Privatisation of the Islamic Dinar as an Instrument for the Development of an Islamic Capital Market

Abstract

The main objectives of this chapter are the following: We will develop certain monetary and investment conditions required for developing linkages among the goods market, the investment or financial market and the money market in an Islamic economic union. We will show that these linkages are established by certain variations of the broad type of profit-sharing stocks and bonds known in Islamic terminology as ‘mudarabah’ investment certificates. In search for the much needed stability of the value of investment return and their relative low riskiness, we will adopt the presently available pseudo-monetary aggregate, the Islamic Dinar, used by the Islamic Development Bank as a store of value of its transactions with its member countries. Thus, we will make the arguments and set up conditions under which the ID can be transformed into a medium of exchange as well. This privatisation of the ID will be shown to play an important role in the future establishment of an Islamic capital market. Theoretical ramifications for these will be given.