QUESTION 1: EXPLAIN THE FOLLOWING: A. WHAT IS MEANT BY RIBA? DEFINE THE KINDS OF RIBA? Definition of Riba: In the literally meaning Riba is excessive or addition, but in the meaning of Shariah under Islamic Economy is the excessive that is prohibited. Also the word "Riba", in Arabic language, means an "increment' or addition". In Islamic Fiqh the term Riba has a special meaning that is an unjustified increment in borrowing or lending money, paid in kind or in money above the amount of loan, as a condition imposed by the lender or voluntarily by the borrower. Riba has been used in the Holy Qur’an on several verses also is described in the several ahadith. So it is necessary to know what it means or what it really stands for Riba . As described above, For examples Interest when money become a commodity and bought and sold with guaranteed results of profitability or the increase of volume of money by using in the transaction. Such increase is the price of money and the price of that money is classified as Interest which is part of Riba. Riba is clearly explained in Quran and Hadith while interest is explained by scholars Greek Scholar Aristotle define Interest in his book “Money and Politics” as “Interest” is an artificial profit which does not enter in legal trading. Using money as a commodity is selling, just a forged artificial transaction. Money has to be used as a means of sale and purchase and measurements of a commodity to be sold or purchased within similar quantities and qualities. Actually interest is the one of categories of Riba for the reasons that interest is taken over and above to principal amount, without any risk, efforts, activity without loss sharing and the return is guaranteed within a specific time. Riba is regarded as unjust because it is received without any sharing in risk or contribution of any labor or other activities for which a payment or reward has been
Interest rates are the cost of borrowing money, expressed as a percentage, usually over a period of one year. Just a few items that have interest rates are mortgages, automobiles, and credit cards. An interest rate is the amount of money a borrower must pay the lender on top of the amount being borrowed. In the last ten years, interest rates have been moving up and down like a roller coaster. According to a report by the Federal Reserve Board, the interest rates in the last ten years have not remained still for more than one year. During 1990 the interest rates were at an all time high at around eight percent, nearly double the amount today. From 1991 to 1994, the rates dropped to a significantly low three percent. Starting at the end of 1994 up to the turn of the millennium, interest rates have jumped up to, and remained between, five and six percent. By...
Money is the main source of power in the world, but in ways it can be viewed as good or bad depending on the situation. It has a negative connotation when mentioned by the word “acts”. “ Acts” means to perform a fictional role. Which shows that most things involving money are fake. Though humans associate being fake with being morally wrong,but its somehow acceptable if there is a greater power involved. Another definition for acts is to take action;do something. In this case to take an action can be either good or bad. There are many ways to come across money, but nobody cares if it is good or bad because it deals with a greater power.
“People also hold money to meet unplanned or unexpected purchase and emergencies which is called precautionary demand” (350). Interest rates affect the amount of money people wish to hold in these funds. “The higher the interest rate, the lower the precautionary money balances become” (350).
Money has evolved with the times and is a reflection of the progress of man. Early money was a physical commodity, grain, gold or silver. During the vital stage, more symbolic forms of money such as certificates of deposit, bank notes, checks, letters of credit, bonds and other forms of negotiable securities came into prominence. Social development transformed money into a trust, “In God We Trust' it says on the back of the ten-dollar bill.” (The Ascent of Money, 27)
Islamic finance is a financial system that operates according to Islamic law (which is called sharia) and is, therefore, sharia-compliant. Just like conventional financial systems, Islamic finance features banks, capital markets, fund managers, investment firms, and insurance companies. However, these entities are governed both by Islamic law and the finance industry rules and regulations that apply to their conventional counterparts. Therefore, islamic finance is to be assets based as oppose to the currency based whereby investment structured on exchange or ownership of assets, and money is simply mechanism for transaction process. It would based on two sources which are Al-Quran and As-Sunnah.
Times interest earned is a measure at the ability to repay service debt obligation. But, in Nestle and Duty Lady does not have any interest expense because this two company in the food industries not like bank which have interest expense.
As the world has recently passed through the global financial crisis that begun in 2008 in the USA with the banks’ collapsing, analysts are giving different opinions and making new economic hypothesizes about the origin of, as well as the process of different countries escaped from the crisis. Among all these new “theories”, the case of Islamic banks is interesting in terms of its nature and consequences. In my essay, I will try to highlight the basic principles of the Islamic finance, the reasons of the restriction of interest, the most important tools used by Islamic banks in economic activities and brief explanation of them, and finally my view point of the probable future improvement of the Islamic financial system.
