Forex Trading In Islamic Finance

Since receiving as well as paying of interest is Haram in Islam, Muslims therefore require a special kind of forex trading account. Conventional forex accounts charge (or pay) interest to the account holder, determined by rollover positions held over the weekend – on a currency pair that has a positive/negative interest rate differential between the currencies. Islamic Forex Accounts negates the interest costs receivable (or payable), and in fact can still function as effectively as any other conventional forex accounts. It is important for a Muslim trader to partner with the right broker in order to make your investments as shariah compliant as possible. Below, we discuss some of the issues surrounding forex trading within the Islamic Finance domain:

The Trading of Currency with Currency

Fursa FX recognizes that only spot forex trading is considered halal as the transaction is done on a spot basis, meaning both price and delivery of the asset are settled at the same moment in time. Currently, we refrain from trading in currency options, swaps, futures, forwards and other derivative contracts as the conditions for which trading of these instruments are permissible depends on a case to case basis (for example, Islamic Scholars and Experts have claimed that swaps are not allowed in the manner they are practiced in the commodity exchange, defined under the AAOIFI Syariah Standard, hlm 358). However, buying and selling of currencies is permissible and is termed Bai Sarf in Islamic banking, and Muslims are allowed to exchange Silver with Gold, buy Gold with US dollars and buy US dollars by selling Euro. The mechanics of Bai Sarf is halal but it has to be done on the spot. We do our best to ensure that all the transactions that we provide or conduct are according to the principles of Halal, or Islamic permissibility.
Leveraged Investments

Current Islamic banking & finance practices do not completely rule out the use of leverage in investments. If we consider the example of Islamic REITs (Real Estate Investment Trusts) in Malaysia, these instruments operate at a maximum leverage of 33 %. Debt ratio below or equal to this level is deemed acceptable by governing authorities in Malaysia. (Muhammad Ayub, 2007 and Jawad Ali, 2007). In addition, Fursa FX does not invest in anywhere that has high excessive leverage of 1:500, as this would promote excessive speculation and incur unnecessary risk for the investor. Our manual trading accounts are thus limited to a 1:100 leverage configuration.

It is worth to note that, at the end of the day, traders should take personal responsibility and not to over-leverage and be exposed to unnecessary risk.

Haram vs Halal

Religion is a personal relationship between self and God and each is responsible for his own choices and decisions. Islamic finance is always evolving and that there are risks and dangers of being trapped in the Im right and youre wrong mentality. Even among the various recognized Shariaah scholars, their opinions may differ in many aspects of Islamic finance, including the topic of forex trading. The beauty of Islam is that it has many different points of view and dynamism, so that we can learn from each other for everyones benefit. Diversity is our strength and that Islam is meant to be suitable for everyone in this world. The most important thing is to respect others beliefs and not to miss out on the bigger purpose and objective of the laws to benefit the community and provide an ethical and fair trade for all. Fursa FX does not claim to be the ultimate authority on the permissibility on Islamic Forex trading, but we strive to provide the best Shariah-compliant trading platform possible and we are always on the lookout to improve and keep up to date with the latest developments.

Meaning Of Finance- Free Useful Hints For Meaning Of Finance

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Expand Your Aquaculture And Mariculture Projects With A Fisheries Finance Program

The FFP or the Fisheries Finance Program is a loan program funded by the government. The Congress has authorized the Fisheries Finance Program to provide long-term goals that are particularly meant for promotion of aquaculture, mariculture, commercial fisheries industries and other eligible projects. Eligible projects include aquaculture and mariculture facilities as well as fisheries shore side facilities. The FFP funds up to 80% of the depreciate cost of the cost of the project. The applicant must necessarily contribute at least 20% of equity to the eligible project at hand.

The FFP is also authorized to finance and refinance prevailing debts for such eligible projects. Additionally, it can also provide finance to applicants to buy or even refinance an already existing fishing vessel. Besides this, it can also finance reconstruction of an existing fishing vessel, provided the reconstruction does not in any way promote the harvesting capacity. However, the FFP cannot fund construction of a new fishing vessel, although it can provide funds to refinance an existing debt on a newly built fishing vessel.

Eligibility Criteria of a Fisheries Finance Program

The FSA (Farm Service Agency) not only provides farm ownership loans to farmers and ranchers, but also funds loans to provide facilities and resources to produce fish in controlled surroundings. An applicant must compulsorily qualify the following, in order to secure a loan under this program:

He must be a US citizen.

Have a satisfactory credit record.

Have ample income to repay his debt.

The net worth and liquidity invested in the eligible project also must be good.

The project must have a collateral security like the personal assets of the borrower.

No recourse against the borrower\’s asset.

He must have a history of owning or managing a fisheries project for a minimum of 3 years.

In other words, an applicant must have the necessary expertise, skills, financial resources, knowledge required to efficiently run the project and repay the debt. These could include the likes of commercial fishermen, processors and distributors of fishery products. An applicant may need to show his financial statement, records and tax returns, in order to establish his financial position.

Terms and Conditions

A loan under the Fisheries Finance Program is granted for a long term. It is a fixed rate loan with interest rates of 2% over the US Treasury cost of funds. The maturity of the loan is up to 25 years. However, it should not surpass the economic useful life of the legible project. It aims to provide direct loan assistance, in order to cover up particular fisheries costs. These direct loans are meant to be used for the purpose of reconstruction or renovation of the fishing vessel, repair and construction of fisheries shore side facilities.

Although the risks associated with the program run high, the primary advantage is a low rate of interest and finance for a long duration of time, which is not generally otherwise available. This consequently makes for, lower annual debt service demand on variable and many a times, good flow of fisheries income also. For further information, you can get in touch with your regional financial services branch to discuss the proposal. If the project satisfies the requirements of the program, an application form has to be submitted along with a fee equal to half of 1% of the proposed amount of loan.

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