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Islamic derivatives: reaching for critical mass


Building an Islamic derivatives market has been a slow process, and remains controversial with some scholars. But the momentum is there – and a new standardised agreement should be available soon. As Siân Williams discovers, many firms and individuals are committed to the market and believe a new phase of faster growth is not far off.

Huge strides have been made over the past 20 years in Islamic finance, so that something which was once small scale and barely known outside specialist circles is now a globally recognised sector of the financial markets.

Derivatives have lagged behind Islamic banking and bond issuance – and they remain controversial. Some Islamic financial players believe derivatives will never be compatible with Shari’ah law.

But the swelling interest in Islamic hedging structures and the wide variety of initiatives being worked on suggest the opposite – that an Islamic derivatives market is emerging that will eventually...

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