According to Interfax, Russian President Vladimir Putin has signed the law on conducting an experiment to introduce Islamic banking in Russia in the period from September 1, 2023 to September 1, 2025.
The experiment will be conducted on the territory of Dagestan, Chechnya, Bashkortostan, and Tatarstan.
The law was posted on the official website of legal acts.
The experiment participants are legal entities registered in accordance with the Russian legislation and included in a register that will be kept by the Central Bank. Under the adopted document, counterpart funding participants have no right to finance activities associated with the production of tobacco and alcoholic products, weapons, munitions, trade in such goods, and also gambling.
Experiment participants have no right to introduce in transactions remuneration expressed in the form of an interest rate.
The minimum amount of capital for a participant in the experiment, which is not a credit or non-credit financial institution – separate limits are set for them – will be 10 million rubles from September 1, 2023 will be 10 million rubles, and 15 million rubles from January 1, 2024.
Islamic banking has a number of prohibitions and restrictions. For example, it bans payment of interest (riba) and related interest-bearing transactions, uncertain transactions (gharar), and financing of particular economic sectors, such as gambling, pork production and alcoholic beverages. There is a condition of sharing the risk of profit and loss between the financing party and the client on transactions and financial transactions based on actual assets or transactions with these assets. It is also necessary to identify the actual assets underlying the transaction.
One of the experiences of Islamic banking in Russia was the private Islamic bank International Commercial Bank Bard-Forte Bank, created in 1991, of which the Islamic Development Bank was going to become a shareholder. Amal Financial House has offered Islamic financial products since 2010. In 2008, Broker Credit Service formed the common investment fund Halal. Traditional Russian banks also showed an interest in Islamic bank principles. In 2006, Globex Bank drew a loan from Dubai Islamic Bank worth $20 million according to the sharia law Murabaha. Ak Bars Bank organized the placement of syndicated funds drawn under a Murabaha deal worth $60 million in 2011. The organizers and book-runners of the deal were Citi and the Islamic Corporation for the Development of the Private Sector (ICD). The bank said the deal had drawn considerable interest among investors from the Middle Eastern countries and increased awareness of Russia and Tatarstan in the Islamic investment community.
In 2019, Ak Bars Bank presented a new mortgage product, housing financing by selling real estate by installments according to sharia law norms.
In February, Sberbank said its counterpart funding center, in collaboration with Sberinvest Middle East experts, had conducted screening of shares of Russian companies trading in the Moscow and St. Petersburg Stock Exchanges for compliance with Islamic financing regulations. As a result of that analysis, 18 shares of Russian companies that could be defined as halal were found.