Commodity Derivatives: Shariah Alternatives in Risk Management?

Nadhirah Nordin, Normadiah Daud, Mahadi Mohammad, Hashim Jusoh, Mohd Shukri Jusoh and Faizol Ismail

International Journal of Academic Research in Business and Social Sciences, 2017, vol. 7, issue 4, 232-246

Abstract: This study aims to examine the application of Shariah principles in the commodity derivative as an alternative to the conventional derivative contracts in risk management. The majority of Shariah scholars consider derivatives contracts are non-Shariah compliant because of selling something that does not exist, the deferment in the counter values, uncertainty, gambling, speculation and sale of one debt for another.This study uses a thematic analysis approach to explain the data collected through secondary sources and interviews with few individuals involved in the derivatives market. This study reveals that the application of wa‘d, hamish jiddiyyah, bay‘ al-murabahah/musawamah are the most relevant and suitable principles to be adopted due to its flexibility and easy application in forward, futures, options and swap contracts to eliminates the Shariah issue in the contract.

Keywords: Derivatives; commodity; risk management; wa‘d; hamish jiddiyyah; bay‘almurabahah/musawamah (search for similar items in EconPapers)
Date: 2017
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