Commodity futures: An Islamic legal analysis

Abstract

Abstract Commentators who have disputed the permissibility of futures in Islamic law have highlighted the following five points in their critique: (1) futures proceed over goods that are nonexistent at the time of contract; a futures sale is therefore only a paper transaction and not a genuine sale; (2) futures consist of sales in which the seller does not own the item he sells, (3) futures fall short of the requirement of qabd, or taking possession of the item prior to resale; (4) deferment of both sides of the bargain to a future date turns futures into the sale of one debt for another; and (5) futures involve excessive speculation that verges on gambling. This article presents nine sections, beginning with a statement of issues, followed by a description of the futures contract, and a literature review in the next two sections. This is followed by an analysis of the hadith “sell not what is not with you,” a similar analysis of the issue of qabd, a section on the sale of debts, another on risk taking and speculation, and a conclusion. © 2007 Wiley Periodicals, Inc.

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