Financial Intermediation In The Framework Of Shari'Ah

The paper seeks to examine the position of the shari'ah on the creation and transfer of financial instruments. In this connection, the paper also highlights the role of financial instruments as a method of mobilizing financial resources for investment and explains the rules and regulations governing the different contracts of investment, as well as their returns, from the viewpoint of shari'ah. The paper argues that financial instruments represent a common share in the ownership and that they have limited liability, but where financial instruments stand for debts payable by a third party, the negotiation of debts is stipulated by shari'ah. The paper argues that it is justified to issue several financial certificates for one single salam sale operation. Shari'ah does not, however, allow salam certificates to be sold at a price other than its face value before the delivery of the goods in question. It is maintained that financial instruments can be issued for specific and general types of investment having different maturities. The proceeds of financial instruments resulting from their sales can be invested through various modes of Islamic financing, such as leasing, equity participation, etc.