The approach of Islamic economists to the prohibition of interest in the context of Böhm-Bawerk’s time preference theory of interest

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Cem Eyerci
Keyword(s):  
Human Nature ◽  
Design Methodology ◽  
Time Preference ◽  
Relevant Literature ◽  
Content Type ◽  
Time Value Of Money ◽  
Preference Theory ◽  
Time Value ◽  
Value Of Money ◽  
Proper Response

Purpose Böhm-Bawerk’s time preference approach had significant importance among many other theories of interest. His assertion based on inherent human nature and the distinction he made between the positive and normative aspects of interest were remarkably authentic. As it is assumed that any efficient evaluation, judgment or regulation on the legitimacy of interest has to consider the theory of time preference, especially Böhm-Bawerk’s approach, the paper aimed to examine the Islamic economists’ response to the time preference theory of interest. Design/methodology/approach The paper presents Böhm-Bawerk’s time preference theory of interest. Then, it evaluates the Islamic economists’ views on the concepts of the time value of money and time preference qualitatively by scrutinizing the relevant literature. Findings It is observed that there is not any proper response of Islamic economists to the assertions of the causes of time preference. Responding to such challenges requires an approach that is mostly developed in the positive domain. Originality/value Although it is evident that interest is regarded as destructive in Islamic economics, the consideration is primarily normative. However, a convincing assertion also requires to be justified in the positive domain. Empirical works are exhibiting the problems with interest-based transactions. Besides, this paper raises the need for theoretical expositions of Islamic economists in response to the interest theories, which claim that the existence of interest is inevitable.

Prepayment rebate in Islamic microfinance cost-plus sale: a descending rebate proposed approach

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Islam Mohamed Kamal
Keyword(s):  
Design Methodology ◽  
Relevant Literature ◽  
Islamic Finance ◽  
Content Type ◽  
Time Value Of Money ◽  
Time Value ◽  
Early Settlement ◽  
Islamic Financial Institutions ◽  
Value Of Money ◽  
Compliant Approach

Purpose This paper aims to propose an Islamic compliant approach that deals with the prepayment rebate on debts resulting from cost-plus sales and their accompanied sale-based financing contracts. The proposed approach uses the time value of money concept without charging excessive fees from the debtor in the early settlement of debts. Design/methodology/approach The paper uses a qualitative analysis via analyzing and reviewing relevant literature. A quantitative analysis is subsequently used with a proposed computation that addresses prepayment rebate accompanied by debts resulting from cost-plus sales. Findings The proposed approach results in a rebate amount for the debtor greater than those rebate amounts resulting from either conventional finance techniques or current Islamic finance practices. Research limitations/implications The application of the descending rebate proposed computation in this paper is restricted to cost-plus sale and their accompanied sale-based financing contracts only. The computation does not address any agreement or deal that may involve a rebate without a selling transaction. Originality/value The paper criticizes the prevailing practices for computing rebates in the case of debt prepayment, whether those nominated by conventional finance or others currently employed by most Islamic financial institutions. The paper also introduces a new rebate computation aimed to comply with Islamic finance's real context.

A critique on accounting for murabaha contract

2016 ◽  
Vol 7 (3) ◽  
pp. 190-201 ◽  
Author(s):  
Mezbah Uddin Ahmed ◽  
Ruslan Sabirzyanov ◽  
Romzie Rosman
Keyword(s):  
Financial Reporting ◽  
Accounting Standards ◽  
Economic Consequences ◽  
Islamic Banks ◽  
Content Type ◽  
Time Value Of Money ◽  
Time Value ◽  
Islamic Financial Institutions ◽  
Financial Transactions ◽  
Value Of Money

