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Is online forex currency exchange allowed in Islam?

Answered according to Hanafi Fiqh by Fatwa-TT.com
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Question:

As-salaamu ‘alaykum.
How are you? I hope this message reaches you in the best form.
Is forex currency exchange allowed in Islam or not? If it is allowed or if not please explain in detail why and please provide proofs from the ibaarah of the Fuqaha. If easy also from Quran and Hadith would be appreciated.
An answer will be waiting. JazakAllah. May Allah reward you abundantly.

Answer:

In the Name of Allah, the Most Gracious, the Most Merciful.

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.

 

Hereunder is the answer to a previous query on Forex exchange.

In basic terms, Forex trading is the buying and selling of currencies via the internet world-wide. In the Forex market all trades result in the simultaneous buying of one currency and the selling of another. The objective when trading currencies is to exchange one currency for another in the expectation that the market price will change so that the currency you bought has increased its value relative to the one you sold.www.jaamia.net

 

 

 

[1] METHOD OF TRADING

When a trader wishes to enter the Forex markets he must firstly open an account to which the Forex Company (or the Holding Company) that handles Forex trading will have direct access. This account is held with one of the major banks chosen by the Forex trading company. Minimum balance for this account is (or was) USD2,500. From this account the Forex Company will deduct losses sustained by the trader, fees when necessary, and it will also credit this account with profits earned by the trader.

There is another reason why this account has to be opened. In the Forex market a person trades on margin, and they refer to this account as a margin account. The amount of cash in that account serves as a leverage to purchase. The leverage is 100:1, meaning that the trader uses one percent of his cash to buy one lot of currency ($100,000). So if he has 2,000 dollars in his account, he may purchase up to 200,000 dollars worth of currency. In other words, the cash in his account serves as collateral for the purchase of currency. The trader is required to put down one percent of the purchase price as collateral.

The trader does business via the internet, telephone, and mobile phones. A typical transaction is for a trader to place an order via one of the above three methods for one lot of currency, such lot being normally one hundred thousand of the base currency, i.e. US dollars. At the same time that he buys USD, he sells another currency. Currencies are bought and sold in pairs. For example, he would buy USD100,000 and simultaneously sell Yen to the value of 100,000 US dollars. It is normal procedure that after placing an order, that amount of dollars is credited to the trader’s account after two days and is clearly reflected on his account statement which he can view online. When the trader buys 100,000 dollars, it is clear that he does not have any funds in his account to pay for that lot of US Dollars, since his account just holds the minimum deposit mentioned above. In order to have funds in his account to pay for this order he has to re-sell the dollars he bought in exchange for Japanese Yen. The trader has to sell that lot by the end of the day that the amount was credited to him. When he does this, he will have the equivalent of USD100,000 in Japanese Yen, which he will then use to pay for the Dollars he bought earlier in the day. Normally the trader exits his position at the end of the day, i.e. he sells the lot of dollars that he had purchased at the start of the day’s trading. In so doing he ensures that he has money to pay for the dollars bought.

One buys a hundred thousand dollars, and simultaneously sells Jap Yen. But there are no Yen to pay for the dollars, and vice versa. The dollars were delivered to him (i.e. into his account, for it is reflected there by the end of that day.) But he has not paid for dollars, thus making this a debt on the shoulders of the trader. He owes the seller (who is not known to him) one hundred thousand dollars. So where does he get the funds to pay for it? This is done by him selling those same dollars to another buyer in return for Japanese Yen (since this was the pair the trader had chosen at the start).

 

[2] الدر المختار وحاشية ابن عابدين (رد المحتار) (5/ 147)

(لَا) يَصِحُّ اتِّفَاقًا كَكِتَابَةٍ وَإِجَارَةٍ وَ (بَيْعِ مَنْقُولٍ) قَبْلَ قَبْضِهِ وَلَوْ مِنْ بَائِعِهِ كَمَا سَيَجِيءُ

الدر المختار وحاشية ابن عابدين (رد المحتار) (5/ 148)

بِخِلَافِ التَّصَرُّفِ الَّذِي يَتِمُّ قَبْلَ الْقَبْضِ كَالْبَيْعِ مَثَلًا، فَإِنَّهُ لَا يَجُوزُ؛ لِأَنَّهُ إذَا قَبَضَهُ الْمُشْتَرِي الثَّانِي لَا يَكُونُ قَابِضًا عَنْ الْأَوَّلِ لِعَدَمِ تَوَقُّف الْبَيْعِ عَلَى الْقَبْضِ فَيَلْزَمُ مِنْهُ تَمْلِيكُ الْمَبِيعِ قَبْلَ قَبْضِهِ، وَهُوَ لَا يَصِحُّ

