Study On Informal Finance Development From The Perspective Of Islamic Culture

Since reform and opening-up, both the public and private finance in Muslim areas have developed rapidly, thus it has greatly promoted the regional economic and social development. Practice shows that the effectiveness of the mechanisms to fulfill contractual obligations is the foundation and core of public finance and private finance development. However, under the background that the economic and financial system continued to deepen, the compliance of public and private finance in Muslim areas (such as the Linxia Hui Autonomous Prefecture) has shown a big difference. On the one hand, because of its high rates of non-performing loans, public financial institutions have to merge its county originations and control the size of loans, which weakens its support for socio-economic development. On the other hand, though the private finances, which are spontaneously developed by the friendship association and have distinctive minority characters, have not yet obtained legal status, they have a booming trend because of its higher system efficiency, a low default rate. It is increasingly becoming an important financing channel for the private economy. Why the private finance which lacks of legal protection has a high compliance rate? Or What kind of ompliance mechanisms does private finance have? What influence do the main Muslim minority cultures (Islamic culture) have on the performance of private finance mechanisms? Obviously, the answers to the above questions can provide new ideas and methods for the issue that how economic development in Linxia Hui Autonomous Prefecture and other Muslim areas are in line with the folk culture of Islamic finance, how to address the shortage of funding Muslim areas in a better way and improve organizations. Also it can give a new perspective on how to effectively implement the government financial support policies for the minority areas.First, based on the diversity and complexity of private financial activities for Muslim and the existing research results and relevant theories, this dissertation explores a comprehensive theoretical framework of civil financial research perspective of Islamic culture with the use of religious sociology, social capital theory, the Islamic economic thought and modern Islamic finance movement and other related theories to comprehensively and systematically interpret Islamic culture under the perspective of the rise of private financial logic, operation mechanism and affecting factors.Second, based on the Islamic cultural perspective, it conducts an in-depth analysis of the status of development of private finance in Linxia Hui Autonomous Prefecture. The results show that the representative model of economic development with national characteristics, such as the trade between the people of Hui and Zang, greatly promotes the development of private finance in Linxia Hui Autonomous Prefecture, the Hui Muslim, who specialize in business, are not only the dominant participants of commercial activitie but also the main groups in private financial activities, which endows private financial activities in the Linxia Hui Autonomous Prefecture with distinctive Islam characteristics. Also, it does a comparative analysis of developments in the Linxia Hui Autonomous Prefecture and Wenzhou private finance, which found that the level of cultural and regional differences in the development of private finance is an important reason for development gap.Third, based on the theory of social capital, the dissertation analyzes the capital structure and the compliance mechanism of Muslim community private finance from a perspective of Islamic culture. The results showed that social capital which developed under the influence of Islamic culture provides a common Muslim value. Muslims not only regard it as a private financial activity, but also a way to express their religious piety. So the financial markets, dominated by private financial system, and a private financial compliance mechanism, specializing in effective implementation of the financing contract, have formed. Through the game of both financing parties, repeated game and a variety of embedded social interaction increase default costs of the borrowers enhance the initiative for the borrowers repay and effectively reduce the uncertainty of private financial activities.Fourth, by way of fieldwork and Heckman two-stage model, the dissertation analyzes the impact of social capital demand for private financing. The results show that, in spite of its obvious impact of social capital on the private financial activities, there are significant differences in the effect between the Muslim community and the non-Muslim communities. On the one hand, the impact of social capital on the private financing in Muslim community is stronger than in the non-Muslim communities, so the promotion for the development of private finance is more obvious; on the other hand, the social network dimension of social capital has a greater influence on the private finance among non-Muslim population while the trust dimension of social capital has a bigger influence on the private finance in Muslim community.Finally, under the guide of a comprehensive theoretical framework for private financial research from a Islamic cultural perspective, the dissertation tries to get a comprehensive picture of the status quo and causes of private finance in Linxia Hui Autonomous Prefecture, analyzes the factors affecting the development of private finance in Linxia Hui Autonomous Prefecture, proposes the recommended development principles and path and makes specific policy recommendations,which aims to provide consulting, intelligence support and reference for the relevant decisions.Compared with the existing research results, this dissertation has the following characteristics:First, for the viewing angle, it tries to interpret private financial activities in Linxia Hui Autonomous Prefecture under Islamic cultural background, hoping to observe the characteristics of private financial markets and development law in a more comprehensive way in Linxia Hui Autonomous Prefecture; Secondly, for the methodology, it introduces the sociology of religion, social capital theory, the Islamic economic thought and modern Islamic finance movement and other related theory into the analysis of credit constraints from both theoretical and empirical point of view of Islamic culture private financial activities of Muslim influence mechanism; Finally, as for its conclusion, based on Islam and Muslims in economic thinking of the good folk of financial activities in the loan idea, it puts forward the development path private finance in Linxia Hui Autonomous Prefecture. It is worth emphasizing that the Islamic culture is the main Muslim minority culture, so it has some applicability for its conclusion to be adapted on the financial problems of other Muslim folk in the common religious and cultural background.