1. MAHYUDDIN KHALID  emkay@salam.uitm.edu.my

2. CONTENT
 DEFINITION
DEFINITION
 EVIDENCES
EVIDENCES  PILLARS OF BAY AL-SARF
 CONDITIONS OF BAY AL-SARF
PILLARS
 OPINION OF SCHOLARS
CONDITIONS
 MODERN APPLICATION
OPINION OF
SCHOLARS
APPLICATION
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3. DEFINITION
 Literal:
DEFINITION
 sale and purchase of money for money including gold
and silver
EVIDENCES
 Technical:
PILLARS  Sale of money for money such as the sale of gold-for-
gold or silver-for-silver.
CONDITIONS  Maliki scholars considers money exchange only if
the sale of gold-for-gold or silver-for-silver but gold
OPINION OF
SCHOLARS for silver does not belong to such transactions.
 Bay‟ al-sarf is a sale of something that is price in its
APPLICATION
own nature for something which is also a price.
 It is regarded, as the sale of price for price and each
price is a consideration for the other.
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4. EVIDENCE
 Hadith:
DEFINITION
 Ubadah ibn Samit narrated that Rasulullah (s.a.w) said
that: “Gold for gold, silver for silver, wheat for wheat,
EVIDENCES
barley for barley, dates for dates, and salt for salt,
should be exchange like for like, equal for equal and
PILLARS hand-to-hand. If the types of exchanged commodities
are different, then sell them as you wish, if they are
CONDITIONS exchanged on the basis of hand-to-hand transaction.”
 Narrated by Muslim
OPINION OF
SCHOLARS  Ijma‟
 All Islamic scholars unanimously agree on the
APPLICATION
permissibility of bay‟ al-sarf as it has been practice by
the people since the time of Prophet (s.a.w) until now
without any objections.
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5. PILLARS OF BAY’ AL-SARF
 Seller and buyer
DEFINITION
 Merchandise/goods
EVIDENCES  Price
 Sighah
PILLARS
CONDITIONS
OPINION OF
SCHOLARS
APPLICATION
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6. CONDITIONS OF BAY’ AL-SARF
DEFINITION Taking possession before leaving one another
• It is necessary that both the things exchanged shall be taken
EVIDENCES possession before the separation of the parties.
• This is because departing with debts on both sides is not
PILLARS permitted as it is regarded as sale of debt against debt (bay‟
al-kali‟ bi al-kali) which is prohibited.
CONDITIONS Equal for equal transaction
OPINION OF • There can be no credit or postponement of delivery. The
SCHOLARS principle concerning money is that it cannot be sold or
bought on credit.
APPLICATION
• If the currency trading involves the exchange of currencies of
the same genus such as silver for silver or gold for gold, they
must be transacted in like-for-like even if they differ in
quality since consideration is given only to quantity.
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7. CONDITIONS OF BAY’ AL-SARF
DEFINITION Freedom from khiyar syarat
• An option of condition cannot be stipulated. One of the
EVIDENCES
contracting parties may stipulate certain conditions which
if not met would grant a legal right to the stipulating
PILLARS party to rescind the contract.
• However, khiyar „aib (option of defect) is allowed.
CONDITIONS
Non deferment
OPINION OF
SCHOLARS • Delivery of both counter values should not be deferred to
a certain point of time in the future.
APPLICATION • If one of the parties stipulated a deferment in the receipt
of one of the currencies, the contract is rendered null and
void as it has been prescribed that exchanges of goods
eligible for riba should be on a hand-to-hand basis.
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8. BAY’ AL-SARF CONCEPT OF ON FOREX
 Spot Basis
DEFINITION
 Practice based on urf (customs)
EVIDENCES
 An exchange between items which are the same such as
currencies with currencies. By using analogy on the
hadith, majority of fuqaha‟ agree that all forms of
PILLARS
currency should obey the rules established for gold and
silver exchanges
CONDITIONS
 A consensus among Islamic jurists on the view that
OPINION OF
currencies of different countries can be exchanged on a
SCHOLARS spot basis at a rate different from unity, since currencies
of different countries are distinct entities with different
APPLICATION values or intrinsic worth, and purchasing power.
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9. BAY’ AL-SARF CONCEPT OF ON FOREX
 Forward Basis
DEFINITION
 In general, majority of scholars on the view that
currency exchange on a forward basis is not
EVIDENCES permissible, that is, when the rights and obligations of
both parties relate to a future date.
PILLARS  However, recently the IFI practice bay al-sarf based on
waad (promise) or murabahah commodity
CONDITIONS
1. Waad based using unilateral promise
 The customer promise to purchase/ sell foreign currency
with a bank.
OPINION OF
SCHOLARS
 A who is looking for a hedge will provide an undertaking to
buy a currency from B in the future. A is bound to fulfill its
promise to B however B is not under any obligation to act on
APPLICATION the transaction when an offer of purchase is submitted.
 Essential elements of the promise include the purchase price
of the currency and the delivery date. The promise must not
be conditional on any event.
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10. BAY’ AL-SARF CONCEPT OF ON FOREX
2. Murabahah commodity based
DEFINITION  Customer and bank enter into two separate murabahah
transaction to facilitate forward foreign exchange contract.
EVIDENCES  Customer will buy commodity for spot value and sell it to
the bank for purchase price plus agreed profit payable on
deferred basis.
PILLARS
 The bank will buy another commodity and sell it to the
customer again for the purchase price plus agreed profit on
CONDITIONS deferred basis to address the other side of the forward deal.
 Both the customer and the bank typically will sell the
OPINION OF commodity back to the market to recover their initial
SCHOLARS investment.
APPLICATION
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11. APPLICATION
 Bay‟ al-sarf is applicable to modern spot forex
DEFINITION
which is based on the spot rate which the deal
settlement is expected to be completed shortly after
EVIDENCES
the contract has been executed.
PILLARS  Majority of scholars opine that different currencies
of different countries consist of different intrinsic
CONDITIONS values and purchasing power.
 There are several IFI offer products construct using
OPINION OF
SCHOLARS bay al-sarf such as:
 Gold investment savings account
APPLICATION
 Shariah compliant forex investment product
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12. END OF CHAPTER
DEFINITION
EVIDENCES
PILLARS
CONDITIONS 
OPINION OF
SCHOLARS
APPLICATION
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