Islamic banking introduced in Russia

Andrey Petrov, Evgeny Nikolaychuk
Islamic banking introduced in Russia

© Photo: Maria Novoselova / Vestnik Kavkaza

Today, State Duma deputies approved in the third, final reading an Islamic banking experiment in Russia: the new banking system will operate from September in Dagestan, Chechnya, Tatarstan and Bashkiria.

From September 2023, an experimental legal regime for partnership (Islamic) financing will be launched on the territory of several of Russia’s subjects. Today, the law on conducting such an experiment was adopted by deputies of the State Duma of the Russian Federation.

According to the document, the experiment will take place in Dagestan, Chechnya, Tatarstan and Bashkiria and will last for two years - until September 1, 2025. The law provides for the prolongation of the experiment by the government in agreement with the Central Bank.

According to the terms of the experiment, its participants will not be able to set a constant remuneration in the form of an interest rate, but they will be able to make it variable depending on the results of transactions. Also, they will not be able to finance the production of tobacco and alcohol products, weapons, ammunition, trade of mentioned goods, as well as the gambling business.

Participants in the experiment are required to have their own funds in the amount of 10 mln rubles, from January 1, 2024, the minimum threshold will increase to 15 mln rubles. They also have the right to raise funds or other property of individuals and legal entities - these can be loans, acceptance of property for trust management, as well as bond issuing. The document also defines anti-moneylaundering framework, according to which the participants in the experiment will be required to provide the authorized body with information about transactions, their nature, and purposes upon request.

The law will come into force on September 1, 2023.

What will Islamic banking change in Russia?

Anatoly Aksakov, Chairman of the State Duma Committee on the Financial Market, in an interview with a Vestnik Kavkaza said, that at least $14 bln will be invested in various projects during the two years that the test period will last.

Aksakov drew attention to the fact that Islamic banking can be extended to the entire territory of the Russian Federation. ”It may well spread to all regions of the country, especially since over 57% of Islamic banking assets are used in non-Muslim countries".

According to him, the state is already receiving applications from the regions to participate in the Islamic banking system. "Ingushetia and Chuvashia have applied. There are proposals from the Kaliningrad region and Moscow. Thus, Islamic banking attracts different regions," Anatoly Aksakov concluded.