FOREX IN ISLAMIC

PERSPECTIVES
DATE OF PRESENTATION:
29 MARCH 2014
ILYAN ANINA BINTI IZANI
BG 1111 0201
HE 23

CONTENTS
Introduction
Law and Arguments
Conditions of Bai Al-Sarf
The Issues of Riba Prohibition
Issues of Freedom From Gharar
Conclusion
2

INTRODUCTION

Foreign
Exchang
e
(Forex)

The exchange of one currency

for another at an agreed
exchange price on the overthe-counter (OTC) market.

Bai AlSarf

A binding obligation between

the counterparties to buy or
sell a specified amount of
foreign currency at an agreed
spot exchange rate.

LAW & ARGUMENTS

Regulated under Shariah
Easily manipulated for the purpose
producing an interest-bearing loan.
Gold is to be paid for by gold, silver by silver,
wheat by wheat, barley by barley, dates by dates
and salt by salt like for like, equal for equal,
payment being made on the spot. If the species
differ, sell as you wish provided that payment is
made on the spot. (Hadith: Muslim)
4

of

CONDITIONS OF BAI AL-SARF

If both of the exchanges are of the same
type or species, then there must be equality
in the amount.
If the exchanged items on both sides are of
different species as in the case of gold being
exchanged for silver.

THE ISSUES OF RIBA

PROHIBITION
Riba
Unlawful gain derived from quantitative
inequality of the counter values.
Forward sale in currencies with fluctuating
exchange rates.
A spot transaction
forward transaction.
6

and

simultaneous

ISSUES OF FREEDOM FROM

GHARAR

Gharar settlement risk.

It is forbidden.
Futures and forward in currencies
are example of contract.
Majority of Shariah scholars have
disapproved.
7

CONCLUSION
Bai Al-Sarf
Permissible.
immediate possession only spot

trading is allowed.
prohibited riba and gharar.

THANK YOU