Contracting with Gharar (Uncertainty) in forward contract: What does Islam says?

Nadhirah, Nordin and Normadiah, Daud and Sumayyah, Abdul Aziz (2014) Contracting with Gharar (Uncertainty) in forward contract: What does Islam says? Asian Social Science, 10 (15). pp. 37-47. ISSN 19112025 [P]

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Abstract

The forward contract is one of derivative instruments. The value of this contract is derived from the values of underlying assets such as commodities, equities, and currencies. Muslim scholars differ on the permissibility of forward contracts. Among the key issues raised in the forward contract is the issue of gharar. In general, gharar means an excessive uncertainty and risk. However, not all contracts containing the element of gharar void the contract. This article attempts to formulate a parameter for gharar that voids the contract based on the opinions of classical and current scholars. It also analyses the elements of gharar that exist in forward contracts of crude palm oil in Malaysia. This study uses a thematic analysis approach to explain the data collected through secondary sources and interviews with few individuals involved in this industry. Based on the analysis of forward contracts on the parameter of gharar, the finding of this research indicates that the issue of gharar exists in forward contracts does not void the contracts.

Item Type: Article
Uncontrolled Keywords: Parameter, gharar, derivatives, forward, crude palm oil
Subjects: B Philosophy. Psychology. Religion > BP Islam. Bahaism. Theosophy, etc
H Social Sciences > HB Economic Theory
Divisions: Faculty of Islamic Contemporary Studies
Depositing User: Syahmi Manaf
Date Deposited: 13 Sep 2022 04:40
Last Modified: 13 Sep 2022 04:40
URI: http://eprints.unisza.edu.my/id/eprint/5442

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