The book A Jurisprudential-Economic Review of Swap Contracts, authored in Persian by Gholamali Masouminia, has been published by the Research Institute for Islamic Culture and Thought, comprising 588 pages.
This work examines one of the prevalent instruments of financial engineering, namely swap contracts, contracts that are widely utilized in global markets in forms such as interest rate, currency, commodity, and credit swaps, accounting for a significant portion of financial transactions. However, from the perspective of Islamic jurisprudence (Fiqh), diverse viewpoints have been presented regarding their legitimacy.
Relying on the Jawaheri jurisprudential method—a rigorous and traditional approach in Shia scholarship named after and modeled on the foundational legal encyclopedia Jawahir al-Kalam, which emphasizes strict adherence to primary Islamic sources and established methods of legal derivation—the author distinguishes between swaps based on the actual exchange of goods and services and those prevalent in the derivatives market. According to the book’s analysis, exchange-based swaps in the commodity and services market are jurisprudentially justifiable, whereas most derivative contracts—especially in cases where their function pertains to hedging or speculation—face jurisprudential objections. Furthermore, certain alternative instruments designed with the aim of Islamizing derivatives are, in the author’s view, confronted with legitimacy challenges.
In the economic section, the book addresses the function of swaps in risk management, the consequences of derivative market expansion and its divergence from the economy’s real sector. Citing the experiences of various countries, the author examines the role of derivative instruments and short selling in the emergence or exacerbation of certain financial crises, including the 2008 US financial crisis and the 1998 Southeast Asian crisis.
The structure of the book is organized around two main axes: jurisprudential and economic. In the jurisprudential section, the legal nature of swaps, the possibility of their alignment with Islamic contracts such as Bay’ (sale) and Sulh (settlement), and concepts such as Riba (usury/interest) and Gharar (excessive uncertainty) are analyzed. In the economic section, the functions and impacts of these contracts in financial and commodity markets are evaluated.
The book is compiled in six chapters: “Overview and Conceptual Framework,” “Jurisprudential Review of Commodity and Service Swaps,” “Swaps in the Financial Derivatives Market,” “Critique of the Superficial Islamization of Derivatives,” “Financial Crises and the Role of Derivatives,” and “Sharia-Compliant Alternatives for Hedging in Islam.” In the final chapter, transactions such as Mudarabah, Musharakah, Ju’alah, and tangible Salaf are introduced as instruments approved by Islamic jurisprudence for risk-associated activities.
