Risk Free Rate in Islamic Perspective

The risk-free rate of return, usually shortened to the risk-free rate, is the rate of return of a hypothetical investment with scheduled payment over a fixed period of time that is assumed to meet all payment obligations

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Risk free rate instruments:

Deposit and LPS

Government Bonds

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Surat Perbendaharaan Negara (SPN) : State bonds with a maturity period of more than 1 year

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Surat Utang Negara (SUN) and Sukuk (versi Syariah) : Government Bonds with maturities of less than 1 year

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Risk-free rate in Islam: In the sharia corridor there is no concept of fixed profit or risk-free rate, because that means interest, and interest is prohibited by sharia.

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Ashker (1987) uses the zakat component as a substitute for the risk free rate which is equivalent to 2.5%. According to him, zakat is the minimum level that is expected so that investors can fulfill their religious obligations on their investment assets

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Selim (2008), The strategy of maximizing return with minimum risk in musyarakah financing implies an optimum zero risk-free rate.

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Hanif (2011) replaces the risk-free rate with inflation on the grounds that the government is responsible for the welfare of its people and participates in guaranteeing and protecting the level of people's purchasing power from the impact of inflation.

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SCAPM was first introduced by Cyril and Ri'fat in 1987 by changing the CAPM model by eliminating risk free in the model. Because they think that the SCAPM model must be free from risk free because according to sharia principles, there is no profit without risk. So that they assess every investment there must be a risk, no investment or business is free from risk

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Inflation can be used as a substitute for risk free variables because inflation can be used as a benchmark for investing without depending on risk

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