Issuing a Secondary Currency and its Impact o...

Issuing a Secondary Currency and its Impact on the Execution of Interest free Loans: Buy and Sell as a Model

Author Name : Abdulla Faroog Ibrahim

ABSTRACT

The problem of usury (Riba) cannot be resolved as long as loans are lend and repaid in one currency. Therefore, this study aims to reveal a new mechanism for issuing Riba free loans. The study adopted the deductive and historical approaches to investigate the problem. The study proposed a new loan repayment mechanism in which banks offer loans in the form of a secondary currency. There is no forbidden prohibition (no harm) in issuing a secondary currency by the state or banks to deal particularly with loan contracts as long as such currency can be exchanged among people, can be used for valuation of items, and can be used to store value. The bank's Banks can profit from capital investments made through buy-and-sell transactions, thus, avoiding usury and protecting Sharia principles. The researcher urges scholars in the field of Islamic banking to conduct more research on the potential of issuing a secondary currency to avoid usury in loan financial contracts, as well as doing more research on the feasibility of adopting electronic currencies by Islamic banks following Sharia standards.

Keywords: Secondary currency, loans, usury, the state, financial contracts.