"Derivatives in Islamic Finance: Examining the Market Risk Management Framework (Book Review)" Banking and Finance Law Review (32)(1), Forthcoming
HOSSEIN NABILOU, University of Luxembourg; Faculty of Law, Economics and Finance Email: email@example.com
According to the economic doctrine of the Sharia’ah, Islamic finance is a normative and mainly prohibition-driven discipline based on three main pillars: prohibition of Riba (usury), Gharar (excessive uncertainty), and Maysir (gambling). A majority of conventional derivative instruments are dismissed by Islamic finance scholars, standard-setting institutions, and Islamic finance boards by resorting to these three general prohibitions. This book provides a revisionist approach to Islamic finance by defending and providing evidence for the permissibility of the use of derivative instruments within the market risk management framework in Islamic finance. It is an attempt to reconcile the risk management demands of the modern business world with the rigid prohibition-driven stance of the majority of Shari’ah scholars on derivative instruments. This is undertaken by sketching out the main arguments made by prominent Islamic scholars in rejecting the use of derivative instruments in Islamic finance, by patiently replying to those objections, and by proposing adjustments to conventional economic theory, so that it can make inroads into Islamic finance.