Issues in Islamic Hedging Practices: A Critical Analysis

Abstract

Hedging is an important concept in overall risk management in conventional finance. The need for hedging is also recognised in Islamic finance, although hedging strategies in Islamic finance are different from their conventional counterparts as they must be in compliance with the Sharīʿah principles. Accordingly, the following international Sharīʿah standard-setting bodies and other Sharīʿah authorities outside Malaysia have issued resolutions acknowledging the need for hedging and discussing various instruments to be used for that purpose: