After almost half a century of development in islamic finance, which took shape in the 1970s, islamic finance has now expanded to more than 130 countries and territories around the globe as a financial medium in parallel with traditional financial systems. The accumulation of oil wealth in muslim countries has always played a non-negligible role in the establishment and development of the islamic financial system and will continue to influence the process of development of islamic finance; nearly 1. 6 billion muslims around the world also provide a promising market for islamic finance, and it is foreseeable that the total volume of islamic financial operations will remain growing relatively rapidly over the coming period, while islamic finance is gradually being accepted and adopted by the non-muslim world as a concept of risk and profit arrangement, with countries such as japan actively preparing to issue islamic bonds。
Summary of islamic financial characteristics
(i) main features of islamic finance
First, the islamic financial system, as a distinct market for conventional finance, has developed through recent decades a relatively well-developed theoretical system of financial instruments based on its basic ideas and instruments, which have enabled the functioning of most conventional financial instruments。
Second, islamic finance, which emphasizes the link between finance and the real economy, has been given world attention and attention by its participants, who have maintained a low financial leverage ratio and have better absconded liquidity risks, allowing them to maintain relatively robust operations during the 2008 financial crisis。
Thirdly, the rapid growth of islamic financial markets in recent years and the rapid expansion of total assets have become an integral part of international financial markets, with a number of non-muslim countries, in addition to muslim countries, showing strong will to participate in islamic finance and a faster development of the islamic financial system。
Fourth, islamic finance is an active exploration to resolve “the contradiction between islamic financing practices and international financial regulation”, and in practice it is an imitation of the functioning of conventional financial instruments in order to conform to islamic teachings. Although structures and processes differ somewhat, they do not, in essence, depart from conventional finance。
(ii) distinction from conventional finance concepts
The difference in attitude towards interest payments is the most striking difference between islamic finance and conventional finance, with modern conventional financial systems arising and developing in western christian societies, which were also banned from interest at an early stage of development, as reflected in the bible's old testament: chapter 23, paragraph 20, of the episode: “it is not your interest to lend your brother money, food, or anything that could produce profit.” paragraph 21: “it is for the benefit of the outsiders, but not for the benefit of your brother, so that your lord, your lord, may bless you in the land you are going to occupy and all that you have done.”
Initially, the concept of brotherhood in the preceding two paragraphs of the old testament was very broad, and in the early christian consciousness, all human beings were equal before god and belonged to brothers, and mutual assistance between brothers should not be subject to interest charges, especially at high rates. Since then, the christian understanding of these two paragraphs has profoundly affected western business values, namely, demanding additional time-based gains for help to others, including borrowing, against god's will, and not going to heaven after death. It was not until the 16th century of the christian religious revolution that the above concepts were changed, and the idea of the immorality of interest was gradually abandoned, and the marketing of interest on loans was no longer religiously restricted。
The earlier christian conception of interest, similar to the current islamic conception of interest, considered interest on money to be contrary to the laws of nature and immoral. Following the christian liberalization of religious restraints on interest, the modern financial system was gradually developed with interest at its core. Islamic finance, for its part, has adopted different approaches to interest, replacing and circumventing it with profits or gains, and has developed the basic theories and instruments of islamic finance in recent decades on the basis of which, at this stage, its ideas do not go beyond conventional finance。
Emphasizing that the direct link between financial activity and real economic activity is another important feature of islamic finance as distinct from conventional finance, regardless of the source of the doctrine, and that in practice, an objective degree of suppression of excessive bubbles in financial assets has contributed to the prosperity of the real economy, and that the relatively robust operation of islamic financial institutions in the financial crisis since 2008 has also served as a positive effect that deserves to be drawn upon in the modern conventional financial system。
(iii) contemporary islamic culture and islamic finance
In today's world, where culture and economy, culture and finance intersect, contemporary islamic culture profoundly influence the political situation and economic development of muslim countries around the world, thus having an important impact on the shape of islamic finance. Unlike buddhism, taoism and christianity, islam is a religion of “accession”, which binds and affects all aspects of daily production and life, such as the “five prayers a day” of one of the “five pillars” of conversion to islam, a constant demand for the religious rites of every muslim and religious requirements that pervades all aspects of life, which greatly strengthens the religious beliefs of muslims, while the religious precepts of the children of muslim families are born muslims and the severe punishments that will be imposed upon them by withdrawal, greatly enhances the cohesion and stability of the muslim community。
Within muslims, the choice of islamic culture in different countries has largely influenced the political pattern of the country, with the shia country, iran, in the context of international sanctions in recent decades, creating a pattern of relative secularism, the election of heads of state and the maintenance of significant political influence by religious leaders; secular muslim countries, such as egypt, turkey, indonesia and malaysia, where the direct influence of religion on politics has receded, while the influence of religion on the population has mainly been based on individual beliefs and traditional life habits; and secular gulf monarchies, which have maintained relatively strict adherence to islamic precepts, with five pilgrimages per day more prevalent, and more constraints and restrictions on daily life; and more radical fundamentalism, which has given rise to an extremist political form of religion such as isis。
Islamic culture influences political patterns, which in turn are compounded by political patterns, affecting the economic development of muslim countries. In almost all muslim countries in the middle east and north africa, the influence of islamic culture has led many to a relatively dispersed and fateful character that has somewhat affected social efficiency; religious activities, such as repeated prayers a day, and in many countries, such as saudi arabia, have also disrupted normal productive activities, and restrictions on women's participation in work, among others, have largely constrained the further release of productivity. However, the strict regulation of theft, fraud, etc. By sharia law and islamic culture, as well as the cruel punishment of such acts in fundamentals, have contributed to the creation of an environment of relative integrity in muslim societies, reducing the cost of social communication and operation and contributing to economic development。
