What is an Islamic forex account?
An Islamic Forex Account is an interest-free account that supports the rulings of Islamic Sharia. In a regular forex trading account, there are certain situations where interest charges may be charged, for example, with London Capital Group, a low 0.0027% overnight financing fee is charged for each open position at 22:00 each day. However, in a halal Islamic Forex account, no interest is charged for an overnight open position in the market like the other conventional trading accounts.
Why regular forex accounts are not Sharia compliant (halal)?
Muslims cannot just open a regular forex account which makes money from money, by charging interest, and making money from money is not permissible in Islam and referred to as Riba.
The interest that is termed as Riba in Islam refers to the amount that is charged above the originally decided amount or any payment that is made without any benefit from the other side. Riba – interest – is not supported in Islam but in the regular forex accounts, there is certain interests and commission charged on a trade.
Secondly, there is another prohibited activity when it comes to Islam which is referred to as Gharar or simply put gambling. Gharar refers to the volatile conditions in the forex market which make it difficult to predict without certainty the what is likely to happen in the future and is akin to gambling. When in any deal, terms and procedures that are not defined and the buyer is not actually aware of all the hazards and outcomes that lead to Gharar and it is declared forbidden in Islam.
The common forex trends followed by the international markets are not complainant according to Sharia.
Riba – an interest that is charged from the buyer under different conditions
Pledge – a signed commitment that is signed by the customer agreeing to the terms to pay the loan back in the limited time or else the agent is permitted to sell out the contract and recover the loan if the customer is unable to reach the specific percentage of the margin.
Loans – money was given by the agent (Bank) to the customer on some settled terms of interest
Short selling, trading on margin and forwards sales are also not permitted by Islam
How do you get an Islamic account?
Getting an Islamic forex account is not a big deal today; a number of brokers and companies are offering the Islamic forex account services. The accounts are designed in the support of all the Islamic rulings on business and investments.
Islamic Forex Trading account is something that is Riba free and follows the Islamic Sharia rulings for business and investment.