Nowadays, the evolution of Islamic capital market instruments has beenincreased in recent years.
There are three Islamic capital markets which are Shariahcompliant securities, sukuk and Islamic real estate investment trust (I-REITs).Capital market is an essential element of financial system where company canraise their long term funds. The part that assembles the financial assets proficientlyIn the Islamic Finance Industry is The Islamic Capital Market (ICM). The first Islamiccapital market that we discuss is Shariah compliant security. Ordinary shares, transferablesubscription rights and warrant of a Bursa Malaysia-listed company are theitems in Shariah-compliant securities.
This security will be evaluated whetherit is compliance with Shariah principles or not in term of its primary businessand investment activities. In the process of determining the Shariah status oflisted securities, the Shariah Advisory Council (SAC) established a Shariahstandard for evaluating activities which are quantitative assessment and qualitativeassessment. During quantitative assessment, the SAC received support and inputfrom the Security Commission (SC) in term of gather any data and information regardingcompany activities from various sources, such as annual financial reports. Organisationor company will be classified as Shariah Non-compliance Company they involve incertain criteria such as financial services based on riba, gambling and gaming.After that, there are two criteria under qualitative assessment to determiningthe Shariah compliancy of company which are image of company must be good andthe main activities of the company have importance and maslahah to Muslim ummahand country.
Next, other Islamic Capital Market is sukuk or also known asIslamic bond. Sukuk representscertificates of equal value that represent an undivided interest in theownership of an underlying asset , usufruct, services or investment inparticular projects or special investment activities. Besides that, REITs is a collectiveform of investment and is used to invest in real estate only.
The venture is generallythrough purchasing, managing, selling and renting real estate or purchasingshares in public-listed real property companies or investing in debt securitiesof real property companies. BODYIn the recent years, there are severalissues arise in Islamic Securities, Sukuk and Islamic Reits. Under IslamicSecurities, first situations of issue exist is Shariah-compliant securities which are subsequently considered Shariah non-compliant.This issue happen when at early, securities were classified as Shariah compliancesecurities but subsequently changes to Shariah non-compliance securities causedby certain reason like changes in company’s operation. In this case, investorshould liquidate or dispose the Shariah non-compliance securities and can keepany capital gains from that disposal at the time of announcement. However, anyexcess capital gain should be channelled to charitable bodies or baitulmal if it was derived from thedisposal after the announcement day. Meanwhile, if the market price of the securitiesis below the original investment costs, investors are allowed to hold theirinvestment in the Shariah non-compliant securities.
