TY  - JOUR
T1  - Islamic Forward Exchange Contracts as a Hedging Mechanism: An Analysis of wa<SUP>c</SUP>d Principle
AU - Alisa Ahmad, Azlin AU - , Shofian Ahmad AU - , Hailani Muji Tahir AU - , Shahidah Shahimi AU - , Saadiah Mohamad AU - , Mat Moor Mat Zain 
JO  - International Business Management
VL  - 6
IS  - 1
SP  - 47
EP  - 54
PY  - 2012
DA  - 2001/08/19
SN  - 1993-5250
DO  - ibm.2012.47.54
UR  - https://makhillpublications.co/view-article.php?doi=ibm.2012.47.54
KW  - wacd
KW  -wacdan
KW  -hedging
KW  -FX forward contract
KW  -al-sarf
KW  -principle
KW  -ruling
AB  - Although, FX forward contract is required for hedging purposes, the issue arises of whether FX forward fulfill al-sarf ruling. The question is how to ensure that this contract is free from prohibited elements in Islam as it is needed in the context of the global economy? As FX forward involves the exchange of currency in the future, it violates the sarf requirement of spot exchange thus, incurring riba al-nasi&#146;ah. This study therefore, seeks to examine Islamic forward exchange contracts that are structured by applying wa<SUP>c</SUP>d binding only to one party. This study has found that in order to make forward exchange contracts meet the condition of spot exchange of currencies, the majority of banks have adopted the principles wa<SUP>c</SUP>d mulzim at an early stage and the actual contract takes place or is executed on the delivery date. However, the practice of wa<SUP>c</SUP>d mulzim has its drawbacks as it only protects the right of banks while customers who are commonly the promissor in the contract are exposed to the risk of default. To overcome this problem, the principle of wa<SUP>c</SUP>dan should be explored to study its suitability and potentiality as a basis in structuring Islamic hedging products.
ER  -