Islamic finance is rooted in islamic culture and is also constrained by the economic development of muslim countries under the influence of islamic culture. Islamic finance is the foundation of muslims ' demands for the purity of religious morality and the constraints imposed by sharia law on the profitability of investments。
(iv) prospects for islamic financial development
Islamic finance has developed with its particular historical background and conditions and, despite rapid growth, its share is currently less than 1 per cent of the global financial services market. As international oil prices continue to fall in recent years, the fiscal revenues of the oil-producing countries of the middle east and north africa, which are the main muslim countries, have been greatly affected, many large-scale government spending projects have been cancelled or postponed, and financing needs have decreased, which may further affect the growth of islamic financial markets。
Most of the basic islamic financial instruments and existing products are mimics of conventional finance, subject to sharia law, and although their ideas have a strong resonance with the current overly bubbled traditional finance, it is difficult to say that there are substantive and subversive differences. For example, in the financing structure created with the help of murabahah (cost added), the bulk of the commodities used to achieve lending and repayments, traditionally requiring physical assets such as gold, silver, etc., have now started to construct more convenient trading structures with financial assets such as stock-in-suppliers, which is far from the concept of islamic finance encouraging increased profits, more like a structure designed simply to circumvent the concept of interest。
At the very least, there are many obstacles that need to be crossed in order for islamic finance to evolve from a small mass product aimed primarily at muslim communities to a global one. These include: further standardization of islamic finance, the establishment of uniform regulatory standards, regulatory systems and dispute adjudication mechanisms; improvement of markets among islamic financial institutions, the creation of a legal framework and platform for islamic financial institutions to participate in international comparable markets, and the resolution of the lack of monetized instruments in compliance with islamic law, thereby alleviating the liquidity management difficulties facing islamic financial institutions; and improving the effectiveness of islamic financial products so that they have a level of return that is competitive with conventional finance。
The global population base of muslims of more than 1. 6 billion and high population growth rates are important underlying drivers of the continued development of islamic finance, but islamic finance is not yet in a position to replace or develop into an alternative system that is counterproductive to conventional finance, either in terms of its basis of development or in terms of its philosophy and product, and in order for islamic finance to flourish, in the current international economic situation, integration with conventional finance is likely to become an option that must be faced. Gradually moving away from religious moral constraints, participating in and integrating into global financial markets as an idea of risk and profit-making arrangements, is perhaps the most realistic and viable direction for the development of islamic finance。
Relevant policy recommendations
Our islamic financial development is at an initial stage, and financial institutions and enterprises have less experience in participating in and using islamic finance. Based on the foregoing analysis and a summary of the characteristics of islamic finance, and from a feasibility perspective, the relevant policy recommendations are set out below。
On the government side, the first is to continue the islamic financial pilots in ningxia and elsewhere, to draw lessons, where appropriate, and to study carefully the development of islamic financial policies that are appropriate to china's circumstances; the second is to establish islamic bonds, fund offshore trading platforms, drawing on the experience of developing islamic finance in non-islamic countries and regions such as london, ireland, singapore and hong kong, and to improve the relevant regulatory systems and safeguards to attract islamic financial demand for issuance; the third is to consider issuing islamic bonds, particularly by local governments, using investment in islamic integration to support infrastructure development; the fourth is to incorporate islamic finance's emphasis on linkages with the real economy and avoid financial speculation; and the fourth is to improve the relevant policy regulations and regulations to enhance the stability and risk resistance of our financial system; and the fifth is to strengthen islamic financial talent development。
On the one hand, financial institutions, in cooperation with mature international islamic financial institutions or international financial institutions with islamic financial windows, are involved in islamic finance and gain experience through inter-bank cooperation; on the other hand, chinese financial institutions, in their branches in developed islamic financial areas such as the middle east, north africa and south-east asia, are considering applying for islamic business windows or acquiring islamic financial business competences, including through acquisitions, and expanding their channels of operation; and on the other hand, islamic financial markets are being used to obtain low-cost financing on the basis of acquiring islamic business competencies。
From the perspective of chinese-owned enterprises, the use of islamic finance to finance outsourcing projects and the export of large-scale equipment packages has been actively explored, with a view to enriching financing modalities, services “out” and national strategies such as “across the street”。
Concluding remarks
With the accumulation of oil wealth in the islamic countries of the middle east and north africa region, islamic finance has grown rapidly, driven by a united islamic state, as an emerging force in the world’s financial arena, but in today’s globalized economy, islamic finance continues to face many challenges in its connection with conventional finance and in its participation in international competition, such as the lack of a well-developed and unified legal system, and the fact that business innovations are often mimicated in conventional financial products. The identification of points of convergence with conventional finance and the establishment of a globally harmonized system of operational norms and adjudication, consistent with the principles of sharia law, will be key to influencing the further movement of islamic finance to the world。
While the creation and development of islamic finance have its particular historical background and realities, its related ideas deserve reference and inspiration, and participation in islamic finance may open the way for the chinese government, financial institutions and enterprises to expand international cooperation and access to relatively cheap financial resources, it should also be noted that islamic finance is not currently in the mainstream of the world, that its mode of operation does not emerge from the realm of conventional finance, and that the development and establishment of an islamic financial system may not be adapted to our national circumstances, and that islamic finance should be explored and utilized on the basis of realistic and progressive principles。
