CFDs: A Modern Face
for Professional Gambling
Introduction to Contracts for Difference (CFDs) Contracts for Difference (CFDs) are derivative financial instruments that allow traders to speculate on the price movements of various assets, such as stocks, currencies, commodities, and indices, without actually owning them. Introduced in the 1990s, CFDs have become a significant part of global trading, particularly in markets like the […]
Shadows of Strategy: A Shariah Analysis of Crypto Trading Strategies
Introduction to Crypto-assets Crypto-assets are digital representations of value that leverage cryptographic encryption techniques to ensure security and decentralization. They operate on peer-to-peer networks and public ledgers known as blockchains. Crypto-assets serve various functions, including asset representation, utility access, and governance rights. Types of Crypto-assets and their Shariah considerations Crypto-assets can be categorized into […]
Piecing Together the Sharia Compliance of BNPL
Introduction Buy Now, Pay Later (BNPL) schemes provide short-term financing for retail purchases, often without additional interest charges. However, this convenience comes with credit risk for financial institutions. This risk stems from several factors: Operational Costs: Managing BNPL transactions incurs operational expenses. Customer Defaults: Delinquency, insolvency, or bankruptcy can lead to customers failing to repay. Economic Downturns: Economic hardship can […]
Trade Flows: Understanding the Sharia Dynamics of Trade Finance
Overview of Trade Finance Trade finance plays a crucial role in facilitating international trade by mitigating risks and providing funding solutions for importers and exporters. This document explores selected conventional trade finance products, their Shariah compliance, and alternative Islamic trade finance instruments. Conventional Trade Finance Products Conventional trade finance products include letters of credit (LCs), […]
Capital Goods Finance: Unlocking Intelligent Value with Ijara
Introduction to Capital Goods Finance Capital Goods Financing (CGF) is widely considered as an essential financial tool used by businesses for acquiring capital goods necessary for growth and expansion. It elaborates on different forms of CGF, including Ijara and Ijara-wa-iqtina, which are compliant with Islamic Shariah principles. What is Capital Goods Finance? CGF is a […]
Hedging Profit Rate Risk:
Navigating the Rough Seas With
Sharia Compliant Strategies
Balancing the Unique Risks The foundation of Islamic banking lies in participation and not in simple financial intermediation. The range of risks may be considered greater in Islamic banking due to their participation as a partner, investor, buyer and seller, as compared to the status of lender in conventional banking. While they share major risks […]
Hedging Currency Risk: Restoring Balance with Sharia Values
An overview of FX risks Currencies fluctuate based on various factors including (but not limited to) monetary policy, inflation, political environment and trade balances. Companies conducting business globally face foreign exchange (FX) risk in three forms: a) transcation exposure from individual deals in foreign currencies; b) translation exposure when converting foreign subsidiaries’ financial statements into […]
Bond Cum Warrants: Can it shift up to the high gear of Sharia compliance?
Conventional Bond These bonds are fundamentally loan contracts; it does not give the investor a share of ownership in the asset project or business. A bond with option rights is called a warrant bond. For a limited time, it confers the right to buy equity securities, such as shares, of the bond issuer at a predetermined price (exercise price). Once […]
Crypto Assets: Zakat of the Digital World
Zakat is the third of five core pillars of Islam and by Quranic ranking, is next after Prayer in importance. Zakat is due on one’s personal assets but is never payable on one’s residence, vehicle, clothing, electronics so on and so forth. Zakat has been made obligatory on specific assets: gold, silver, cash, business stock, […]
Inflation Linked Bonds: Heightening Terrains of Sharia Compliance
What is Inflation linked bonds? An index or inflation linked bond is a bond which has its coupon payments adjusted for inflation by linking the payments to some inflation indicator, such as the Consumer Price Index (CPI) or the Retail Price Index (RPI). These interest-bearing investments typically pay the investors a yield plus accrued inflation, […]
Syndicated Financing: A Granular Look at Sharia Compliance
What is Conventional Syndicated Financing? These are debts issued by a group of lenders to a single borrower. It is the practice of providing a loan by a group of lenders – known as the syndicate – to fund an individual borrower. Under a syndicated loan, lenders are typically big banks, though financial institutions such […]
Mastering The Logic of Sharia Principles in Futures and Forwards
A Derivative is a financial instrument whose value is derived from an underlying asset or group of assets. They are a contract between two or more parties. The value of this contract depends on changes in the value of the asset that the derivative’s value is derived from. Derivatives enable parties to trade specific financial […]
