A. O. FILONIK

Candidate of Economic Sciences

Institute of Oriental Studies of the Russian Academy of Sciences

Keywords: islamic banking, Islamic financial industry, financial business, assets, microfinance

For half a century, Islamic banks have become famous for not recognizing charging interest for money transactions, which is categorically condemned in Islam as usury, and participate in the investment process as business partners, sharing all the risks of the funded project. Bank profits are generated from the income from the capital placed in such a project, which is forbidden to keep in a pot, which puts it entirely at the service of society, contributing to the idea of an even distribution of benefits and social justice.

Islamic banks are more lenient than classical ones, which is especially important right now, when extreme instability in the Arab East significantly complicates the situation in the markets, turning off an important part of the region from normal economic life. Many economic institutions, even on the periphery of a military conflict, operate with a high degree of risk and are forced to build their activities in an unhealthy environment, which always has a chance to deteriorate sharply in circumstances that are difficult to foresee.

Islamic banks, which, according to the established practice, are actively operating in the economy of Arabian oil exporters and beyond (mainly in Malaysia and, in a point version, in a number of Western countries), are in a better position in this regard. They are focused on moving away from the problem Arab States and are not subject to accidents of a non-economic order. It was here that after the oil price revolution in the mid-70s of the last century, they earned the reputation of a reliable business partner and quickly formed into an organic element of the financial system that ensures the stability of investment, trade and credit transactions.

ARAB CAPITAL IN AN ISLAMIC IMAGE

In the zone of relative calm, the Islamic financial system continues to operate according to a given algorithm, gradually increasing its capabilities and expanding the area of its claims. This is, in general, a natural process that has been going on for decades, and is mainly associated with a physical increase in Islamic capital and other assets accumulated during successful establishment in a related environment that responds quite vividly to the Islamic initiative of Arab money capital.

Nevertheless, this initiative, even in its own civilizational field, comes across the fact of the existence of ordinary banks, which historically did not experience the influence or competition of other credit institutions.

But the financial power of the Arabian owners of foreign exchange resources has changed the situation in a certain way. Their interests collided with foreign capital, and the internal structure of banking and financial activities in the region began to change, spurred by the dynamics of the globalization process. Arab capital was drawn into it mainly as an adept, not a pioneer. But in fact and in the process, it has managed to prove its effectiveness as an equal participant in the system of global capital circulation.

In their own countries, Islamic banks rely on advantages not only because they have successfully entered a highly competitive environment. They are psychologically more comfortable for Muslim clients. They also follow the Islamic tradition of social justice. The need for it is high on the national scale-

It is becoming increasingly popular, especially since the beginning of protest movements in a number of Arab countries in 2011.

By that time, the rise of national consciousness was a factor contributing to the final institutionalization of the idea of Islamic banking. It has been implemented in a major Arabian project and has accumulated enough strength to expand within its borders and, to a certain extent, compete with the largest conventional credit and financial brands on their territory in the areas of settlement of the Muslim diaspora.

In the mass consciousness of the Muslim Ummah, the existence of this project has fixed a certain quite formulated subtext. It creates confidence that interaction with Islamic banks is an act of fulfilling a religious duty, and brings additional moral satisfaction from the fact that the clients ' money serves a good purpose and in an undefiled form. Otherwise, it is difficult to explain the success of Islamic banks, which find supporters not only in the world of Islam, but also in other civilizational systems. After all, the idea of a Sharia bank's investment participation in a funded facility echoes the concept of social partnership, which has become widespread in the Western world as a means of mitigating the severity of class struggle.

The transformation of Arab capital into Islamic capital can, to a certain extent, be seen as a collective Arab response to the global claims of Western capital, which should have been blocked ideologically and economically. In principle, this point fits into the scheme of relations of a part of the Arab intellectual elite to globalization, the concept of which cannot appeal to the Arab public consciousness, especially since it is linked to excesses in consumption that are unacceptable for a true Muslim and increases the dependence of the Arab-Muslim world on external influence.

Other groups, including the management layer of the financial and economic block, are more tolerant of external influences. Their vision is based on the fact that ordinary banks can hardly be significantly squeezed out of their positions, at least in the foreseeable future. They play the role of a self-sufficient force in the world of finance, which equally has the right to exist and to share in the profits from the circulation of capital.

