Currencies are always traded in pairs, one against the other. FX Empire may receive compensation from the companies featured on the network. The Musharakah arrangement works just like a normal mortgage arrangement where all the terms and conditions between the parties are clearly defined. Is there any halal way of trading forex or commodities?
Money is not a commodity. Money may never be traded like commodities, and the practice of trading with or selling money using speculative steps and involving riba is forbidden in Islam, and is thus haram. For a foreign exchange transaction to be halal in Islam, it must not be speculative. The buying of British pounds from your friend is an example of a halal transaction, since you legitimately need the pounds for your trip to London.
So, going back to how Islam views foreign exchange: The type that is permissible in Islam is the spot transaction, which is done on the spot or almost immediately, with the rate known to both parties and involves no speculation or interest rates. This article originally appeared in the July issue of Aquila Style magazine. There are generally two kinds of foreign exchange transactions: Additional reporting by Ryan Hardy.
If the types are different then sell however you like, so long as it is hand to hand. According to Islamic law, usury, or any contract or business dealing that involves charging interest riba is strictly forbidden.
In standard Forex trading, online brokers tend to charge or pay the interest differential between the two sides of any currency pair whose position is held overnight. These brokers maintain profitability by increasing their commission on spot Forex trades, so they can recover the losses of not having commission on other positions.
Some might say this is also considered charging interest, and if you believe this to be true, you may think that Forex trading is still prohibited, or, at the very least questionable, for those who adhere strictly to Shariah law. Additionally, since there is an element of interest involved in trading Forex forwards, this type of trading is also forbidden.
With regards to Forex trading, we can argue that a deal is made between two parties, the trader and the broker, and that this type of exchange is permitted within Islamic law.
In Forex trading, traders predict that the value of one currency will increase and the value of another currency will decrease. There is no actual buying or selling or owning of the currency. And so, we still have to ask: Is this type of speculation permitted for those who follow Islamic law?
In short, the Mudharabah banking arrangement permits Muslims to loan out their money for a share of the profits in a similar fashion to where conventional banks pays out interest to depositors. So what a Mudharabah banking arrangement does is to extend the concept of an ordinary business partnership to cover the relationship between the depositor and the bank.
With the Musharakah arrangement, the bank enters into a business relationship with an individual who is regarded as the investor. Under this arrangement, profits are divided based on the capital contribution.
The Musharakah arrangement is normally used when an individual wishes to take a mortgage for the purchase of a property. For mortgages under the Musharakah arrangement, the property is actually purchased by the bank in return for a share of the rent that the property would earn from the occupier of the property.
The Musharakah arrangement works just like a normal mortgage arrangement where all the terms and conditions between the parties are clearly defined. Once the buyer has fully paid up his loan, the arrangement between the buyer and the bank will end. As retail forex becomes more popular over the years, it has triggered a debate among Islamic scholars as to whether it is permissible for Muslims to participate in it. The availability of swap free trading accounts means that Muslim traders can still participate in forex trading while fulfilling their religious obligations at the same time.
As mentioned earlier, there is a sizeable market among the Muslim populace for forex brokers to tap into. As such, most forex brokers nowadays are beginning to offer swap free accounts as part of their product offerings to Muslim traders. While swap free accounts operate without rollover interest being applied to it, traders trading with a swap free account also have full access to the range of products which normal trading accounts have access to.
Now that we understand that an Islamic or Swap free trading account is a trading account allowed by the Islamic Shariah principle where there is no interest applied for an overnight position, Islamic traders can benefit from online trading. In order to assist Islamic traders in finding the best brokers for them to trade with, FX Empire has ranked the leading brokers offering the best swap free Islamic Accounts.
This page may not include all available products, all companies or all services. Is it Halal or Haram for Muslims to trade forex? Musharakah Arrangement With the Musharakah arrangement, the bank enters into a business relationship with an individual who is regarded as the investor. Permissibility of Islamic account As retail forex becomes more popular over the years, it has triggered a debate among Islamic scholars as to whether it is permissible for Muslims to participate in it.