Time Value of Money versus Riba

[dilkadr]

:sl: Dear Friends,

There is a concept of Time Value of Money in the field of Financial Management.

Can anyone tell is it Riba or Not?

Thanks

[Malaikah]

:sl:

Are you talking about adjusting the value of money based on inflation rates and all that stuff? Like if you take a loan of $500 and a few years later you need to pay it back as about $510 because of inflation? (For example)

If so, the majority of scholar have rules that this is indeed riba. However some scholars hold that it is permissible.

That is about all I know on the matter. Allah knows best!

[dilkadr]

:sl:

Yes! I am talking about the same thing as you mentioned in the example.

I need to know the criterion?

Surely, Allah Knows Best

:wasalamex

[E'jaazi]

I am interested in knowing also. If someone finds out, please post and send me a PM. Shukran!

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[Malaikah]

:sl:

I don't know much about it. It is something I am trying to get more information about. I know a shaykh in my area said it is permissible, but he is too busy to be able to explain why at the moment. He said he will explain later.

But here are some things relating to why it is haram:

http://islamtoday.com/show_detail_se...&main_cat_id=5

And from the alkuathar student forums:

Assalamualiakum,

As we mentioned in class:

1. Any repayments that are indexed payments, indexed to the Consumer price index etc.. are not allowed by the majority of the scholars and is considered riba.

2. The definitive proof that shows that student loans are in fact riba repackaged is that the indexation is applied annually just like a conventional riba loan. If it was the proper indexation which a minority of the scholars of Islam allowed, then the indexation should only be able at the end - on the day of repayment of the loan, not annually such that the indexation is compounded.

3. The the indexation is applied in inflation, not in deflation and as a result, the indexation is more in resemblance with riba.

Wallahu alim.

Abu Yusuf

http://forums.alkauthar.org/showthread.php?t=1376

[dilkadr]

:sl:

I don't know much about it. It is something I am trying to get more information about. I know a shaykh in my area said it is permissible, but he is too busy to be able to explain why at the moment. He said he will explain later.

But here are some things relating to why it is haram:

http://islamtoday.com/show_detail_se...&main_cat_id=5

And from the alkuathar student forums:

Assalamualiakum,

As we mentioned in class:

1. Any repayments that are indexed payments, indexed to the Consumer price index etc.. are not allowed by the majority of the scholars and is considered riba.

2. The definitive proof that shows that student loans are in fact riba repackaged is that the indexation is applied annually just like a conventional riba loan. If it was the proper indexation which a minority of the scholars of Islam allowed, then the indexation should only be able at the end - on the day of repayment of the loan, not annually such that the indexation is compounded.

3. The the indexation is applied in inflation, not in deflation and as a result, the indexation is more in resemblance with riba.

Wallahu alim.

Abu Yusuf

http://forums.alkauthar.org/showthread.php?t=1376

:sl:
Thanks for the help,
Can you provide more details on the concept of indexation

[Malaikah]

:sl:

Sorry, I don't even really know what it is.

[dilkadr]

:sl:
Thanks for the kind postings.

May Allah Help all of us...