Indices - Appendix B (The Shariah Basis for the Standard)

Transcription

1. Shari ’ah Standard No. (27): Indices Appendix (B) The Shari’ah Basis for the Standard ■ Developing indices is permissible in Shari’ah because they constitute a method of forecasting and a means of observing the state of circumstances (inferences). Resorting to inferences is a well-recognized practice in judicature and financial transactions. Ibn Al-Qayyim in his book on Judicial Methods presented a number of proofs on permissibility of using inferences. ■ Permissibility of using indices to forecast the market situation is derived from acceptability of using inferences for judgment. As indicated above, Shari’ah does not object to using inferences to make current or future judgment based on past events, or to initiate practical actions in the light of probable developments. ■ Selling or buying indices is prohibited because it is nothing more than payment or receipt of money for the mere existence of a certain reading or figure. Such an act constitutes a form of gambling and an illegal act of gaining money. Hence, prohibition of selling or buying indices has been well emphasized by the Resolution of the International Islamic Fiqh Academy which states that it is not permissible to sell or buy an index, because this constitutes pure gambling. It is an act of selling an imaginary object that never exists.(2) ■ Prohibition of concluding option contracts that are based on indices, or on the index contracts’ multiplier, rests on the same reasons for prohibition of trading in indices, in addition to prohibition of dealing in options themselves. Such transactions obviously deal with wills and intentions rather than with real commodities. Moreover, prohibition of dealing in options has been clearly stated in a resolution issued by the International Islamic Fiqh Academy.(3) (2) Resolution No. 63 (1/7), Resolution of the Islamic Fiqh Academy (P. 127). (3) Resolution No. 63 (1/7), Resolution of the Islamic Fiqh Academy (P. 127). 714
2. Shari ’ah Standard No. (27): Indices ■ The justification for periodical adjustment of wages subject to changes in the level of prices is to pursue application of a fair wage policy, and protect the money income of the employees against deterioration of purchasing power due to inflation. It is permissible to provide for such a condition in the contract because conditions between contracting parties are permissible in principle, unless they lead to reversing what has been permitted or prohibited by Shari’ah. 715