BAI’ AL-SARF IN FOREIGN EXCHANGE: AN ANALYSIS OF MAQASID SHARIAH

Abstract

This study aims to analyse bai 'al-sarf in foreign exchange based on the maqasid alshariah. Money serves as a transactional medium accepted by the global community and legislation. The abilities held by money cause it to be regarded as one of the daruriyyah needs. For this reason, Muslim scholars permit the practice of buying and selling currency by using bai 'al-sarf contract. One of the most important requirement for the contract is that it must be conducted on spot. This situation creates restrictions on transactions that have to be conducted Volume: 3 Issue: 11 [June, 2018] pp. 22-35] Journal of Islamic, Social, Economics and Development eISSN: 0128-1755 Journal website: www.jised.com m23 in future or forward. This study analyse the above issues qualitatively by using secondary data comprised of written materials on bai 'al-sarf contracts in currency exchange and maqasid alshariah to identify the concept in bai' al'sarf contract and to analyse the practices of bai 'alsarf for foreign exchange according to maqasid al-shariah. It is found that in fulfilling the requirements of maslahah and rejecting the greater mafsadah in maqasid al-shariah, foreign exchange may use other contracts as a hedging mechanism while still adhering to the principles of sharia through sharia-compliant derivative instruments such as Islamic FX forward, Islamic FX option and Islamic FX swap by using other contracts and principles that meet the requirements of sharia.