The Evolution of Islamic Finance and Financial Institutions

697 WordsFeb 26, 20183 Pages
The evolution of Islamic finance now takes place in most of the countries, whether in Muslim countries or non-Muslim countries. Islamic finance institutions perform the same essential functions as financial institutions do in the conventional system, except that there is a need for them to carry out their transactions in accordance with the rules and principles of Islam. One of the most growing parts of the Islamic finance is Islamic equity market. In principle, Islamic equity market is characterized by the absence of interest based transactions, doubtful transactions and unlawful stocks of companies which deal in non-shariah compliance activities or items. Its market activities must be free from any of unethical or immoral elements. The emergence of several Islamic indices such as the Dow Jones Islamic index has offered better screening processes to both Muslim and non-Muslims investors. The existence of the shariah screening process in the stock market will enable Muslim investors to invest into companies that run the permissible activities in the businesses. The Dow Jones Islamic Market Index (DJIM), launched in 1999 in Bahrain, was first benchmark to represent Islamic-compliant portfolios and for investors seeking investments in compliance with Muslim Shariah law. The DJIM in essence is a specialized ethical index that screens out prohibited stocks, as defined by Shariah law, and it is monitored by Muslim scholars. Malaysia is recognized as one of the dynamic
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