Purpose The purpose of this paper is to examine the accounting treatment and reporting of a murabaha contract and its implication to the financial statements of Islamic banks. In addition, the paper also explains the implication of time value of money on the measurement of a murabaha contract and the concept of substance over form in recognising financial transactions. Design/methodology/approach This study reviews the accounting treatment and reporting for a murabaha contract as stated in the Financial Accounting Standards (FAS) of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and the application of a murabaha contract as a financial instrument based on International Financial Reporting Standards (IFRS). Findings The paper finds that, while IFRS-based financial reporting primarily focuses on economic consequences of financial instruments, AAOIFI further takes into consideration the legal structure of the instruments, which are based on Shari’ah precepts. The paper also finds that IFRS-based financial reporting cannot always capture the distinctive structure of the murabaha and, hence, may lack representational financial reporting. However, the IFRS recognizes the substance of a murabaha contract as financing, and the majority of Islamic banks in Malaysia report it as one of financing and not as a trading contract. For measurement, IFRS adopted the concept of time value of money where the profit allocation is based on amortized cost, which is similar to the measurement of conventional loan transactions that apply the concept of effective interest rate. Meanwhile, AAOIFI uses a straight-line basis to allocate the profit of a murabaha contract. Practical implications The forthright discussion and the observations of the paper are expected to assist regulators and standard setters in developing accounting standards that are in convergence but also cater to the unique characteristics of Islamic financial transactions. Originality/value The paper criticizes both accounting treatment of a murabaha contract based on the AAOIFI and IFRS and then suggests an extension of these treatments to be adopted to improve the reporting.

scholarly journals DIMENSI WAKTU DALAM ANALISIS TIME VALUE OF MONEY DAN ECONOMIC VALUE OF TIME

2013 ◽  
Vol 4 (1) ◽  
pp. 131
Author(s):  
Fetria Eka Yudiana
Keyword(s):  
Time Preference ◽  
Economic Value ◽  
Islamic Finance ◽  
Value Of Time ◽  
Time Value Of Money ◽  
Time Value ◽  
Positive Time ◽  
A Charge ◽  
Finance Theory ◽  
Value Of Money

The development of the Islamic finance theory today has become a hot issuediscussed, such as polemic of the concept of time value of money. This concept cored that money today is more valuable than the same amount of money in the future, so that the grounding or assumptions used by this theory is al ghunmu bila ghurmin (get results regardless of risk) and al kharaj bila dhaman (get results without issuing a charge), and it’s contrary to the principles of Islam. Then The positive time preference concept was replaced with the concept of economic value of time, this concept cored that time has economic value, not money has a time value

scholarly journals Time Value of Money dalam Perspektif Hukum Islam

AL- ADALAH ◽  
2017 ◽  
Vol 14 (1) ◽  
pp. 157
Author(s):  
Rahmat Ilyas
Keyword(s):  
Money Demand ◽  
Time Preference ◽  
Economic Value ◽  
Value Of Time ◽  
Time Value Of Money ◽  
Time Value ◽  
Investment Theory ◽  
Positive Time ◽  
Value Of Money ◽  
Islamic View

This article reveals the Islamic view of the concept of Time Value of Money (referred by economists as positive time preference). This concept states that the value of commodities at present is higher than in the future. Time Value of Money is closely linked to the ‘discount’ concept that exists in capital and investment theory and, in practice, is used as a tool for project evaluation as well as investment decisions. This study concludes that Islam is not familiar with the concept of Time value of money. Islam only recognizes the concept of economic value of time. In Islamic view, money is simply a means of exchange, not a commodity. Similarly, the motive for money demand is to meet the needs of transaction, not for speculation.

Time value of money in Islamic accounting practice: a critical analysis from maqāṣid al-Sharī‘ah

2020 ◽  
Vol 11 (9) ◽  
pp. 2035-2052
Author(s):  
Ahmad Baehaqi ◽  
M. Nur A. Birton ◽  
Fahmi Ali Hudaefi
Keyword(s):  
Islamic Law ◽  
Review Literature ◽  
Research Approach ◽  
Content Type ◽  
Time Value Of Money ◽  
Islamic Perspective ◽  
Accounting Practice ◽  
Time Value ◽  
Accounting Measurement ◽  
Value Of Money

