3 Types of Islamic Financial Institutions You Want to Know

Islamic Financial Institutions have their own importance in terms of the development of the whole industry. Despite the fact that Islamic financial institutions have a variety of forms, customers, and goals, they all have one thing in common. They must adhere to Islamic law. The following sorts of Islamic financial institutions serve Muslim and non-Muslim communities around the world:

Islamic banks

Islamic banks perform many of the same responsibilities as their conventional counterparts, but they must do them in a sharia-compliant manner. As a result, the products offered by an Islamic bank differ significantly from those provided by a typical commercial bank. Furthermore, the methods through which an Islamic bank invests its funds differ dramatically by using Islamic contracts.

Islamic capital market participants

The Islamic capital market is a marketplace for sharia-compliant financial assets and securities. Any investor, even non-Muslims, can participate in the Islamic capital market.

Islamic funds, Sukuk (Islamic bonds), and Islamic interbank money market funds are among the products bought and traded in the Islamic capital market (which are quite new and just now developing). As a result, capital market participants include Islamic investment fund managers and Sukuk issuers. They also include high-net-worth individuals looking to invest their money in sharia-compliant products. As the capital market is very young, it’s likely to grow and include more types of investment products as the Islamic finance industry matures.

Islamic index providers

When Islamic investment funds first came up, they compared their investment performance to well-known traditional indices (such as the S&P 500). However, that comparison was not relevant. Because Islamic funds are unable to participate in a large number of the businesses covered by those indexes. As a result, Islamic indexes have emerged as better standards for analyzing the performance of Islamic investment vehicles. Dow Jones Indices, S&P, FTSE, and MSCI are some of the major index providers that offer Islamic indexes.

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