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Published in:
2016 | OriginalPaper | Chapter
2. Islamic Financial Instruments
Authors : Suren Basov, Ishaq Bhatti
Published in: Islamic Finance in the Light of Modern Economic Theory
Publisher: Palgrave Macmillan UK
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Abstract
In this chapter we are going to describe the major Islamic financial instruments and compare them with the conventional ones. Islamic financial instruments can be divided into equity-based and debt-based instruments. The first group includes mushārakah, a contract governing the pooling of labor and capital, and mudārabah, an agency contract. The second group consists of murābahah, a generic sale contract, salam, which allows the seller not to be in possession of the good at the time of sale; however, the good must be fungible and readily available on the market, istisnā’, which is similar to salam, but dispenses with the fungibility requirement, and ijarah, which refers to renting someone’s goods or services.