Financial Instruments: Islamic Versus Conventional

Abstract

The financial system of any economy is made up of its financial institution, financial instruments and financial regulators. However, the nature of the instruments, institutions and regulations depend on the economic system and philosophy prevailing in that economy. This chapter presents a simple and precise narrations on the meaning of financial instruments, their forms and characteristics, fundamental principles of Islamic finance as well as the similarities and differences between convention and Islamic financial instruments. A case study reflecting the core merits and pitfalls of financial instruments is presented to further press home the understanding of the topic. This piece is intended to provide readers with the basic understanding of issues raised.