Forex is an acronym for ‘ Foreign exchange ‘. Forex is an activity of buying and selling of currencies. This type of trading has become increasingly popular in recent years. Forex is an online exchange trading that promises to profit quickly, it also has a variety of images and forms and focuses on a form of foreign exchange trading by individual spot forex through electronic platforms.
State fatwas and international islamic fiqh academy have ruled that online foreign exchange trading is against islamic law and is therefore haram. Forex trading has been subject of debate within islamic finance due to its association with maisir.
forex may be considered as gambling or known as maisir. In islam, gambling is seen as speculation where the participants have almost no control over the result. Forex requires skills and research through market analysis and making trading plans, setting goals and reading forecasts. Trading requires making predictions about currency exchange rate fluctuations. Some traders may make decisions based only on "gut feelings" or projections rather than a solid analytical basis. This may have some similarities to gambling, where bets are made solely on chance or educated guesses.
These forex transactions also often involve speculative activities that are banned. In general, not all forms of speculation are prohibited in the context of Sharia. Prohibited speculation is speculation that involves the risk of having elements of gambling (qimar and maisir) banned.
In general, Islam recognizes the existence of speculation in the context of transactions and investments. This is evident through the formation of several methods of jurisprudence related to liability for loss such as “al-kharaj bi al-dhaman” and “al-ghunm bi al-ghurm”. Speculation is only prohibited if it involves excessive uncertainty and risk, and resembles gambling or zero-sum games.
In this context, Ibn Taymiyyah among scholars who clarify the fact of risk (mukhatarah) that reads:
"وأمَّا المُخَاطَرَةُ فَلَيْسَ فِي الأَدِلَّةِ الشَّرْعِيَّةِ مَا يُوجِبُ تَحْرِيْمَ كُلِّ مُخَاطَرَةٍ؛ بَلْ قَدْ عُلِمَ أنَّ اللهَ وَرَسُولَهُ لَمْ يُحَرِّمَا كُلَّ مُخَاطَرَةٍ، وَلَا كُلَّ مَا كَانَ مُتَرَدِّدًا بَيٍنَ أَنْ يَغْنُمَ أو يَغْرُمَ أو يَسْلَمَ... ولكن يَحْرُمُ مِنْ هذهِ الأَنْوَاعِ ما يَشْتَمِلُ عَلَى أَكْلِ المَالِ بِالبَاطِلِ، والمُوْجِبُ لِلتَّحْرِيْمِ عِنْدَ الشَّارِعِ أَنَّهُ أَكْلُ مَالٍ بِالبَاطِلِ، كَمَا يَحْرُمُ أَكْلُ المَالِ بِالبَاطِلِ وإِنْ لَمْ يَكُنْ مُخَاطَرَةٌ؛ لا أَنَّ مُجَرَّدَ المُخَاطَرَةِ مُحَرِّمٌ "[17]
It means: “there is no Islamic proposition that prohibits all forms of risk, in fact Allah and His Messenger did not prohibit all risks, and all activities that are doubtful whether there will be profit or loss or safe (do not obtain any profit or loss) ... on the other hand, the risks of being banned are those that contain the element of consuming property in a vanity way. It is because of the power of God that he has given you, that you may not be able to eat from the tree of life, but from the tree of life that you may not be able to eat from the tree of life. The risk simply does not become a ban”.
From Ibn Taymiyyah's explanation above, it is clear that the risk associated with vanity transactions is prohibited. Including in consuming property falsely here when the contract or contract used is invalid and perfect with the intention of making a profit. Among the characteristics of the contract of sale that is not valid to cause falsehood in FOREX transactions include the issues discussed above touching the aspect of usury, gharar buying and selling, imperfect ownership, buying and selling currencies that do not exist in essence and hukmi. In this regard, spot forex not only contains an element of deferral of both exchange rates (ta'jêl al-badalayn), but also has a gharar element from the point of view of price. This is contrary to the conditions of exchange of currencies discussed in the chapter of bay ' al-Iharf and the Prohibition of the messenger of Allah s.a.the story of bay ' Al-GHARR, as told by:
«نَهَى رَسُولُ اللهِ صَلَّى اللهُ عَلَيْهِ وَسَلَّمَ عَنْ بَيْعِ الْحَصَاةِ، وَعَنْ بَيْعِ الْغَرَرِ»[18]
He said: "the Prophet (s.A. W.).a.w. it is forbidden to buy and sell.”
Any Islamic financial transaction must be free from riba, no gharar involved, no gambling features and must be fair and just to the parties to the contract. In contrast, conventional Forex option is impermissible as it involves the element of leverage, gambling, trading of right and riba. All these elements are totally prohibitted in Islam. Therefore, altering and modifying conventional product is required in the current market in order to fulfil the need of hedging.
As Islamic banks and financial institutions are now highly aware of the need for a rigorous approach to risk management, thus hedging products such as Islamic Forex option based on principle of wa’d, al-‘urbun, commodity murabahah had been developed. The development of Islamic Forex option is merely to provide an innovative sharia-compliant risk management tool against currency risks. Although Islamic Forex option gives similar economic effect of Forex option conventional, the contract must strictly be used only for hedging when there is a clear underlying transaction. Nontheless, this study found that the existing shariah Islamic Forex option are still debatable and controversial. Therefore a definite need for shariah advisory bodies to revisit their resolution on the 10 approved Islamic Forex structures. This initiative will indeed give confidence in the islamic financial industry thus giving assurance that adequate and effective resolutions are produced.
