Resolution No.(106) by the Board of Iftaa`, Research and Islamic Studies:
“ Ruling on Foreign Exchange Offices “
Date: 26/4/1472 AH, 24/5/2006 AD
Question: What is the ruling on foreign exchange offices that deal in foreign exchange speculation, American Stock Exchange (AMEX), gold, silver and petrol.
The way such offices operate can be clarified as follows: The client makes a deposit e.g.(5000) dollars and the office offers him credit facilities up to (50.000), but when the loss reaches (5000), the client loses his money and the office closes his account and the opposite is true in case of profit?
Answer:
The Board is of the view that such transaction is forbidden in Islamic Law {Sharia} because the money which the office lends to the client is conditioned by trading in foreign exchange with none other than it. In this case, it is a tied loan: no credit facilities to the client unless he adheres to dealing with the office alone. Moreover, the office`s profit is assured while the client`s isn`t, and this is tantamount to gambling.
This is in addition to the fact that this transaction is conducted without mutual reception in the place where the transaction was concluded. Also, the office sells and buys that which isn`t in its possession and this has been disapproved and forbidden by the Prophet (PBUH). And Allah Knows Best.
Chairman of the Iftaa` Board
Chief Justice/ Dr. Ahmad Hilayel
Dr. Abdusalam Al-Abbadi Dr. Yousef Ghaidahn
Dr. Abdolmajeed As-Salaheen Sheikh Sai`ed Hijjawi
Dr. Wasif Al-Bakri Sheikh Abdulkareem Khasawneh
Sheikh Na`iem Mujjahid
