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CONTENT
DEFINITION
EVIDENCES
PILLARS
DEFINITION EVIDENCES PILLARS OF BAY AL-SARF CONDITIONS OF BAY AL-SARF OPINION OF SCHOLARS MODERN APPLICATION
DEFINITION
DEFINITION
Literal:
sale and purchase of money for money including gold and silver
EVIDENCES
Technical:
Sale of money for money such as the sale of gold-forgold or silver-for-silver.
PILLARS
Maliki scholars considers money exchange only if the sale of gold-for-gold or silver-for-silver but gold for silver does not belong to such transactions. Bay al-sarf is a sale of something that is price in its own nature for something which is also a price. It is regarded, as the sale of price for price and each price is a consideration for the other.
EVIDENCE
DEFINITION
Hadith:
Ubadah ibn Samit narrated that Rasulullah (s.a.w) said that: Gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates, and salt for salt, should be exchange like for like, equal for equal and hand-to-hand. If the types of exchanged commodities are different, then sell them as you wish, if they are exchanged on the basis of hand-to-hand transaction.
Narrated by Muslim
EVIDENCES
PILLARS
Ijma
All Islamic scholars unanimously agree on the permissibility of bay al-sarf as it has been practice by the people since the time of Prophet (s.a.w) until now without any objections.
EVIDENCES
PILLARS
EVIDENCES
PILLARS
EVIDENCES
PILLARS
Non deferment
Delivery of both counter values should not be deferred to a certain point of time in the future. If one of the parties stipulated a deferment in the receipt of one of the currencies, the contract is rendered null and void as it has been prescribed that exchanges of goods eligible for riba should be on a hand-to-hand basis.
Spot Basis
Practice based on urf (customs) An exchange between items which are the same such as currencies with currencies. By using analogy on the hadith, majority of fuqaha agree that all forms of currency should obey the rules established for gold and silver exchanges A consensus among Islamic jurists on the view that currencies of different countries can be exchanged on a spot basis at a rate different from unity, since currencies of different countries are distinct entities with different values or intrinsic worth, and purchasing power.
EVIDENCES
PILLARS
PILLARS
In general, majority of scholars on the view that currency exchange on a forward basis is not permissible, that is, when the rights and obligations of both parties relate to a future date. However, recently the IFI practice bay al-sarf based on waad (promise) or murabahah commodity
1. Waad based using unilateral promise
The customer promise to purchase/ sell foreign currency with a bank. A who is looking for a hedge will provide an undertaking to buy a currency from B in the future. A is bound to fulfill its promise to B however B is not under any obligation to act on the transaction when an offer of purchase is submitted. Essential elements of the promise include the purchase price of the currency and the delivery date. The promise must not be conditional on any event.
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APPLICATION
DEFINITION
EVIDENCES
PILLARS
Bay al-sarf is applicable to modern spot forex which is based on the spot rate which the deal settlement is expected to be completed shortly after the contract has been executed. Majority of scholars opine that different currencies of different countries consist of different intrinsic values and purchasing power. There are several IFI offer products construct using bay al-sarf such as:
Gold investment savings account Shariah compliant forex investment product
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END OF CHAPTER
DEFINITION
EVIDENCES
PILLARS
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