Money Time Value and Time Preference in Islamic Perspective

Abstract

This paper examines the roles of money time value in Islamic monetary economics, time preference de-cisions and economic pricing. We establish the perimeter of money time value and its implications in terms of time preference behavior and investment decisions. In the Islamic perspective, time value of money can be distinguished as economic time value through real transactions on one hand and social time value where an economic agent con-siders the reward of his transactions in the hereafter, on the other hand. We conclude that aside from loans, time preference is positively related to time value of money in sales operations. The social time value of money reinforces the preference for the future. Consequently, the time horizon of economic decision is lengthened in Islamic eco-nomics and the time preference is always positive under Sharia rules.