By Muhammad Ayub
ABSTRACT
Time value of money is not only an economic reality, but also accepted by Islam in a different paradigm from that of the interest based finance. Islamic allows one to keep in view the time of any credit transaction while pricing the assets and / or their usufruct, but not for loans and debts. The unanimous rule of Bai’al Sarf that money or monetary units have to be exchanged on hand-to-hand basis lead to the fact that in business and commercial transactions time has value. Although Shirkah based modes are preferable than the debt creating mode like Murabaha, yet banks can use the latter provided they fulfill the relevant Shariah essentials. But some writers keep on arguing that Islamic banks using Murabaha are involved in interest business. The paper argues that while profit on credit sales – Murabaha or Musawama is permissible and Halal, any return on loans and debts is prohibited due to being Riba.
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