Speculation in the Islamic Capital Market: Setting the Sharīʿah Parameters
Dr. Noor Suhaida Kasri (Head, Islamic Capital Market | [email protected])
Prof. Dr. Younes Soualhi (Senior Researcher | [email protected])
Dr. Moutaz Abojeib (Researcher | [email protected])
International Shari’ah Research Academy for Islamic Finance (ISRA)
Ustaz Nasrun Mohd Ghazali (Consultant | [email protected])
This paper studies speculation from economic, legal and Sharīʿah angles. It describes and clarifies the concept of speculation from the economic perspective, including its utility in the financial market and the rationale for it. The term speculation is further clarified by comparing it with other closely related terms, namely investment, gambling, trading and hedging. Thereafter, the paper presents its view on what is deemed as speculation. To be in line with the Sharīʿah, speculative activity is viewed as engagement in risk-based Sharīʿah-compliant transactions with the aim of making profit from the price difference. A clear definition of ‘speculation’ to form the basis of Sharīʿah deliberations upon it has hitherto been lacking.
The crux of this paper lies in the discussion of speculation from the Sharīʿah perspective although it also discusses the historical legal evolution that resulted from legalization of speculation in the British and Malaysian regulatory frameworks for the capital market. The paper identifies and deliberates the following five key factors affecting the Sharīʿah compliance of speculation:
1 the legal maxim: al-ghunm bil ghurm;
2 the ʿillah (effective legal cause) of the prohibition of gambling;
3 real economic activities;
4 the intention; and
5 public interest (maṣlaḥah) and the consequences of actions (maʾālāt al-afʿāl).
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