Kolombo & Other Religiously Inclinded People

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AbdiWahab252
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Kolombo & Other Religiously Inclinded People

Post by AbdiWahab252 »

Saxiib, I have a dilemma. A man borrowed $2,000 from my father in 1980 and now wants to repay him back the $2,000.

The time value of money has changed. $2,000 was worth much more in 1980 than it is now 28 years later.

What would be a fair way of calculating today's equivalent sum ? Would it be fair to assess time value of money based on a certain rate ? Or can one simply judge it on a fixed base such as the equivalent value of Gold i.e. how many grams of Gold could $2,000 buy in 1980 and then ask for the $ equivalent of the same amount of Gold in 2008. Say, $2,000 bought about 100 grams in 1980 and now 100 grams would be worth say, $4,000.

Which would be a fair Islamic method of accounting for an equivalent sum ?
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Re: Kolombo & Other Religiously Inclinded People

Post by Kolombo »

I have no clue, all I know is if $2,000 was borrowed, then $2,000 must be repaid, otherwise it will become riba. Inflation, market depriciation, loss of value, etc. play little or no role in these matters. Let me research it for you and get back to you, insha Allah.
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Re: Kolombo & Other Religiously Inclinded People

Post by AbdiWahab252 »

Thanks Kolombo :up:
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Re: Kolombo & Other Religiously Inclinded People

Post by SummerRain »

:lol: :lol:
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Re: Kolombo & Other Religiously Inclinded People

Post by Hyperactive »

AW the money was a loan or was given for business that you get benifits?
if you give some one $100 after 50 years you only owe $100 and may given to your kids or grand kids. otherwise it's riba.
la'ag la'ag ma dasho. work make money and johd.
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Re: Kolombo & Other Religiously Inclinded People

Post by AbdiWahab252 »

ismahan Cadeey,

Xa ku haya manta ?

Hyper,

I was looking at the loss of value. If say Aabe gave him the loan in GOLD instead of cash, then the value would still hold well unlike cash which loses its value.
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Re: Kolombo & Other Religiously Inclinded People

Post by Hyperactive »

AW now you made it complicated adeer.
i need to get my father to answer this for you about the gold :)
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Re: Kolombo & Other Religiously Inclinded People

Post by AbdiWahab252 »

Hyper,

Thanks Adeer. :up:
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Re: Kolombo & Other Religiously Inclinded People

Post by Grant »

AW,

The price of gold is not stable. And note that this chart (1970-2008) is "inflation adjusted".

http://libertyvalley.com/rough_projecti ... ver_prices
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Re: Kolombo & Other Religiously Inclinded People

Post by AbdiWahab252 »

Grant,

Neither is the Time Value of Money especially the USD !

I want to find a fair way of assessing time equivalent value of money.

$2,000 went a lot further 28 years ago than today.
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Re: Kolombo & Other Religiously Inclinded People

Post by Hyperactive »

ader if that was a cash , a money. he only obligated to return the $2000
nothing in shari'a regarding value change. you owe him only what he got as a loan.
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Re: Kolombo & Other Religiously Inclinded People

Post by AbdiWahab252 »

Hyper or Kolombo,

Any updates ?
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Re: Kolombo & Other Religiously Inclinded People

Post by Kolombo »

AW,

I asked my imaam last night, he said the principle is simple; whatever that is borrowed must be exactly what is repaid.

Anything more and it becomes interest. Market depriciation, loss of value, etc doesn't apply to repaying amount borrowed.
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Re: Kolombo & Other Religiously Inclinded People

Post by AbdiWahab252 »

Kolombo,

Many thanks :up:

I wonder how Islamic Finance can operate without time value of money :idea:
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Re: Kolombo & Other Religiously Inclinded People

Post by huda6207 »

AbdiWahab252 wrote:Saxiib, I have a dilemma. A man borrowed $2,000 from my father in 1980 and now wants to repay him back the $2,000.

The time value of money has changed. $2,000 was worth much more in 1980 than it is now 28 years later.

What would be a fair way of calculating today's equivalent sum ? Would it be fair to assess time value of money based on a certain rate ? Or can one simply judge it on a fixed base such as the equivalent value of Gold i.e. how many grams of Gold could $2,000 buy in 1980 and then ask for the $ equivalent of the same amount of Gold in 2008. Say, $2,000 bought about 100 grams in 1980 and now 100 grams would be worth say, $4,000.

Which would be a fair Islamic method of accounting for an equivalent sum ?

lol. very good question if i may say it myself. walaahi i myself wonder at times what incentive one would have to lend someone money without expect them to pay him/her back down the line without taking into account the time value of money.
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