Building an Islamic derivatives market has been
a slow process, and remains controversial with
some scholars. But the momentum is there – and a
new standardised agreement should be available
soon. As Siân Williams discovers, many firms and individuals are committed to the market and believe
a new phase of faster growth is not far off.
Huge strides have been made over the past 20 years in
Islamic finance, so that something which was once small scale
and barely known outside specialist circles is now a globally
recognised sector of the financial markets.
Derivatives have lagged behind Islamic banking and bond
issuance – and they remain controversial. Some Islamic
financial players believe derivatives will never be compatible
with Shari’ah law.
But the swelling interest in Islamic hedging structures and
the wide variety of initiatives being worked on suggest the
opposite – that an Islamic derivatives market is
emerging that will eventually offer an extensive range of
The world of Islamic derivatives is arcane and fragmented
– nobody contacted by FOW was able to give an
indication of the size of the market.
But most participants agree that there is noticeable growth
every year, which, although disrupted by the financial crisis,
looks set to continue when the economy recovers.
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