New opportunities within the Russian banking law were discussed at the “Islamic Finance. Prospects of Development in Russia” international conference in Moscow on December 10, 2009. The event organized by the Moscow Times and the Council of Mufties of Russia was supported by the Russian-Arab Business Council and sponsored by VTB Capital, PG&P, Norton Rose and Goltsblat BLP. The conference was attended by the Ambassadors Extraordinary and Plenipotentiary of Algeria, Bahrain, Indonesia, Iraq, Kazakhstan, Kuwait, Luxemburg, Malaysia, Morocco, Nigeria, Qatar, Saudi Arabia, Senegal, Turkey, representatives of government bodies, academic circles, religious, public, and commercial organizations.
Islamic Banking Events in 2009
The participants in the conference noted that the opportunities and prospects of Islamic banking in Russia had been discussed several times during 2009 at the events organized in Russia or attended by Russian delegations. Representatives of Russia took part in the Fifth World Islamic Forum in Jakarta in March 2-5. Two weeks later, Moscow hosted the First International Conference “Islamic Banking. Specifics and Prospects” backed by the Russian-Arab Business Council.
The Russian President Dmitry Medvedev met Ekmeleddin Ishanoglu, Secretary General of the Islamic Conference Organization in Moscow on March 27. For the first time in its history, the 2009 St. Petersburg International Economic Forum was started by the “Business Dialogue Russia – The Arab World” section supported by the Russian-Arab Business Council (RABC). The International Islamic Business and Financial Summit was for the first time held in Kazan, Russia, on June 25-26. In October, the RABC organized the Russian-Saudi Business Forum in Jeddah, Saudi Arabia, during which Dr. Ahmad Muhammad Ali Al-Madani, President of the Islamic Development Bank met representatives of the Russian delegation.
Special Islamic finance workgroups have been created by the Council of Mufties of Russia and the Association of Regional Banks of Russia.
Tatiana Gvilava, Director of the Russian-Arab Business Council speaks about the Council’s activities
During the conference, Mrs. Tatiana Gvilava, Director of the Russian-Arab Business Council described the activities of the Council aimed at creation and implementation of agreements on establishing bilateral Islamic financial and banking institutions. Mrs. Gvilava stressed the importance of the fact that according to recent reports, the Islamic financial sphere showed more stability and reliability in meeting the challenges of the world financial crisis. A positive view on the possibility of implementation of Islamic banking models in Russia has been forming. The Director of RABC voiced hope that the ideas of implementing the Islamic financial instruments would be turned to life, and the bilateral Russian-Arab banking structure that had been agreed upon during the Russian-Bahraini Business Forum in 2007 would be created in the near future. Mrs. Gvilava concluded by inviting the audience to the “Arabia-EXPO 2010” exhibition in April 2010.
Implementing Islamic Financial Instruments in Russia
The experts reported on various aspects of implementation of the Islamic financial model during the conference’s three sessions. Two of the reports featured the prospects of cooperation with Luxembourg, the first European state to establish Islamic financial institutions, and Malaysia, that managed to become an Islamic finance leader in the Muslim world after a five years period. The participants discussed Islamic banking services for retail and corporate clients and ways to make these services available to a larger number of clients. Much attention was given to such topics as microfinancing, the national banking, finance, and tax legislation, as well as the results of reforms in banking sphere in Great Britain, Germany, Malaysia, Kazakhstan, Kyrgyzstan and other countries.
According to the recent survey conducted by the Council of Mufties of Russia which was presented at the conference, certain parts of the country’s population show interest in Islamic banking services but most of them do not have sufficient information on these services. While this information should be available to more customers, several law firms in Russia have already successfully implemented mudaraba and musharaka deals with their corporate clients. The representatives of these firms confirmed that such deals are fully compliant with the acting legislation. The participants in the conference also discussed the results of the first attempts to implement what was called halal insurance, the possibilities of sukuk issues, and the creation of Shariah-compliant mutual investment funds.
Though some of the Islamic financial schemes had been successfully used in Russia, the participants stressed the importance of further development in this area, which included establishing an Islamic bank that could become basis not only for the intensification of the Russian-Arab trade and economic relations, but also for the implementation of a broader range of Islamic financial instruments, insurance, investment, and the execution of projects in cooperation with partners from Muslim countries.
More Efforts are Needed to Promote Islamic Finance in Russia
The conference suggested a number of spheres where more efforts are required to promote the development of Islamic financial instruments. They are as follows:
- Development of documentation, legislation and taxation standards
- Training of Sharia advisors and experts in Islamic finance
- Formation of a community for Islamic finance professionals
- Establishment of an Islamic bank
The ResolutionThe conference adopted a resolution to further promote the implementation of Islamic finance in Russia. The text of the resolution is available online on the Council of Mufties of Russia website.