Islamic accounts

    0
    285

    An Islamic account is an account that complies with the Islamic Shari’ah law, which prohibits payment and acceptance of interest. In conventional trading, you receive or have to pay an interest fee for any position you hold after 22:00 GMT. This would constitute a violation of the Shari’ah.

    An Islamic account avoids this kind of violation by automatically closing all trades at 22:00:00 GMT and then reopening them immediately at 22:00:01 GMT, which avoids the payment or receipt of any interest (called riba). Normally, the spreads on an Islamic account are a little bit higher in order to compensate for the losses a broker might incur by not receiving interest.

    Devout Muslims are also proscribed from engaging in excessive risk (gharar) or gambling (maysir), meaning that they must trade within the ethical ideals laid down in the Shari’ah.

    For further reading on Islamic accounts, see The Accounting and Auditing Organization for Islamic Financial Institutions(AAOIFI) website.