The Malaysian central bank’s sharia advisers have outlawed the payment of a fee to support a pledge made in Islamic forward foreign currency transactions, saying such charges contravene the religion.
Islamic banks tend to levy a payment when a promise or “waad” is made to enter into a forward foreign currency hedging contract to reflect the parties’ commitment to the transaction.
But Bank Negara’s sharia advisory council, whose rulings are binding on Islamic banks in Malaysia, said such charges would render the promise a bilateral waad, which is not allowed by the sharia.
A bilateral waad is deemed a contract and some experts said in this context it could lead to an agreement without the present delivery of the price and subject matter of the transaction, giving rise to uncertainty which is prohibited by Islamic law.
