It is where financial instruments are traded Mobilise large amount of

It is where financial instruments are traded mobilise

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people who have investment opportunities. It is where financial instruments are traded. Mobilise large amount of relatively small savings and pool them together to channel them for productive investments in the economy . For Islamic financial system , the mechanism to mobilise funds from Surplus Financial Unit ’s and Deficit Financial Units must be done within the parameters stipulated by Shariah ( Islamic Law ). The behaviour and operation of financial institutions and markets operating under the Islamic financial system need to comply with the rules and regulation under the Shariah( Islamic law) . 4. Distinguish between direct and indirect finance Direct finance: there is no financial intermediaries 1
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- Borrowers borrow directly from lenders in financial markets by selling financial instruments/ securities - Financial market issue claims on borrowers directly to savers - Securities: asset to buyers (lenders) but liabilities to issuers (borrowers) Indirect finance - Financial institution act as middle-man by holding a portfolio of assets and issuing claims to savers - Borrowers borrow indirectly from lenders via FI IFI : Islamic financial institutions 5. Discuss the SEVEN(7) functions of Financial Markets a. Saving function: Provides a conduit for the savings profitable outlet for utilization of savings in bonds, stocks and other financial claims b. Credit function:
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  • Summer '15
  • Economics, concept of Financial System

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