Absa Capital, the corporate and investment banking division of Absa Bank (Ltd), in partnership with Absa Islamic Banking, today added to their product range by launching Islamic Forward Exchange Contracts.
A need was identified for a Shari’ah compliant Forward Exchange Contract as conventional Forward Exchange Contracts are impermissible for Muslims. The Islamic Forward Exchange Contract is governed by Shari’ah Law which – among other requirements – forbids the payment or earning of any interest.
Islamic finance standards are set globally by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI). The Forward Exchange Contract launched today takes into account and aligns with the AAOIFI guidelines.
“The Islamic Forward Exchange Contract is specifically aimed at Importers and Exporters. However it will also appeal to the Muslim business community in South Africa, who would prefer to purchase a product that manages the associated risk of foreign currency exposure and conforms to Shari’ah Law”, said Karl Sieber, Head of Trade Products at Absa Capital.
Clients use Forward Exchange Contracts to manage the risk posed by exchange rate fluctuations when conducting transactions with international trade partners. An Islamic Forward Exchange Contract enables a client to buy or sell currency at an agreed exchange rate, on a specified date or within a specified period.
“The Islamic Forward Exchange Contract is another way of offering clients more flexibility, and reflects the innovative approach of our business,” added Sieber.
Depending on the type of undertaking chosen by a client, Absa Capital offers fixed, partially optional and fully optional Islamic Forward Exchange Contracts.
“Islamic Forward Exchange Contracts are not only for Muslim clients, they are available to anyone wishing to take a different approach to their banking services,” said Mufti Yusuf Suliman, Acting Head of Absa Islamic Banking.
“Absa Islamic Banking is committed to the development of innovative financial products that align with the dictates of Islamic Law, so that Muslims have the peace of mind of knowing that they are operating in this sphere of their lives as required by their faith,” added Mufti Suliman.
Islamic banking is a financial system for Muslims who wish to conduct their financial affairs in accordance with Islamic Law and for anyone else who would like an alternative to conventional banking.
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About Absa Capital
Absa Capital, a division of Absa Bank Limited (Absa) and affiliated to Barclays, is a leading South African corporate and investment bank with global reach, offering clients financing, risk management and advisory solutions in a wide range of currencies and structures across the globe.
About Absa Islamic Banking
Absa Islamic Banking was launched in 2006 as part of Absa’s commitment to offer financial products and services that meet the needs of all South Africans. It has attracted the largest customer base of any Islamic bank in Southern Africa. It is widely acknowledged as Best Islamic Bank in South Africa and Best Islamic Bank in Africa.
The Absa Islamic Banking offering includes Retail, Private, Wealth and Business Bank offerings in addition to being the only Islamic bank in South Africa to offer Takaful (Islamic insurance), personal and business asset protection. The Shari’ah compliance of every aspect of the products and process of the bank is overseen by an Independent Shari’ah Supervisory Board, which is supported by an internal Shari’ah department.
About the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI)
Islamic finance standards are set globally by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI). The AAOIFI standard states that dealing in currencies shall not take place in the futures and forwards market. Forward currency contracts are prohibited, whether such contracts are effected through the exchange of deferred transfer of debt or through the execution of a deferred transaction in which the possession of both counter values does not take place immediately. The Absa Islamic Banking Shari’ah compliant Forward Exchange Contract takes into account and aligns with the AAOIFI guidelines.
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