Islamic finance and food commodity trading: is there a chance to hedge against price volatility and enhance food security?

Heliyon
Madina Kalimullina, Mikhail Shamil Orlov

Abstract

This paper evaluates current food commodity trading from the Shariah point of view, which is particularly relevant for the MENA region. It focuses on futures contracts as the main instrument for grain trading and analyzes the traders' activities. Through a qualitative and multifaceted approach, the paper accumulates and evaluates the suggestions for 15 Shariah-based alternatives to futures by contemporary researchers. Sukuk, commodity funds and takaful programs are among potential structures that could be developed and broadly implemented. The research compares the current criticism of futures markets with the opinions of Islamic scholars and researchers, as well as Shariah standards. The paper also evaluates several recent suggestions by researchers to raise the efficiency of the international commodity trading market for the sake of food security. The results show that there is space for cooperation taking into account Islamic financial principles and conventional commodity exchange regulations, in combining existing best practices of the latter and the rulings of the former in engineering a sounder system of grain trading for the benefit of market players and the end consumers. This would require a joint effort and support f...Continue Reading

References

Nov 20, 2009·The Journal of Nutrition·Patrick Webb

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