what is islamic capital markets
The Islamic Capital Market (ICM) functions as a parallel market to the conventional capital market in Malaysia. In the ICM, market transactions are carried out in ways that do not conflict with the conscience of Muslims and the religion of Islam.
Investing in Shariah-compliant securities is not limited to only Muslims as Shariah-compliant securities are part of the securities listed on Bursa Malaysia. In general, all ICM instruments and institutions must comply with Shariah principles, namely:
- Prohibition of riba (interest)
- Application of al bai’ (trade and commerce)
- Avoidance of gharar (ambiguity) in contractual agreement
- Prohibition of maisir (gambling)
- Disengagement from production of prohibited commodities,
such as liquor, pork, tobacco, etc.
Among the products currently available for which Shariah principles are applied include:
Sukuk is a financing instrument for the purpose of raising funds by companies or governments (issuers) and the underlying transaction is structured based on various Shariah principles/contracts. Sukuk investors are entitled to the income/profit arising from the underlying transaction.
Shariah-compliant securities are securities listed on Bursa Malaysia which have been classified as Shariah permissible for investment, based on the company’s compliance with Shariah principles in terms of its primary business and investment activities.
Islamic Unit Trust Funds
Islamic unit trust funds are a collective investment scheme that offers investors the opportunity to invest in a diversified portfolio of Shariah-compliant securities, fixed income securities and money market instruments.
Islamic Real Estate Investment Trusts
Islamic real estate investment trusts or I-REITs are collective investment vehicles (typically in the form of trust funds) that pool money from investors and use the pooled capital to buy, manage and sell real estate. I-REITs provide an investment opportunity for those who wish to invest in real estate through Shariah-compliant capital market instruments.