Growing Islamic banking in Russia
-DR. ABDUL RUFF COLACHAL
____________________

Unfortunately, Islam today is the most insulted relation while Muslims
remains most terrorized humans on earth. Most Muslim media also
contribute to this phenomenon as they are committed to anti-Islamism
on payment basis.

Mosques are important Islamic assets. Russia has plenty of Islamic
assets like mosques. The Qolşärif Mosque in Kazan, the republic of
Tatarstan in Russia, for instance, is an asset of modern Islamic
civilization. .

However, one of positive trends is ever growing Islamic banking
globally. Increasing awareness among people about the rationale of Islamic banking
and financing is indeed an encouraging phenomenon that would make people self sufficient and self-reliant in due course.

The true Islamic banking is more client-oriented: banks are supposed
to go easy on borrowers in case of emergencies that render clients
unable to pay, even up to forgiving their debts. The core tenet of
Islamic banking is a ban on riba, or interest, and loaning money for
profit. The ban comes straight from the Prophet Muhammad, and is
spelled out in the Quran. On the face of it, such a ban should
eliminate any possibility of sharia-compliant banking — but this is
not actually the case. The ban on "riba" prohibits making money from
money. So instead, Islamic banks earn profits by co-investing in their
clients' goods and businesses

Islamic banks are banned from financial speculation of any kind —
where, again, money is made from money — as well as from investing in
haraam, or sinful, products, such as alcohol, pork and gambling. The
meticulously worded practices have seen a fair share of criticism from
those who say they are just a piously worded cover-up for conventional
banking. This may be true in some cases.

Islamic banking process is on the rise even in Russia where
Muslims are attacked especially in Muslim nations within Russian
federation, like Chechnya which has been demanding freedom ever since
Soviet Union got dismantled and 15 new states emerged out of USSR.
There are more Islamic believers now in Russia though only a fraction
tries to actually live by their religion's customs - they just observe
certain formalities without sincere approach to Islam.

Islamic finance is generally a recent invention, first developed in
the 1960s. It has since grown to an industry with $1.3 trillion in
assets as of 2012, according to last year's Islamic Finance
Development Report based on data by Thomson Reuters. Among the
powerhouses of Islamic banking are Malaysia, Saudi Arabia and Iran,
although banks in many Western countries, including Britain and the
United States, also offer halaal-friendly banking services.

The first bank to offer Islamic financial services in Russia, Badr-Forte, folded in 2006. The industry has been gradually sprouting ever since and lately seems to be making headway. Several non-Islamic Russian banks have attracted halaal investment in recent years, including Ak-Bars Bank in Tatarstan, which brought in a total of $160
million in two investment deals in 2012 and 2013. But despite these
signs of growth, the country's pool of officially registered Islamic
financial institutions remains limited to two organizations in
Tatarstan and two in the republic of Dagestan in the North Caucasus,
said Gabbasov of the Russian Center of Islamic Economics and Finance.



Islamic finance is a fast-growing field worldwide, and proponents say
it offers both ethical and practical benefits to the faithful and
non-Muslims alike. The religious renaissance that spans all creeds in
Russia does not mean people rush out to seek services that comply with
their religion.

Russian Muslims, so used to Soviet model of thinking, are slow to
change their financial habits, while nonbelievers among them, as
elsewhere in the word, are plagued by a deep-rooted distrust of Islam.
An Islamic finance industry has been budding over the past decade in
Russia, and analysts and players show cautious optimism about its
prospects. Yet, the financial authorities in Moscow, to some extent,
are in no hurry to adapt economic legislation to facilitate Islamic
banking.

There is no overt exhibition of pursuing Islam or Shari’a in Russia,
which killed the Chechen Muslims stock and barrel after   giving them
hopes for a free independent Chechnya under new Russia under Boris
Yeltsin.

Today, however, there are at least 10 million Muslims in Russia, but
only four public organizations where they can invest and borrow in
compliance with the Quran. Russia, however, lags behind in the
industry. Russia seems to promote Islamic banking as without the state
banking, nothing can either exist or grow. Islamic banking assets in
Russia will reach up to $10 billion by 2018 as the industry still has
plenty of room to grow. The niche is small, but the demand is better
than, say, seven years ago.

In general Islamic banking operations are less profitable than
conventional banking, but On the other hand, Islamic banking being
more client-friendly, banks can make up for that by devoting a bigger
share of the profits to dividends. Thanks to its ban on financial
speculations, interest in Islamic banking has even peaked worldwide
since the last recession — though not necessarily in Russia.
The Islamic finance market is at an embryonic stage in Russia. The
total volume of assets managed by Russian halaal financial
institutions is estimated at $10 million, a blip on the radar for the
country's banking system, whose total assets stood at 57.4 trillion
rubles ($1.7 trillion) in 2013.  The prospects for growth may seem
glorious, given the size of Russia's Muslim population. Muslims were
estimated to make up 7 percent of the populace.

The financial merit of the Islamic system is a more complicated issue.
Rinat Gabbasov, director of the Russian Center of Islamic Economics
and Finance said the ethical nature of Islamic banking operations is
one unquestionable advantage of this practice. It can also at times
prove an obstacle. They once had to refuse a prospective client who
worked in a private security firm that guarded a distillery, "Security
services are good in and of themselves — but sadly, alcohol production
is not"

Religion is one thing for them, and everyday life is another Muslims
embrace Islamic finance first and Islam second, often negligent about
practicing their faith. There are several colleges in Russia now
offering courses on Islamic finance but many people opt for self
study.

Russian regulations are also poorly suited to Islamic banking: Russian
banks are supposed to refrain from trade operations, in which they
would technically engage when providing many Islamic banking services.
The main problem is widespread distrust of and hatred for Islam, a
result of the 15 years of violent turmoil in the largely Muslim North
Caucasus, analysts said. Many officials share this antipathy, which is
why they have little desire to modify Russian legislation for the
industry. The situation is better in the Muslim heartlands: for
example, authorities in Tatarstan are interested in supporting Islamic
finance and have hosted numerous conferences on the matter. This
support has yet to translate into any kind of financial backing or tax
breaks. And some client bases are yet to be evaluated for sharia
compliance.

The industry still has plenty of room to grow. There are forecasts that

Islamic banking assets in Russia will reach up to $10
billion by 2018. The potential client base includes both Muslims and
nonbelievers, though some limitations are unavoidable.

The fact  that Islamic banking in Russia  is steadily grown, albeit slowly,

is a genuinely positive trend.