ISLAMIC FINANCE: UNDERLYING PHILOSOPHY, CONTRACTS, INSTRUMENT DESIGN, AND REQUISITES

Obiyathulla Ismath Bacha, Ali Zhang Hengchao and Mirzet Šeho

Chapter 2 in Islamic Capital Markets:A Comparative Approach, 2025, pp 29-48 from World Scientific Publishing Co. Pte. Ltd.

Abstract: This chapter is designed to provide an overview of the underlying philosophy of Islamic finance, and the requirements for financial instruments and contracts. Following a description of the underlying themes and fundamentals of fiqh mu’amalah, the chapter examines the key contracts of Islamic finance and requisites for Shariah-compliant instruments and transactions. The chapter also discusses the relevance of the commodity murabahah contract and the associated issue of tawarruq. On completing the chapter, you should have a basic understanding of the philosophy and underlying fundamentals of Islamic finance, the key prohibitions, and the commonly used contracts.

Keywords: Islamic Banking; Islamic Finance; Capital; Capital Markets; Contracts; Instrument Design; Interbank; Interbank Money Market; Islamic Interbank Money Market; Bond; Bond Market; Sukuk; Sukuk Market; Common Stocks; Equity Markets; Islamic Equities Market; Derivative Instruments; Shariah; Shariah-compliant Derivative Instrument; Exchange Rates; Foreign Exchange Market; Digital Financial Assets; Blockchain; Financial Solution; Digital Financial Solution; Conventional Capital Market; Dual Market (search for similar items in EconPapers)
JEL-codes: F3 G15 G18 G23 G24 (search for similar items in EconPapers)
Date: 2025
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