Islamic Banking Equity Finance Industry

Definition

Companies that process or license bank card management systems and have customers in the Islamic world have long supported the main IF rule, according to which a bank cannot issue a loan and take interest. The traditional logic of credit cards is not applicable here, and therefore other ways of managing card accounts are implemented. They allow cardholders to use the bank's funds, and the bank to receive income in the form of fees for issuing, issuing and servicing an account.

The concept of IF is not fully understood by most compatriots and is often associated with a service available only to Muslims, but this is absolutely not the case. Any financial institution and any individual can work on the IF principle. By the way, a more neutral name is sometimes used for IF: the shared financing industry. At the same time, the bank's qualitative participation in financing seems to shift from the debt zone to the equity zone, and philosophically it is already to some extent a bank "with a human face," which does not use the difficult position of the client to make a big profit, but helps its clientele, being ready to share the emerging risks with it. The basis of Islamic or "ethical" banking is the principle of partnership between the client and the bank.

"The essence of the Islamic economy above all... interest waiver, futures deal waiver. The closest thing is how to work... the concept of project investment is suitable. This is project investment, which is associated with the division of risks, equity participation. The bank does not receive interest, the bank studies the person who came to him for help, the proposed business plan, analyzes the risks... There is Islamic insurance.... The main thing is a fundamental ban on games over time. The main establishment of Islam as a method of determining the approach to an objective world (including labor processes).... The main concern is to prevent games with time, and to prevent the laying of time, especially the future, not yet lived time, in favor of some speculators today. Well, in particular, for example, there is a ban on the sale of wheat crops that have not yet been grown, which is common in the West.... Society (Islamic - ed.) Is arranged in such a way that it is fundamental... focused on the real economy... at the level of official laws and at the level of society.... Installation on real production and installation to prevent you from speculating on your own time.... (description of the real situation in the Islamic world - ed.)... Oddly enough, much more dynamic is the development of Islamic banking in, especially in To Europe... there Great Britain are Islamic banks and there are Islamic windows in ordinary ones (for example, banks Citibank, Barclays)... This is a controversial thing, because there is such a concept - halal money (allowed from the point of view of sharia), on which the seal of crime does not lie (from the point of view of sharia). If you have a bank, in general, not halal... and there is an Islamic window in it, in which you give money not to grow, but to invest in a useful business... but the total pool of money, you don't know how they are there... mix with the rest of the money or don't mix.... The Islamic economy stands in the position that money smells. For example, you cannot use the money received from alcohol, even if this alcohol is sold to non-Muslim drinkers. I.e. you have no right to sell alcohol at all,... but you do not have the right to use this money from alcohol (from the profit of sale - ed.)... The dynamics of the development of Islamic banks effectively competes with the dynamics of the development of ordinary banks.... (Many European) hosts appreciated the benefits of working with Islamic... the advantages of the banks reliability, the guarantees that this Islamic approach provides.... But one must be aware that the share of the Islamic economy is not comparable to the overall economic balance on the planet. " Features of the Islamic^[1]

History of Islamic funding

The history of commercial banks in the Western world is not very old in itself. The development of commercial banks in the West is synchronized with the emergence of industrial civilization in the last two and a quarter centuries. With the beginning of the industrial revolution, there was a huge growth of traders, manufacturers, industrialists and other entrepreneurs who wanted to expand their business and create various kinds of firms, but their own financial resources were not enough. Thus, it was necessary to find a method for gaining access to the finances of other entrepreneurs^[2]

The existence of the need for financial intermediation was the main motivation for the emergence of commercial banks, which very soon became the basis of the modern industrial and financial system. An efficient and smoothly functioning banking system today is one of the most basic prerequisites for the successful development of the economy.

When the Muslim world came into contact with industrialization and other institutions of capitalism, including the commercial banking system, Muslims could choose one of two options:

• accept the scheme of existing commercial banks if it is approved that the interest accrued by commercial banks will not contain riba elements (interest) prohibited by Islam. Thus, commercial banks will be able to become permissible for Muslims.
• decide that the interest accrued by commercial banks is riba and, with this in mind, adopt an alternative system of banks that will not violate the principles of Islamic Sharia.

