Bay al-sarf (currency exchange)
An exchange of money for money, of the same or a different currency, which must be settled on the spot.
Bay al-sarf is the exchange of money for money, whether of the same type or of different currencies, as Bank Negara Malaysia's glossary defines it. Because money is treated like the ribawi items gold and silver, the exchange is generally required to settle on the spot, and an exchange of the same currency must be at equal value. These rules shape how Islamic banks handle foreign exchange and why forward currency deals are structured differently.
Sources
This entry explains a term; it is not a Shariah ruling. Approving a product is for each institution's own Shariah board and regulator.
Related terms
Riba al-fadlRiba of excess: an unequal exchange of the same kind of certain goods, such as gold for a larger quantity of gold.Islamic FX forwardA currency hedge built on a binding promise to exchange at an agreed rate on a future date, with the exchange itself done at spot.Wa'd (promise)A unilateral promise to do something in the future; it can be made binding and is used in hedging, sukuk and lease-to-own deals.