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Islamic Financial System (Islamic Capital Market (Requirements of well…
Islamic Financial System
Islamic Capital Market
Products
Shariah Compliant Securities
Islamic Unit Trusts
Islamic Real Estate Investment Trust (iREIT)
Exchange Traded Funds
Sukuk
Key Features of Capital Market
Shariah compliance
Equity
Debt
Islamic Capital Market same but prohibits:
Interest (Riba)
Ambiguity or uncertainity (Gharar)
Gambling (Maysir)
Speculation
Unethical practices
Manipulation (Talá'ub)
Hoarding (Ikhtikár)
Artificial price hiking (Najsh)
Concealment of a defect (Tadlís)
Prohitbited (Harám) elements deemed non-permissible according to Shariah
Intoxicants
Alcohol
Pork
Pornography
Prostitution
Capital market transactions entail risks for both the issuer and the investor
Capital market transactions are usually made through financial intermediaries
The capital market takes the form of either physical or virtual facilities
Securities represent financial claims which are issued by firms requiring financing and held by retail and institutional investors
Market where medium to long term securities are issued and traded
The vehicle used for capital circulation is represented by securities
An organised market
Role (functions and objectives) of ICM
Intermediates between demanders and suppliers of funds
Plays a complementary role to the Islamic banking and takaful operators
Provides opportunities for diversification of risk
Facilitates the availability of liquidity enabling secondary trading of securities
Makes available various financial services
Contributes to economic growth
Requirements of well functioning ICM
Appropriate regulations
Shariah requirements
Shariah Compliance
Corporate governance
Investor protection
Oversight
Taxation
Accounting
Legal
Risk management
Product standardisation
Product documentation
Product innovation
Secondary market
Standard setting bodies