Islamic Commercial Law: An Analysis of Futures and Options

by Prof. Mohammad Hashim Kamali

Overview

Islamic Commercial Law: An Analysis of Futures and Options focuses on options and futures as trading tools and explores their validity from an Islamic point of view. Futures and options are a completely new phenomenon which has no parallel in Islamic commercial law. After reviewing the existing rules of Islamic law of contract and verifying their relevance or otherwise to futures trading, the author, Professor M H Kamali, advances a new perspective on the issue of futures and options based on an interpretation of the Qur'an and the Sunnah and referring to the principle of maslaha (consideration of public interest) as enshrined in the Shari'ah. Islamic Commercial Law consists of three parts. Part One is devoted to the description of futures trading and the understanding of operational procedures of futures and futures markets; Part Two investigates the issue of permissibility of futures trading in Islamic law and the underlying questions of risk-taking and speculation, which are of central concern to the topic. Part Three is devoted to an analysis of options. This work will be of use to anyone working on Islamic law, comparative law or working in Islamic banking.

Product Details

ISBN-13:	9780946621804
Publisher:	Islamic Texts Society
Publication date:	01/01/1990
Pages:	262
Product dimensions:	5.90(w) x 8.90(h) x 0.60(d)

About the Author

Dr Mohammad Hashim Kamali is Professor of Law at the International Islamic University Malaysia where he has been teaching Islamic law and jurisprudence since 1985. Among his other works published by The Islamic Texts Society are: Principles of Islamic Jurisprudence, Freedom of Expression in Islam, The Dignity of Man: An Islamic Perspective, and Freedom, Equality and Justice in Islam.

Read an Excerpt

'Sell not what is not with you' means not to sell what you do not own (ya'ni ma laysa fi milkik) at the time of sale. One of the basic requirements of sale, as al-Kasani has stated, is that the seller owns the object of sale when he sells it, failing which the sale is not concluded, even if the seller acquires ownership afterwards. The only exception, in this context, is the forward sale of salam, where ownership is not a prerequisite. This is confirmed, al-Kasani adds, by the text of the hadith in which Hakim ibn Hizam reported that he would sell what he did not have, which means that which he did not own. He would take the price of the object from the prospective buyer, buy the goods in the market and then deliver them but, when the Prophet learned of this, he discouraged it. When Hakim ibn Hizam sold the goods to his customers, he attempted to transfer the ownership of those goods at the time when he received the price, which was unfeasible, since he could not transfer the ownership of what he himself was not the owner of. Al-San'ani has concurred with this interpretation and stated that 'sell not what is not with you' implies that it is not permissible to sell something before owning it. Ibn al-Humam and Ibn Qudamah have similarly concluded that the sale of something which the seller does not own is not permissible, even if he buys and delivers it afterwards.
   The Hanafis have elaborated, however, that the seller’s ownership of the object of sale is not a condition of the validity (shart al-sihhah), but of the effectiveness (nifadh) of the sale. Thus they validate the bona fide sale by an unauthorised person (al-fuduli) who does not own the object but nevertheless sells it (for a good reason), because in this case the sale is valid but not effective, and it becomes effective upon obtaining the consent of the owner.

Table of Contents

PART ONE–FUTURES TRADING IN THE MARKET-PLACE
I. The Futures Contract
II. Uses of Futures
III. Futures Contracts and Conventional Contracts
IV. The Futures Market
V. Risk Reduction Strategies
VI. The Futures Markets of Alexandria and Kuala Lumpur

PART TWO–FUTURES TRADING AND CONVENTIONAL SALES:
A DISCOURSE IN FIQH
VII. The Shari'ah Perspective on Commercial Transactions
VIII. Uncertainty and Risk-Taking
IX. The Subject-Matter of Sale
X. 'Sell Not What is Not With You'
XI. Sale Prior to Taking Possession
XII. Debt Clearance Sale
XIII. Deferred Sale
XIV. Speculation or Gambling
XV. A Summary of Modern Opinion

PART THREE–OPTIONS
XVI. A Market Analysis of Options
XVII. Options from the Islamic Legal Perspective
Glossary
Bibliography
Index

Editorial Reviews

'A model of Islamic analysis that I would commend to everyone.'

Mohammed Amin