Capital markets are an important component of the financial system for raising funds for long-term investment. They provide opportunities for diversification of risk through cross-sectional risk sharing. The long-term investments are facilitated through a series of short-term contracts in the form of tradable securities enabling the investors an opportunity to exit or enter through trade. Thus they provide an element of liquidity to the otherwise illiquid assets. The secondary market also provides pricing and valuation of assets on a continued basis thus eliminating arbitrage and inefficiencies

1. EBB 30303
ISLAMIC ACCOUNTING PRACTICES
THE IMPORTANCE OF
ISLAMIC CAPITAL MARKET IN MALAYSIA

2. WHAT IS ISLAMIC CAPITAL MARKET?
• important component of the financial system for raising
funds for long-term investment
• provide opportunities for diversification of risk through
cross-sectional risk sharing
• provide an element of liquidity to the otherwise illiquid
assets
• more relevant in an Islamic economy because prohibition of
interest entails a greater reliance on equity and asset-based
finance

3. HISTORY AND OVERVIEW OF ISLAMIC
CAPITAL MARKET IN MALAYSIA
• In year 1961, Egypt have start a Islamic finance by
establishing the earliest Islamic Bank ( Mit Ghimar Bank)
• In year 1970 to 1980 ,Islamic finance involve in financial
market by establishing many Islamic bank, Takaful and
invesment companies.
• The boost in Islamic Capital Market came after financial
liberalization. ICM started in 1980s in Malaysia.

4. OBJECTIVES OF ISLAMIC CAPITAL MARKET
CAPITAL MARKET
• organised securities market (an integral part of capital market)
which can provide sufficient marketability and price continuity
for shares
• a market that can provide a reasonable measure of safety and
fair dealing in the buying and selling of securities
• properly organised stock exchange assists in a reasonably
correct evaluation of securities in terms of their real worth.
• securities the stock exchange helps in the orderly flow and dis-
tribution of savings as between different types of competitive
investments

5. OBJECTIVES OF ISLAMIC CAPITAL MARKET
ISLAMIC CAPITAL MARKET
• facilitate the development of various competitive products and
services related to the Islamic capital market
• to create an independent market to mobilize Islamic funds
effectively
• to ensure an appropriate and comprehensive accounting
• tax and regulatory framework and to enhance the
international recognition of the Malaysian Islamic capital
market

6. IMPORTANCE OF ISLAMIC CAPITAL
MARKET IN MALAYSIA
CAPITAL MARKET
• immobilising saving and channel is in them into productive
investments for the development of commerce and industry
• important link between savers and investors
• facilitates the movement of stream of capital to be used
more productively and profitability
• provides a market mechanism

7. IMPORTANCE OF ISLAMIC CAPITAL
MARKET IN MALAYSIA
ISLAMIC CAPITAL MARKET
• parallel market to the conventional capital market
• complementary role to the Islamic banking system in
broadening and deepening the Islamic financial markets in
Malaysia

8. DIFFERENCES AND SIMILARITIES OF ISLAMIC
CAPITAL MARKET AND CONVENTIONAL CAPITAL
MARKET
Similaritites
Both Islamic Capital Market and Conventional Capital Market
have their own regulated body to make sure that their
standard and sector were following their own standard that
been issued by their own regulated body

9. DIFFERENCES AND SIMILARITIES ISLAMIC CAPITAL
MARKET AND CONVENTIONAL CAPITAL MARKET
Characteristics Islamic Capital Market Conventional Capital Market
Shari’a
framework
Products designed based on Shari’a law-
Shari’a scholars ensure adherence to
Islamic Law and provide guidance
Not based on religious laws or guidance
Prohibited
transactions
Islamic capital market restrict stocks of
company dealing with unlawful activities
such as pork, alcohol, tobacco,
pornography and arms & ammunition.
Except for money laundering and the
financing of criminal activities, these
activities are permitted.
Financing Islamic bank provide equity capital to a
project or venture. Losses are shared on
the basis of equity participation while
profits are shared on a pre-agreed ratio
Venture capital companies and investment
banks which typically take equity stakes
and management control of an enterprise
for providing start up finance.

10. CHALLENGES TO DEVELOPMENT OF
ISLAMIC CAPITAL MARKET
• Some terms that might be acceptable to scholars from one
school of Islamic jurisprudence, may not be valid for
another.
• Convergence of Shariah principles and interpretations are
important.
• ontinuous interaction among Shariah scholars can help
overcome this issue, the dearth of such experts is a critical
deterrent.
a) Difference
in Shariah
interpretation
• Current regulatory frameworks for Islamic financial
services vary across different countries.
• There is still uncertainty regarding accounting standards
to be followed.
• Regulators are required to constantly keep themselves
abreast with new market developments, focusing on
ensuring adequate and timely supervision of the market.
b) Inadequate
regulatory
framework

11. CHALLENGES TO DEVELOPMENT OF
ISLAMIC CAPITAL MARKET
• There are very few collaborative efforts on the regulatory
front at the international level, there is no uniform
approach for monitoring and enforcement of securities
laws.
• Market players have to go through an approval process
that is lengthy, which defers the development of new
products considerably.
c) Lack of
standardization
and presence of
numerous
• Islamic financial institutions face difficulties in efficiently
managing their day-to-day cash and short-term liquidity
needs.
• Several financial institutions are currently focusing on
human capital development, standardization of products
and practices and developing a framework for
monitoring and regulatory purposes to strengthen the
Islamic financial system
d) Need for
liquidity and
risk
management

12. BENEFITS OF ISLAMIC CAPITAL MARKET IN
MALAYSIA
• Malaysian financial system in general and the
Islamic Banking and Finance System in particular
serves many functions. Chief is the role of an
intermediary between the various surplus and
deficit units of the economy.
Intermediary
• Besides the banking system, the Islamic Capital
Market is also an alternative market to raise
funds.
Alternative
Funding Market
• Another area of benefit to the Islamic Banking
and Finance System is the opportunity in the
Islamic Capital Market to provide Off Balance
Sheet Funding
Off Balance
Sheet Funding

13. CONCLUSION
In conclusion, we believe that with further development of the
Islamic Capital market in Malaysia, we will broaden and add
further depth to the overall capital market.
By doing so, we hope that the Islamic Capital Market can
provide a significant contribution to the overall objectives of
the Islamic Banking and Finance System as set out in the
Financial Sector Master Plan.