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

Author

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

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.

Suggested Citation

  • Nurrachmi, Rininta & Fathia , Mia & Mad-ahdin, Ashanee & Radenarmad, Ninasrin & Akhtar , Rulia, 2012. "Time Value of Money in Islamic Perspective and the Practice in Islamic Banking Implications," MPRA Paper 46818, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:46818
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    More about this item

    Keywords

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

    JEL classification:

    • A11 - General Economics and Teaching - - General Economics - - - Role of Economics; Role of Economists
    • Z1 - Other Special Topics - - Cultural Economics
    • Z12 - Other Special Topics - - Cultural Economics - - - Religion

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