Islamic finance’s momentum in Russia increasin
With the many challenges Russia’s economy is currently facing, now is the time to shore up relationships with regions in which Russia has had continued success.
With that in mind, Russia has set off on a path towards greater participation in Islamic finance and the broader Islamic economy.
Three major banks—Vnesheconombank, Sberbank and Tatfondbank—all signed memorandums of understanding with the Islamic Development Bank (ICD) in order to formalise their support for that participation. This comes after the Central Bank of Russia signed a similar agreement with the same institution.
Speaking at the Eigth International Economic Summit of Russia and OIC countries Kazan Summit 2016 in the city of Kazan on 20 May 2016, Vnesheconombank Chairman Sergei Gorkov shed more light on why he would like his organisation to start Islamic financial activity, as well as giving support for more in his nation to do the same.
“Vnesheconombank is interested in developing competences in Islamic finance, sharing business experience in this area and using instruments of Islamic banking in the Bank’s activity. As a developing institution that invests in projects in the real economy, we embrace philosophy of the Islamic financial system which is based on asset-backing and refusal from unfounded capital gains. Even now we are working on the issues of using Islamic financing instruments to support export-import transactions and fund projects,” said Gorkov.
Robert Musin, Chairman of the Board of Management of PJSC Tatfondbank, echoed those sentiments after the signing of their own memorandum.
“It is necessary to develop partnership banking in Russia. It will give us an opportunity to broaden cooperation with Eastern countries and extend the product line. Partnership banking is interesting from the point of view of business, because customers obtain better understandable financing”, noted Musin.
Though large institutions are urging greater participation, this does not mean there is no Islamic finance in Russia. In 2011, The Waqf fund of the Republic of Tatarstan, a region of Russia, was established under the Muslim Religious Board of the Republic of Tatarstan for the purposes of restoring the institution in Russia. The main task of the fund is the legislative recognition and regulation of activity of Waqf funds, return of property of Muslim communities, development of cooperation with Muslim countries, formation of economic basis for implementation of social, charitable, cultural, and educational programmes.
Even so, there is no current official definition and regulatory framework for Islamic finance in Russia, so though institutions are looking to get more involved, there is still a long way to go. Perhaps with all of this positive sentiment, we are well on our way to the Russian Government officially recognising Islamic finance as a promising path forward towards greater economic recovery.
Copyright to CPI Financial 2016