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The role of Islamic finance in Russia

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Tehran (IQNA)- When the Western capital market for Russia was restricted by sanctions linked to the annexation of Crimea, Russian officials, as well as some banks and large companies, turned to Islamic banking as alternative.

In the 1990s, the first attempts were made to justify and support the establishment of Islamic banks in Russia. The first and only bank to advertise itself as an Islamic finance institution in Russia was “Badr Forte Bank” which offered a limited range of products and services related to Islamic finance, but suspended its activities in 2006.

The development of high-level political relations between Russia and the Persian Gulf states has opened up new opportunities for economic cooperation, including in the field of Islamic finance. Effective investment cooperation with foreign companies and funds has also contributed to the development and growth of the domestic Islamic finance market.

The sanctions imposed on Russia have limited the extent of the financial resources that Russian organizations can draw from the international market. The local sector, especially small and medium enterprises, lack financial resources to develop their activities. Islamic financing instruments, based on risk sharing, have become an alternative for companies, regardless of their religious views.

Since Islamic financing in Russia has not yet been regulated, there is no official registration or list of Islamic financial companies working in the field of Islamic financial projects and transactions.

There are financial institutions and companies that provide Islamic finance services in Russia, mainly since 2011, which can be divided into six main groups: Non-banking micro-financial institutions, banking institutions, investment companies, asset management companies, mortgage finance cooperatives, and other companies (leasing, microcredit and insurance companies).

نقش تامین مالی اسلامی در روسیه برای جایگزینی بازار سرمایه غرب

The best known Islamic microfinance companies and the largest in terms of assets are “Amal Finance House” and “LaRiba Finance Company”.

The business models of the two companies are different, although they provide the same services.

“LaRiba” based in Dagestan, specializes in short-term financing in the retail sector. “Amal Finance House” mainly focuses on corporate finance, but in 2019, “Finance House” also introduced short-term retail finance services. The LaRiba website provides a detailed catalog of products that can be purchased through the company, in the area of ​​Electronics and Housing, Furniture, Cafe Equipment, Bicycles, Educational Activities, Children’s Goods and Equipment, Photography and film equipment, Machinery and cooling equipment, the company also offers financing in the automotive field.

Sberbank, Russia’s largest asset bank, announced in 2019 that its Islamic financing portfolio had reached 16 billion rubles ($250 million), including a contract in Turkmenistan, worth 14 billion rubles ($219.5 million) as of April 2019. The bank mainly focuses on export financing, mainly grain, which accounts for about 98% of its Islamic financing operations.

According to Oleg Ganeev, Vice President of “Sberbank”, the bank has called Islamic financing a “Distinct business model for a distinct clientele” and “Unique product range and risk management system” responding to the values ​​of Islamic ethics. . The bank is preparing to launch corporate financial products and services across Russia, both for businesses and individuals that operate in areas with high Muslim densities, to encourage investment in these areas.

نقش تامین مالی اسلامی در روسیه برای جایگزینی بازار سرمایه غرب

Currently, out of about 30 Islamic financial projects launched in Russia during the period 2010-2018, about 20 are active projects that show growth and expansion of the bank. Most of this growth in the years 2017-2019, is due to the start of Islamic financing services of Sberbank.

Currently, the lack of regulation in the field of Islamic finance is a negative aspect that makes newcomers and potential customers of these services hesitate in Russia. Of course, it also allowed for relative market freedom and allowed companies to experiment with these services and take advantage of this emerging sector.

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