The Islamic Capital Market

The Islamic capital market, as one of the branches of the Islamic economic system, is the trading place for financing and derivative instruments, and also other securities, all of which are designed based on Islamic teachings, and the main players of this market are financial institutions such as brokers, companies and investment funds, capital supply companies, market operators, credit rating agencies, financial information processing companies, and investment consultants, all of whom have their financial activities based on the goals, principles, and rules of Islamic economics.

With the relative success of the teachings of Islamic banking, Muslim thinkers thought to realize the second phase of the Islamic economic system, based on the principles and regulations of Islamic transactions. Based on this, extensive and critical studies were conducted on the main pillars of the traditional capital market (principles and foundations, financing tools, hedging tools against risks and financial institutions) and compatible and incompatible topics with Islamic views were identified. The next step was to clean the market from phenomena incompatible with Islamic teachings and design tools compatible with Islamic teachings, in order to form the basic and minimum frameworks necessary for the formation of the Islamic capital market.

This research, which is carried out as the first volume of the “Islamic capital market”, examines the legal and economic principles and foundations of the Islamic capital market. It also examines conventional financial instruments and Islamic financial instruments (Sukuk). In the review of prevalent financial instruments, the study seeks to explain the issues of identifying the subject, economic performance and jurisprudence. But in the examination of Islamic financial instruments (Sukuk), the study aims to financially design instruments based on Islamic jurisprudence with an emphasis on Twelver’s jurisprudence. The research method used in the sections of identifying the subject and economic performance, is the library method. In the jurisprudence section and in cases where there is a history of jurisprudence, the library method is adopted and the valid rulings and judicial opinions are used. In cases where authentic jurisprudential work has not been done, the method of Ijtihad and deriving rulings from documents and applying principles and rules is used.

The findings of the research clearly show that in the Islamic capital market, although securities bonds and related transactions cannot be used due to illegitimacy, other instruments, especially ordinary shares, premium shares, partnership bonds, Mudarabah, Muzara’ah, and Musaqat, for risk-taking investors. Murabahah bonds, Salaf, Lease, Istisna’ and Ju’ala bonds can be used for risk-averse investors. Also, Qarz Al-Hasna (Interest free loan) and Waqf bonds, can be used for charitable activities. It will later be mentioned that in this market, the real need will be satisfied, and it will be even more reliable and better than the traditional capital market.