1. Mudarabah (Profit-Sharing Partnership)
Description: Mudarabah is a partnership where one party provides capital, and the other offers expertise and manages the trade. Profits are shared based on a pre-agreed ratio, but losses are borne solely by the capital provider unless they arise from negligence or misconduct by the manager.
Application: In a margin trading context, the platform could act as the capital provider, while the trader acts as the managing partner. Profits from successful trades would be shared according to the pre-agreed ratio, but any losses would only affect the initial capital, not imposing any debt or interest on the trader.
Criteria for Compliance:
Clear agreement on profit-sharing ratios.
Transparency in terms of responsibilities and expectations.
Risk disclosure to avoid excessive uncertainty.
2. Murabaha (Cost-Plus Financing)
Description: Murabaha involves the sale of an asset at a markup price agreed upon by both parties. The platform buys the asset first, takes possession, and then sells it to the trader at a higher price with a clear markup (but no interest).
Application: In margin trading, the exchange would buy assets and sell them to traders at a higher price. The trader would then have the flexibility to resell these assets in the market. This avoids direct borrowing with interest.
Criteria for Compliance:
Full ownership of the asset by the platform before reselling.
Transparent markup structure disclosed in advance.
No hidden fees or charges that could resemble interest.
3. Qard Hasan (Benevolent Loan) with Service Fee
Description: Qard Hasan is an interest-free loan intended as a form of financial assistance. Instead of interest, the exchange could charge a modest service fee solely to cover administrative expenses, without linking it to the loan amount or duration.
Application: The platform could lend capital without interest but add a fixed fee to cover operational costs. This ensures that the loan is ethically compliant and not exploitative.
Criteria for Compliance:
No interest charged; only a flat, transparent service fee is allowed.
The fee should not increase based on time or loan size.
Clear documentation and disclosure of terms.
4. Wakala (Agency Model)
Description: Wakala is an agency agreement where one party (the agent) manages investments on behalf of another in exchange for a fixed fee or a share of profits.
Application: The platform could act as an agent who facilitates trading activities on behalf of the investor, charging a flat fee or commission rather than interest.
Criteria for Compliance:
Clear terms of the agency agreement, including responsibilities and fee structures.
Transparency on how funds will be used and where profits will come from.
Avoidance of speculative or gambling-like trading.
5. Ijara (Leasing Model)
Description: Ijara involves leasing assets rather than selling or lending them. The exchange could lease digital assets or funds to the trader for a fee, with the right to use them but not full ownership.
Application: Traders could lease the funds or assets from the exchange for a fixed fee. At the end of the lease period, the trader can return the asset or renew the lease.
Criteria for Compliance:
The exchange retains ownership; the trader only pays for usage rights.
Fee is fixed and not linked to loan duration or amount.
Transparent, mutually agreed lease terms.