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Munich Personal Repec Archive, P.2
Munich Personal Repec Archive, P.2
Munich Personal Repec Archive, P.2
Supporting
details
Implement
ation of
Riba can
gives bad
impact to
the
economy
such as
inflation
and
recession.
All
economic
activities
have the
element of
interest.
Original text
Interest rate had been
considered an
important factor for
determining the saving
and investment by
classical, neo-classical
and contemporary
economists.
Citation technique
Paraphrase
Rephrased text
Source
Economically,
usury is called
as interest rate
that is
determinant in
finance
activity such
as deposit,
investment and
borrowing
(Saba &
Danish, 2015,
p.2).
Saba &
Danish
(2015). Effect
of interest
rate on
economic
performance:
Evidences
from Islamic
and NonIslamic
Economies.
Munich
Personal
RePEc
Archive, p.2
Farooq (n.d.).
Interest,
Usury and its
Impact on the
Economy.
The
Dialogue,
Volume VII
Number 3,
p.265
Muhammad
Farouq also
mentioned
element of
interest or
Riba is an
inseparable
part of the
economic
activities in
todays world
(n.d. ,p.265).
Islam
prohibited
business
that
involve
riba but
trading is
allowed.
Increasing
in
borrowing
s cost will
decrease
the
investment.
Literal
meaning of
riba.
Paraphrasing
in Islam, only
real business
transaction is
allowed while
commercial
dealings that
have element
of usury is not
allowed
(Ahmed, 2014,
p.131).
Ahmed
(2014). The
Adverse
Impact Of
Riba On
Individual
And Society:
A Concise
And
Comprehensi
ve Study.
Journal of
Social
Sciences and
Humanities,
p.131
As highlighted
by Saba and
Danish,
However
with the
increase in
interest rate,
cost of capital
will increase
hence results
reduction in
investment
within the
economy
(2015, p.2).
According to
Muhammad
Farouq, Riba
is an Arabic
word which
literally means
increase,
addition,
growth or
Saba &
Danish
(2015). Effect
of interest
rate on
economic
performance:
Evidences
from Islamic
and NonIslamic
Economies.
Munich
Personal
RePEc
Archive, p.2
Farooq (n.d.).
Interest,
Usury and its
Impact on the
Economy.
The
Dialogue,
Volume VII
Number 3,
Technical
meaning of
riba.
Paraphrasing
augmentation
(n.d. ,p.266).
p.266
Technically,
riba means
additional
charge to
borrower for
the late
payment of
loan (Umar,
1985, p.266).
M. Umar
Chapra,
Towards a
Just Monetary
System
(Leicester:
The Islamic
Foundation,
1985), p.266
Original text
However, it
should also
to be kept in
mind that a loan
taken by the
poor country on
a high price
(high rate of
interest) will
rather increase
the total amount
of loan and will
make difficult
the repayment of
installments of
the debt. It is the
repayment of the
foreign loans
that pose some
of the most
difficult
problems to the
poor countries
like Pakistan.
Citation
technique
Long quotation
Rephrased text
Source
Muhammad
Farouq (n.d.)
stressed out that:
However, it
should also to be
kept in mind
that a loan taken
by the poor
country on a
high price (high
rate of interest)
will rather
increase the total
amount of loan
and will make
difficult the
repayment of
installment of
the debts. It is
the repayment of
the foreign loans
that pose some
of the most
difficult
problems to the
Farooq (n.d.).
Interest, Usury
and its Impact
on the Economy.
The Dialogue,
Volume VII
Number 3,
pp.270-271
Government
impose income
tax to pay their
loan.
First, as debt
servicing
obligations
increases, a
large amount of
personal income
would be taken
away by the
government in
form of taxes to
repay both the
outstanding debt
and the amount
of interest.
Paraphrasing
poor countries
like Pakistan
(pp.270-271).
Government
will impose
individual salary
taxes to the
citizen in order
to pay the
remaining loan
and sum of
interest (Farouq,
n.d, p.271).
Farooq (n.d.).
Interest, Usury
and its Impact
on the Economy.
The Dialogue,
Volume VII
Number 3, p.
271
Profit-sharing
system will
strengthen and
balance the
economy.
Original text
They earn easy
money by
advancing their
extra money
based on interest
while doing
nothing in
concrete.
Islamic
economists have
theoretically
articulated that
the profitsharing system
assures a
relative degree
of stability and
more equitable
compared to
Citation
technique
Short quotation
synthesizing
Rephrased text
Source
As highlighted
by Farouq (n.d.),
They earn easy
money by
advancing their
extra money
based on interest
while doing
nothing in
concrete
(p.272).