However, the Quran categorically prohibits any surplus (or excess) compared to the principal amount subject to riba and clearly says that creditors are only entitled to the principal amount. Islam makes no distinction between consumption and credit production. Rib's prohibition should apply regardless of the purpose of issuing loans.

As a consequence, modern commercial banks cannot make significant progress in Muslim countries, as was the case in the Western world, and even in some Asian countries. This is supported by the fact that commercial banks in the Muslim world even today are mostly confined to locations in major urban centers where Western culture and civilization have made a profound breakthrough. But even in cities, a significant number of people stay away from commercial banks for religious and moral reasons, complying with the Qur'an regulations regarding rib. Among them are those who have to deal with banks, because of circumstances or because of the absence of any banking institutions permitted by Islam, who believe that this is a violation of faith. They do not use interest as their own funds. Either they leave them unclaimed in the bank, or give them to someone else.

Another approach, to design a banking system to meet Sharia requirements, has become even more relevant recently, although the idea of ​ ​ creating an interest-free bank dates back to the 1940s. However, at that time there were still no conditions for practical measures to create an Islamic bank, since there were no ideas on the technical details and actual functioning of an interest-free bank. In fact, the theory of interest-free banking and the idea of Islamic banking remain simple desires, not even a plan, for a long time.

Early experiment

A pioneering experiment that put the principles of Islamic banking into practice was conducted at Meath Gamr in Egypt from 1963 to 1967. The experiment combined the idea of German savings banks with the principles of the banking system within Islamic values. Mit Gamr is mostly rural and the people there as a whole, as elsewhere in the Islamic world, were quite religious. They did not place their savings in any bank due to the prohibition of interest in Islam. In addition, it is unlikely that any financial institutions were previously available to them. Under these conditions, the task was not only to respect Islamic values, but also to educate people in the use of banking services.

A Western expert describes the significance of the Mit-Gamr experiment as follows: "Most of the population has never dealt with financial institutions. In this regard, the accumulation of capital was violated. Mostly religious populations tended to distrust Western-style bankers, there were several local branches that looked after them. Since a significant part of the income was not spent immediately, but was saved for social events, emergencies and the like, forming dead capital that cannot be used for productive investments. However, the condition for any change in behavior from savings and "real savings in assets" to "financial savings" was the creation of a financial institution that does not violate the religious principles of the general population. Only then was most of the population integrated into the capital accumulation process. "

Thus, an attempt was made to include the rural population in the financial system and "the development of the nature of said early experiment made it very important"

The following account types were accepted in the Meath-Gamr project:

• (I) savings accounts;
• (II), investment accounts,
• (iii) as well as zakat accounts.

Interest is not payable on savings account deposits, but was allowed to be withdrawn on demand. Under them, there is a right to small, short-term interest-free loans for production purposes. Funds invested in investment accounts were subject to a restriction on the withdrawal and possibility of investment based on participation in profits. Zakat accounts attracted attention due to the amount of zakat for distribution to the poor.

The Meath-Gamr Islamic banking project was a surprise success.

Savings deposits increased from 25,000 Egyptian pounds to 125,000 Egyptian pounds in 1963-66. During the same period, investment deposits increased from 35,000 to 75,000 Egyptian pounds. The expert also said that "the bank functioned cautiously, rejecting, on average, 60 percent of loan applications."

Although the Meath-Gamre project made a good start, it had to be abandoned due to certain political factors. Currently, it has only historical significance. However, it was the first experiment to show that banking activity could be organised on the basis of Islamic principles of respect, the prohibition of rib and the absence of interest.

The emergence of Islamic banks

The first urban Islamic bank was established in Cairo in 1971 with the participation of the Nasser Social Bank, which began operations in 1972. The bank was public with autonomous status. Its goals were mainly to provide interest-free loans for small projects with participation in profits, to help the poor and needy, to issue loans for students of universities and other higher educational institutions. Due to the implementation of this kind of social functions, Social Bank Nasser was exempted from the basics of banking and credit law in 1957 during the initial stages of its work. The bank initially functioned under the Ministry of Finance, but currently under the Ministry of Social Affairs and Insurance. The bank's capital was represented by funds allocated by the President from extrabudgetary funds, allocations from the state budget and contributions from the Ministry of Waqf Affairs.

