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What you sell is what you lend? Revealing complexity of riba in loan contract

Author

Listed:
  • Abdul Ghafar Ismail

    (Islamic Development Bank
    Universiti Kebangsaan Malaysia)

  • Bayu Taufiq Possumah

    (Universiti Kebangsaan Malaysia)

  • Mohd Akil Muhamed Ali

    (Universiti Kebangsaan Malaysia)

Abstract

The purpose of this paper is to resolve and examine the possible modus operandi of riba on selling and loan contract according to the Sharia’s precepts. This paper investigate the Qur’an, hadith, and juristic views on such relevant issues based on the survey done on the several sources, i.e., previous studies, Al-Qur’an and Al-Hadith and juristic views and deviate from the existing studies in two aspects, i.e., the selling and buying of goods do not involve riba and also the banks provide loan without riba. The findings of this paper are: First, the concept of interest in lending is widely accepted both in theory and practice. Second, riba exists in selling and lending. Third, the categorization and application of extensive and complex subjects of riba in economic life bring all speculative and usurious transactions under the rubric of riba prohibition. This paper important because express and disclosure riba in both exchange of goods and loans, also the social and economic developments. This is an original undertaking of this paper.

Suggested Citation

  • Abdul Ghafar Ismail & Bayu Taufiq Possumah & Mohd Akil Muhamed Ali, 2018. "What you sell is what you lend? Revealing complexity of riba in loan contract," European Journal of Law and Economics, Springer, vol. 45(3), pages 591-609, June.
    • Handle: RePEc:kap:ejlwec:v:45:y:2018:i:3:d:10.1007_s10657-013-9404-1
    DOI: 10.1007/s10657-013-9404-1
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    References listed on IDEAS

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    1. Mike Burkart & Tore Ellingsen, 2004. "In-Kind Finance: A Theory of Trade Credit," American Economic Review, American Economic Association, vol. 94(3), pages 569-590, June.
    2. Ziaul Haque, 1993. "The Nature and Significance of the Medieval and Modern Interpretations of Riba," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 32(4), pages 933-946.
    3. Nadiri, M Ishaq, 1969. "The Determinants of Trade Credit in the U.S. Total Manufacturing Sector," Econometrica, Econometric Society, vol. 37(3), pages 408-423, July.
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    Cited by:

    1. Ismail, Abdul Ghafar, 2014. "Between Free Market and State Capitalism: How Islamic Economics System Shape the Future Global Economy?," Working Papers 1435-8, The Islamic Research and Teaching Institute (IRTI).

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    More about this item

    Keywords

    Riba; Complexity; Selling; Loan; Contract;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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