Islamic Screening Mechanism of Islamic Capital Market—A Comparison Between the Fatwa—DSN-MUI, the Kuala Lumpur Stock Exchange Islamic Index and the Dow Jones Islamic Market Index
Abstract
Globally, the role of capital market is very essential. Capital market is the source of capital for a firm. According to the theory of capital structure, Pecking Order Theory, which emphasizes the hierarchy of financing, stock in capital market is the last choice for firm financing if the internal financing hasn’t sufficient funds for the operational activity of the firm. The existence of the Islamic capital market is very important because of the increasing Islamic business in the world. In Indonesia and in the world in general, Islamic product is only available in the conventional capital market, so it is necessary to decide the mechanism of screening the stock in the Islamic capital market to obtain the product of Islamic capital market according to sharia compliance. This study will compare the mechanism of stock screening according to the Fatwa DSN-MUI, the Kuala Lumpur Stock Exchange Islamic Index, and the Dow Jones Islamic Market Index. This study uses qualitative method. The result of the study gives the explanation of the mechanism of stock screening in the Islamic capital market based on the Fatwa DSN-MUI, the Kuala Lumpur Stock Exchange Islamic Index, and the Dow Jones Islamic Market Index and their role for the development of the Islamic capital market.
Keywords: Islamic screening, capital market, Fatwa DSN-MUI, the Kuala Lumpur Stock Exchange Islamic Index, Dow Jones Islamic Market Index
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