Bay al-Sarf and Its Contemporary Applications in Light of Imam Muhammad’s Seminal Work al-Hujjah ala Ahl al-Madinah

Abstract

This research examines the classical Islamic contract of Bay al-Sarf (currency exchange), analyzing its foundational principles and their relevance to modern financial systems. Drawing on the authoritative juristic framework presented in Imam Muhammad al-Shaybani’s seminal work al-Hujjah ala Ahl al-Madinah, the study explores key conditions of the contract, including immediate possession (qabd), the prohibition of speculation, and the avoidance of uncertainty (gharar). The paper evaluates these classical principles in relation to contemporary financial practices such as foreign exchange (forex) trading, digital banking, and cryptocurrencies. The analysis concludes that while spot transactions involving immediate settlement may comply with the requirements of Bay al-Sarf, many speculative and deferred currency transactions conflict with its strict conditions. The study ultimately calls for the integration of these classical juristic principles into modern Islamic finance regulations in order to establish Shariah-compliant standards suited to evolving digital and global currency markets.