QUESTION 1: EXPLAIN THE FOLLOWING: A. WHAT IS MEANT BY RIBA? DEFINE THE KINDS OF RIBA? Definition of Riba: In the literally meaning Riba is excessive or addition, but in the meaning of Shariah under Islamic Economy is the excessive that is prohibited. Also the word "Riba", in Arabic language, means an "increment' or addition". In Islamic Fiqh the term Riba has a special meaning that is an unjustified increment in borrowing or lending money, paid in kind or in money above the amount of loan, as a condition imposed by the lender or voluntarily by the borrower. Riba has been used in the Holy Qur’an on several verses also is described in the several ahadith. So it is necessary to know what it means or what it really stands for Riba . As described above, For examples Interest when money become a commodity and bought and sold with guaranteed results of profitability or the increase of volume of money by using in the transaction. Such increase is the price of money and the price of that money is classified as Interest which is part of Riba. Riba is clearly explained in Quran and Hadith while interest is explained by scholars Greek Scholar Aristotle define Interest in his book “Money and Politics” as “Interest” is an artificial profit which does not enter in legal trading. Using money as a commodity is selling, just a forged artificial transaction. Money has to be used as a means of sale and purchase and measurements of a commodity to be sold or purchased within similar quantities and qualities. Actually interest is the one of categories of Riba for the reasons that interest is taken over and above to principal amount, without any risk, efforts, activity without loss sharing and the return is guaranteed within a specific time. Riba is regarded as unjust because it is received without any sharing in risk or contribution of any labor or other activities for which a payment or reward has been
Money: The large amount of capital required, generally provided by large corporations or national governments.
The value of money is something hard to determine. Money is a commodity. For money allows us to establish prices for most goods and services available. Money exists because man realized that some things are more wanted and sought after than others. People sell things for money to increase their income and enrich their futures. They exchange things of equal price, but the values differ in the minds of those involved. For money must have five essential characteristics: (1) divisibility, (2) portability, (3) durability, (4) recognizability, and (5) scarcity.
In conclusion, time is money and knowing investment options, interest rates, and the formation of calculations of both present and future value as I have learnt in this class, will be a great deal of help both now and in the future. “Time is money”. The value of money right now the same as it will be in the future and vice versa. So this is to encourage us that we should know the appropriate investment of money in other to differentiate between the worth of investments that offer us returns at different times.
known in the novel as “Old Money”. Which is basically money that has been passed down
“People also hold money to meet unplanned or unexpected purchase and emergencies which is called precautionary demand” (350). Interest rates affect the amount of money people wish to hold in these funds. “The higher the interest rate, the lower the precautionary money balances become” (350).
The next advantage is the bank will get a fixed amount of repayment and charges from penalty fees, late fees or over-the-limit fees. With banks and same institutions, a major source of non-interest income is the fees according with the management of customer accounts. For instance, a financial record may be organized to permit a little charge to be charged from the client's record on a month to month premise. It is also called an administration charges, is use to return for such assignments as presenting charges and credits on the record and supplying the client with a month to month articulation of record.
Interest rates are the cost of borrowing money, expressed as a percentage, usually over a period of one year. Just a few items that have interest rates are mortgages, automobiles, and credit cards. An interest rate is the amount of money a borrower must pay the lender on top of the amount being borrowed. In the last ten years, interest rates have been moving up and down like a roller coaster. According to a report by the Federal Reserve Board, the interest rates in the last ten years have not remained still for more than one year. During 1990 the interest rates were at an all time high at around eight percent, nearly double the amount today. From 1991 to 1994, the rates dropped to a significantly low three percent. Starting at the end of 1994 up to the turn of the millennium, interest rates have jumped up to, and remained between, five and six percent. By...
Many commentators of the Holy Qur’an are of the opinion that the word riba in this verse does not refer to usury or interest. Ibn Jarir Al-Tabari (D310 AH), the most famous exegete of the Holy Qur’an, reports from Ibn Abbas, Radi-Allahu anhu, and several Tabi’in like Saeed Ibn Jubair, Mujahid, Tawoos, Qatadah, Zahhak, and Ibrahim Al-Nakha’i that the word riba in this verse means a
Islamic finance is a financial system that operates according to Islamic law (which is called sharia) and is, therefore, sharia-compliant. Just like conventional financial systems, Islamic finance features banks, capital markets, fund managers, investment firms, and insurance companies. However, these entities are governed both by Islamic law and the finance industry rules and regulations that apply to their conventional counterparts. Therefore, islamic finance is to be assets based as oppose to the currency based whereby investment structured on exchange or ownership of assets, and money is simply mechanism for transaction process. It would based on two sources which are Al-Quran and As-Sunnah.
