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International Journal of Law and Management Conventional futures: derivatives in Islamic law of contract
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Abstract
Purpose – This paper aims to compare and contrast the concept of conventional futures contract from the
Islamic law of contract perspectives. The underlying theory and practice of Islamic finance is based on the
principles of Islamic law of contract. Although the necessity of derivative instruments such as the case with
futures contract is essential for developments in Islamic finance, the permissibility of using these instruments
still remains a debatable issue.
Design/methodology/approach – The paper discusses arguments for and against using derivative
instruments as in futures, for example, in light with the Qur’an and Sunnah (the Prophet’s traditions), as well
as the views of classical scholars, jurists and contemporary researchers. Arguments for and against are
analysed systematically to derive a logical conclusion.
Findings – The study finds that majority scholars consider futures contracts as non-compliant with the
Islamic law due to the fact that selling something that does not exist, deferment in the both counter values,
gharar or ambiguity and excessive risk taking, pure speculation and sale of one debt for another.
Research limitations/implications – The study focuses narrowly on conventional futures contract.
Analysing other financial derivative contracts could be a future research endeavour.
Practical implications – The study has so far found the verdict of impermissibility of conventional
futures contract in its current form as has been argued by majority scholars in the premise that they do not
comply with the Islamic law. Policymakers and industry practitioners need to take this opinion of majority
scholars while developing new Islamic financial derivatives.
Originality/value – To the best of the author’s knowledge, the present research is the first attempt so far
that explained the validity of conventional futures by analysing arguments of classical and contemporary
jurists, scholars and researchers.
NONE
Text
ENGLISH
EMERALD INSIGHT
2020
ENGLAND
JURNAL ILMU HUKUM
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APA Citation
Md Akther Uddin. (2020).International Journal of Law and Management
Conventional futures: derivatives
in Islamic law of contract.(Electronic Thesis or Dissertation). Retrieved from https://localhost/etd