The Role of Islamic Legal Institutions in Transformation of Financial Markets

This article aims to demonstrate the impact of legal institutions and Islamic principles on structure and performance of financial markets. The main impacts include the ban on asset creation based on debt and its prescription according to real value. As a result, money market is omitted from the structure of financial markets and usury including bonds and their derivatives are made forbidden. On the contrary, asset market and capital expand and financial institutions such as banks, stock market, and central bank manage the financial policies instead of creating money and implementing monetary policies.