This document discusses the differences between riba (interest) and the time value of money concept from Islamic and capitalist perspectives. It notes that riba involves the addition of excess to loans or debts as interest, while the time value of money concept recognizes the difference in value between money received now versus in the future. Islam views money as a medium of exchange and commodity for purchasing goods and services, but not as a capital that has intrinsic time value. Capitalism allows money to be lent, invested, and treated as a capital with time value. The document provides references on the prohibition of riba in Islamic finance and reconciling this with time value concepts.

1. EPPE 6554ISLAMIC BANKING
PROF MADYA DR MARIANI ABD MAJID
LAILA AZHAN BINTI AHMAD TAJUDDIN
P68372

2. RibavsTime Value of Money
RIBA
vs
TVM
Excess, growth, additions
Anincrease in qualitative or quantitative sense
Concept
The difference in value of money received in cash vis-à- vis the value of money received on deferred basis in future.
Payment of Interest
Term
Positive Time Preference (PTP)
Debt-based contract
Contract
Exchange-basedcontract
Addition to the principal of loans or debts
Situation
Pricing assets and their usufruct

3. Concept of Money
CAPITALIST
PURPOSE
ISLAM
Yes
Mediumof Exchange
Yes
Yes
Commodity
No
Yes
Purchase Goods & Services
Yes
Yes
Loanto Make Profit
No

4. Money As CapitalCAPITALISTMONEYISLAM
Yes
Lend ToAnother
No
Yes
InvestingOn Business
Yes
Yes
PurchasingGoods
Yes
YES
Capital
Has Time Value
NO
Not Capital
Has No Time Value

5. Money As Commodity
•Purchasing goods and investing on business
Not a subject of trade
•Must be of equal repayment
Trading money itself is prohibited
therefore it cannot be saved for future / cannot be wasted in large quantities

6. REFERENCE
•Bank Negara Malaysia. Second Ed. 2010. ShariahResolutions In Islamic Finance. 195-196
•ErdemBafra. 2014. Prohibition of RibaOver Against Time Value of Money in Islamic Banking. Izmir Review of Social Sciences.2 (1), 75-87
•Mohamed FairoozAbdul Khir. 2012. The Concept of the Time Value of Money: A ShariahViewpoint.ISRA Research Paper 38/2012
•Abu Umar FaruqAhmad and M. KabirHassan. 2006. The Time Value of Money Concept in Islamic Finance. The American Journal of Islamic Social Sciences 23:1,66-89