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Islamic Finance




Khayar al-Naqd al-Islami


An Islamic finance treasury arrangement that an Islamic bank and a counterparty enter into for the purpose of foreign exchange risk management. The counterparty purchases a commodity on the basis of credit murabaha using its local currency and then sells the commodity on a murabaha basis, but with the price being paid in either its local currency (or some other currency of choice).

This structure replicates that of a conventional currency option in a shari’a-compliant manner (since payments of the two legs of the transaction are denominated in different currencies and are pre-agreed at the contract session or majlis al-aqd).



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The last three decades have witnessed the modern rebirth of Islamic finance both in terms of literature and practice. Islamic banks and ...
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