Islamic banking will be introduced in Russia: what awaits the country’s economy

Islamic banking is a financial activity that complies with the principles of Shariah. First, within the framework of this religious law, “interest on loans” is prohibited. How can financial activity be carried out if the bank “does not give money on interest”? Islamic banking uses partnership financing, when a client invests in a business that the bank buys (thus a familiar bank deposit is made), and then receives a part of the profit during the sale. Or it is an installment plan, in which the property purchased with the bank’s money is transferred to the client with a trade margin (that is, we are talking about a credit card).

Secondly, Islamic banking is focused on supporting and developing the real sector of the economy. Any speculative transactions that are not related to activities of direct benefit are prohibited.

“Islamic banking implies the need to invest in exclusively real production and the rejection of high-risk operations, including speculative ones,” explains Pavel Seleznev, Dean of the Faculty of International Economic Relations of the Financial University under the Government of the Russian Federation. “The latter will significantly reduce the risks associated with the bankruptcy of credit institutions.”

In other words, it is prohibited to carry out transactions with any types of securities and derivative financial instruments (futures, options, etc.) in Islamic banking. Thanks to this principle, 14 years ago, almost the whole world paid attention to Islamic banking.

In the midst of the mortgage crisis in the United States, which led to the collapse of many enterprises around the world and the bankruptcy of large banks, the most striking of which was the financial institution with more than a century of history Lehman Brothers, the Islamic approach to risk assessment was in a winning position.

“Particular interest in Islamic finance around the world appeared after the crisis of 2008-2009,” says Ravil Asmyatullin, Associate Professor at the Institute of World Economy and Business of the Peoples’ Friendship University of Russia. – Then the industry showed greater stability than traditional finance. The crisis phenomena that are typical for the traditional financial system affect Islamic banking to a lesser extent.”

The development of this industry is a tool to diversify our traditional system and add additional stability to it, the expert is sure.

The third feature of Islamic banking is related to the ethical standards of Sharia. Thus, enterprises operating under these laws are prohibited from financing activities condemned by Islam, such as arms sales, casinos, lotteries, pork and alcohol production, as well as any business associated with vicious activities – strip clubs, night bars, etc. d.

In addition, as Asmyatullin pointed out, special attention is paid to the norms of morality and ethics, a fair distribution of risks, profits and losses between participants – so as to strengthen the position of all parties (and not just creditors, who are usually in a more favorable position in the traditional system).

The law adopted by the State Duma in the first reading has a number of vulnerabilities and in its current form contradicts the law on banks and banking activities. However, the bankers themselves are positive about it, and believe that after completion it will help to significantly reduce the cost of launching a new service and accelerate its implementation in the country.

According to Seleznev, the adoption of this draft law will certainly contribute to the development of real production in Russia and create favorable conditions for attracting investments. The law will definitely not remain on paper, since influential groups of elites at the regional and federal levels are interested in its implementation.

At the start, the proportion of qualifying loans is likely to be around 3-5% of the total number of loans. But already in the medium term, this figure may increase to at least 10%, the expert is sure.

“In fact, the creation of a regulatory framework for the implementation of Islamic banking is necessary to include in the legal field the already existing investment instruments offered by BCS, MC Pervaya and Ak Bars Capital,” continues the conversation, Associate Professor of the Department of State and Municipal Finance of the Russian University of Economics. G.V. Plekhanova Mary Valishvili. “However, if the bill is adopted, a significant revision of existing regulations will be required. For example, neither the Civil Code of the Russian Federation, nor the federal law on banks contains a definition of “loan interest”, which appears in Islamic banking as a ban.

In addition, the current law also lacks an understanding of what “partner financing and investment agreements” are and what specific transactions will be allowed.

But it is worth finalizing the normative act, because Muslims of Russia, that is, about 7-8 million citizens of our country, are ready to use partner banking.

“In addition, these may not necessarily be adherents of Mohammedanism, there are no restrictions on religion,” says Mark Goykhman, chief analyst at TeleTrade. “For example, in Malaysia, in a very developed market in this regard, more than 50% of Islamic bank customers are non-Muslims.”

In general, the idea is necessary. In all countries where Islamic banking was introduced, the goal was to mobilize the funds of the population so that they would further invest in the economy. And if innovations make it possible to attract funds from those who, due to religious beliefs, cannot use the usual banking services (take loans, for example), this should only be welcomed. Any expansion of the scope of these services, the emergence of alternatives is a benefit for the market.

In addition, the idea of ​​the project is much broader. This is one of the components of the broader concept of “pivot to the East”. It can, in the future of several years, with the stabilization of the geopolitical situation, facilitate the attraction and investment of investments, trade operations with the countries of the Middle East, the Persian Gulf, Central and Southeast Asia. The corresponding structures created in Russia can actively work with counterparties abroad on the principles familiar to them, the expert emphasized.