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All Journal IJISH (International Journal of Islamic Studies and Humanities)
Mustofa, Latif
Universitas Muhammadiyah Surabaya
Religion Humanities Education Languange, Linguistic, Communication & Media Law, Crime, Criminology & Criminal Justice

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THE SUBSTANCE OF THE FORMAL PROHIBITION OF THE RIBA: ISLAMIC FINANCE AND THE TIE WITH THE REAL ECONOMY Mustofa, Latif
IJISH (International Journal of Islamic Studies and Humanities) Vol 1, No 1 (2018)
Publisher : Universitas Ahmad Dahlan

Show Abstract | Download Original | Original Source | Check in Google Scholar | Full PDF (568.376 KB) | DOI: 10.26555/ijish.v1i1.134

Abstract

Islamic Financial Institutions come up with sharia-compliant products mimicking one of their conventional counterpart. This particular development is one of the unintended consequences under the interpretation of the prohibition of interest. Islamic Finance Institutions need to find substitute for profit-generating mechanism. There is no consequential difference between ‘interestfree’ and interest-bearing products on the practical level. This paper attempts to deal with the question of the interpretation of riba on a theoretical level. This paper argues that equity-financing should be preferred to debt-financing. In doing so, this paper embraces a juristic approach to arrive at the intended conclusion. However, debt-financing could be utilised where deemed appropriate and no equity-financing method is applicable to a particular project.
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