Sharia finance, extracted from the past, has become a successful move of Arab economic thought. Historically, Arab initiatives have led to major changes on the world stage. In the recent past (in the mid-1970s), there were important economic and technological developments in the life of the West. This, in one case, was due to its accelerated transition to the era of energy conservation, in another-to the need to seriously take into account the influence and financial power of Arab oil exporters. And the innovation in the form of Islamic finance also makes us talk about ourselves.

In any case, Islamic banks have found a worthy place in global finance and even formed an influential niche, which they are improving with the expectation of further expansion. And the newly developed economic instruments of the pre-capitalist era demonstrated the broad adaptive capabilities of Arab economic thought and its ability to be embodied in new images.

Naturally, one should not exaggerate the importance of Islamic holdings, if only because ordinary banks within the Arab borders have not been reborn and have only limited themselves in some cases to Islamic branches. The activity of Islamic banking institutions against this background is much narrower geographically and is not devoid of noticeable burdens. The latter are expressed in the fact that institutions have rather cumbersome apparatuses, which raises doubts about their effectiveness. But they must resort to complex additional research on financial, economic, and religious issues, so as not to violate the Sharia restrictions imposed on transactions.

A significant drawback that can reduce the popularity of Islamic banking among non-Muslim clients and limit its role in modern credit and banking operations is seen in a certain archaization of commodity and monetary settlements. It consists in the fact that it can cause some associations with the medieval foreign cultural era, the attributes of which have never been present in European economic usage before. Non-believers often do not take into account that the terminology is more intended to set off the national identity of the credit and financial system in its traditional guise. But they may conclude that isolation is deliberately emphasized, and this creates a moral barrier that hides the danger of unforeseen risks for foreign clients.

But it hardly makes sense to overemphasize the traditionalist framing of the Islamic banking phenomenon. Moreover, all operations are carried out in a modern society, the latest technical means are introduced for them, the subject is also the population of the region, which includes-

integrated into modern types of production and services through both Islamic and conventional banking channels. And this whole organism creates an environment that, in general, has proven its ability to adapt to the conditions of a developed market. The real sector and other parts of the reproduction mechanism that create the foundations for the viability of the state are connected to it. They overwhelmingly use standard schemes that do not have a special national coloring and, in general, are universal. In this capacity, they make the economic systems of the Arab and entire Muslim world an integral part of the global economic space and obey its laws.

ISLAMIC BANKS ON THE MARCH

The " Islamic economy "(and, in fact, the financial bloc) is developing quite rapidly. Its total assets were estimated at $2 trillion at the end of the first decade of the new century (for scale, the losses of Arab countries from the global financial and economic crisis of 2008, as of 2009, reached $2.5 trillion).¹. At the same time, it is localized in segments of the geographical space inhabited by 1.6 billion people. person ². Total funds are projected to reach $3.4 trillion by 2020, which should serve as proof of the dynamism of the process3. Meanwhile, there are other estimates -only $¹ trln4.

Discrepancies can be considered the result of conflicting accounting practices or intrigues that often accompany large-scale activities that are closely related to their limits. Otherwise, it is difficult to explain the reasons for such instability of the indicator for an enterprise applying for world recognition, such as Islamic banking, which attracts financial flows in multi-digit absolute figures.

Islamic finance has provided strong evidence of strong growth. But now some problems began to be detected, restraining the roll-up. It's probably too early to mistake them for signs of system exhaustion. It is easier to assume that the time of exclusively quantitative accumulation of growth factors has ended.

This means, on the one hand, that Islamic capital has expanded to the maximum possible limits today, and significant quantitative shifts are difficult, although, of course, there are options for expanding positions, including in the Western world. On the other hand, it is really difficult to assume that the process can be constantly on the rise. A place in the market, apparently, has to be won back from ordinary banks, which do not give up even to large Islamic players.

Perhaps this is the reason for the formation of a large block of unincorporated financial businesses. Its subjects massively specialize in investments and redistribution of funds by Sharia funds, companies and family institutions, and form their own clientele from less well-off economic entities that are not interesting for" mainline " competitors. It seems that all sectors of the economy in the monarchies of the Persian Gulf, in one way or another, are permeated with links with Islamic institutions and work only with their support. During the years of the crisis, this sector suffered the most, being carried away by speculation and real estate transactions.

