Russia mulls turning to Islamic banking over closure of Western financial markets

MOSCOW: Russia yesterday started an experimental 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.

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

“At the corporate level, it is already obvious that all Western financial centres 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 recognised 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, the Islamic banking has been actively developing in recent years with the Middle East being the biggest centre for Islamic banking and Malaysia for Islamic security market.

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 organisations, and the Islamic finance system has good prospects due to “very voluminous demand” from more than 20 million Russian Muslims, he said.

Religious affiliation does not impose any limitations for using Islamic finance system, Kazakov said, noting that legal entities, which also use bank services, cannot practice religion in principle.