Ialamic Banking

ABMF3213 ISLAMIC BANKING

TUTORIAL 4

QUESTIONS:

1. Define riba and discuss the elements that make riba prohibited in Islamic Muamalat.

* Literally means excess, increase, expansion and growth

* Riba is every excess in return of which no rewards or equivalent counter value is paid

* The interest that must be paid by borrower together with principal, as a condition for the loan or for an extension in its maturity

* It is a predetermined excess or surplus over and above the loan

* 3 elements

i) Excess or surplus over and above the loan capital

ii) Determination of surplus in relation to time

iii) Stipulation of surplus in loan agreement

2. Differentiate between the types of riba.

* Riba al-Duyun – Occurs in lending and borrowing. Additional or increase above principal imposed by lender / willingness of borrower

~ Riba Qardh (due to excess)

Imposed from the beginning and proportionate to time taken to repay

~ Riba Jahilliyah (due to delay)

Imposed upon default

* Riba al-Buyu – Occurs in trading transactions where exchange for the same commodity but

unequal amount / same product in equal amount but postponed in delivery

– Occurs out of exchange between two ribawi materials of the same kind,

where necessary rule(s) is / not observed

~ Riba al-Fadhl (due to excess)

Ribawi materials are exchanged of different weight, measures or numbers and are exchanged at the same time.

~ Riba al-Nasiah / Riba Yad (due to delay)

Ribawi materials are exchanged of equal weights, measurement or numbers but payment of price and delivery of goods are made at two different times.

3. What is ribawi materials and explain the rules of exchange for ribawi material

* Ribawi goods are items sold by weight and by measure.

* Ribawi materials are made of 2 types - i) commodities...