However, Islamic financial businesses at various levels show little sign of alarm. In unsinkability, he had the opportunity to make sure in the crisis of 2008-2009. Back then, in the Gulf countries, he didn't experience any drama, but rather some confusion. It was quickly stopped due to a wide maneuver of accumulated funds and the redistribution of monetary resources between sovereign funds and banks that managed to mobilize.

The Arab Spring and subsequent events also did not cause a shock or any noticeable changes in the financial situation of the monarchies. The authorities injected a hundred and fifty billion dollars into possible areas of growing social tension and prevented mass demonstrations, reducing them to just a few excesses, although they were different in intensity. Otherwise, Islamic banks, which are an integral part and, in a certain sense, the face of the financial system of the Gulf oil-exporting countries, could also suffer.

Supported by such a rear, Islamic financial capital remains in its former positions in the Arabian economy, actively participates in savings and services in all types of economic activities, while remaining an attractive area for capital investment. Against this background, its intention to maintain growth rates and not reduce the level of its presence in the regional and international banking sector and in the economy as a whole does not seem inappropriate.

The attractiveness of Islamic money as an object of professional activity creates not so much competition as a crowd in the market and the temptation to ignore the rules when making transactions to speed them up. And such frequent events become a serious challenge that undermines trust in the system on the part of strictly minded customers. No wonder the National

The Dubai Financial Services Authority strongly recommends that banks in the emirates, including Dubai itself, which claims to be a leader in Islamic banking, follow the established standards. If the pillars of the industry deviate from the requirements, and on such a scale that it excited the supervisory authorities, then the same trends will inevitably develop on the lower floors of business.

Meanwhile, even in countries less developed in terms of the density of the Islamic banking network, such as Pakistan, perfect implementation of all Sharia regulations is observed. The requirements are even more stringent than prescribed by the source documents. And this is an intolerable situation, when the moral primacy threatens to gain a foothold for proselytes. Therefore, along with recognizing the merits of Dubai, it, like other Islamic banking centers, is required to normalize all the functions inherent in the industry and strictly comply with internal regulations for compliance with regulatory documents.⁵

BANKING HORIZONS

However, Islamic economists are less concerned about how often banks circumvent the system's requirements than they are about why this has become a regular occurrence. To date, we have accumulated data on unbalancing the process of processing and performing transactions in a number of cases. They are carried out arbitrarily, often limited to certain formalities that create only the appearance of mandatory procedures.

The lack of unification approach has led to the emergence of many inconsistent methods that give rise to discrepancies and inaccuracies in the most important issue - determining the nature of traded goods and establishing the Sharia purity of transactions. The legal block of the industry fears that critics of the system will continue to exploit the issue of ignoring the banking community's serious shortcomings.⁶

The leadership of the Islamic banking industry now comes to the conclusion that the process is absolutely standardized and requires focusing efforts not only on growth indicators, but also on related legal procedures. After all, the industry may not be viable at all in the absence of a unified system of Sharia bureaus responsible for the practical application of religious norms in business, without which real standardization will be a fiction.

Some Western neophytes actively support Sharia strictness and consider the unification of requirements to be the main condition for the active approval of Islamic financing in other civilizational areas.⁷

Islamic legal experts, on the other hand, are constantly looking for the best ways to interpret Sharia guidelines for each specific and often specific product on the market. Numerous small consulting firms are also involved in this process, whose task is to monitor the market situation and help find optimal business solutions for their implementation in regional and other markets. These structures, of course, work in the Islamic field, but not as Islamic banks, since they provide only information and analytical services.

Meanwhile, orthodox critics believe that such companies remain outside the framework of the course for the integration of Islamic business. Therefore, they cannot follow the general line of strengthening the movement, in line with which they should not only be imbued with Islamic dogma, but also be drawn into the processes of capitalization. And the consulting business defends its format, because it has flexible and creative tools that attract the interest of large banks and funds to cooperate with it.⁸

In general, Islamic banks have established themselves as an established phenomenon, although they are not equally advanced in all aspects and are ready to work adequately on any platforms. All the more so, the authorities want to bring them up to date, improving their management and the entire management system as a condition for bringing Islamic business to the Muslim world and beyond. Moreover, the flaws are known, work is underway on errors, and there is no particular contradiction with the desire to expand the coverage area, despite the remaining flaws.

