Islamic Hedging, Speculation or Risk Management? (Critical Analysis of Islamic Hedging)

Abstract

The problem of currency exchange rate fluctuations has motivated conventional financial economists to implement hedging in the form of derivative contracts to avoid risks resulting from currency fluctuations. Muslim economists, in offering mainstream hedging reforms by removing elements of sharia violations and incorporating sharia contracts into them. However, have the elements that caused the prohibition of hedging been eliminated. This paper tries to discuss the problem of Islamic hedging, to be able to offer a solution to these problems. This research is a type of literature research, a method of critical thinking analysis using inductive methods in finding the concept of Islamic hedging in general. Then, it is explained using the descriptive method with critical analysis as a criticism of Islamic hedging. This paper concludes that Islamic investment funds and exchange rate risk reserves as alternatives to Islamic hedging have not eliminated the elements of gharar, riba and maysir and it can be said that Islamic hedging is a form of speculation.