Bank Islam in Malaysia has launched a new Shariah-compliant derivative product called an Islamic Dual Currency Investment-i (DCI-i).
This product is wrapped in a murky Shariah cloak, but make no mistake about it: it is a derivative product designed to squeeze additional returns out of fluctuations in foreign currencies. The foreign currency markets are highly volatile and the article linked below certainly implies that there is indeed risk involved.
This flies in the face of the claims by promoters of Shariah-compliant finance that Shariah-compliant products are insulated from financial crises.
No less investment authority than Warren Buffett himself has deemed derivatives “financial weapons of mass destruction.” A derivative product associated with foreign currency exchange rates is far from a product one would associate with a conservative, solid investment that would protect its owner from financial turmoil…