What is Islamic Financing?

The economic simplification of these authors is that Islamic doctrine prohibits any form of interest. This view is still echoed today, not only by religious figures but also by Western regulators. As I and others have pointed out in detail in academic publications, traditional religious scholars do not support the application of this oversimplified view in modern finance. In fact, the actual operation of Islamic finance is based on interest.

Islamic Finance

The Islamic world has a well-developed business and a more prosperous financial industry. In the past, in order to deal with large amounts of money, banks in the Middle East had traditional meanings, and creditors and currency dealers relied on legal alternatives to obtain large profits. Modern, with the West

In the past half century, although Islamic banks and financial institutions have made great progress, after all, it is the practice of Islamic teachings in the sense of modern society. In the early stage, the reconciliation with modern financial theories inevitably encountered difficulties and deficiencies, and they needed continuous improvement. Only then can we conform to the trend of globalization of the world economy.

First, there is a lack of an authoritative leadership body to unify and regulate Islamic banks and financial institutions. Although Islamic banks and financial institutions both claim to adhere to Islamic doctrines and laws and bear the title of Islam, their respective business methods are different and closely related to the specific political, economic, and social environments of various countries. The explanations and views of the question are also not consistent, and the lack of religious authority organizations to uniformly formulate various economic and financial activity standards has restricted its continued development. As for the "interest" argument, some Islamic scholars believe that charging interest for productive investment activities is in line with teachings. However, some people think that modern bank interest is a kind of profit without paying labor, which exceeds a certain amount of income beyond the original loan amount. Therefore, the current regulations on financial interest and training prohibiting "interest" are completely No match. Different Islamic countries will have different views on the same banking business and will be treated differently. Due to economic globalization and close financial exchanges between the East and the West, an authoritative institution is needed to resolve the conflicts and inconsistencies between Islamic banks and financial institutions and similar institutions in the West. Although large western banks have established Islamic branches, they are still outside the Islamic financial business.

Secondly, Islamic banks and financial institutions also need to develop some new businesses, investment ideas, and business methods to promote the transformation of Islamic banks into an all-rounder, fully play the financial functions of Islamic banks in various economic fields, and provide more financial activities for all financial activities. Fuller and wider financial services. Only when Islamic scholars realize the integration and growth of western bank capital and industrial capital, and when they form a monopoly of financial capital, they will do everything possible to restrict the bank's functions, so that it will not become a place to gather wealth, and appropriate the stock market limit. Islamic banks and financial institutions mainly raise funds, issue loans and make investments. They actually play the role of investment companies, which makes it unable to absorb and trade bonds of western countries as their current assets. Therefore, in some western countries, Islamic Banks cannot be registered as full-function banks and are excluded from certain financial activities, so they lack the ability to compete with ordinary commercial banks. They have realized the disadvantages of traditional financial institutions, such as narrow business scope, few trading varieties, and low liquidity. They have launched some new measures: opening trading varieties that can meet customers' hedging requirements in high-risk financial markets such as the foreign exchange market. New ways of doing business, such as reselling debt, paper debt, or new investment management. Some Islamic banks use the Internet to provide customers with a full range of financial services, such as automatic deposits and withdrawals, insurance business, stock trading, e-commerce, access to financial information, and financial legal advice.

Finally, the capital market is underdeveloped and lacks accounting systems and accounting standards related to financial operations. The main problems of the capital market are the small number of investment types, the low level of securitization, the low liquidity of securities, and the small number of investors caused by these defects. The customers of Islamic banks are mostly small and medium-sized enterprises, their strength is not strong, their capital base is not strong, their ability to bear economic risks is poor, and their disadvantages are obvious compared with secular banks. Islamic financial institutions make up for it by issuing funds, such as equity funds, commodity funds, and leasing funds, but this is only used for business activities whose capital structure and operating method are in line with Islamic teachings, so the market has room for development and gains new Growth point, increase the rate of fundraising, development is difficult.

Doctrine-dominated business activities, and thus the market's development space, have achieved new growth points, raised capital raising rates, and made development difficult. The Islamic world still needs to formulate a set of accounting systems and accounting standards that meet the requirements of Islamic teachings and economic activity standards, and can ensure that information in the process of economic activities is fully and timely disclosed as in Western countries and is in line with universal standards. But this will be a fairly long process.

Today, Islamic banks and financial institutions are working hard to find a strategy that is more suitable for their survival and development, and actively cultivate composite financial talents to get involved in overseas markets. While competing with secular banks, they are also constantly harmonizing with secular economic laws, adapting secular administrative systems, and reconciling secular ideology to win new development space. ^[1]