The opportunities for this are promising. The Global Islamic Microfinance Forum, held in Dubai in mid-2014, was not accidentally focused on the efficiency of using financial resources in the field of small businesses. The whole situation here is practically a challenge to the Islamic finance system, which shows insufficient attention to promising areas of capital application. But it is here that a tight knot of serious socio-economic and political problems has formed.

In the Arab world, Islamic microfinance, as well as conventional microfinance, has not become widespread. In general, only a quarter of the population of Muslim-majority countries has access to the official financial services market. By statistics-

By the end of 2008, residents of Egypt, Pakistan, Bangladesh, and Nigeria accounted for more than half of the world's poor with incomes not exceeding the minimum allowable national levels9. Under these conditions, the intervention of Islamic money capital has a chance not only to actually provide funds to specific people, but also to promote the Islamic principles of helping the poor on an organized basis. Moreover, most people do not make contacts with ordinary microfinance organizations, fearing bondage as a result of turning to usurious capital.

In these episodes, Islamic institutions could fully demonstrate the humanity of the approach to the problem, without sliding into openly speculative actions.

The movement in favor of microfinance began in the region at the turn of the century, but it did not develop quickly. Only 157 societies were formed in a decade, and 70% of them originated in Morocco.¹⁰ Perhaps the main obstacle to their implementation in Arab practice was the doubts of a part of the banking community that the dispersion of capital would be justified.

Meanwhile, according to statistics, in 2009 alone, 74 million people in Africa, India and a number of other regions received microloans worth $38 billion, and 95-98% of the debt was returned to banks.¹¹ And this is contrary to claims that such practices will only further drive debtors into a financial trap. But this is not happening. All the more so, Islamic institutions should be introduced into this kind of activity, demonstrating to huge contingents of the smallest and smallest economic entities their readiness to show a characteristic feature of Islamic virtue - helping those in need.

Indeed, both in the Middle East and North Africa, the masses of people in distress but potentially interested in work are in dire need of at least minimal funds to get a chance at social advancement. Therefore, the main task of the Islamic banking industry at the current stage is precisely to mobilize small business initiatives in the field in order to bring it into broader projects based on systematic microfinance of the poor as an incentive for economic growth.

Microeconomics in the plans of Islamic banks can also be important in political terms. Organized financing can become a crowding-out alternative to targeted subsidies from extremist organizations. They inject small but always sought-after funds, and in this simple way recruit supporters who easily respond to calls for jihad. In fact, banks can also perform counterterrorism functions on their own terms by using money rather than weapons, just by expanding lending and meeting the demand for financial resources in time.

THE STRATEGY OF "THIN" APPROACHES

Another goal of Islamic banking's efforts is to introduce a new vision of the organizational and technical aspects of the functioning of the Islamic financial industry institutions themselves. This is another challenge, because without the appropriate tools, competition at the proper level is unlikely to be ensured.

Against the background of global trends in highly organized business, such as banks, the pace of intensification of the Islamic industry and the speed of its acquisition of signs of a higher technological order and the overall increase in the efficiency of the financial sector look insufficient.

The idea of connecting subtle mechanisms to money management has already entered quite deeply into the consciousness of the Islamic financial community, and the number of supporters of the use of advanced information technologies is gradually growing. In order to open the way for innovations, from the corporate point of view, it may be more advantageous to switch specifically to the release of internal reserves through the rational use of personnel and optimization of relations between the structural divisions of banks. This means both eliminating bureaucratic obstacles and speeding up document flow without losing its quality, as well as vigorously promoting new products - credit cards, personal finance, electronic savings accounts, as well as mastering new techniques, such as cross-selling, standardizing approaches, etc. It is in the idea of intensifying efforts that the core of a new strategy is laid. Otherwise, it will be absorbed by all participants of the Islamic capital market.

