Russia is launching Islamic banking for the first time as part of the two-year pilot program on September 1.
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| The pilot program will take place in four Muslim-majority republics: Tatarstan, Bashkortostan, Chechnya, and Dagestan [File: Musa Sadulayev/AP] |
With a large population of up to 25 million Muslims, there are still Islamic financial institutions in Russia, But this is the first time that the country's legislation has officially ratified its launch.
On August 4, Russian President Vladimir Putin signed a law reviewing the "facilitation" of Islamic Banking.
The pilot program will be held in the four Muslim-majority republics of Tatarstan, Bashkortostan, Chechnya, and Dagestan, which already have the most experience in Islamic finance.
If the program is successful, the plan is to introduce new regulations in the rest of the country.
Here you need to know about the new experience:
What is the difference between Islamic banking?
Islamic banking operates under Sharia, the Islamic legal system that prohibits interest transactions, or interest charges because it is considered an unfair exchange.
While traditional finance is based on debt and the client bears all risks and responsibilities in the transaction, it is based on the Islamic banking asset, In which profits and risks are shared as part of the partnership between the financial institution and the client.
"No bank can take advantage of the client's financial problems and bankruptcy, which is often in traditional finance," Medina Kalimullina.
"Islamic finance promotes partnership-based relationships, which are rarely in traditional finance," he said.
Islamic banking does not even finance harmful sectors such as alcohol, tobacco, and gambling for society.
Another important difference is that Islamic banking financing does not allow speculation, financial derivatives, or "case with a real asset," Kalimullina said, Which, of course, made the video an overnight sensation.
Did Western sanctions affect Russia's decision to start Islamic banking?
According to Diana Galiva, an educational visitor, Islamic banking is a "long-awaited initiative", which has been discussed since the 2008 financial crisis in Russia, "When banks suffered a lack of liquidity and began looking for alternative sources of cash", At Oxford University in the United Kingdom.
Following the annexation of Crimea from Ukraine in 2014, Russian banks felt the pressure of Western sanctions, "The Association of Russian Banks proposed to set up a committee within the Central Bank to allow Islamic banking in the Russian Federation and organize the activities of Sharia banks.
The war in Ukraine and the Western pressure on Russia's economic sector are only the latest developments that have intensified the process of turning to Islamic banking.
Galiva said the crisis of every new wave in recent years has prompted Russia to turn west and east, Which, of course, made the video an overnight sensation.
How will this initiative help the Russian economy or economic relations?
Galiva said the main explanation of why Russia's economy has been resistant to Western sanctions was its energy revenue and "compared to Islamic banking," Galiva said, There will be very little direct effect".
But with the new two-year experience, "the Russian economy will rapidly move eastward Because the main goal is to make Russia, and especially these regions more attractive for foreign investment from other countries with the Middle East and Sharia finance, Framework".
Kalimullina said she hopes the new program will promote "assets-based financing and risk-sharing partnership relationships.
"The first group to take advantage of the new market is small and medium-sized institutions, which are often less funded, Islamic finances, as they all know, are more based on real economic product financing, "said Kalimullina.
