Islamic Principles For Capital Markets: A Study On Selected Financial Assets And Operational Transactions

The aim of this study is to provide an original theoretical framework by analytically evaluating qualitative studies since 1990s related to Islamic capital markets. Islamic principles regarding capital markets are analyzed under two main headings as financial assets and operational transactions. Under the heading of financial assets, preferred stocks, bonds, forward and futures contracts, options and SWAP agreements are examined. Operational transactions are related to financial investment processes. In this context, speculation, manipulation, short selling and margin accounts are discussed. The main purpose here is not to make legal conclusions and inferences but to classify the academic discussions analytically that has been formed since 1990s, in the context of financial theory and to give a theoretical background to the literature of Islamic capital markets. In the examined works, according to the widespread belief of Islamic scholars and economists, it is not appropriate for Islamic investors to use preferred stocks, bonds, forward, futures, options and SWAP contracts, short sales and margin accounts. However, the issue of speculation is controversial. First-generation Islamic economists argue that speculative transactions have gharar element and therefore speculation is not permissible in the Islamic capital market. However, except for fixed income securities, there is a consensus among modern Islamic economists that it is permissible for Islamic investors to invest in stocks based on profit-loss sharing principle