Usury can be defined as “lending money” that will be paid back with “interest” (Halio, 2000, p.115). The method was highly debated upon years prior to and after the Merchant of Venice by many prominent theologians. Usury can be
"Interest is the cost of borrowing money. An interest rate is the cost stated as a percent of the amount borrowed per period of time, usually one year" (Getobjects.com, 2004). An interest rate is a very important factor in all financial decisions. The two types of interest rates are simple and compound (Brealey, Myers & Marcus, 2003). A simple interest rate for example, occurs when a person borrows money from a lender and he or she will have to pay the lender a fee, this fee is the simple interest rate (Brealey, Myers & Marcus, 2003). Simple interest is normally used for a single period of less than a year, such as 30 or 60 days [simple interest = p x i x n] (Getobjects.com, 2004). For examp...
The invention of money was a major improvement in peoples’ lives. In the past, people usually had to travel all day to find the person who is willing to exchange their goods. In addition, the goods people want to exchange did not have the standard value of measurement. This led to unequal exchanges. Furthermore, it is not convenient to carry heavy goods from one place to another for an exchange. To solve these issues, money will be the only solution. Later, people tend to develop money from cowry shells to credit cards for the convenience and to improve their society.
All the more particularly, this decides the ability to absorb misfortunes, fund its extension, pay profits to its shareholders, and develop an adequate level of capital. Being front line of defense against the destruction of a capital base from misfortunes, the requirement for high profit and earnings can scarcely be overemphasized. Although diversifying pointers are utilized to fill the need, the best and most broadly utilize indicator is a Return on Assets (ROA). ROA is employed by establishments and banks to outfit them with an important instrument for evaluating their progress, including utilization of assets and financial quality (Haque, 2014). Then again, for inside and out examination, an alternate pointer Net Interest Margins (NIM) are likewise utilized. Chronically unfruitful money related establishment’s hazard bankruptcy. Contrasted and most different pointers, inclines in gains can be hard to decipher for cars, abnormally high benefit can reflect excessive danger
It means blessing, purification, increase and goodness. It is so called as it blesses the wealth from which it is taken and protects it from misfortunes. Ibn Taimiah said that the soul of one who gives zakat is blessed and so is his wealth. The obligation of zakat is mandatory on every Muslim who possessed the minimum of Nisaad, fully owned by them in excess of items of personal use such as clothing, food, shelter, furniture, utensils and car. Allah stated that “Of their goods take alms so that thou mightiest purify and sanctify them” (Surah 9 : Verse 103). Imam Ibn Hazim also said that every young or old Muslim needs to cleanse his or her wealth with zakat because of the generality of the
The second type of accounting process is the Islamic accounting. Islamic accounting refers to the accounting process which provides to investors and creditors the proper information needed in order to enable them to ensure that their organization is operated according to Sha'riah and Islamic law. In other word; Islamic accounting means recording, classifying, summarizing and reporting the organization's transactions in an Islamic way. This type of accounting process considers the profit as a sharing between the company and its users in many ways. These ways include Mudaraba and Murabaha. As the sha'ria concept is allow profit from trading transaction but prohibiting interest on it. This refers to Qura'an verses of "
The overall discussion of risk management based on the Islamic law or maqasid al-shariah. Chapra quotes al-Ghazali in defining maqasid as promotion of “the well-being of the people, which lies in safeguarding their faith, self, intellect, posterity, and wealth (ISRA, 2011). Economic activities are not judged by their inherit risks, but by whether they add value and/or create wealth from an islamic perspective. To makes risk management an imperative for a flourishing financial system, wealth protection is being one of the major shariah objectives.
Literally zakat means blessing, purification, increase and goodness. Zakat is the third pillars of Islam, it is obligatory upon all Muslims to give part of their wealth and assets once it reaches al-nisab (the minimum assigned) on annual basis or once harvested to the eight categories of people as specified in al-Quran (At Taubah: 60). It is also important to note that zakat has to be paid from lawful wealth and assets and should be obtained through lawful means (Magda & Ahcene, 2011).