If you study accounting and economics, you will not be able to avoid the term "time value of money". I think a lot of people knows what it is and how to use it. But does anybody know who created/found it? Try looking for its creator anywhere and when you found it please tell me. I might give you a very pleasant gift because I could never find it anywhere and I gave up looking.
Actually, I am not surprised if its the devil itself craeted the TVM. Wanna know why? It forms the very basic foundation of RIBA' ! Thats why.
"Money today is more valuable than money tomorrow" it says. See it? No? OK.
Try these : Present value, Future value, Compounded, IRR, ARR, Annuities etc etc. which basically want the user to calculate the RIBA u get from your investments. Maybe if you use it for manufacturing processes to calculate the percentage of produce over cost of buying the machine it is not RIBA. But if you compare it to the return you'd expect from your investment.... it may still be... and it has the time element.
How is it related to insurance and unit trust u'd ask. Well..... the TVM is used to calculate the return the insurance companies get from the premium you pay periodically and compare it to the probability of your insurance being called upon before providing you with the insurance products/services. Dont be confused. It only means that TVM lets them know the insurance product available in the market (or those sold by them) will give them more money/return from they public compared to paying out as a result of claims from such products.
How come? Well.... simple. AIA will not sell cheap HIV insurance policies in an HIV infested country. And Great Eastern will not sell cancer related policies to a cancer patient because the probability of that client having a cancer and making a claim is..... almost 100% (I still say almost 100% coz Allah can still change it). I know coz I told the insurance salespersons that I will buy their policy on heart deseases when I've got it and was told that its not possible.
Islam prohibits trading on products you do not know if it exist ....... Islam prohibits insurance then..... true? u tell me. But do you know when u're gonna die? And u have life insurance.
Takaful pools the money of the contributors and provide the needy...... of those paid, they should add. What happen to those who do not pay but need the financial assistance? Go to Baitulmal to get zakat. Then no need Takaful.... improve zakat. Then Allah said we're all the same, rich or poor, big or small, the only difference is our iman and amal towards Him. Takaful is differentiating His servants (from those who has and has not). Is that ok?
Enuf written. You be d judge and enlighten me.
salam
Dec 6, 2006
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Salaaam,
Thanks a lot for that piece of writing. But Takaful or Islamic Banking which is free of Riba and Uncertainty has now the approval of most of the contemporary scholars. Moreover, Takaful in its raw form was being practiced in Medina during the Prophet's (PBUH)time.
No doubt most of the present day 'islamic insurance and banks' are still based upon riba but there are some who are trying hard to comply with sharia. We need to give them support for this industry is still in its infant stage.
More people like you should come forward to research and contribute.
was salaam
atif
Dear Atif,
Thank you for your comment. But could you please help me to locate the writings on the Takaful practiced in Medina during the Prophets time.
Thanking you in advance.
Salam.
Bro.,
For as long as the basis used is fiat money, TVM would be an issue. It would never be resolved as the underlying valuation of fiat money is factors determined by human themselves.
For this Allah SWT has imposed money to be purely store of values. Where are they? Only in element-based currencies, such as gold, silver, etc.
What it means is fighting riba needs to start from the changing of the currency itself.
Current theories of Islamic economics would be trodding along difficult path as it has to keep on implementing conventional methods such as hedging, etc.
As for insurances, there are several contracts of ta'aawun applied in the early days. Where caravan traders pool their contributions to assist fellow caraveneers who had met calamaties. Life insurances are perhaps the one that you are not satisfied with as it is closer to, or perhaps are gharar.
Wallahu a'lam
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