Islamic Capital Markets

The book I read to research this post was Islamic Capital Markets by Abbas Mirakhor et al which is an excellent book which I read at

http://safaribooksonline.com

I think it's a good idea to read about other cultures and religions. The authors of this book teach a course in islamic finance and world markets and so they are quite qualified to write this book. Muslims aren't allowed to charge interest which lets face it can spiral out of control, but can charge a loan fee and also can't invest in things like gambling and must put a portion aside for defaulting loans called sukkuk  and also must give some to the poor. This book focuses on the Malaysian Stock Exchange which has been instrumental in introducing forms of investment acceptable to Islam. It is of course a predominantly muslim country. For many years it was becoming a stagnant stock exchange with many people buying shares and then waiting many years for them to mature and the amount being invested was getting less and less. Government and banks needed some kinds of bonds to be introduced  to help them weather shortfalls in their own finances. Many types of Islamic bond need the purpose of the bond and what it will be spent on made clear. Often the bond is secured on something and has a fixed payout. If it's secured on something the debtors liability is limited. The bank's bonds reach maturity quite quickly and the government ones more slowly. There are also bonds for other industries to raise money and there is also share dealing where you can arrange for them to be bought up by a clearancehouse if they rise or fall to a certain point. Also no one should take on more risk than he can afford which also applies to companies so that a large loan will often be shared by several banks. This of course helps prevent banks and other financial institutions going out of business. I really enjoyed reading this book and I thought it's quite interesting.