Next to Nasser Social Bank was the creation of Dubai Islamic Bank in 1975. Dubai Islamic Bank is a joint stock company with a head office in Dubai, with a capital of 50 million dirham. The governments of Dubai and Kuwait, respectively, participated in the amount of 20 percent and 10 percent in the capital of the bank. Since 1975, a number of other Islamic banks have been established in Muslim countries and other parts of the world and are successfully functioning to the present.

Two major international Islamic holding companies, namely AI-Mal al-Islami "(DMI) Trust and Control" and the Al-Baraka group, controlled a number of Islamic banks. DMI is a holding company incorporated under the laws of the Bahamas. It was created in 1981 with an authorized capital of 1 billion US dollars consists of 10 million shares of equal value. Today, OMI operates in a number of Islamic countries with international financial centers through a network of Islamic financial institutions, including Islamic investment companies, Islamic banks and Islamic insurance companies.

The Al-Baraka Group was established in 1982 and has 12 branches and financial interests in a number of subsidiary institutions. There are certain Islamic banks in the Gulf region, such as Dubai Islamic Bank, Kuwait Financial House and Islamic Bank of Qatar, not owned by any of these holdings. There are also Islamic banks in some other Islamic countries, such as Malaysia and Bangladesh, which were established with active support from the governments of those countries. A number of Islamic banks also operate in non-Muslim countries, such as the Philippine Amanach Bank, the Islamic Bank of the International in Denmark and the House of Islamic Finance of the General Holding in Luxembourg.

In addition, several conventional institutions have so-called "Islamic windows" through which they can offer their clients certain services using various Islamic funding methods. Among them, the National Commercial Bank of Saudi Arabia, and the Misr Bank of Egypt deserve special mention.

Key rules

The rules by which Islamic banking operates are:

• a blanket ban on loan interest;
• prohibition of profiteering - the use of any circumstances, of someone's difficulties in their own interests, of their plans (for example, speculation on political difficulties). However, "Western" financial instruments in a modified form (in accordance with Sharia law) are used by two exchanges: NASDAQ Dubai and Dubai Financial Market (owner of the Arab holding company Borse Dubai).
• a ban on gambling (lottery, etc.).

Social and ethical conditions for the selection of economic actions can also be noted. Especially this includes the ban on investment in:

• production and consumption of alcohol and tobacco
• prostitution
• pornography
• sorcery
• processing meat of animals that died their death, blood, pork, meat of animals that were slaughtered carrying the name of Allah^[3]

The most important concepts

• Fiqh: Islamic legal law; human understanding of divine law (Sharia)
• gharar: "danger," uncertainty, vague disclosure in the contract and the risk resulting therefrom; it is forbidden
• maisir: "speculation," excitement; is also prohibited, as is usury
• idschara: literally "Funds," used in leasing
• Mudaraba: Equity Financing Similar to a Commandite Partnership ("Mezzanine")
• Murabaha: trade financing ("mark-up sale")
• Musharaka: Equity financing through participation for a while ("Venture Capital")
• Riba: "usury" or "interest," depending on the context, the main ban in Islamic banking
• Sharia (Scharia)
• Scharia Board: A religious commission (advisory body) that monitors compliance with Islamic regulations and certifies products
• Takaful: Islamic (cooperative) insurance
• Sukuk: Islamic bond
• Vakal - deposit

Business practices of Islamic banks

Islamic banks, like other banks, attract financial resources from individuals and institutions and direct them to commercial firms that need external financing to support their production activities. Thus, Islamic banks perform the same financial intermediary functions as traditional banks. The main difference between Islamic banks and mainstream banks is how these functions are performed, that is, how they increase funds and how they use them. For the convenience of analytics, it is necessary to distinguish the sources and directions of use of funds.

Funding sources for Islamic banks

It is well known that banks accept deposits with different maturities, with different interest rates for each type. Islamic banks do not pay interest on deposits. How Islamic banks operate with different types of deposits is described below

(A) Current accounts

All Islamic banks operate with current customer accounts, as do traditional banks. These accounts are defined as "demand accounts," "bearer deposits," "without notifying the bank." The bank guarantees a full refund at the first request of the client. The Bank may use these funds in its commercial activities at its own peril and risk. Since all risks are borne by the bank, depositors are not entitled to any share in the profit received by the bank.

