Forex shariah compliance

Forex shariah compliance

Author: legenda1981 Date: 14.07.2017

But when you start looking the whole thing is a minefield. For a start its hard to pick through where you should be investing, what assets, for how long, with the cheapest brokers, and at what risk, and on top of all these usual concerns you also want your investment to be halal.

Shares are okay per se to invest in as they are simply seen as owning a percentage in a business. The obvious thing to watch out for is that the company should not be dealing in unislamic things.

The real question is what do you do when a company deals in some unislamic things and some unislamic things? However for the private investor all is not lost. It is quite easy on most online share trading websites to get a snapshot of the company, how much debt they are in, what is their market capitalisation, and even their accounts. It really just comes down to being a bit sensible and using your common sense. Investing in a heavily leveraged company that sells beverages including alcoholic ones is probably unislamic, while investing in a pharmaceutical company which makes the majority of its money from drug sales is okay.

There are a number of people who have adopted different opinions on share trading and regard it as unislamic.

However these are either weak opinions or do not understand the investment context part of a wider problem of scholars not being well-grounded in finance when it comes to Islamic Financial rulings. This, these people argue, means that shares are a form of gambling. So it is fine for a company to be worth more than its constituent parts.

Therefore, shares are buying and selling a bunch of rights and is haram. Firstly, this argument is wrong because ultimately what these rights are giving to the shareholder are exactly those rights that define an owner — ultimate control on key decisions and a right to profits. Secondly, they are also likely wrong on the point about selling rights. But more on that in a later blog. Two introductory books I highly recommend on learning how to invest are: Forex trading is very easily accessible online and the allure of quick money is there with their slick advertising promising you millions.

Again, from the outset it also looks halal as you are apparently just trading in money — which is perfectly fine. Not very much is it? That means that with a very small amount of money you can take very large positions in the forex market. This magnifies both your profits and losses.

Again, nothing wrong with this per se. In Islam you can borrow from someone, and then use that money to invest, make a profit, and return that loan interest free to the creditor.

But there is something very subtle which makes this haram in the context of forex. In forex these companies are lending you this money for the sole purpose of you then using that money to enter a trade with them for which they will get a commission. In other words they are getting a set return from every loan they make. This is understood by scholars to be a form of interest, and so the whole transaction is haram.

forex shariah compliance

Of course Islamically this is good and would be part of a Shariah-compliant currency trading account, but it does not deal with the fundamental problem of the way the transaction works which I noted above.

One possible way of structuring a Forex trading platform to make it shariah compliant would be to divorce the source of the loan and the platform on which you trade.

So if you loaned money from x and then used broker y to enter into the forex transaction, with no link between x and y.

So watch out for that in the coming weeks. Please remember to subscribe to our email list box on the top right , and follow us on Facebook and Twitter. Really helpful, thank you! Can you please do a similar one for Bonds and ETFs? There has now been a new post on this: Nice to see simplified Islamic stances on commonly misunderstood issues — curious to know which scholars you consult on the matter? What I liked about this article was it took something that was complicated to under for me and broke it down into and easy to read article with practice examples.

Jazakallahu bi khair my research so far has confirmed what you stated above and I have found it informative especially from a review stand point. I agree that some more specifics are needed on this.

May Allah put baraka in your rizq and enable you to benefit from in in the dunya and akhira, and the same for everyone else seeking or providing information on halal investing.

From a quick google search of what it is, it sounds very very dodgy and akin to gambling. What if I open a forex trade at morning and close at night, this does not incur any charges from the broker. Or if my broker does not charge interest rate on Islamic account but instead charges a higher fees for the transaction? This would avoid rollover interest and charging a higher transaction fee is also fine in my opinion. All the trading sites give leverage option even if u have the money to buy X number of shares….

The first thing is this is not short-selling — which is leveraging going down. That is quite clearly not permissible. This issue is essentially one of buying on credit. What do you think? Is it halal to do forex trading online without taking any loan from them?

Shariah-Compliant Funds

I read the fatawas of Mufti Taqi usmani and Mufti Ibrahim desai that forex trading is not permissible. Some scholar gave the reason that the trader does not take the full possession of the currency. I have not entirely made up my mind about the topic. This is certainly an area I want to look into iA. Gut instinct is that given there is certainty in the trade, and as modern finance requires constructive possession rather than actual possession, this is not as big an issue as on first glance.

But watch this space. I will get around to looking into this eventually! Does the trader take constructive possession of the currency he buys before he sells it to the market without any conditions? Let me explain something to you. The problem with that is it does not account for the appreciation of the stock that occurs when these companies grow usually by borrowing money for expansion or short term borrowing etc. So you can never tell what portion of the increase in the share price came from the borrowed money or income earned from haraam sources e.

Dividends are only a fraction of the profit most people invest in.

Most of them hope for an capital appreciation. If something is haraam…a little of it is haraam just as much. Saying bismillah before drinking wine does not make it halal and neither does slaughtering a pig with Allah-o-Akbar make it edible. The problem with it is that by extension the implication of your argument are: Muslims cannot work in and by consequence support a conglomerate that has, at some point in its chain, unislamic practices.

Please use the contact page: Your email address will not be published. Notify me of follow-up comments by email. Notify me of new posts by email. Home IFG IFG Lifestyle Contact About IFG Articles Index. Shares Shares are okay per se to invest in as they are simply seen as owning a percentage in a business.

But you all knew that right? Secondly, if a company deals in only a fraction of unislamic things e. Contrarian opinions on shares There are a number of people who have adopted different opinions on share trading and regard it as unislamic.

GENERALLY FINE, JUST DO YOUR RESEARCH ON A COMPANY PROPERLY Two introductory books I highly recommend on learning how to invest are: Forex Trading Forex trading is very easily accessible online and the allure of quick money is there with their slick advertising promising you millions. However all is not what meets the eye. However Forex trading is not that. It is not that for a number of reasons: NOT SHARIAH COMPLIANT AS IT IS.

Is my job haram? Texting whilst driving is illegal — but is it haram? December 17, at 6: December 17, at Thank you for your feedback. June 12, at July 20, at 7: Thanks How can I as non Malaysian resident invest my money in Malaysia? September 1, at 4: September 4, at 8: Thanks for the help!

Is forex trade Islamic Shariah compliant?

Have you discussed Option trading in any posts yet? September 26, at 9: Muazu Ibrahim Muazu says: October 5, at 5: November 10, at 8: Great article thanks and appreciate you keeping it simple. January 12, at 2: November 30, at 2: December 27, at 6: We can do online stock trading at the very least. March 24, at 6: April 1, at December 17, at 1: January 3, at January 25, at February 3, at 3: AssalamuAlaikum brother, Is it halal to do forex trading online without taking any loan from them?

February 5, at 1: February 5, at 5: Please enlighten me with your research. March 24, at 3: Your approach would work in an ideal world. Given we are patently not, it is naive.

April 28, at Ibrahim I needed to contact you about a specific query i have how do i get in touch? May 3, at 7: Leave A Comment Cancel reply Your email address will not be published. Follow Blog via Email Enter your email address to follow this blog and receive notifications of new posts by email. Have a search of our archives: Proudly powered by WordPress Theme: Send to Email Address Your Name Your Email Address jQuery document.

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