ISLAMIC CAPITAL MARKETS

“Islamic capital markets are a crucial component of the Islamic financial system which supports the Islamic banking industry’s participation in investments.”

Islamic capital markets are components of a financial system that deals with raising capital using shariah-compliant securities and instruments as alternatives to conventional shares, bonds, and other long-term investments.

In Islamic capital markets, Riba is forbidden (Riba — Interest) Because of this, conventional debt instruments are not suitable as investment instruments or means of raising funds for business.
But a Sukuk has been created that links the profits and cash flows from credit financing to the specific asset being purchased, thereby sharing the benefits of that asset. In this way, investors can avoid the Shariah ban and still benefit from the debt.

What is a Sukuk ?
A sukuk is an Islamic financial certificate, comparable to a bond in conventional banking and consistent with Islamic religious law. The current expansion of the Islamic capital market depends on the issuance of sukuk, which governments and businesses use to expand their financial operations.

Establishing clear guidelines for the types of shares that comply with Shariah norms is an important aspect of the early establishment of an Islamic capital market.

Islamic capital markets are relevant because they adopt standards related to Islamic finance and specifically aim to improve and unify procedures in the Islamic financial sector with respect to accounting, auditing, governance, morality and Shariah norms. There are many options for those who just want to invest and deal with Islamic capital market instruments. The main financial structures and products that are subject to these standards include: Murabaha, Salam, Ijara, Istisna, Mudaraba.

Islamic methods of product structuring, project financing, stockbroking, asset management, and venture capital services are becoming more broadly accessible, and the Islamic capital market has become more sophisticated.The adoption of sharia-compliant stocks and asset-based transactions in the Islamic economy ensures that Islamic capital markets play a crucial role in meeting the needs of investors who want to diversify their investment portfolios.

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