One of the amazing aspects of the popularity of currency trading is that it has caught on across the globe, through all types of cultures, ethnic backgrounds, and religious affiliations. Being a “one-size-fits-all” forex broker, however, is not an easy task in this day and time. Not only must the broker have customer service representatives that speak many different languages, but they must also understand the nuances of various religious beliefs that call into question the actual practice of speculating.
According to Islamic law, or Shariah law, Muslims are prohibited from earning interest on their giving. This law, when applied literally, also applies to interest earned on forex trading. To address this issue and to make it possible for Muslims to trade forex according to Islamic law, many forex brokers opened the opportunity for Islamic forex accounts which offer interest-free forex trading (aka No Riba Forex).
Financial markets are driven by the time cost of money at every avenue, but forex brokers have learned that, in order to appeal to a wider audience of potential customers, the issues surrounding interest or “Riba” within the Islamic world must be addressed in some way. The result has been what is referred to as an Islamic, No-Riba, or Shariah forex account. The broker handles the delicate issue of covering his interest related costs by modifying the spreads offered on these accounts to provide the margin he needs. There may also be additional fees or restrictions placed on these accounts to prevent abuse.
Thus an Islamic broker account must be seen to conform to all these principles. The process of a brokerage setting up an Islamic account is not a simple one. First, the brokerage must first consult a group of Islamic scholars (jurists) who will thoroughly vet the investment product(s) to ensure compliance with Islamic Law, as well as conduct a continuous process of due diligence to ensure that variations are not introduced to the produce which then negate the Islamic principles originally adhered to.
When choosing an Islamic forex broker it's important to consider not just the account type, but also the services and trading conditions offered by the broker or brokers you're considering. Sometimes traders prefer to open accounts with two different brokers to see which they like better, and which platform has better performance. Oftentimes traders are willing to take higher spreads in order to get a better trading platform or better customer service. Before choosing your Islamic forex broker, make sure to consider all your options and to read forex broker reviews that can help make the decision easier.
