Handbook on Islam and Economic Life
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Handbook on Islam and Economic Life

Edited by M. Kabir Hassan and Mervyn K. Lewis

Handbook on Islam and Economic Life is a unique study, one of the first of its kind to consider Islam within a broader economic sphere. Covering a wide breadth of topics and research, it explores how Islam impinges upon and seeks to shape major aspects of economic life including economic organisation, business and management, finance and investment, charity, mutuality and self-help, and government. It concludes by analysing the link between religion and development, the present economic situation in Arab countries and the causes of underdevelopment in Muslim countries.
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Chapter 6: Riba, time value of money and discounting

Shamim A. Siddiqui


The foundations of contemporary Islamic banking and finance are based on the prohibition of riba (usury or interest), gharar (avoidable uncertainty in business contracts) and maysir (gambling-like transactions). There are several controversies about the scope of riba and implications of its prohibition on modern banking and finance. The great majority of Islamic scholars treat bank interest as riba but also approve the deferred payment sale with higher than cash price as legal. This raises the question whether Islam recognizes the time value of money or not. Also, if interest is prohibited, would the discounting of future streams of income or benefits be appropriate in project selection? This chapter addresses these issues by critically analysing the arguments made by Islamic scholars.

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