Type: Definition Essays
Sample donated: Colleen Baldwin
Last updated: September 15, 2019
Forex is known as foreign exchange or themarket currency. To be more understanding, forex is like any form of thespeculation which means we buy a currency at a lower price and sell thecurrency at a higher price. However, according to National Fatwa Council thepractice of forex is haram. This is because a study by the committee found thatthe forex trading involves currency speculation which is against the Islamiclaw. Bank Negara Malaysia (BNM) also saying that the selling and buying offoreign currency in Malaysia are only allowed with the licensed of any banks. Howabout the forex trading based on the leverage practice in online forex trading? Accordingto the head of research affair at the International Shariah Research Academy, DrAsyraf Wajdi Dusuki, he says that the practice including leverage where an individualtrading forex based on online are allowed in order to provide only part of theamount invested with the balance provided by the forex broker.
The result in a combinationof the two contract which are sale and purchase of the currency and the credit’sprovision, which is prohibited by Islamic law. He also added that online forextrading have not been licensed by BNM, which making them illegal and contradictwith Shariah. Inthe other hand, online forex trading are not permissible since the exchange arenot hand to hand. What is hand to hand mean? It means that any exchange of the commoditiesshould have the akad which means I’m buying or I’m selling.
However, thisquestion are not a deal since the olden day there were no computers ortelephone. In fact, one can conclude that it is natural and accepted for anagreement to be made between two different parties. In modern times, it isarguable that in terms of the trading, agreements are made between forexbrokers and traders, so this will qualify under the definition of two differentparties, which will be allowed under Islamic law.
Inaddition, in order to know whether the doing forex online is permissible ornot, let see these conditions which according to Shariah. First, the currenciesmust be paid in full and second both payment must be at the time of thecontract. From these conditions, we can know that futures and margintransactions are not permissible. This is because, nowadays almost all thetransactions on the internet are futures. According to Prof. Dr.
Monzer Kahf,he does not recommend the forex trading unless we need a foreign currency touse for import and export. He added that the profit from forex is a bad thingin any way. Inconclusion, online forex trading are not permissible in Islam because the forextrading do not fulfill the conditions under Shariah law. Another reason why hetrading in online currencies with exchange platform are not allowed because itis dangerous to macros and no actual delivery has ever been done even thoughthey make fake credits and debits.