Name: Nur Diyanah Binti Mohd Sofri @ Kenny Matric No.

: BB21110191

BF30703 EKONOMI KEWANGAN ISLAM

INDIVIDUAL ASSIGNMENT – 20%

INSTRUCTION: PLEASE ANSWER ALL THE QUESTIONS WITH YOUR OWN WORDS.

1. Explain why riba is haram (forbidden) in Islam from the perspective of objectives of shariah
(Islamic law).
(4 Marks)

Answer:

Riba is an action or practice of lending money at unreasonably high rates of interest. It is

considered haram because it often involves an unequal exchange of values between the lender and
the borrower. When interest is charged on a loan, the borrower is obligated to pay back more than
the principal amount borrowed, without any equivalent countervalue. This violates the principle of
fairness and equal exchange, which is a key objective of Shariah. Next, Islamic finance encourages
economic activities that contribute to value addition and societal well-being. Riba is criticized for its
lack of connection to real economic activities or value creation. When interest is earned on a loan, it
does not involve active participation in economic endeavors, such as entrepreneurship or investment
in productive assets. On the other hand, Islamic finance encourages transactions that lead to the
addition of tangible value and contribute to the development and well-being of society. This
prohibition is rooted in the broader objectives of Shariah, aiming to foster a financial system that
prioritizes fairness, ethical conduct, and the well-being of individuals and society.

2. Suggest two (2) financial instruments or tools of Islamic financial economics that you think can
help to reduce the burden of economic difficulties during Post-COVID-19 pandemic. Explain.

(6 Marks)
Answer:

In my opinion, two financial instruments or tools of Islamic financial economics that help to
reduce the burden of economic difficulties during post-Covid-19 pandemic are Zakat and Qard Al-
Hassan. Zakat is one of the five pillars of Islam. It ordering all Muslims who meet the necessary
criteria to donate a certain proportion of wealth each year to Zakat Institutions. The primary types of
wealth subject to Zakat include savings, investments, gold, silver, and agricultural produce. Zakat
funds collected are distributed to various categories of recipients known as "asnaf”. For example,
Zakat funds can be directed towards supporting small businesses and entrepreneurs who may be
struggling to recover from the economic impacts of COVID-19. This support can help them sustain
their livelihoods, create employment opportunities, and contribute to economic recovery. This
example demonstrates how Zakat can serve as a tool for economic recovery by empowering
individuals to become self-sufficient and contribute to the overall well-being of the community.

Qard Al-Hassan is a loan that is given to the borrower out of kindness of the lender that does
not involve interest or additional conditions at the time of loan repayment. However the lender may,
at its discretion, repay the additional amount of money borrowed as a token of gratitude. The
agreement for a Qard al-Hassan is made through a contractual arrangement between the lender and
the borrower. The terms of the loan, including the amount, repayment schedule (if any), and other
conditions, are agreed upon by both parties. For instance, a single mother lost her job during the
pandemic and is struggling to make ends meet. She needs financial assistance to cover essential
expenses such as rent, utilities, and groceries. A local Islamic charity offers her a Qard al-Hassan to
help her through this challenging time. They provide her with an interest-free loan to cover her
Name: Nur Diyanah Binti Mohd Sofri @ Kenny Matric No.: BB21110191

immediate financial needs. In this way, Qard al-Hassan offers a practical and ethical solution to
overcome the economic burden faced by individuals during the post COVID-19 pandemic.

3. Answer the following (up to two decimal points) by showing the working calculation. The rates of
the months for 2018 are shown in the table below. There are 28 days in February and assume you
withdraw hibah at the end of each month. Any positive or negative increment in the monthly rates
shown is based on the basic rate.

You open a new wadiah account with a deposit of RM1000 on 28.01.2018. You deposit another
RM1000 and RM5500 on 13.02.2018 and 30.03.2018 respectively. Again, you deposit another
RM1550 on 31.05.2018. Then, you deposit another RM8500 on 10.06.2018 but withdraw RM5000 on
28.06.2018. On 15.12.2018, you withdraw another RM2000 from the account and then withdraw
again another RM3250 on 28.12.2018. What will be your total hibah on 30.12.2018?
(10 Marks)
Table 1: Monthly rates

Month Rate (%)

Jan 4.00%*
Feb +0.00%
March +0.10%
April -0.10%
May +0.10%
June +0.20%
July -0.10%
Aug +0.20%
Sept +0.10%
Oct +0.20%
Nov -0.10%
Dec +0.00%

* Basic rate

TOTAL 20 MARKS

Answer:

January (4 days)

x = = 0.43

February (12 days)

x = = 1.43
Name: Nur Diyanah Binti Mohd Sofri @ Kenny Matric No.: BB21110191

February (16 days)

x = = 3.81

March (30 days)

x = = 6.61

March (1 day)

x = = 0.83

April (30 days)

x = = 24.38

May (30 days)

x = = 24.80

May (1 day)

x = = 1.00

June (9 days)

x = = 9.50

June (18 days)

x = = 36.86

June (3 days)

x = = 4.39

July (31 days)

x = = 40.79

August (31 days)

x = = 43.93

September (30 days)

x = = 42.88
Name: Nur Diyanah Binti Mohd Sofri @ Kenny Matric No.: BB21110191

October (31 days)

x = = 43.93

November (30 days)

x = = 40.79

December (14 days)

x = = 18.89

December (13 days)

x = = 14.75

December (4 days)

x = = 3.14

0.43 + 1.43 + 3.81 + 6.61 + 0.83 + 24.38 + 24.80 + 1.00 + 9.50 + 36.86 + 4.39 + 40.79 + 43.93
+ 42.88 +43.93 + 40.79 + 18.89 + 14.75 + 3.14 = 363.14

Thus, the total hibah on 30.12.2018 is RM363.14