Prohibition of Riba, a term literally meaning “an excess “and interpreted as “any unjustifiable increase of capital whether in loans or sales” is the central tenet of the system. More precisely, any positive, fixed, predetermined rate tied to the maturity and the amount of principal (i.e., guaranteed regardless of the performance of the investment) is considered Riba and is prohibited. The general consensus among Islamic scholars is that Riba covers not only Usury but also the charging of “interest” as widely practiced. This prohibition is based on arguments of social justice, equality, and property rights. Islam encourages the earning of profits but forbids the charging of interest because profits, determined ex post, symbolize successful entrepreneurship and creation of additional wealth whereas interest, determined ex ante, is a cost that is accrued irrespective of the outcome of business operations and may not create wealth if there are business losses. Social justice demands that borrowers and lenders share rewards as well as losses in an equitable fashion and that the process of wealth accumulation and distribution in the economy be fair and representative of true productivity. Under the Sharia, it is not permissible to charge, pay or receive interest. The Sharia does not recognize the time value of money and it is therefore not permissible to make money by lending it. Money must be used to create real economic value and it is only permissible to earn a return from investing money in permissible commercial activities which involve the financier or investor taking some commercial risk. This prohibition is the main driving force behind the development of the modern Islamic finance
Laidler, D., (1966). “The Rate of Interest and the Demand for Money: Some Empirical Evidence”, Journal of Political Economy, Vol. 74, pp. 545–555.
First of all, let us outline how Islamic banks actually work and what their main differences are in comparison with conventional banks. In this banking system, banks are operated by Islamic laws (known as Sharia), so Islamic economic principles are considered as primary guidance. Two basic doctrines behind Islamic banking are the sharing of profit and loss and, significantly, the prohibition of the collection and payment of interest . Hence unlike conventional commercial banks, Islamic banks do not pay or charge interest on lending or borrowing of money. This is because the Sharia’s strictly prohibits, among other things, the receipt and payment of riba (interest) /. The interpretations to clarify the meaning behind this restriction suggests that earning or charging extra amount of money from debtor has to be seen something as immoral behavior, because making pressure on your borrower is actually unfair from the view point of Islam. To make it clear, the religion of Islam basically promote the principle of justic...
Vietnam is one of the emerging economies of the world, the country experiences high economic growth for continuous years. Banks, stock exchange market and insurance make up the backbone of one country’s financial system. This essay reflects on the recently changes in Vietnam regarding actual money and virtual money. The essay will first discuss the various definition and lays out some comparison between the two types of money. The later part of the essay will discuss the possible role of the two types of money within Vietnam’s economy
All the more particularly, this decides the ability to absorb misfortunes, fund its extension, pay profits to its shareholders, and develop an adequate level of capital. Being front line of defense against the destruction of a capital base from misfortunes, the requirement for high profit and earnings can scarcely be overemphasized. Although diversifying pointers are utilized to fill the need, the best and most broadly utilize indicator is a Return on Assets (ROA). ROA is employed by establishments and banks to outfit them with an important instrument for evaluating their progress, including utilization of assets and financial quality (Haque, 2014). Then again, for inside and out examination, an alternate pointer Net Interest Margins (NIM) are likewise utilized. Chronically unfruitful money related establishment’s hazard bankruptcy. Contrasted and most different pointers, inclines in gains can be hard to decipher for cars, abnormally high benefit can reflect excessive danger
"Interest is the cost of borrowing money. An interest rate is the cost stated as a percent of the amount borrowed per period of time, usually one year" (Getobjects.com, 2004). An interest rate is a very important factor in all financial decisions. The two types of interest rates are simple and compound (Brealey, Myers & Marcus, 2003). A simple interest rate for example, occurs when a person borrows money from a lender and he or she will have to pay the lender a fee, this fee is the simple interest rate (Brealey, Myers & Marcus, 2003). Simple interest is normally used for a single period of less than a year, such as 30 or 60 days [simple interest = p x i x n] (Getobjects.com, 2004). For examp...