Russia Beyond The Headlines

Why #Islamicbanking is not working in #Russia

A year ago, when Tatagroprombank launched The Partnership Banking Center, many analysts believed in its success. At the moment, Robert Musin, one of the main shareholders of Tatagroprombank is facing criminal charges for alleged large-scale fraud. In addition to that, on March 9 the Russian parliament decided to reject the bill that would let Islamic banking fully and legally operate in Russia. Since 1997, several Islamic "windows" were set up, but most eventually closed down. According to Nina Mamedova, head of the Iranian sector at the Russian Academy of Science, Russia doesn’t have a well-developed legal framework for Islamic banking. She added that inspite of that, due to the growth of the Muslim population in Russia, some forms of the Islamic banking system will continue to exist in Russia.

Russia's first Islamic bank to open in Kazan

The Partnership Banking Center, Russia's first financial institution established upon Islamic banking principles will start operations in March 2016 in Kazan. The new bank will function as a subsidiary of Tatagroprombank. The Partnership Banking Center will work with both individuals and companies, and will aim to channel Islamic investment into Russia. It will also sign an agreement with the Islamic Development Bank. The bank’s creation became possible thanks to a new law submitted to the State Duma in late January, under which the Russian banking system can comply with requirements of religious financial institutions.

Russia looks to become halal friendly

Tourism authorities have launched a program to make more halal-certified food products available in Russia. The program aims to attract more tourists from the United Arab Emirates, Saudi Arabia and Kuwait. The halal program will focus on Moscow, St. Petersburg, Kazan, Sochi and the towns of the Golden Ring. According to Schegolkova, these cities already have the infrastructure and hotels that can provide halal-friendly services. The list of cities will be expanded over the next few months. In addition to cuisine from Russia’s Muslim regions and internal republics, the program aims to make halal-certified traditional Russian dishes widely available in the country.

Russia looks to replace Western loans with Islamic finance

Islamic finance could help Russian companies hit by Western sanctions to gain access to credit, Rustam Minnikhanov, President of the Russian republic of Tatarstan, said at the Kazan Summit Forum. According to Rustam Minnikhanov, Russian banks, including the country’s largest bank Sberbank, are currently showing an interest in Islamic finance. One of the advocates of the development of Islamic banking in Russia is the head of Sberbank, former Russian Minister of Economic Development, German Gref. Minnikhanov also said that the development of Islamic banking in Russia should be done on a federal level and that there is no talk of creating a unique financial zone in Tatarstan.

Russia seeks Malaysian expertise in Islamic Finance

Russia is looking to Malaysia to assist and build its knowledge and human capital in Islamic Finance, as it looks to introduce the system for its Muslim citizens. A delegation from Malaysia, consisting of representatives of a subdivision of the Central Bank of Malaysia for development of Islamic finance and University Tun Adbul Razak, visited Russia in February to assess the market. Earlier this year, two major Islamic banking institutions, Al Baraka and Al Shamal, announced that they are actively looking for partners in the Russian market at a recent banking summit. Working with a local partner will allow them to operate legally in Russia.

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