The Islamic Capital Market (ICM) is an integral part of Islamic Financial System where Syariah compliant financial assets are transacted. It plays a pivotal role in the growth of Islamic Financial Institutions. It is a market where people, companies, and governments with surplus funds transfer it to people, companies, or governments who have a shortage of funds. It acts as a financial intermediary by channeling money from surplus to deficit unit. The backbone of ICM is Shariah principles. The ICM functions as a parallel market to the conventional capital market for capital seekers and providers. The ICM attracts funds from domestic as well as international sources.
ICM is formed to attracting savings and channel it for productive purposes by following Shariah principles. ICM comprises of primary and secondary markets. While the primary market directly effects the supply of funds for investment via equity, the secondary market does the same indirectly. The function of secondary market is multi-fold. It provides liquidity to the assets by providing early exit opportunity; prices the assets and their associated risks on continuous basis incorporating relevant new information as it arrives. Today, various capital market products are available such as Shariah-compliant securities, sukuk, Islamic unit trusts, Islamic Real Estate Investment Trusts etc.
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