After numerous challenges and pitfalls, the Islamic finance sector in Russia is now ready to contribute to the country’s real economy with the help of a determined team from the Russia Muftis Council.
Here is an interview with Ms Madina Kalimullina, Director of Economic Department of Russia Mufties Council, on her assessment and expectations of the development of Islamic finance industry in Russia.
Ms. Madina, as an expert in Islamic economy, how do you gauge the current development of Islamic Finance in Russia?
For a long time, the Russian market featured a substantial uncertainty with regard to Islamic finance. After the revocation of banking license from Badr-Forte Bank three or four years ago and the closure of Manzil project which was dealing with financing of real estates, the market has gathered enough information and interest in Islamic finance. Still, there was no project, probably except for BrokerCreditService‘s mutual Halal fund, which unfortunately was launched at the beginning of the last financial crisis. It should be noted as well that that a lot of projects were announced, but most of them were never launched.
There is a reasonable explanation for this. The market was actually waiting for a new project. Muslims were wondering why there was not a single Islamic bank in Russia, or why there were no Islamic financing projects. Those who had no clue of market peculiarities started to think that there was hardly any prospect for such projects, that such concepts would never materialise in Russia.
These sentiments were clearly seen even during Islamic finance courses which were organized jointly with the Moscow International Higher Business School (MIRBIS) in 2009. There were quite a number of people taking up the course, and many of them were attracted by their originality. In early part of 2010 however, the number of students started to dwindle, but the student body continued to become stronger, to an extent it now consists of individuals who are fuly ready and willing to implement in practice Islamic finance projects in Russia.
The later part of 2010 and 2011 however has witnessed a revival of sort. Several projects have been successfully launched simultaneously in various regions of Russia. And it wasn’t just mere announcements – these were functioning and growing financial institutions.
Practice in the development of Islamic finance is very important. It allows to adjust the knowledge and forecasts and to identify the ways for further improve. The market must move on as it is new and it attracts great interest both in Russia and among foreign partners. We should also expect the reaction from regulators, who are surely aware of the positive potentials within Islamic finance in fostering real developments in various sectors within our economy.
As for today, what concrete steps have been taken to allow for Islamic finance to function properly in Russia?
I can list the following main steps undertaken:
- gradual accumulation of experience and improvement of quality of Shariah expertise;
- opening of two Islamic branches for commercial banks and three financial investment companies;
- opening of vocational courses on Islamic finance in several universities in Moscow and Kazan;
- cooperation with the international community from OIC countries on an ongoing basis;
- translation and publication of AAOIFI Shariah standards for Islamic financial instruments;
- organization of professional platforms for the development of Islamic business: Moscow Halal Expo, Kazan Summit on Islamic business and finance;
- consolidation of experts under the Russian Association of Experts in Islamic Finance;
- establishment of pre-requisites for the setting up of an Islamic Business Club.
In your opinion, what kind of objectives should the originators of Islamic finance projects in Russia pursue?
The essence of Islamic economics and finance is not merely in the rejection of prohibited transactions. Many people say that the main objective of Islamic banks, as well as other banks’, is to make profit. This is true to some extent, but the desire to get profit as a means to maximize the efficiency of asset allocation is never equal to the enrichment at any price.
The task of a Muslim entrepreneur is not only to become a billionaire, but to create a new product or service which will be useful and beneficial to society. If, by the will of God, he is successful in earning a considerable fortune, it imposes an additional responsibility on him in front of the society. In the end, no one will live forever with his wealth, and the best thing that a person can leave in this life is the result and continuation of his good deeds.
Unfortunately, most of the contemporary entrepreneurs today do not produce new goods or services which improve the lives of the people. They also have no desire to maintain or improve the quality of their products – be it food or textiles, building materials or furniture, a majority of them are of low quality or even defective. Most of the services offered are mediation in nature, which is often based on delusion.
Investments are almost never directed into the sectors where the population has the utmost need: agriculture, energy, environmental protection, improving living conditions in urban and rural areas. Instead, investors prefer to invest in areas that have large and fast money output: casinos, football clubs, trading, financial instruments, banking sector, etc.
In our opinion, this is the distorted concept of entrepreneurship. Today, those entrepreneurs who operate under the norms of Islam do not receive high profits, but have a normal income. I believe those who want to earn on Muslims are destined to fail if they do not share the moral principles that are inherent in Islam, as well as in all monotheistic religions.
The initiatives that are present today in the development of Islamic finance are the result of great efforts and collaboration of people who do their utmost, not by words but with through real deeds.
Allah says in the Holy Quran (4:95): “Not equal are those believers who sit at home and receive no injurious hurt, and those who strive hard, fighting Jihad in God’s Cause with their wealth and lives. God has granted a rank higher to those who strive hard, fighting Jihad with their wealth and bodies to those who sit (at home). Unto each has God promised good, but He prefers Jihadists who strive hard and fight above those who sit home. He has distinguished his fighters with a huge reward.”
All the positives we have today are the result of good deeds and hard work of certain individuals. We are glad that today a team of like-minded people have been created in Russia to focus on the development of Islamic finance. In our view, the guarantee of success and blessings of God depends exactly on partnership and cooperation.
How Moscow Halal Expo may contribute to the development of Islamic finance in Russia?
Actually, the idea of the exhibition itself was originally to promote not only halal-production, but also Islamic financing. One of the main challenges of Moscow Halal Expo is to demonstrate the need for Islamic financing from among socially-oriented, high-tech projects and those related to halal production; and unite all of them together on a single platform both investors and entrepreneurs.
Business program is also designed to attract interest of the regulators and market players, to present and to give a wider publicity to the existing and perspective projects in the field of Islamic finance. Owing to the participation of foreign parties, Russian businessmen will have an opportunity to review and analyze the approaches of different countries to the regulation of Islamic financial institutions and to exchange experience in the organization of Islamic financing.