(B) Savings accounts

Islamic banks also accept savings deposits from individuals. Four different methods of operating savings accounts have appeared in Islamic banks: (I) savings deposits, which are accepted on the principle of al-wadi'a (targeted), with a request to give the bank's depositor permission to use the funds at their own risk, while banks guarantee a full return of deposits and profits after sharing the funds. (II) savings deposits that are accepted with the permission to invest them and the division of profits in an agreed manner for the period in which the minimum balance remains. (III) savings deposits of Card Hasan (charity loan) from depositors to the bank and providing them with material or intangible benefits. (IV) savings deposits accepted into an investment fund and considered as investment deposits as described below. Basically, depositors receive the right to withdraw the deposit without prior notice to the bank, while customers are not entitled to a share in the profit for the reporting period in which the recall was made.

(C) Investment Accounts

Investment accounts of Islamic banks are analogous to the term "deposits" in the usual system. These accounts can be opened by both individuals and companies for any specified period, for example, for 6 months, for 1 year or more. Savers did not receive any interest. Instead, they were entitled to a share of the actual profits derived from the bank's investment activities. The gains are common to depositors in the agreed share depending on the amount of their deposits.

(D) Joint/General Investment Accounts

Some Islamic banks used shared investment accounts. The investment fund takes the form of a common investment account in which investment deposits have different maturities. They are not tied to any particular investment project, but are used in various financial transactions of the bank. Profit was distributed at the end of the period on a pro rata basis.

(E) Limited period of Investment Deposits

Some Islamic banks also accept investment deposits during the specified period, which is determined by mutual agreement between the depositor and the bank. The contribution ceases to exist at the end of the period, but revenues are distributed and accounted for at the end of the fiscal year.

(E) Unlimited period of Investment Deposits

These investment deposits are automatically issued without a deadline. They can be terminated by determining the specified period with the notification of the bank, as a rule, 3 months. Non-collection or increase of the deposit amount is allowed during this period. Profit is calculated and distributed at the end of the fiscal year.

Special Investment Contributions

Some Islamic banks are developing investment deposit schemes with special permission to invest in specific schemes or specific products. The profit of activity is distributed between the depositor and the bank. In this case, the bank works as an investor agent. It may agree to perform this function for an agreed fee or it may refuse to have a share in the profits.

Islam credit is not a hindrance, Iran's central bank experience

Iran's central bank unveiled the country's first-ever credit cards in September 2016. It will take some time to debug the system. On the first day, 12,000 credit cards were issued to the population.

At the first stage,Iran ^[4] reports^[5]the new credit cards will be in three denominations: 3000, 10,000 and 15,000. dollars Cards will be able to pay for purchases in the store or on the Internet. It is assumed that this measure will help stimulate consumer demand in the Iranian economy, Iran reports today. Cards will be issued by the number of banks applications received. "It would be wrong to think that these cards will be used quickly in the banking network," warned the head of Iran's central bank, Valiullah Seif.

It should be borne in mind that Islam prohibits usury in the form in which it exists in most countries of the world. Therefore, for the operation with loans in many Muslim countries of the world, a special trade agreement is used - "murabaha." Credit transactions are formally carried out as a purchase and sale service, in which the buyer purchases goods more expensive (with a mark-up) and in installments. Under the same scheme, transactions with Iranian credit cards will be carried out. Currently, credit cards are issued only by two Iranian banks: Bank Melli Iran and Ayandeh Bank, with an interest rate of 18%. Up to 36 payments are provided for the payment of the loan.

Islamic finance in the Eurasian region

Central Asian countries are also actively testing this model. The pioneer here is Kazakhstan (overtaking many countries of the former USSR in the field of financial innovation). Back in 2009, the chapter on Islamic banks was included in the Kazakhstan law "On Banks and Banking Activities," and at the same time a subsidiary of the Islamic Bank Al-Hilal appeared in the country. Later he was joined by the Islamic bank "Zaman-Bank," already with local roots. In 2011, the concept of Islamic securities (sukuk) was fixed in the legislation of Kazakhstan. Last year, Kazakhstan developed a Master Plan for the development of Islamic financing until 2025. Recently it became known that the world's first digital financial service Tayyab has entered the Kazakh market, the work of which fully complies with the norms of sharia^[6].

