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​Islamic Derivatives – Bai al-Kali bil-Kali (Debt for Debt)
  • Definition:
    • Bai al-kali bil-kali refers to:
      • A transaction where both countervalues are deferred
      • In simple terms: exchanging one debt for another debt


  • How it works:
    • Buyer promises to pay later
    • Seller promises to deliver later
    • At the time of contract:
      • No money is paid
      • No goods are delivered
    • Result → both sides hold future obligations (debts)


  • Why it is prohibited in Islam:
    • No real exchange at the time of agreement
    • Leads to:
      • Uncertainty (gharar)
      • Higher risk of default or dispute
    • Goes against Shari’ah requirement:
      • At least one countervalue must be immediate


  • Key Shari’ah concern:
    • Contracts should involve certainty and fairness
    • Debt-for-debt creates:
      • Weak contractual foundation
      • Potential for speculation and exploitation


  • Simple example:
    • A sells goods to B:
      • Payment: after 3 months
      • Delivery: after 3 months
    • → Nothing exchanged now → both are debts → prohibited


  • Contrast with permissible contracts:
    • Salam:
      • Payment made upfront
      • Delivery later
      • Only one side deferred → allowed
    • Murabaha:
      • Goods are owned and sold with known cost and profit
      • Clear structure → permissible


Key takeaway:
  • Bai al-kali bil-kali = both sides deferred
  • Considered invalid in Shari’ah
  • One of the main reasons why conventional futures contracts are problematic in Islamic finance

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