Islamic Formula of Future Value of Asset

Abstract

Increasing price of an asset being sold on credit is a common practice of Islamic Financial Institutions (IFIs) and certain retailers using formulas of compound interest (Riba) and speculation (Maysir). As Islam prohibits both of these concepts, relevant literature was qualitatively probed to find Shariahcompliant mechanism for setting future value of an asset being sold on credit negating Riba and Maysir. The study thus extracted a formula from authentic Shariah sources and presented it quantitatively as an alternate to abandon the conventional formulas of interest and speculation. It further contributed recommendations for credit sellers and buyers in the light of Shariah principles and possible future research.

Keywords

• credit sale
• maysir
• riba
• future value
• inflation