In this regard, the experience of Qinvest, Qatar's leading investment bank and one of the world's largest players in Islamic finance, is indicative.In October 2014, Qinvest adopted a new strategy to consolidate its forces in order to achieve a breakthrough in its work. Its essence is to achieve sustainable development and increase competitiveness in the face of the challenge of Western corporations. The greatest hopes here are associated with the support of a well-developed network of its own branches in the Middle East and North Africa, in Turkey and England. Broad connection of brokerage services

the latter companies guarantee a profitable presence on international markets. And the growth of activity in this field promises high results in the initial placement of Islamic securities on regional and global exchanges. The Bank discovered this path because it felt ready for change, which is supported by the fact that the concentration of capital and growth opportunities within it and in the state as a whole is noticeably higher, even in comparison with rich neighboring countries.

Qataris believe that a modernized financial business is built on the basis of "a unique combination of fixed capital, regional executive mechanisms and diversified connections both in Qatar and in the region as a whole", while focusing on key products and services and developing the most attractive market niches. ¹² This synthesized practice is no longer considered exceptional in the world. And the Qatari experience now makes it not new for the Islamic industry of neighboring states, which, following its example, will not fail to take advantage of the promising advantages.

We can expect that this process will lead to an overall increase in the efficiency of Arabian Islamic banking, a strong spirit of competition and imitation, which will serve institutions that are by definition involved in profitable investment operations.

Hopes for success are linked to the biased selection of a team of high-level professionals with extensive connections across the region and in the world, not only at the corporate level, but also at the individual level. The goal of such a personnel policy is obvious -mass attraction of profitable clientele, accelerated concentration of resources, wide maneuver of them with access to large-scale operations in the sukuk* and murabaha * * markets.

Another component of Qinvest's growth strategy is responsible investing, which requires developing your own strategy within the broader trend of improving the quality of banking. But even this work is meaningless without careful selection of personnel capable of providing the best solutions. Meanwhile, their shortage is chronically dominating the entire Arab world, including the Islamic banking industry. Qatar is no exception in this regard.

In the Gulf countries, they are not very willing to devote themselves to studying the sciences necessary for living in a digital reality, although many believe that banks are the right path to social growth in an environment where the emphasis is on humanities.¹³ It is not for nothing that the corporate community believes that the real obstacle to Islamic business is "the lack of talents who have a predisposition and experience in working with specific Islamic schemes and are able to navigate the subtleties of Sharia law." ¹⁴ Without them, a serious conversation about a broad and calculated maneuver of material and financial resources in the management of Sharia institutions is hardly possible.

Meanwhile, the guaranteed placement of capital is especially required in the case of high-yield but risky murabaha transactions, operations with subordinated resources, with "hybrid" financing, which create an increased risk of non-return of funds. Adjacent to this niche are real estate transactions that require an unmistakable response and precise decisions, which are very voluminous in the Cooperation Council for the Arab States of the Persian Gulf( GCC), Europe and America.

The third component of the corporate strategy is the asset management scheme reorganized in early 2014, which has become a kind of symbol of the bank's modernization. By doing so, it has established itself as a leading platform in the Gulf region and as such is ready to provide Sharia investors with access to a variety of global offerings.¹⁵

However, it's not just about intrabank evolutions. Shortcomings in the sphere of circulation lead to the fact that Islamic financiers too often face difficulties on the stock exchange about determining the Islamic nature of partners. Companies often change their names, addresses, and numbers in the exchange registers in search of better conditions, without thinking about how this affects their own performance, not to mention their business partners.

Traditional intermediary companies do not keep a register of Sharia shares at all and are not monitored ¹⁶. Such cases are perceived as a serious challenge that restricts the freedom of circulation of Islamic capital and reduces the competitiveness of the industry.

The same conclusion can be drawn with regard to Islamic insurance - takaful. This is the most fragile link in the system of Islamic finance, requiring delicate handling in a capricious and spoiled environment in the zone of developed Arab market economy. For a long time, the well-known caution of Arab capital, including insurance, and the complexity of the insurance business as such limit its development, especially in conditions of sensitive stakes-

* Sukuk - Islamic bonds (approx. author's note).

* * Murabaha - a method of Islamic financing (author's note).

analysis of global market conditions ¹⁷. As a result, Takaful has enjoyed its greatest growth only in Malaysia and a few Arab states, and its share in the global insurance market remains below 1% ¹⁸.

