Time Value of Money in Islamic Perspective.

Time Value of Money in Islamic Perspective.

Time value of money gives a concept that a dollar today worth more than a dollar that will be received at some future date. The time value of money is a basic investment concept and a basic element in the conventional theory of finance. However, does this concept is permissible in Islamic Finance? The Shari`ah does not rule out this consideration, for it does not prohibit any increment in a loan given to cover the price of a commodity in any sale contract to be paid at a future date. What is prohibited is making money’s time value an element of any lending relationship that considers it to have a predetermined value.

Islamic jurists have, undoubtedly, permitted a contrast between the cost of a thing on the off chance that it is conveyed now and the cost in the event that it is conveyed sometime in future or between the cash and credit cost of a thing. Yet this does not so much imply that they the distinction in the present what's more future values of the same thing can't be considered to have been permitted simply in view of the unadulterated time component included. Permitted this distinction in light of the fact that they perceived that supply and interest forces are distinctive at diverse purposes of time. Maybe, this is the reason they permitted the future cost The extent that I know, they never say that the cost in hay' mu'ajjal ought to dependably be higher than the present cost when in doubt. Same is the situation of hay' salam. The authorization for the distinction in the cost of a product to be conveyed in future is prone to be basically a distinguishment of the forces of supply and request that may cause prices to vary at distinctive purposes of time.

Now, as we all know that time value of money is usually related to the interest or return of money either through investment,saving or loan.

As for time value of money in investment, people will invest their money in a company that is authorised by the...