The Theory and Practice of Profit Sharing Investment
- Foundations of Islamic Finance series
Edited by Mohamed Ariff, Munawar Iqbal and Shamsher Mohamad
Chapter 13: The Role of IDB in Islamic Capital Market Development
Salman Syed Ali Khan 13.1 INTRODUCTION The unstated but significant hallmark of Islamic capital market development is to keep finance relevant to economic activities to maintain justice and fair play for all members of the society. By avoiding financial transactions based on a pre-agreed interest rate, unnecessary risk-taking by following the principle of gharar and by adherence to certain fair trade and exchange rules, Islamic finance provides a means for orderly financial contracting. The development and smooth functioning of Islamic capital and money markets depend on the sustained efforts of all the stakeholders in an economy as in conventional finance. Thus, private business firms and financial institutions, governments and multilateral financial organizations as well as individual savers, the investors, all have important roles to play in their respective contexts. The Islamic Development Bank (IDB), which is a multilateral development finance institution, is actively contributing towards the orderly development of Islamic capital markets at national and international levels. To understand the role of the IDB in the development of Islamic capital markets, it would be useful first to know the IDB and its mission while understanding the issues and challenges in Islamic capital market development. Development banking uses sukuk-type instruments in its multilateral financial activities, so a discussion of IDB in a book on sukuk is relevant just as it is appropriate to cover other forms of market-making for sukuk securities in this book. Therefore, in section 13.2 we provide a brief introduction to the IDB: its purpose and mission. Section...
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