The first results of the experiment with “Islamic mortgages” in Russia have appeared
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Three months ago, the Central Bank launched an experiment in four regions to introduce Islamic banking in the Russian Federation. Of particular interest to Russians was the “Islamic mortgage,” which can be obtained by any citizen, regardless of religion. MK found out how this product differs from a classic mortgage, where and under what conditions you can get halal money to solve a painful housing problem.
On September 1, 2023, a two-year experiment on partner (Islamic) financing began in Bashkiria, Dagestan, Tatarstan and Chechnya. Banks, non-credit financial organizations and legal entities admitted to it were given the opportunity to apply for a special “Islamic mortgage” using maternity capital. “For eight years in a row, the topic of introducing Islamic banking has become one of the main ones at the Kazan Summit economic forum. Great hopes are placed on “Islamic mortgages,” which are designed to improve social well-being and improve demography in regions where Muslims make up a significant part of the population. Unfortunately, its implementation in the Russian financial market is very slow,” said BitRiver Communications Director, economist Andrei Loboda.
Indeed, the cat has made the cat cry so far. At the end of November, only four organizations were listed in the Central Bank register of participants in the partnership financing experiment. Another 11 companies and banks have submitted applications and are awaiting approval from the Central Bank of the Russian Federation.
There are several reasons that do not allow the “Islamic mortgage” to gain cruising speed in the Russian Federation. As explained by a financier who wished to remain anonymous, the Bank of Russia and State Duma deputies, the authors of the bill on Islamic banking, chose an extremely unfortunate moment to start the experiment: “To launch such a progressive project in a year when the Central Bank carried out a senseless devaluation of the ruble, as a result of which the exchange rate of the national currency from fell by 50% in January – a bad idea for both investors and potential clients.”
Secondly, such an important law for the 20 million Russians who profess Islam turned out to be crude. A number of provisions, for example on maternity capital for “Islamic mortgages,” had to be quickly finalized on the fly. No one has really explained who and how will exercise Sharia control over Islamic financial products: bankers who have little understanding of Islam, or theologians from the Spiritual Administration of Muslims (SAM)? Some banks have abandoned ulema audits. The reluctance of bankers to interact with the MBM sometimes leads to anecdotal situations. Thus, one of the banks included in the top 10 issued a plastic card for Muslims with a pig on it.
Let us add that the composition of the expert council on Islamic banking was approved by the Government of the Russian Federation only on November 30, three months after the start of the experiment. Was it really that difficult to do before the start?
Thirdly, the Bank of Russia carried out vague explanatory work among potential participants in the experiment. If in Bashkiria the specifics of partnership financing with the support of the Central Bank were discussed within the framework of International Business Week, then in Dagestan, according to business circles, representatives of the regulator held presentations on the experiment formally, for show.
As Murad Aliskerov, general director of the Islamic financial company LyaRiba-Finance, told MK, there are three types of Islamic mortgages. The most popular contract is considered to be Ijara – a lease agreement with the right to buy at any time at book value. Each year, the lender can revise the rent to reflect average market prices. The client pays not only the rent monthly, but also part of the cost of the apartment. In case of violation of the contract, the asset remains the property of the bank.
Murabaha is more similar to the nature of Islamic banking. This is a transaction when the bank buys an apartment and resells it to the client in installments with a markup. For example, over 10 years in equal annuity payments. The terms can only be revised with the consent of all parties. Until the end of the contract, the apartment is the client’s property, but under an encumbrance.
There is a third type – waning Musharaka. This is a transaction where a financial institution and a client jointly purchase an apartment. The bank usually leases its share to the borrower, and he buys it back in small parts (microshares or “squares”). In this case, lease payments are reduced in proportion to the share owned by the lender. “If under the Ijara agreement the apartment is owned by the bank, under the Murabaha agreement it is owned by the client, then under the Musharakah agreement the asset is jointly owned,” Aliskerov emphasized. He recalled that penalties, fines and penalties are prohibited in Islamic mortgages. According to him, not a single “Islamic mortgage” transaction has yet taken place in Dagestan. In the local market of new buildings there are installment programs from developers, but they have nothing to do with Islamic banking.
According to Ramil Batyrshin, director of the Beit company, coordinator of the Housing Traditions project, in Tatarstan contracts are issued on the basis of Murabaha (usually on the secondary market) and waning Musharaka for new buildings. Russians can receive an “Islamic mortgage” and installment plans according to Sharia law for the purchase of an apartment or house in any region of the country, the expert emphasized. The main thing is that an organization that is included in the Central Bank register works there.
As Ruslan Khaliullin, an expert at the Russian Center for Islamic Economics and Finance at the Russian Islamic University (Kazan), told MK, today in the Russian Federation “Islamic mortgages” according to Sharia are issued by three organizations: two registered in Tatarstan and one in Chechnya.
“Islamic mortgage is one of the most popular financial products, especially among young families,” noted Ruslan Khaliullin. — In Tatarstan in 2018, a total of about 3 billion rubles were issued, which, of course, is very little for our republic. The demand for the product is huge. It is no coincidence that banks have recently shown increased interest in “Islamic mortgages”. However, unfortunately, many bankers do not understand the specifics of Islamic financial products, so we have to constantly provide them with consultations on Islamic banking.
Newspaper headline:
Mortgage by the will of Allah
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