Following Kazakhstan, other countries moved along the same path. In May 2014, the law "On Islamic Banking" was adopted in Tajikistan, and exactly a year later the launch of the first Islamic bank was announced. In 2018, Sohibkorbonk Bank transformed into Tavhidbank, which became the first Islamic financial institution in Tajikistan.

Uzbekistan The Commission was established to develop and implement the principles of Islamic banking and finance. The December message of the country's president, Shavkat Mirziyoyev, promised to include the concept of Islamic finance in the legislation.

A Place in the Global Economy

2021: In Kazakhstan, interest in Islamic financing grew by 32 percent over the year

In Kazakhstan, over the past year, interest in Islamic financing has grown by 32%, said Kuralay Eldesbay, trustee of the Association of Islamic Finance Professionals, in September 2021.

According to her, mostly Kazakhstanis turn to Islamic banks for mortgages.

"I assess the prospects for the development of Islamic banks in Kazakhstan positively. This is evidenced by interest in products for 2020. Official resources publish that the growth of assets of Islamic banks increased by 32%. That is, there is a lot of demand. We clearly see that there is an interest in Islamic mortgages. Muslims turn mainly to buy apartments, according to Sharia, "said Kuralai Eldesbai.

2020: Bank makes first blockchain-based transaction under sharia law

In mid-January 2021, Bangladeshi Bank City Bank, together with the International Islamic Trade and Financial Corporation (ITFC), conducted a deal with a letter of credit on blockchainContour. The transaction was carried out in accordance with Sharia law (Islamic Banking (equity financing industry)).

The cross-border letter of blockchain credit transaction was conducted with the participation of the ITFC division, which specializes in financing trade operations in accordance with the murabakh agreements. The letter of credit was issued on behalf of Bangladeshi clothing manufacturer Debonair Group to Apparel Link, a trading company registered in. Hong Kong

2015

According to 2015 data, the share of Islamic Finance is $2 trillion. The United States, and the average annual growth shown for several years, is unprecedented and is more than 15%.

Islamic banks are developing faster than traditional ones, with Muslims pouring $1.8tn into Islamic banks every year. This was announced in May 2016 by UAE Deputy Minister of Economy Abdullah al-Saleh at a summit in Kazan.

"The Islamic

economy is developing steadily, our Islamic banks are developing more rapidly than traditional banks, this is especially important in the context of an increase in the number of Muslims in the world," the deputy minister said. "Muslims invest $1.8tn in Islamic banks every year, a sign that there are high prospects for the development of Islamic banking." According to Saleh, the UAE ranks second after Malaysia among Islamic states that carry out Islamic banking, the first Islamic bank in the world was opened in 1975 in Dubai

.

The head of Tatarstan Rustam Minnikhanov noted that "today the Islamic financing sector is one of the fastest growing in the world, its annual growth is 15-20 percent."

First Islamic bank to open in Germany

In the summer of 2015, the first Islamic bank opened in Germany, Deutsche Welle reports. The ^[7]. The bank, called KT Bank AG, is owned by Kuwaiti-Turkish financial institution Kuveyt Türk Bank. The bank is open to providing financial services to German Muslims.

According to KT Bank AG estimates, the Islamic audience in Germany has 4-5 million people. Moreover, the bank intends to attract investments from small and medium-sized businesses, real estate traders, as well as investors from Kuwait.

The bank will not participate in financing the trade in weapons, alcohol and tobacco, and, according to the postulates of Islam, cannot charge interest. There are not many such "ethical" financial institutions in the world, including the Arab one. In Turkey, for example, they make up 5 to 7 percent of the total number of ^[8].

Investments in Russia from the countries of the Organization of Islamic Cooperation

Experts estimate that potential investments in Russia from the countries of the Organization of Islamic Cooperation (OIC) may amount to $150 billion. Islamic finance is a rapidly growing sector of the economy, opening up huge resources (with the right ability to use it), which are especially relevant now, when access to Western financial markets for Russian business structures is extremely difficult. In addition, a significant part of the Muslim population of the CIS can be much more actively involved in financial flows, including within the framework of card operations, if the latter are compatible with IF. An example of this can be Tatarstan and Kazakhstan. At the same time, the problems lie, rather, not in the technological sphere, but in recognizing the existence of this sector of the economy and full coordination with the laws of the Russian Federation. On a global scale, it takes very little to open up this global sector to Russia.

