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Younes Soualhi

1. Introduction Islamic finance, growing from a niche market, is gradually positioning itself in modern finance as a mainstream choice, offering its customers a myriad of alternative instruments and presenting an ethical financial system that promotes equitable distribution of wealth whilst

Azhar Mohamad and Aghilasse Kashi

1 Introduction If the Islamic finance industry is to grow and develop, the market must diversify. Diversification and an increase in the volume of transactions can be achieved through increased foreign participation in Islamic finance markets. This will require an active and well-regulated trading

Amir Shaharuddin

also provide reasonable returns to their depositors and shareholders. Emphasis on Sharīʻah compliance paves the way for Sharīʻah scholars to play an integral role in the Islamic finance industry. In order to ensure that ifi operations are conducted in accordance with Islamic principles, Sharīʻah

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Edana Richardson

Introduction The contemporary Islamic finance industry, which is arranged around financial activity structured to adhere to the financial principles of Islamic law (a term frequently used interchangeably with shari’ah ), 1 has grown from its rural beginnings in Egypt in the 1960s 2 to become a

Asim Jusic and Ashraf M. Ismail

1. Introduction: The Global Diffusion of Islamic Financial Services Islamic finance is one of the fastest growing sectors of the global financial system. Particularly in light of the ongoing global financial crisis, there is renewed interest in alternative forms and styles of investment

Umar A. Oseni, Abu Umar Faruq Ahmad and M. Kabir Hassan

Islamic finance products. 1 While it is believed that the original philosophy of Islamic economics is elusive in some Sharīʿah-compliant transactions, 2 there is an increasing call for the stakeholders in the Islamic finance industry to take stock of the evolution of Islamic finance products in the last

Dina Elshurafa

to many modern-day economists. However, with the advent of Islamic finance (IF) in its modern form in the recent past, such a notion might no longer seem too farfetched. Although a fast-growing industry to date, IF has been forced to develop in what is essentially a Western-based economic system

Reyadh Mohamed Seyadi

, compete with conventional transactions by relying on formalism, when it would be better to rely on real Islamic fundamentals. In today’s financial market, not even Islamic finance specialists can deny that the results of both Islamic and conventional transactions are similar and intermingle in one pool

Risk Management in Islamic Finance

An Analysis of Derivatives Instruments in Commodity Markets

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Muhammad al-Bashir Muhammad al-Amine

This study addresses derivatives instruments in Islamic finance. It highlights the benefits of these instruments, their legal aspects and the appropriate alternatives. The forward, futures and options contracts in commodity markets are discussed and the arguments in favour of and against these instruments examined.

The forward contracts issue includes the possibility of trading gold in forward basis, the forward market for currencies and the possible alternative to manage related risks. With the examination of futures contracts, the main arguments against such a contract are addressed, for example the sale prior to taking possession and the sale of debt hedging and speculation. The study proposes khiyar al-shart and bay al-arbun as tools of risk management and alternatives to options. The sale of pure rights is at the center of the admissibility of options in Islamic law and is investigated comprehensively.

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Mufti Muhammad Taqi Usmani

Although the principles of Shari'ah require banks and financial institutions to be structured on an interest-free basis, this does not mean that such institutions are charitable concerns. As long as a person advancing money expects to share in the profits earned (or losses incurred) by the other party, a stipulated proportion of profit is legitimate. The philosophy is enshrined in the traditional Islamic concepts of musharakah and mudarabah, along with their specialized modern variants murabahah, ijarah, salam, and istisna'. This invaluable guide to Islamic finance clearly delineates the all-important distinctions between Islamic practices and conventional procedures based on interest. Justice Usmani of Pakistan, who chairs several Shari'ah supervisory boards for Islamic banks, clearly explains the various modes of financing used by Islamic banks and non-banking financial institutions, emphasizing the necessary requirements for their acceptability from the Shari'ah standpoint and the correct method for their application. He deals masterfully with practical problems as they arise in the course of his presentation, and offers possible solutions in each instance.