Madina Kalimullina: "Islamic banking recognized in Russia"
Annual international exhibition Moscow Halal Expo was held in Moscow several days ago. It was organized under the patronage of Russia's Chamber of Commerce and Industry and the Council of Muftis, with the support of Moscow's government. On the sidelines of this event, adviser on Islamic economics and financing, head of the Council of Muftis' apparatus, Madina Kalimullina, discussed on of the topics of this exhibition, Islamic banking, in an interview with Vestnik Kavkaza.
- This is the eighth exhibition. What changed in Russia in the field of Islamic banking in these eight years?
- In 2009, Russia didn't have a single Islamic financial company, and today there are a number of them, they work, they sign contracts. A significant breakthrough was made during these eight years. Although we don't have any legislation that determines the order of work of Islamic banks yet, over the last three years a special group under the Central Bank of the Russian Federation and an expert council under the State Duma have been working on this topic. At the very beginning we, the expert community that works on Islamic banking, couldn't imagine that this will happen. In 2014-2015, both for political and financial reasons, Russia became interested in alternative sources of financing and conducting financial activities, and today the state officially recognizes such concept as partner banking, which can be called Islamic banking. It's important, since operation of any financial mechanism begins when it's recognized, even if it's under a different name like partner or ethical banking.
Right now we have Islamic financial companies that work in the non-banking sphere, as well as Russian banks that want to try themselves in this field. During this year's exhibition, one of the federal banks proposed a new product - an installment plan. It's a simple product for most banks, especially popular ones, but this bank developed halal installment plan, removing all elements prohibitied from the point of view of Islamic standards. So banks are gradually testing new products.
The main issue, which we're currently discussing and trying to resolve, is how Islamic financial system will move forward in the banking sector, whether it will be done through the creation of Islamic branches within the existing bank or in the non-banking sector. A lot of experts say that it should be done through a non-banking sector. First of all, it's very difficult to change mentality, and when the entire system works based on percentages, it's very difficult for bank's employees to change the pace of their work. Second of all, goals and principles of contracts of the entire banking sphere are completely different from Islamic banking. When we talk about some specific company that deals with investments and trade based on the norms of Islamic financing, then the bank can't do much in this framework. There's also another problem. It's difficult to separate halal and non-halal finances, there's a risk that they will mix up, which also shows that it's better to choose the option of separate institutions or even separate Islamic banks, which is still unlikely in our country.
To sum it up, a lot of work has been done over these eight years. An important element is that for the first time all international Sharia standards of Islamic financing were translated into Russian. They are also presented at this exhibition, including standards of accounting and audition of Islamic financial institutions. It really helps the market, since all the latest works and developments in this field are now in Russian. Financial system needs documents, internationally recognized standards. Now, Russian market participants that are interested in Islamic banking can confidently implement these standards in their activities.
- What issues of financial sector will be discussed during this exhibition?
- This year we have two main topics. First is financial - cryptocurrencies. Muslims discuss this issues, we discuss whether it's halal. There are projects of halal cryptocurrencies, but experts have their doubts. First of all, it's unclear who regulates all of this and who guarantees that tomorrow all of investments won't disappear. Second of all, right now cryptocurrencies look like pure, uncontrolled speculation. But money is a means of exchange, they shouldn't be an object of investments and earnings based on the growth of exchange rates, even if many people are attracted by this.
The second topic is very popular. It's discussed by many people, both opponents and supporters - it's a multi-level marketing. A huge number of people, especially in the Caucasus, are interested in it. Some suffered from it, some are delighted with it. We have gathered the strongest representatives of both opponents and supporters of this system, they will participate in discussions, during which we will try to find a common ground and understand whether it's mechanism we should pursue. We want each participant to decide whether it's right or wrong.
- What can you tell about Russia's cooperation with the CIS countries in the field of Islamic financing?
- There's a cooperation at the state level, meetings between representatives of Central Banks and other regulators are held within the framework of the EEU. We can share with each other: Kyrgyzstan made a great progress in Islamic microfinancing, Kazakhstan made a great progress in legislative development of instruments and infrastructure. There's a department of Islamic financing in the International Financial Center in Astana. Exchange of experience at the level of market participants is not as active, since everyone works in their own region, and existing tasks can be resolved withough asking other countries for help. Perhaps it would be great to exchange expirience in the field of software, but due to different legal requirements in different countries, internal developments are usually more useful. As for the expert level, there's a constant cooperation. There are representatives of Kazakhstan and Kyrgyzstan in the Russian association of experts on Islamic financing.
- What is the current state of Islamic banking in the world?
- Since the phase of active growth, Islamic financing has never undergone digress. Of course, there was a slight decline during global financial crisis of 2008, since this crisis affected real sector of the economy, which Islamic financing affects directly, but if we look at the reports and data right now, we will see a stable growth. In Russia, the crisis of recent years, including the currency crisis, has affected Islamic financial companies, but only for a short time. Right now this sector continues to develop, number of contracts increases, some people come to Moscow and expand their business, although it's not enough, not everyone are able to participate in thos Islamic financial system.