Exploring financial derivatives through Shariah principles: identifying parallels in Islamic jurisprudence and modern finance

Nasrun, Mohamad Ghazali and Md. Sawari, Mohd. Fuad and Ghalia, Bouhedda and Syed Jaafar Alhabshi, Syed Musa (2025) Exploring financial derivatives through Shariah principles: identifying parallels in Islamic jurisprudence and modern finance. Al-Qanatir International Journal of Islamic Studies, 34 (2). pp. 36-47. E-ISSN 2289-9944

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Abstract

This paper analyzes the key features of financial derivatives and explores their compatibility with Shariah principles by comparing them with contracts in Islamic jurisprudence, such as salam, istisnā’, and wa’d. The study highlights how these Islamic contracts align with the underlying functions of conventional derivatives, while avoiding prohibited elements such as gharar, ribā, and qimār/maysir. It employs a qualitative, document-based analysis, using a doctrinal approach to assess the feasibility of adapting conventional derivative instruments within a Shariah-compliant framework. The findings indicate that while Islamic alternatives fulfill similar economic objectives, structural limitations remain in addressing the complexities of modern derivatives markets. This research contributes to the ongoing discourse on Islamic finance by assessing the potential for ethical financial instruments to meet global market demands. However, it notes that further innovation is necessary to address the flexibility required in contemporary financial transactions

Item Type:	Article (Journal)
Uncontrolled Keywords:	Derivative, Risk Management, Salam, Istisnā’, Wa’d
Subjects:	H Social Sciences > HG Finance > HG3368 Islamic Banking and Finance
Kulliyyahs/Centres/Divisions/Institutes (Can select more than one option. Press CONTROL button):	Kulliyyah of Islamic Revealed Knowledge and Human Sciences > Department of Fiqh and Usul al-Fiqh Institute of Islamic Banking & Finance (IIiBF)
Depositing User:	Assoc. Pro Bouhedda Ghalia
Date Deposited:	14 Nov 2025 12:16
Last Modified:	14 Nov 2025 12:16
URI:	http://irep.iium.edu.my/id/eprint/124364

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