Russia starts Islamic financial pilot project in Muslim-dominated areas

MOSCOW (AA) – Russia has started a pilot project on implementing Islamic financial practices in several regions with Muslim-dominated population.

The experiment will take place in Dagestan, Chechnya, Bashkiria and Tatarstan and will last for two years. After that, the authorities will decide on the suitability of the Islamic model for Russia.

Alexandr Kazakov, a senior expert at the Russian Association of Experts in Islamic Finance, said that it was “time to forget” about the Western financial markets and focus on cooperation with Arab and Asian countries.

“At the corporate level, it is already obvious that all Western financial centers are closed to Russian capital. We have no choice but to develop affordable alternatives. It’s time to forget about the existence of London and concentrate on Beijing, New Delhi, Singapore, Kuala Lumpur and the Gulf countries,” the expert said.

Kazakov said the State Duma passed in the first hearing the bill on partner financing, where the term “partner financing” suggests financial products based on Islamic principles.

“Once it is adopted, the existence of alternative financial instruments will be recognized at the legislative level in Russia. This is an important political step both within the country and in relation to our real foreign partners,” he said.

According to Kazakov, Islamic banking has been developed in recent years with the Middle East being its biggest center.

Asked if the Islamic financial model can oppose the Western financial system, Kazakov said: “We will live and we will see. The Western financial system is now in a serious crisis. Everything will depend on how it survives this crisis and if it survives it.”

In Russia, there are several successfully functioning retail Islamic financial organizations, he added, and the Islamic finance system has good prospects due to “very voluminous demand” from more than 20 million Russian Muslims, he said.

Speaking about the sticking points of Islamic finance, Kazakov said the principal difference is that Islamic finance prohibits charging interest.

He recalled that the traditional financial system in both the Christian and Muslim world prohibited usury. However, the interest-bearing loans eventually found their way to European business model.

“The Islamic banking offers the partnership, which involves participation in both profits and losses, while interest-based loans should be repaid regardless of the result of the borrower’s activities,” he said.