Cover Image

Commodity futures from Islamic perspective: the theory-practice gap

Commodity futures trading is a relatively new phenomenon in the Islamic finance, which emerged in the early 1990s. Many scholars and SharÊÑah bodies have passed prohibitive judgment against the legality of futures trading due to two reasons. First, the futures trading system contains a number of ele...

Full description

Saved in:
Bibliographic Details
Main Author: Khalil Mohammed Khalil Ahmed
Format: Thesis
Language:English
Published: Universiti Sains Islam Malaysia 2015
Subjects:
Commodity futures
Finance > Religious aspects > Islam
Online Access:http://ddms.usim.edu.my/handle/123456789/8757
Tags: Add Tag
No Tags, Be the first to tag this record!
id my.usim-8757
record_format dspace
spelling my.usim-87572017-02-27T05:14:34Z Commodity futures from Islamic perspective: the theory-practice gap Khalil Mohammed Khalil Ahmed Commodity futures Finance--Religious aspects--Islam Commodity futures trading is a relatively new phenomenon in the Islamic finance, which emerged in the early 1990s. Many scholars and SharÊÑah bodies have passed prohibitive judgment against the legality of futures trading due to two reasons. First, the futures trading system contains a number of elements that oppose Islamic law e.g. sale of nonexistent object, short selling, gambling, and deferment of countervalues. Second, the practice of Islamic banks, in trading commodity futures, may not be totally in compliance with Islamic principles of muÑÉmalÉt. The scope of the present analysis is, however, limited to futures contracts based on commodities. They represent the most probable area in which an Islamic alternative is possible. The broader concept of commodity, which includes currencies, bonds, interest rates, indices and other financial futures, is beyond the scope of this study. The study begins with defining the gap between theory and practice, examining the existence of the gap in different disciplines, and reviewing the relevant literature. The study also examines related issues to the futures contracts and their markets from conventional point of view. The study, furthermore, evaluates commodity futures contracts from an Islamic perspective and critically analyzes the prohibitive arguments and judgments advanced on the futures contracts. The practice of Islamic banks related to the commodity futures was also examined. Islamic banks use commodity murÉbaÍa as a platform to trade futures. Commodity murÉbaÍa is structured to give a fixed return with minimum risk. The study found that this structure mimics conventional one where the priority is given to guarantee return and avoid risk. Results of the study revealed that the gap between theory and practice exists, on one hand, due to improper understanding of the futures trading by those scholars who declared futures invalid. On the other hand, the Islamic banks have failed to apply strict rules of Islamic law during the deal with futures markets. The practice of Islamic banks involves a mere debt creation exercise which is said to be similar to conventional loans with interest. 2015-07-09T07:57:21Z 2015-07-09T07:57:21Z 2013-03 Thesis http://ddms.usim.edu.my/handle/123456789/8757 en Universiti Sains Islam Malaysia
institution Universiti Sains Islam Malaysia
building USIM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universit Sains Islam i Malaysia
content_source USIM Institutional Repository
url_provider http://ddms.usim.edu.my/
language English
topic Commodity futures
Finance--Religious aspects--Islam
spellingShingle Commodity futures
Finance--Religious aspects--Islam
Khalil Mohammed Khalil Ahmed
Commodity futures from Islamic perspective: the theory-practice gap
description Commodity futures trading is a relatively new phenomenon in the Islamic finance, which emerged in the early 1990s. Many scholars and SharÊÑah bodies have passed prohibitive judgment against the legality of futures trading due to two reasons. First, the futures trading system contains a number of elements that oppose Islamic law e.g. sale of nonexistent object, short selling, gambling, and deferment of countervalues. Second, the practice of Islamic banks, in trading commodity futures, may not be totally in compliance with Islamic principles of muÑÉmalÉt. The scope of the present analysis is, however, limited to futures contracts based on commodities. They represent the most probable area in which an Islamic alternative is possible. The broader concept of commodity, which includes currencies, bonds, interest rates, indices and other financial futures, is beyond the scope of this study. The study begins with defining the gap between theory and practice, examining the existence of the gap in different disciplines, and reviewing the relevant literature. The study also examines related issues to the futures contracts and their markets from conventional point of view. The study, furthermore, evaluates commodity futures contracts from an Islamic perspective and critically analyzes the prohibitive arguments and judgments advanced on the futures contracts. The practice of Islamic banks related to the commodity futures was also examined. Islamic banks use commodity murÉbaÍa as a platform to trade futures. Commodity murÉbaÍa is structured to give a fixed return with minimum risk. The study found that this structure mimics conventional one where the priority is given to guarantee return and avoid risk. Results of the study revealed that the gap between theory and practice exists, on one hand, due to improper understanding of the futures trading by those scholars who declared futures invalid. On the other hand, the Islamic banks have failed to apply strict rules of Islamic law during the deal with futures markets. The practice of Islamic banks involves a mere debt creation exercise which is said to be similar to conventional loans with interest.
format Thesis
author Khalil Mohammed Khalil Ahmed
author_facet Khalil Mohammed Khalil Ahmed
author_sort Khalil Mohammed Khalil Ahmed
title Commodity futures from Islamic perspective: the theory-practice gap
title_short Commodity futures from Islamic perspective: the theory-practice gap
title_full Commodity futures from Islamic perspective: the theory-practice gap
title_fullStr Commodity futures from Islamic perspective: the theory-practice gap
title_full_unstemmed Commodity futures from Islamic perspective: the theory-practice gap
title_sort commodity futures from islamic perspective: the theory-practice gap
publisher Universiti Sains Islam Malaysia
publishDate 2015
url http://ddms.usim.edu.my/handle/123456789/8757
_version_ 1645152465114365952
score 13.222552

Similar Items