In 2014, in Russia, the National Rating Agency launched an assessment of companies' compliance with Sharia requirements, rating 7 companies that can already receive equity funding from Islamic financial institutions. According to experts, the 20 million Muslim population of Russia can actually demand 10-15 million cards issued on the terms of Islamic banking (which will be at least 5% of all bank cards in the country). The forum also noted that when publishing Sharia standards, Russian became the third language after Arabic and English (an agreement reached in 2009 - Accounting and Auditing Organization for Islamic Finance Institutions, AAOIFI).

In a fairly large number of countries of the world, including not by any means Sharia, Islamic finance is a developed institution - for example, in the UK, where investment in IF has reached $34 billion on the London Stock Exchange. This once again confirms the attractiveness of IF as a sector of the industry.

A pilot project in the field of IF in our country is already operating in the Republic of Tatarstan. The infrastructure of Islamic finance in Tatarstan includes the Fund for the Development of Islamic Business and Finance (IBFD Fund), the Tatarstan International Investment Company (TMIK), the Eurasian Leasing Company (EALK), AK BARS Bank, the financial house Amal, the insurance company Alliance Life and several other organizations. The educational function here was taken over by the Russian Center for Islamic Economics and Finance (RCIEF). Thus, the foundation of the country's Islamic financial industry is already being laid in Tatarstan.

In Russia

2023: Law on Islamic banking adopted in Russia

On July 19, 2023, the State Duma in the third (final) reading adopted a law on Islamic banking. The corresponding experiment will be held in Bashkiria, Tatarstan, Chechnya and Dagestan from September 1, 2023 to September 1, 2025. Its participants can be legal entities registered in accordance with the legislation of the Russian Federation and included in the register of participants in the experiment.

The minimum amount of own funds of an experiment participant who is not a credit institution or a non-credit financial institution is set for the duration of the experiment in the following amount: from September 1, 2023 - 10 million rubles, from January 1, 2024 - 15 million rubles.

The law also establishes requirements for the activities of the participant in the experiment. In particular, in the implementation of partner financing activities, the participants in the experiment do not have the right to finance activities related to the production of tobacco and alcohol products, weapons, ammunition, trade in such goods, as well as with the gambling business.

In addition, the participant of the experiment has no right to refuse individuals or legal entities to provide financial services on the grounds of social, racial, national, linguistic or religious affiliation.

The law also establishes that the participants in the experiment will be obliged to provide the authorized body, upon request, with information about transactions, their nature and goals.

According to the bill, participants in the experiment when making transactions do not have the right to establish remuneration expressed in the form of an interest rate.

At the same time, it is allowed to establish remuneration in the form of a variable value, the value of which changes depending on the results of these transactions, - says the updated text of the document, excerpts from which are quoted by Interfax.

Earlier, the head of the State Duma Committee on the Financial Market, Anatoly Aksakov, clarified that the essence of the document is to attract funds, for example, citizens without interest by analogy with the stock market, but money will not be invested in securities, but in various projects, production enterprises.^[9]

2019

"Ak Bars" offers housing financing according to sharia standards

Since 2019, the largest commercial bank of Tatarstan "Ak Bars" offers housing financing according to Sharia standards. Under the State Duma Committee on the Financial Market, a working group has already been created to change legislation to attract funding from Islamic countries.

Sberbank acquired 25% of PeiZakat

On June 11, 2019, Sberbank announced the signing of an agreement with PeiZakat LLC, according to which the bank acquires 25% of the company. PayZakat is a platform for collecting and distributing mandatory and voluntary payments collected by the Muslim community in favor of the poor and needy. Read more here.

2017

Kazan will create an autonomous structure for Islamic banking

Large federal banks are interested in creating the project, including Sberbank, Vnesheconombank and Gazprombank.

In Kazan, an autonomous structure is being created for partner banking based on Sharia canons. This was announced in April 2017 by the head of the Investment Development Agency of Tatarstan Talia Minullina.