Zarqa, (1983),
Mukhsin Khan
(1986) and
Chapra (1985)
articulated that
economic will
be more rightful
and balance due
to the
implementation
of profit-sharing
Farooq (n.d.).
Interest, Usury
and its Impact
on the Economy.
The Dialogue,
Volume VII
Number 3, p.
272
Borrowers have
responsibility to
pay their loan
plus amount of
interest
Interest will be
calculated from
beginning and
on the previous
period of a loan.
riba-based
economy,
(Zarqa, 1983)
and (Muhsin
Khan, 1986),
(Chapra, 1985).
He/she has to
pay the lender
the principal
amount of loan
plus a fixed
percentage as a
reward for
his/her money.
The debtor
cannot settle the
transaction on
equal footing and
terms with the
creditor because
of his weaker
position.
The moneylender goes on
charging interest
over and over
again and it goes
on increasing
with the passage
of time.
Money-lender
becomes the
stronger partner
in the earnings of
the debtor
without any risk
or hard work on
his part.
Paraphrasing
Summarizing
The borrowers
have to settle up
the loan
including
accumulated
usury on money
they have
borrowed
(Farouq, n.d.
p.272).
That is why the
borrowers
always fail to
pay the loan on
time due to their
financial
position
(Ahmed, 2014,
pp.140-141).
Farooq (n.d.).
Interest, Usury
and its Impact
on the Economy.
The Dialogue,
Volume VII
Number 3, p.
272
Rephrased text
Source
Ahmed (2014).
The Adverse
Impact Of Riba
On Individual
And Society: A
Concise And
Comprehensive
Study. Journal
of Social
Sciences and
Humanities,
pp.140-141
Original text
Citation
technique
synthesizing
Supporting, the
contention that
riba gives bad
impact to
investment,
Farouq (n.d.),
Saba and Danish
(2015) point out
that rise of
interest rate will
encourage
people to save
thus discourage
people to make
investment.
Free-based
interest
enhances people
to make
investment thus
increase saving
Make the
investment more
risky and limits
the productive
investment.
investment
which will
adversely affect
the total
investment in
the country.
If there is no
Block
interest, the
amount of
savings will be
available for
investment with
zero cost and the
rate of
investment will
increase and the
economy will
take off based
on Musharakah
and Mudarabah
modes of
finance both. It
is basically the
rate of
investment that
influences
positively the
total income of
the people
which ultimately
enhances the
ability of the
people to save
more
This makes
investment very
risky and
hampers the
growth of the
process of
production in a
Short
This is
supported by
Farouq (n.d.):
If there is no
interest, the
amount of
savings will be
available for
investment with
zero cost and the
rate of
investment will
increase and the
economy will
take off based
on Musharakah
and Mudarabah
modes of
finance both. It
is basically the
rate of
investment that
influences
positively the
total income of
the people
which ultimately
enhances the
ability of the
people to save
more (p.270).
As highlighted
by Farouq (n.d.),
This makes
investment very
risky and
hampers the
growth of the
Farooq (n.d.).
Interest, Usury
and its Impact
on the Economy.
The Dialogue,
Volume VII
Number 3,
p.270
Farooq (n.d.).
Interest, Usury
and its Impact
on the Economy.
The Dialogue,
Volume VII
Number 3,
country
Islamic Banks
products are not
influenced by
interest rate
instead of profit
rate
Haron and
Paraphrasing
Ahmed (2000)
studied that
customer of
Islamic banks
are more
influenced by
profit. They did
study of Islamic
banks deposit
in Malaysia and
concluded that
rate of profit and
Islamic banks
deposits are
positively
correlated. On
the other hand
they concluded
that interest rate
has negative
relationship with
Islamic bank
deposit in
Malaysia.
process of
production in a
country
(p.273).
On the other
hand, deposits
of Islamic banks
are influenced
by profit rate
instead of
interest rate that
has inverse
relationship
(Saba and
Danish, 2015,
p.7).
p.273
Conclusion
Supporting
details
Interest was
prohibited in
islam but
permitted
trading
Original text
Whereas Allah
permitted
trading and
forbideth usury
Citation
technique
Short quotation
Rephrased text
Allah clearly
prohibited
interest by
stating that:
Whereas Allah
permitted
trading and
forbideth usury
(Quran, 2:275).
Source
Quran (2:275).