As you know, the Islamic world lives according to its own laws and principles, which every Muslim must sacredly observe and honor. Not to mention the everyday and religious way of life of believers, the prohibitions of Sharia, known as “Haram”, make their own adjustments in the economic sphere of life.
The economic constraints of the Islamic world
What seems familiar and mundane for the non-Islamic world is simply impossible for Muslims. For example, many banks in Muslim countries are open from Sunday to Thursday. Friday is considered a day off. All transactions are also carried out on these days. In addition, the Sharia prohibits usury (interest-bearing loans) or riba, so the bank interest is charged for Muslim clients in a more complicated way. Similarly, this item includes trading in bonds. Trading in futures and options is no less problematic, and most often impossible. those that have not yet grown. And, of course, you cannot trade currency from hand to hand.
If you think about it, it turns out that there are more prohibitions here than allowed opportunities. And, as we all know, the Muslim world is vast and rich, so it is not surprising that banks and financial institutions are trying to get out of the situation by introducing their own norms for Muslim clients.
Islamic Forex accounts – swap-free accounts (SWAP-free accounts)
Forex is no exception. Companies that provide access to the foreign exchange market for clients who practice Islam offer the so-called Islamic Forex accounts… And the problem with ordinary trading accounts arises again from the concept of “usury”, which arises when swaps are charged on transactions, ie. the commission that occurs when transactions are carried over to the next day and is calculated based on the difference in interest rates of the countries whose currencies are included in the working pair of the transaction.
Islamic accounts in this case are synonymous swap-free account (SWAP-free account), where these charges have been replaced by a simple commission, which, however, is somewhat overstated. In a long-term strategy, such an approach, of course, can be profitable for a trader, because the company bears all the costs of the swap, while for a short-term strategy it is unlikely. However, this is the only way out of the situation, so you have to put up with it.
How to open an Islamic Forex account?
It is also worth saying that brokerage companies offer the use of Islamic account on Forex only to Muslim clients. Of course, no one will force you to read the Koran by heart, but you will need to present a certificate of religion signed by the imam of the mosque. In Muslim countries, most often, these data are already included in the official documents of citizens in order to simplify the collection of documents for financial institutions, because banks also make similar requests when opening an account.
Recently, Islamic accounts can also be used by traders who are simply suitable for this type of trading account. Brokers do not require any information.
Islamic accounts on Forex Is a step towards clients who adhere to their religious beliefs. To some, the lack of a simple opportunity to open an Islamic account may seem like some kind of discrimination to the rest of the world, but it should be understood that this service is synthetic and actually invented, it does not work according to the law of the market, and its use is not a whim, but a necessity caused by religious rules.
Where to open an Islamic Forex account?
Not all brokers and dealing centers provide the opportunity to open Islamic forex accounts… Most often these are those companies that are focused on the Muslim world. For opening an Islamic account it will be necessary to make an appropriate request and provide documents proving that you are a Muslim, if the company requires it.