Chapter 1 Introduction to Islamic Capital Market PDF

PIF2013_Madam Madihah  Our lesson for today : 1.1 The Financial Market Development 1.2 Introduction to Islamic Capital Market 1.3 Differences between Islamic and Conventional Capital Market 1.1 The Financial Market Development CHECKING ISLAMIC Islamic capital CAPITAL c...

PIF2013_Madam Madihah  Our lesson for today : 1.1 The Financial Market Development 1.2 Introduction to Islamic Capital Market 1.3 Differences between Islamic and Conventional Capital Market 1.1 The Financial Market Development CHECKING ISLAMIC Islamic capital CAPITAL capital market involve in money MARKET market or capital market ? Q&A  1.2 Introduction to Islamic Capital Market Definition : According to Islamic Capital Market Task Force report " Islamic capital market is a market where investment, financing activities and products are structured in accordance with Shariah principles. Bursa Malaysia quote that ICM refers to markets where activities carried out in way doesn't conflict sith the principle of Islam." The importance of capital markets in Islamic financial system also fact that slam prohibits interest and encourages trade.  established within a dual financial A systems. It is parallel to the conventional market and monitored by a globally respected SAC and supported by legal and efficient regulatory structure and framework. B complimentary role in develop economy of nation by providing Overview Shariah compliant instruments needed by IFI and investors. Islamic Deals with long term security paper Capital C with maturity period more than 1 year. Market d The securities must be Shariah compliant products approved by SAC with greater visibility to the internationally acceptable investment that will attract cross border transactions.  e ICM is source of long term funding that commonly used by corporation and FI to make capital investments. Investment papers that available in ICM are: 1. Sukuk 2. Shariah compliant stocks 3. Shariah exchange traded funds 4. Shariah based unit trust funds Overview 5. Islamic real estate investment trusts 6. Shariah complaint derivatives Islamic Capital Market  1.3 Differences between Islamic and conventional Capital Market  Differences between Islamic and conventional Capital Market SHARIAH FRAMEWORK Islamic capital market Not based on religious laws products are designed or guidelines based on Shari’a law-Shari’a scholars ensure adherence to Islamic laws and provide guidance  Differences between Islamic and conventional Capital Market PROHIBITED TRANSACTIONS Islamic capital market Except for money laundering restricts stocks of companies and the financing of criminal dealing in unlawful activities activities, these activities are such as gambling, pork, permitted alcohol, tobacco, pornography and arms & ammunition  Differences between Islamic and conventional Capital Market FINANCING Islamic banks provide equity Venture capital companies and capital to a project or investment banks which venture. Losses are shared on typically take equity stakes and the basis of equity management control participation while profits are shared on a pre agreed ratio  Differences between Islamic and conventional Capital Market PROHIBITION OF INTEREST Islamic capital market Charge of interest is not restricts charge of interest restricted  Differences between Islamic and conventional Capital Market SUKUK-BOND MARKET Sukuks issued are backed by Bonds issued are in the form of underlying Shari’a-compliant debt paper that represents asset underlying debt payable at maturity. It follows the principle of interest-based lending Q&A What are the fundamentals of Islamic Finance? A. No interest-based lending B. Profit and loss sharing (risk-sharing concept) C. Concept of one ‘buyer’, one ‘seller’ D. All of the above To take note of the amount in our checking account, we can use our knowledge of simple math concepts. Q&A What is the Islamic Capital Market? A. Market where securities are traded and where all transactions, operations and activities are carried out as per Islamic law. B. Market that provides opportunities for long term investments and risk sharing through diversification C. Market that asserts Islamic religious law and is free from activities prohibited by Islam, such as riba (usury), maysir (gambling) and gharar (ambiguity). Think of ways on how D. All of the above you can lessen these charges and save. Q&A Which is an example of a product in the Islamic Capital market? A. Islamic Unit Trusts Funds B. Islamic Real Estate Investment Trusts C. Shariah-compliant Securities D. All of the above SAVINGS What is the Islamic equity market? A. It is where Shariah-compliant stocks are Q&A traded B. It is where Shariah-compliant securities are traded in both primary and secondary markets C. It is where funds are invested only in halal stocks and not in shares of companies involved in gambling, alcohol, conventional banking and anything else prohibited by Islam D. All of the above Thank you!