Question

From Islamic Finance prospective, Why the economy needs financial markets?

Answer 1

Islamic finance is sharia compliant finance which prohibits charging of interest and instead believes in trading in the real assets.

By focusing on trade and exchange in commodities and assets, Islam encourages risk sharing, which promotes social solidarity.

Now, for this trading of commodities and assets, financial market becomes mandatory as it provides a platform for the parties to meet.

Sukuk (Sharoa complain Bonds),Shariah-Compliant Stock, Funds and Derivative Product are major products which are traded in islamic financial market.

Shariah “screens” have been adopted by various index
providers to identify companies where business performances do comply with a minimum requirement of
Shariah-compliant standard.

Thus financial markets is an integral part of economy from the point of view of Islamic finance where all sharia compliant products are traded.