Islamic Asset Management and Shariah Screening

This chapter is concerned with financial assets and products that are traded on capital markets that the shariah deems permissible, and the functioning of capital markets themselves. A methodology of shariah screening has been developed by scholars that determines if a certain asset is shariah‐compliant or not. As the authors discuss financial markets, the screening is applied by and large to equities. A stock exchange, for instance, is a platform where companies issue shares to raise capital and where investors go to invest capital. This is the primary function of a stock exchange and the market for initial public offerings is known as primary markets. Islam forbids speculative trading. Islamic capital markets should not be a zero sum game.Although derivatives instruments can function as hedging tools and offer mechanisms of sharing risk, they have themselves become objectives of speculative transactions.