Purpose This paper aims to critically analyse the application of present value (PV) practised in the concept of time value of money (TVM) from the perspective of maqāṣid al-Sharī‘ah (objective of Islamic law) explained by Ibn ‘Ashur. The analysis is important as this concept has been adopted in the practice of Islamic accounting measurement. Design/methodology/approach This paper uses qualitative research approach. The authors first review literature related to TVM in Islamic perspective to understand the extent to which the scholarly articles have been discussing this topic. Furthermore, the authors conduct face-to-face interviews with the experts to comprehend the means of TVM application in the recent Islamic accounting practices. The tawhid (monotheistic) paradigm is further used with special reference to the concept of maqāṣid al-Sharī‘ah of Ibn ‘Ashur to critically analyse the practice of TVM in Islamic accounting measurement. Findings This study identifies the opposing views among the experts on the topic of TVM from the Islamic perspective. That is, the experts’ opinion on this issue can be classified into two. Firstly, a view that rejects TVM and proposes the concept of economic value of time. Secondly, an opinion that recognises TVM with the basis of bay’ al-mu’ajjal (deferred sale). This paper further critically analyses these two opposing opinions. The discussion is established based on the theory of maqāṣid al-Sharī‘ah as explained by Ibn ‘Ashur and the excerpts from interviewing the experts. This work draws a conclusion that such PV-based measurement of TVM does not meet the Islamic principles explained in the theory of Ibn ‘Ashur’s maqāṣid al-Sharī‘ah. Thus, the practice of PV measurement in Islamic accounting is debatable. Research limitations/implications This study does not establish a positivism discussion. It is thus the generalisation of this work is not applicable to the Islamic perspective in general. Rather, it is limited to Ibn ‘Ashur’s maqāṣid al-Sharī‘ah. Practical implications An analysis of PV measurement adoption in Islamic accounting from maqāṣid al-Sharī‘ah perspective is practically important to raise the awareness that such practice is debatable in Islamic principles. That is, such debate opens new arena for academics, industry professionals and other related stakeholders to further discuss an ideal practice of Islamic accounting. Originality/value This paper is among the pioneers that analyses the concept of TVM, in particular relation to PV measurement in Islamic accounting practice from the perspective of Ibn ‘Ashur’s maqāṣid al-Sharī‘ah.

Information processing by elderly consumers: a five-decade review

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Gianluigi Guido ◽  
Marco Pichierri ◽  
Cristian Rizzo ◽  
Verdiana Chieffi ◽  
George Moschis
Keyword(s):  
Information Processing ◽  
Design Methodology ◽  
State Of The Art ◽  
Relevant Literature ◽  
Academic Research ◽  
The Elderly ◽  
Marketing Strategies ◽  
Content Type ◽  
Processing Activity ◽  
Elderly Consumers

Purpose The purpose of this study is to review scholarly research on elderly consumers’ information processing and suggest implications for services marketing. Design/methodology/approach The review encompasses a five-decade period (1970–2018) of academic research and presents relevant literature in four main areas related to information processing: sensation, attention, interpretation and memory. Findings The study illustrates how each of the aforementioned phases of the information processing activity may affect how elderly individuals buy and consume products and services, emphasizing the need for a better comprehension of the elderly to develop effectual marketing strategies. Originality/value The study provides readers with detailed state-of-the-art knowledge about older consumers’ information processing, offering a comprehensive review of academic research that companies can use to improve the effectiveness of their marketing efforts that target the elderly market.

The Time Value of Money Concept in Islamic Finance

2006 ◽  
Vol 23 (1) ◽  
pp. 66-89
Author(s):  
Abu Umar Faruq Ahmad ◽  
M. Kabir Hassan
Keyword(s):  
Basic Element ◽  
Islamic Finance ◽  
Purchasing Power ◽  
Conventional Theory ◽  
Modus Operandi ◽  
Time Value Of Money ◽  
Time Value ◽  
Value Of Money ◽  
Future Date ◽  
Rule Out

The time value of money is a basic investment concept and a basic element in the conventional theory of finance. The Shari`ah does not rule out this consideration, for it does not prohibit any increment in a loan given to cover the price of a commodity in any sale contract to be paid at a future date. What is prohibited, however, is making money’s time value an element of any lending relationship that considers it to have a predetermined value. Here, the Shari`ah requires that a loan be due in the same currency in which it was given. The value (i.e., purchasing power) of paper currencies varies due to changes in many variables over which the two parties of a loan contract usually have no control. This study examines possible modus operandi of time valuation according to the Shari`ah’s precepts vis-à-vis the concept of money, and whether any value can be attributed to time while considering money’s value. For this purpose, it investigates the juristic views on such relevant issues as the permissibility of difference between a commodity’s cash and credit prices and an increase and reduction of the loan’s amount in return for early repayment.

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