Riba in Islamic finance: Some fresh insights
Abstract. In present-day Islamic finance, all forms of interest are considered riba, which is prohibited in the Qur’an. However, this definition of riba creates several problems in everyday business transactions. The Islamic financial institutions are obliged to adopt such operational procedures that closely resemble interest, the while they claim to be operating on interest-free basis. The paper delves into the Qur’anic text relating to riba and suggests an alternative understanding which can help resolve various controversies relating to riba and interest. It attempts to formulate a contemporary definition of riba which accommodates the current practice of Islamic financial institutions.
Keywords. Riba in Qur’an, riba and interest, cash and credit prices, time value of money, riba and inflation, definition of riba, Islamic financial institutions.JEL. D64, E40, G21, Z12.
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