Islamic embedded options in structured products of Malaysia: issues and challenges
Structured Products could be defined as savings or investment products in which the return is linked to an underlying asset with predefined features such as the maturity date, coupon date, capital protection level (SMR Wealth Management). Islamic structured products are essentially Shariah-compli...
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| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
2020
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| Subjects: | |
| Online Access: | http://eprints.unisza.edu.my/6952/1/FH02-FPP-20-38977.pdf http://eprints.unisza.edu.my/6952/ |
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| Summary: | Structured Products could be defined as savings or investment
products in which the return is linked to an underlying asset with predefined features such as the maturity date, coupon date, capital
protection level (SMR Wealth Management). Islamic structured
products are essentially Shariah-compliant structured products. They
bear similarities to conventional products in terms of purpose,
economic benefits and basic structural features. The difference being
that Islamic structured products adhere to Shariah principles by
avoiding riba (usury), gharar (uncertainty), zulm (injustice), and
operate holistically in a Shariah-compliant manner. This includes
utilizing Shariah contracts approved by the Shariah Advisory Council
of the Central Bank of Malaysia to structure the investment and
contains underlying assets that are permissible by Shariah. Despite
having been introduced into the industry since its establishment,
implementing Islamic structured products have many Shariah issues.
Using in-depth analyses of both the literature and several case
studies for structured products in Islamic banks in Malaysia, this
paper analyzes and assesses the most important Shariah issues
surrounding Islamic structured products in Malaysia. Our findings
confirm that the current implementation of Malaysian structured
products continues to possess a number of Shariah issues, which
need to be corrected by both the banks and the industry in order to
have fully Shariah-compliant structured products to be operational
in the market. |
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