REVISITING THE CONCEPTS OF MONEY, PROFIT AND INTEREST FROM THE PERSPECTIVE OF VALUE AND DIMINISHING MARGINAL UTILITY

  • Ahamed Kameel Mydin Meera International Islamic University Malaysia https://orcid.org/0000-0001-6436-0564
  • Hamida Mubasheera International Islamic University Malaysia
Keywords: money, marginal utility, monetary system

Abstract

This article is a theoretical article that attempts to clarify the inherent meanings of the concepts of profit and interest, i.e. two important concepts in finance, particularly Islamic Finance. These are age-old concepts in economics that still draw confusion among people. Profit comes from trade and interest comes from lending and borrowing activities. While the former is much encouraged in Islam, the latter is strongly forbidden. Nonetheless, in today’s monetary and financial circumstances, the market interest rate is being used as a benchmark for the Islamic profit rate, drawing criticisms from many quarters that both are indeed one and the same. Using the fundamental economic concept of marginal utility, this paper attempts to clarify the fundamental difference in these two concepts and their implications for modern finance, particularly Islamic finance. Indirectly in the process, the paper also clarifies the concepts of money and riba.

 

Author Biographies

Ahamed Kameel Mydin Meera, International Islamic University Malaysia

Professor of Finance

Kulliyyah of Economics and Management Sciences, International Islamic University Malaysia

Hamida Mubasheera, International Islamic University Malaysia

Postgraduate Student

Kulliyyah of Economics and Management Sciences, International Islamic University Malaysia

References

Ayub, M. (2007). Understanding Islamic Finance. John Wiley & Sons Ltd.

Gesell, S. (1934). The Natural Economic Order. Free-Economy Publishing Co.

Gray, J. (2000). False Dawn: The Delusions of Global Capitalism. The New Press.

Ingham, G. (2004). The Nature of Money, Polity.

Lietaer, B., Ulanowicz, R., Goerner, S., & McLaren, N. (2010). Is Our Monetary Structure a Systemic Cause for Financial Instability? Evidence and Remedies from Nature. Journal of Futures Studies, Special Issue on the Financial Crisis.

Meera, A.K. (2009). Real Money – Money and Payment Systems from an Islamic Perspective. Kuala Lumpur: International Islamic University Malaysia.

_________. (2004). The Theft of Nations – Returning to Gold. Kuala Lumpur: Pelanduk Publications.

Nyazee, Imran Ahsan Khan. (2008). The Concept of Riba and Islamic Banking, Islamabad.

Steiner, P., Purvis, D., Courant, P., & Lipsey, R. (1990). Economics. Longman Higher Education.

Published
2015-08-10
How to Cite
Mydin Meera, A., & Mubasheera, H. (2015). REVISITING THE CONCEPTS OF MONEY, PROFIT AND INTEREST FROM THE PERSPECTIVE OF VALUE AND DIMINISHING MARGINAL UTILITY. Journal of Islamic Monetary Economics and Finance, 1(1), 25-53. https://doi.org/10.21098/jimf.v1i1.482
Section
Articles