Islamic capital marketing is one of the key players in the growth of Islamic financial institutions in the Muslim world. The primary purpose of this market is to facilitate or allow individuals, government and companies with surplus funds to transfer the same to other people in need of such funds. It therefore helps in stabilizing and regulating the flow of money and acts as a parallel market for the other kinds of capital markets for capital seekers and providers.
The market attracts funds from both internal and external markets. Some of the international sources of funds for these banks include high net worth individuals or corporations from oil-rich countries. Business sector is also one of significant contributor of the funds. There has been a potential increase in the Islamic products due to lack or prohibition from non-Muslims to participate in the Islamic capital markets.
The origin of the Islamic capital market dates back in the 1970s and 1980s when individuals with high net worth sought for ways to invest their surplus funds they got from sale of oil. By 2008, the Islamic capital market thrived because of retail demand.
To ensure success and sustainability, the Islamic capital markets had no obligation to find new competitive products. They introduced equity funds and Islamic bonds that regained their competition in the markets. They attracted and served non-Muslims by providing numerous products that competed with the conventional financial products.
Islamic capital market consists of the Islamic equity markets, which comprise companies that operate in activities allowed by the sharia. To ensure that the sharia laws are followed to the later, Islamic stock screening helped to regulate and ensure that trading was permissible. Revenues derived from activities involving pork, alcohol and gambling were not considered in the Islamic equity market.
In summary, financial products that did not exist in the Islamic capital market found their way in the market. However, some products like Islamic hedge funds are still controversial in many parts of the Muslim community, since the funds are viewed as stimulating short selling.