ABSTRACT
This study aims at analysing the possibility of introducing Islamic derivatives in Bangladesh from the shariah perspective. It analyses the opinions of the shariah scholars in Bangladesh and proposes shariah-compliant structures for FX forward, cross-currency swap and FX option. Semi-structured interviews have been conducted with leading shariah scholars in the country in the field of Islamic finance to collect first-hand data. Classical and contemporary sources of Islamic jurisprudence (fiqh) have been reviewed to determine the shariah status of the proposed derivatives. The findings of the study show that the majority of the shariah scholars in Bangladesh are holding a stringent position regarding the practice of Islamic derivatives. However, there is a group of scholars who hold that Islamic derivatives, especially Islamic FX forwards, should be permissible in the shariah. Regarding Islamic FX forwards, this study argues that the majority of shariah scholars in Bangladesh prohibit it due to a particular understanding of a prophetic narration pertaining to currency transaction (bay‘ al-sarf). However, based on the sources of the shariah and the opinions of classical Muslim scholars, it is possible to develop Islamic FX forward using the underlying concept of wa‘d. This study is limited to analysing the possibility of Islamic derivatives from the shariah perspective, which excludes financial, technical and other operational aspects. The outcome of this research may have implications for the shariah committees of different Islamic banks in Bangladesh. The proposed structures of Islamic derivatives might be adopted by the Islamic finance industry in Bangladesh.