Federal banks will become partners of the new structure, but it has not yet been specified who is in question.

In March 2016, on the basis of the local Tatagroprombank, a pilot project was created within the framework of the Bank of Russia roadmap for the development of Islamic finance in the country - the Partner Banking Center. However, the financial institution had its license revoked in April 2017.

Minullina also spoke about the concept of the new center: "There is an idea, there is even a team that is selected, one might say, bit by bit - these are our friends from Azerbaijan who are successfully developing partner banking, from Kazakhstan, our federal colleagues. We bring everyone together here, and we think that we will succeed in this complex and ambitious project. This year we plan to intensify ^[10] to ^[11]

.

Minullina clarified that from the experience of the previous Partner Banking Center in Kazan, it became clear that this area has great prospects. The center has had about 500 clients since its opening (that is, since March last year), mainly Muslim believers.

The State Duma did not approve the law on Islamic banking

The State Duma Committee on the Financial Market recommended that the lower house of parliament reject in the first reading a bill aimed at the ability of credit institutions to engage in trade activities to introduce the principles of Islamic banking^[12].

The document was introduced by deputy Dmitry Savelyev from the Liberal Democratic Party. He offered to give banks the opportunity to directly sell the necessary goods to the client, without providing loans.

According to the parliamentarian, Islamic banking will contribute to attracting additional investment and the formation of a new economy based on "no longer raw material money." Also, the formation of this system will attract money from Muslims to the country's financial system, of which there are more than 15 million people in Russia.

2016

Sberbank may open Islamic banking windows in its branches

Sberbank may start providing Islamic banking services in its branches. This was announced in July 2016 by Igor Bulantsev, Senior Vice President, Acting Head of SberCIB.

According to him, the credit institution is exploring the possibility of creating a joint venture with Tatarstan or a special window of services in Moscow branches and in the regions of Russia with a Muslim population.

It is planned that the first test deal under the rules of Islamic banking may take place in September-October this year. "The timing of its implementation will depend on how work with partners will progress, on our joint work with the regulator and other factors," Bulantsev said. Companies from Tatarstan are primarily interested in Islamic banking services, he said.

Spiritual Administration of Muslims of the Republic of Tatarstan takes part in the creation of the Partner Banking Center

The Republic of Tatarstan has been selected as a pilot region for the implementation of partner banking in Russia. The Partner Banking Working Group is chaired by Alexey Simanovsky, First Deputy Governor of the Bank of Russia. The working group includes the Chairman of the Management Board of PJSC Tatfondbank Marat Zagidullin and the First Deputy Chairman of the Management Board of PJSC Tatfondbank Ramil Nasyrov. Tatfondbank and Tatagroprombank are credit institutions jointly implementing the project in the Russian Federation.

As part of the development of partner banking in March 2016, a cooperation agreement was signed between the Spiritual Directorate of Muslims of the Republic of Tatarstan and LLC Tatagroprombank"."

The first Partner Banking Center in the country will begin work in the third decade of March 2016 in Kazan. Its activities will be built in full accordance with the principles of partner financing, widely applied in many countries of Southeast Asia and the Middle East - Malaysia, the United Arab Emirates and others.

The agreement was signed by the Chairman of the CRO-DUM RT, Mufti Kamil Khazrat Samigullin and Chairman of the Board of Tatagroprombank LLC Airat Khaidarov.

The document was signed for the purpose of interaction between the parties in banking and financial activities, including research, development and analysis of financial products and services. The main areas of interaction between DUM RT and Tatagroprombank also include conducting an examination for compliance with Islamic law, preparing recommendations and proposals for organizing the work of the Partner Banking Center, conducting educational and other events. According to the parties, this will contribute to the promotion of partner banking in the Republic of Tatarstan and beyond.

The roadmap for the introduction of Islamic banking in the Russian Federation will be completed ahead of schedule

"The document is designed for 2 years and can be specified in the course of implementation in all respects. But I have the impression that we will fulfill the planned plans ahead of schedule, there are all the prerequisites for this, "Torshin said. - The Roadmap covers key aspects of partner banking: legal, regulatory, educational and other, provides for a set of measures aimed at exploring the possibility of introducing partner banking services, "Deputy Chairman of the Central Bank of the Russian Federation Alexander Torshin said in May 2016

.

