Harmonizing Sharia Principles and Market Practices: Conceptual Mechanisms of Islamic Investment in Capital Markets

Abstract

The intersection of Islamic jurisprudence and modern capital market operations presents both a challenge and an opportunity for advancing ethical finance. This study examines the conceptual and structural mechanisms through which Islamic investment instruments can align with sharia principles while fulfilling the practical demands of capital markets. Employing a qualitative, document-based methodology, the research synthesizes classical Islamic contracts—mudārabah, mushārakah, and ijārah—with contemporary financial instruments such as sukuk and Islamic mutual funds. Standard-setting bodies, legal frameworks, and compliance screening tools are shown to play a pivotal role in translating religious norms into operable investment strategies. The study addresses three core research questions concerning the operationalization of sharia principles, the structuring of compliant instruments, and the reconciliation of normative values with market imperatives. Findings affirm that ethical finance in Islam is not only viable but scalable, provided it is supported by financial innovation, regulatory coherence, and interdisciplinary collaboration. By integrating the objectives of Islamic law (maqāṣid al-sharīʿah) into investment practice, this research contributes to the theoretical development of Islamic finance and offers actionable pathways for sustainable, compliant market growth. These insights are relevant for both academic discourse and institutional strategy in the expanding domain of Islamic capital markets.