views “Money” and “commodity” differs and compares with the principle as defined by Islam. This leads the time valuation of money in Islamic Perspective is totally different from the conventional. The objective of this study is to discuss the concept of Time Value of Money in Islamic Perspective and its advantages. The paper attempts to analyze the difference between the concept of Time in Islamic and Conventional Perspective. Furthermore, we are going to highlight how Islamic Banks applied the concept of Time Value of Money in Islamic View to their implications in the practice. In addition, this study observed the practical issues and challenges in applying the concept of Time Value of Money in some financial products which are Murabahah, Istisna and Salam.

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    File URL: http://mpra.ub.uni-muenchen.de/46818/
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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 46818.

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    Date of creation: Mar 2012
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    Handle: RePEc:pra:mprapa:46818

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    Keywords: Islam; Islamic Banking; Shariah; Time Value for Money;

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