ENGLISH: THE APPLICABILITY OF SHARI’AH COMPLIANT COMMODITY FUTURES IN AGRICULTURE SECTOR

  • Abidullah Khan Assistant Professor-Islamic Finance, Department of Business Administration, Sukkur IBA University, Airport Road, Sukkur, Pakistan https://orcid.org/0000-0001-5072-5948
  • Abdul Rahman Nizamani Assistant Professor, Department of Economics, University of Sindh, Jamshoro, Pakistan https://orcid.org/0000-0002-1904-2265
  • Irfan Ahmed Shaikh Assistant Professor, Department of General History, University of Sindh, Jamshoro, Pakistan. https://orcid.org/0000-0003-4662-7864
Keywords: Future Contract; Bay al-Istisna; Speculation, Agriculture Sector

Abstract

The presence of the commodity future contracts in the financial markets gave rise to the idea of introducing Shari’ah compliant commodity futures in order to channel the investments from the oil rich Muslim countries. Bay al-Istisnais considered an ideal contract for the commodity future contract as the nature of this mode of financing is similar to the conventional commodity future contracts. The main objective of this paper is to sort out the applicability of Shari’ah compliant commodity futures in the agricultural market and to highlight the issues that can arise from the application of the commodity futures. A content analysis on the current literature has been performed to achieve the objective. It is found that due to speculation activities in the current market, a separate market for Islamic future contracts is necessary. It is suggested that Istisna based future contracts can be traded in this market. This will help the buyer and seller of the agriculture based commodities to hedge against the price uncertainties.

Published
2019-05-06