 

[3] الدر المختار وحاشية ابن عابدين (رد المحتار) (4/ 555)

فَلَا ضَرُورَةَ إلَى تَجْوِيزِ الْعَقْدِ فِي الْمَعْدُومِ مُصَادِمًا لِلنَّصِّ، وَهُوَ مَا رُوِيَ «أَنَّهُ – عَلَيْهِ الصَّلَاةُ وَالسَّلَامُ – نَهَى عَنْ بَيْعِ مَا لَيْسَ عِنْدَ الْإِنْسَانِ وَرَخَّصَ فِي السَّلَمِ»

 

[4] However, while we might be inclined to agree that wikaalat is found here to a certain extent, the profit earned on such a deal cannot be lawful; in fact such profit will be tantamount to ribaa, for it is an excess that is earned without any tangible exchange. The trader has not laid out any cash or commodity on the basis of which he derives profit. As for the margin account which he has opened, the money in that account is not expended or employed to generate profit. The account serves only to provide token collateral, to allow deduction of fees and to receive profits earned on the Forex deals. None of that money is being invested in any income-deriving venture.

 

 

[5] المحيط البرهاني في الفقه النعماني (6/ 322)

وإذا باع فلساً بفلسين حالة الرواج، فهذه المسألة على ثلاثة أوجه: (46أ3)

أحدها: أن يبيع فلساً بغير عينه بفلسين بغير أعيانهما، وفي هذا الوجه البيع فاسد لوجهين:

أحدهما: أن هذا بيع الدين بالدين.

والثاني: أن الجنس بانفراده محرِّم للنساء عندنا على ما يأتي بيانه في موضعه إن شاء الله تعالى.

المبسوط للسرخسي (12/ 127)

فَأَمَّا تَعْجِيلُ رَأْسِ الْمَالِ فَنَقُولُ إذَا كَانَ رَأْسُ الْمَالِ دَرَاهِمَ أَوْ دَنَانِيرَ يَكُونُ التَّعْجِيلُ فِيهِ شَرْطًا قِيَاسًا وَاسْتِحْسَانًا؛ لِأَنَّ الدَّرَاهِمَ وَالدَّنَانِيرَ لَا يَتَعَيَّنَانِ فِي الْعُقُودِ فَيَكُونُ هَذَا بَيْعَ الدَّيْنِ بِالدَّيْنِ وَذَلِكَ لَا يَجُوزُ لِنَهْيِ رَسُولِ اللَّهِ – صَلَّى اللَّهُ عَلَيْهِ وَسَلَّمَ – «عَنْ بَيْعِ الْكَالِئِ بِالْكَالِئِ» يَعْنِي: النَّسِيئَةَ بِالنَّسِيئَةِ

 

بدائع الصنائع في ترتيب الشرائع (5/ 202)

(وَمِنْهَا) أَنْ يَكُونَ مَقْبُوضًا فِي مَجْلِسِ السَّلَمِ لِأَنَّ الْمُسْلَمَ فِيهِ دَيْنٌ، وَالِافْتِرَاقُ لَا عَنْ قَبْضِ رَأْسِ الْمَالِ يَكُونُ افْتِرَاقًا عَنْ دَيْنٍ بِدَيْنٍ وَإِنَّهُ مَنْهِيٌّ عَنْهُ لِمَا رُوِيَ أَنْ رَسُولَ اللَّهِ – صَلَّى اللَّهُ عَلَيْهِ وَسَلَّمَ – «نَهَى عَنْ بَيْعِ الْكَالِئِ بِالْكَالِئِ» أَيْ النَّسِيئَةِ بِالنَّسِيئَةِ

 

(Contemporary Fatawa, P. 141, Idara Islamiat)

[6] If payment from one side is deferred, then the transaction will only be valid with the current market rate (at the time of agreement). In this case any excess amount or percentage added will be considered interest.

[7] http://www.albalagh.net/qa/Forex_currency_trading.shtml

http://askmufti.co.za/index.php?option=com_content&view=article&id=414%3Aforex-trading-&catid=39%3Ariba-and-usury&Itemid=127

This answer was collected from Fatwa-tt.com, which is operated by the Darul Iftaa of Jaamia Madinatul Uloom (Trinidad and Tobago) under the advice and guidance of Mufti Ebrahim Desai (Daamat Barakaatuhum) of South Africa.

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