Nevertheless, the system has made a name for itself in recent years and is now focused on growth within the framework of gaining a foothold in mass markets, although we are talking about small absolute values. The entire global takaful market in 2010 was estimated at only $13.7 billion in value terms, although it grew by 23% compared to the previous year. The GCC accounted for $5.7 billion of total funds, or 41% of total turnover. In general, since 2003, the entire product market, while remaining small in absolute terms, has increased 12-fold ¹⁹.

This gives apologists a reason to consider takaful as a global phenomenon that has already taken place. However, to this day, success in this segment is limited both geographically and in other respects.

A serious expert believes that here the issues of "efficiency, profitability and size have the character of critical imperatives, and therefore it is necessary to look for innovative solutions to manage challenges from the extremely competitive market for the takaful system, strengthen operational capabilities and improve the financial performance of the industry." Only in this way will it be possible to weaken the benefits of conventional insurance, which uses economies of scale to its advantage, in contrast to the situation with the takaful 20^.

* * *

Even a cursory glance at the state of affairs in the market of Islamic products allows us to note an unequivocal intention to narrow down the range of problems that hinder it. The professional community of Islamic capital operators is fully aware of the importance of both planned and ongoing measures to consolidate the industry and give it additional energy for the future.

Islamic theorists insist that a Sharia-type economy is best suited to solve Arab and Muslim problems. For them, it is obvious that the chronic occurrence of episodes of local and global imbalance of economic mechanisms is the lot of a non-functioning" interest-bearing " economy, while the islamic one is devoid of this disadvantage, since it is built on partnerships between labor and capital. In light of this, the question "not how to do without interest, but how to survive with interest" is not worth it for them. ²¹

Leaving aside this message, we can see that the Islamic financial business in its current form has become quite familiar in the Arab-Muslim world as a natural part of its modern economic structure. And the current practice confirms in the opinion that improvements in various parts of Islamic entrepreneurship can give its development significant impulses. A direct consequence of this should be its transformation into a force indistinguishable in terms of technical support and operational prowess from conventional banks. The final result should be implemented in at least two dimensions.

One thing is materialized in the willingness of Islamic capital to improve and develop its banking component and concentrate its efforts on serving its interests, thereby demonstrating a response to the challenges of the global market. Another is seen in strengthening the position of Islamic finance in competition with Western institutions, despite the fact that they monopolized a huge segment of the global financial space. But we are already forced to share it with our Islamic competitors, whose requests are growing. Islamic capital, by all indications, considers the consolidation of this trend to be its best choice for the future.

¹ Kompas. 2009, N 5, p. 23.

² Excellence in Islamic business // Business Islamica. Vol. 7, issue 8, Dubai Media City 2013, p. 18.

³ Al-Bayan. 29.10.2014.

⁴ Gulf News. 26.02.2014.

⁵ Islamic Banking Needs Global Standartization // Business Islamica.., p. 32.

⁶ Is Islamic banking reaching potential? // Business Islamica.., p. 2.

^{Owermohly Sarah.} 7 Going global with Islamic finance // Business Islamica.., p. 35.

⁸ Gulf News...

⁹ Is Islamic banking reaching potential?...

^{Bocharova L. S.} 10 K voprosu o mikrofinansirovanii v araby stranakh [On the issue of microfinance in Arab countries]. Abstracts of the MSU Scientific Conference, Moscow, 2011, p. 144. (Bocharova L. S. 2011. K voprosu о mikrofinansirovanii v arabskikh stranakh // Lomonosovskie chteniya... M.) (in Russian)

¹¹ Is Islamic banking reaching potential?...

¹² Qinvest unveils new growth strategy // Business Islamica.., p. 22.

^{Mukherjee Aparajita.} 13 How much of career mapping in Qatar is universally applicable? // Theedge, Qatar's business magazine. Vol. 6, N 4, issue 54, April 2014, p. 61.

¹⁴ New Measures for Regional Takaful Growth // Business Islamica.., p. 39.

¹⁵ Qinvest unveils new growth strategy.., p. 21.

¹⁶ Al-Bayan. 29.10.2014.

¹⁷ Sukuk Forging Ahead Despite Structural Pitfalls // Business Islamica.., p. 57.

¹⁸ New Measures for Regional Takaful Growth....

¹⁹ Ibid., p. 40.

²⁰ Ibidem.

²¹ Islamic Banking Needs Global Standartization...

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