Leverage and Futures: Why are they forbidden in Islam? 🚫💸
1. Definition of leverage and futures contracts 🏦📊
Leverage and futures are two modern trading tools that have spread in the financial markets. Leverage is a system that allows traders to use a relatively small capital to open deals larger than the value of their capital, meaning you can open a deal ten times larger than your amount, while futures are deals to buy or sell assets at a specific time in the future and at a pre-agreed price. 📅💸
2. Why are leverage and futures contracts considered haram in Islamic law? 🚫
Islam is keen to protect people's rights and money and prevents any kind of injustice or manipulation. The use of leverage and futures contracts makes financial transactions enter the area of usury and gambling, due to the high risks they carry, and sometimes there is injustice to small traders. ⚖️
1. Usury: Using leverage requires paying interest on the borrowed money. If you lose, you will pay the amount you lost in addition to the interest. Usury is explicitly prohibited in the Holy Quran, such as the Almighty’s saying: “Allah has permitted trade and forbidden usury” (Al-Baqarah: 275). 📜💰
2. Gambling (Gharar): Futures contracts and leverage have a high element of risk and uncertainty, meaning that the trader enters into a deal without being sure of profit or loss. Islam forbids transactions that involve clear uncertainty, as the Prophet (peace and blessings of Allah be upon him) said: “He forbade the sale of uncertainty” 🙅♂️📉.
3. Legal evidence from the Qur’an and Sunnah 📖🕋
The Quran and Sunnah have clear texts against usury and gambling, and they contain strong indications about the danger of transactions that involve great harm or risk to money. ⚠️
Verses prohibiting usury: Allah the Almighty said: “O you who have believed, fear Allah and give up what remains of interest if you should be believers.” (Al-Baqarah: 278). Usury is dangerous to the economy, and it is clear injustice because it makes the creditor earn without effort at the expense of the debtor. 🏦🚫
Hadith of the Prophet, may God bless him and grant him peace, about uncertainty: This type of transaction falls under the category of uncertainty sales, which the Prophet forbade, because it is an unclear sale, and trade must be transparent and guarantee the rights of both parties. 🌟
4. The wisdom behind prohibiting leverage and futures contracts 💡
Islam aims to protect the individual and society from any harmful financial practices.
1. Capital Protection: Transactions with high leverage bring huge losses to people who have no experience in the market, and as we say, “they play with money they cannot afford to lose.” 💔💸
2. Preventing exploitation: Many financial companies exploit those who want quick profits and expose them to great risks, and as we know, money is a responsibility and any major loss can cause social and economic crises. 🚷
5. Conclusion: An invitation to think about what is permissible and what is forbidden 🕌💭
Profit can be tempting, but it is important for the trader to be aware of the legal consequences, and to ensure that his profit is from a lawful source that Allah blesses. Leverage and futures contracts are full of doubts and risks that make them unacceptable by Sharia, and every Muslim must seek to profit in the right way that respects religious controls, so that his money is good and blessed. 🙏💚
Disclaimer: Contains third party opinions. Not financial advice. May contain sponsored content. See terms and conditions.
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