Torshin recalled that in 2015 a working group on partner banking was created in Russia, headed by First Deputy Chairman of the Central Bank of the Russian Federation Alexei Simanovsky, two subgroups were formed under the working group, one of which is engaged in the development of partner banking, the second is engaged in the study of legal ^[13] to ^[14].

In his speech, the President of the Islamic Development Bank Group (IDB) Ahmed Mohammed Ali al-Madani said that the Islamic Development Bank is ready to provide assistance to amend Russian legislation so that the principles of Islamic banking can be used in the country. He noted that the institutions of Islamic banking have confirmed their capacity and vitality during the world crisis and will be able to play a huge role in strengthening the financial system of the Russian Federation.

The Islamic finance industry in Russia is represented by 7 companies: Lyariba-Finance, Mudarib Islamic Investment Center, Amal Financial Houses, Masraf, Saada, Tatarstan International Investment Company and Amana microcredit company.

2015

Islamic banks announced plans to enter the Russian market

At least two Islamic banks, including Al Baraka and Al Shamal Islamic, are negotiating to enter the capital of Russian banks in order to enter the Russian market, the Kommersant newspaper reported in early 2015, citing Abdul-Rahman al-Baker, executive director for supervision of financial institutions of the Central Bank of Bahrain.

He told the publication that these two banks have long been interested in the Russian market, but cannot enter it due to the lack of rules in Russia that allow Islamic banks to operate in compliance with the basic norms of sharia. In such conditions, these banks are now negotiating with Russian credit institutions to enter their capital and enter the Russian market.

The area of ​ ​ interest of Al Baraka and Al Shamal banks is corporate financing in certain areas of business, with the exception of gambling and alcohol business, pork production, and so on.

The Association of Russian Banks (ARB) has already noted an increase in demand for Islamic financial instruments. And offered to license credit institutions engaged in Islamic banking separately. This was justified by the fact that Islamic banking is an alternative to traditional banking and functions in compliance with Islamic economic principles. Banking products designed with Muslim requirements in mind do not allow the use of elements prohibited by Islam and Sharia (a set of rules for the life of a Muslim). In particular, loan interest and usury are prohibited. It is also not allowed to invest and receive income from prohibited activities, including the production and sale of pork, alcohol and weapons, as well as prostitution, pornography and gambling.

The final version of the feasibility study on Islamic banking in Russia is presented

The ceremony of transferring the final version of the feasibility study on the creation of an Islamic bank or an Islamic banking window in the region was held in December 2015 at the Government House of the Republic of Tatarstan.

The document, which is considered as the basis for the start of a pilot project on Islamic banking in the Russian Federation, was handed over to the Prime Minister of the Republic of Tatarstan Ildar Khalikov.

The meeting was attended by President of Unirazak University (Malaysia), Professor Datuk Seri Dr. Mohammed Zabid Haji Abdul Rashid, President of Islamic Business and Finance Development Fund (IBFD Fund) Linar Yakupov, Assistant to the President of the Republic of Tatarstan Albert Nafigin, Head of the Department of Economics, Finance and State Property Management of the Cabinet of Ministers of the Republic of Tatarstan Renat Gainutdinov, Minister of Economy Artyom Zdunov, Minister of Justice Larisa Glukhova, First Deputy Minister of Finance Marat Faizrakhmanov. The banking community of the Republic of Tatarstan was represented by Deputy Manager of the National Bank of the Republic of Tatarstan Saria Sirazieva, Chairman of the Management Board of Spurt Bank Evgenia Dautova, Deputy Manager of the branch of Bank Tatarstan Dmitry Volostnov, First Deputy Chairman of the Management Board of Ak Bars Bank Radik Salyakhutdinov.

The feasibility study transferred to the Government of the Republic of Tatarstan includes the basic principles of the functioning of the Islamic economy, the implementation model of Islamic banking and Islamic insurance in various countries, a study of the interest of the population of the region in Islamic banking products, as well as the use of mechanisms of the Islamic financial industry within the framework of current legislation. Work on the feasibility study took place for 9 months. Funding for the development of the feasibility study was supported by the Malaysian Government.

See also

• Ethical banking

Notes