Islamic banking in Russia: banking services by Sharia standards

Over recent years, the Islamic banking trend in Russia has been growing. Experts of Capital Legal Services, head of Corporate practice Dmitry Churin and lawyer Maria Aksenova told Islamic Finance News about the prospects for Islamic finance in Russia.

The potential of Islamic finance, i.e. Sharia-compliant banking is enormous in Russia: for instance, Sberbank recently announced the acquisition of a 25% share of PayZakat, an Islamic payment processing system. Also, the largest state bank entered into a deal to construct the TAPI pipeline (Turkmenistan - Afghanistan - Pakistan - India), with the Islamic Development Bank (IsDB) participating in the deal, making this project the first with a letter of credit through Islamic banking.

The launch of the Sharia-compliant mortgage program at Ak Bars Bank (Republic of Tatarstan) also testifies to Russia's interest in the development of Islamic banking. So far, the bank is providing Islamic mortgages in pilot mode; however, if the program is successful, it will be extended to other Russian regions. Moreover, the Republic of Tatarstan is developing a program for compensating interest rates on loans for enterprises that comply with Sharia standards. This program allows enterprises to comply with the requirements of Islam until Islamic banking is fully introduced.

And it is highly likely that this will happen – various Russian business associations support Islamic banking, including the Muslim Entrepreneurs Association of the Russian Federation, whose assets exceed 60 bln rubles, as well as the Russian Center for Islamic Economics and Finance, whose goal is to increase public awareness of Islamic financial products.

Despite the above, there are several problems which prevent the development of this area, in particular, the lack of special legislation.

However, if the taxation of Islamic finance operations is optimized, Islamic banking in Russia could grow ten-fold by 2022.