Thursday, February 16, 2012

It's Now Haram For MuslimsTo Trade in Forex

The National Fatwa Council yesterday made a ruling that foreign exchange (forex) is haram for Muslims.

National news agency (Bernama) quoted council chairman Dr Abdul Shukor Husin as having said that forex trading is against Islamic law because involves currency speculation.

Also that it creates confusion among Muslims.

He said this to reporters after chairing the Council's 98th conference in Kota Baru.

He said Muslims should not engage in forex trading as there are many doubts about it and it involves individuals using the internet, with uncertain outcomes.

But other forms of trading in foreign currencies, such as by money changers or between banks, are permissible, as they do not involve currency speculation or uncertain outcomes..

Dr Abdul Shukor said the council also ruled that it is permissible for Muslims to invest or save in the Premium Saving Certificate scheme managed by Bank Simpanan Nasional (BSN).
The decision was reached after a briefing by the Bank Negara syariah panel on the scheme's implementation.

"At first we had doubts about the scheme's implementation, but we were satisfied after the trading system was changed into the Islamic concept of Mudharabah," he said.

Read the rest of the article here.

To be honest, I have no knowledge of how forex works, so I won't know whether or not the council's decision is right, if you know what I mean.

A fatwa has been issued, be that as it may. So, how will this impact forex trading? Will Muslims heed the fatwa - although I'm not sure of the number of Muslims who trade in forex ? I guess there must be sizeable number because the council had to look into it.
And, will there be any action against Muslims who continue to trade in forex, although a fatwa is not legally binding?


bodoh.pandai said...

Also that it creates confusion among Muslims.!

Are they saying that the Muslims can easily be confused?

Anonymous said...

Dear Nuraina,

And so is zina,judi,arak,
menilik,dedah aurat,porno,
makan babi/makan binatang sembilihan yg tidak sebut bismillah,pergaulan bebas lelaki/perempuan yg bukan mahram/muhrim,sihir,riba etc....but majority of us

will only tobat bila kekuatan dah hilang,penyakit dah hinggap kat badan. Muka dah berkedut,rambut dah penuh uban,badan dah tidak menarik barulah senario neraka tampak jelas di-minda kita but for now ajal/seksaan/seksa kubur/neraka/ macam cerita kartun kan?

The best time to tobat I think is when you have the capacity and strenghth to maksiat but you stop forever doing it.

Anonymous said...

ls there a fatwa against using loans for raising cattle to purchase property and cars?

is there a fatwa against giving Rm 50 ringgit to a cop when caught on the handphone while driving?

why don't we hear about these?

bruno said...

Nuraina,in that case what about professionals,traders and fund managers working in financial,investment and brokerage firms,speculating in forex.Do they have to change careers and go looking for other jobs outside their profession.

As far as I know up till around fifteen years ago,forex trading by individual traders was mostly done by trading in futures.Then later this trading of forex in the cash market was introduced to individual traders and is a cash cow to the financial industry.

Before in futures you have to trade in lots of 100,000-125,000wheareas in forex cash markets you can trade in lots of 10,000 up.So in futures you need margins of few thousand to trade one lot and in the forex cash market you only need a few hundreds to trade one mini lot.

Since the forex cash markets were introduced and with the trading done by the internet,the trading volume of forex has soared to new heights.

Before in futures people with higher income only speculate in forex as sometimes the moves can be incredible and the margins and losses are much higher.Now with the mini lots being traded in the cash market and lower margins any person,even with a few hundred dollars can trade forex.And of course many inexperienced traders have been cooked.

Now in the United States the authorities are trying to clamp down on speculative trading by upping the margins and stricter rules.

bruno said...

Nuraina,'but other money changers or between banks...
are permissible as they do not involve currency speculation or uncertain outcome,says the National Fatwa Council.This statement I beg to differ.

Yes,it has been well known about currency traders the likes of George Soros to be blamed for the attack on the bank of England or the Asian financial crisis.But these big traders only go in for the kill when the trend has already been established.That is local money has been steadily streaming its way out of the country to start a trend.Then these traders with instints like hawks sprang into action.

Other than that hedge and commodity funds trade in opposing directions against each another.It is the commercials that are the strong hands in these markets.Manufacturers and banks and sometimes known as smart money.

And banks are rumoured to be the biggest speculators in the forex markets.At one time Bank Negara was one of the biggest speculator in forex.Even traders as far as the US were to wait for BN to enter the market and play follow the leader.But BN got cooked because of the politicians advising them,the professionals.

Some good bank forex trading managers and trading desk supervisors are rumoured to be better paid than bank managers and some hedge fund managers,because profits of large banks come from trading forex.

But nobody said anything about them is because it is done on the quiet.It is only an issue when things go awry.Like having losses amounting to hundreds of millions or billions.Then out comes the rogue trader scrapegoat excuse.

How can a rogue trader lose hundreds of millions or billions without the bank management knowing a thing,until the bank is on the bankruptcy line.

bruno said...

Remember that British trader based in Singapore who single handedly brought down his bank.Then about four or five years ago a trader at Societe Generale lost billions,and brought the bank to it's knees.If not for the French government it would have followed the British bank too.

Then later Lehman Brothers and the subprime mess.If not for Uncle Sam not one major US bank will be left standing.

Anonymous said...

Salam, Nuraina and friends,

1. You wrote: "To be honest, I have no knowledge of how forex works, so I won't know whether or not the council's decision is right, if you know what I mean..."

2. As Muslims, we MUST respect the decision of FATWA COUNCIL, be it in Malaysia or elsewhere.

3.You and I are in no position to question a FATWA by a state Fatwa Council or national Fatwa Council.

4. Your knowledge, my knowledge, of Islam is limited. Very limited. Let us reflect on the content of Ayatul Kursi in Surah Al Baqarah.

5. Just because we do not understand certain issues, that does not mean we can say "I know better", or "I won't follow" or "I am not sure it is right".

6.Even if we do understand the issue, we do not have in-depth knowledge of the issue from the perspective of Islam. Fatwa council members undoubtedly comprise highly learned ulama who know Fiqh, uniquely combined with FAITH (Iman) (as opposed to statements or books written by Orientalists and secular non-Muslim academicians who study Islam as a subject matter.

7. I can understand non-Muslims discussing the statements by FATWA councils; but it is most unbecoming and unacceptable for Muslims to do the same.

8. May we Muslims stand up and be united. InsyaAllah.

Dr Shinah

Anonymous said...

If forex is haram, then most of the banks' tradings are haram too. God clearly states (Holy Quran, Surah Al'Baqarah 2:275) that all tradings (buy/sell) is permissable as long as it does not involve interests (very straight-forward, nothing confusing about that). We all know banks activities involve interests one way or another or whatever names they want to call it, its still interests. There is no such thing as haram to individuals but permissable to banks. This is like saying prostitution is haram if it's solicited by individuals but its permissable if its managed by big organization.


Dr Shinah,

I'm no ulamak. I do know that our own ulamak are not infallible. I may not be an ulamak but i am not illiterate. I know also that fatwa s are not binding. I think it is okay for us to disagree with fatwa issued by the council as long as we do not insult the council.
Muslims will not be progressive if they do not read and learn about issue affecting them. Issues like fores, Valentine's day etc are not sacred issues that we cannot discuss.
Ulamaks time and again have proven that they can make mistakes.
Thank you for your comment.