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Interview with Mr. Linar Yakupov, Adviser to the Prime Minister of the Republic of Tatarstan on dealing with Islamic financial institutions, the President of Islamic Business and Finance Development Fund (IBFD Fund) about current trends of Russian foreign economic policies - towards East.

Mr. Yakupov, Tatartsan Republic is not accidentally chosen as headquarter of IBFD Fund. So republic has something to be proud of on Islamic finances development and cooperation with East.

The capital of the Republic of Tatarstan, Kazan becomes the area of cooperation of Russia with Islamic countries within last six years. International economic summit of Russia and OIC countries (KazanSummit), which started as Islamic finance conference in 2009, has become an event of world-wide scale, nowadays are visited by ministers of Islamic countries, representatives of financial organizations from all parts of the world, parliamentarians and entrepreneurship. The range of discussed issues shifted from theoretical aspects of Islamic financial model to practical steps of implementation.

Infrastructure of Islamic financing in Tatarstan includes Islamic Business and Finance Development Fund (IBFD Fund), Tatarstan International Investment Company (TIIC), Eurasian Leasing Company (EALK), Ak Bars Bank, “Amal” finance house, “Alliance Life” insurance company and others. Russian center of Islamic economy and finances (RCIEF) is educational component of this structure. Number of the person involved in Islamic finance field in these organizations is more than 60. It makes it possible to note that Tatarstan makes a base for Islamic financial industry. Then region may be the area of financial activity based on ethical approach.

Rustam Minnikhanov, The President of the Republic of Tatarstan takes an active part at economic cooperation with Islamic countries. Cooperation Council with international financial institutions operates under the President.

What else required for starting of Islamic banking? Officials of Federal level are interested at creation of full-scale Islamic finance system in Russia too.

Two possible ways are considered for establishment and development of Islamic finance system and implementation of ethical business practices. As in Kazakhstan, where financial system had launched by politic will of president and directive passing of law, which regulates Islamic finances and banking. Another one is the way when practice of Islamic financial tools implementation forms within existing legislation. Law and regularities are formed at analyzed practice. We are more at second way.

So starting practice is sufficient, only enshrining in the law is required?

Tatarstan Republic went further than other Russian regions. It is not possible to attract investment by mechanism which is not worked out in details. Before imposed sanctions 90% of all investment projects were with European countries and USA. Why did it happen? In 90-s banks in Russia were established by west standard. We were adopting experience of western countries. Amendments of Russian legislation had been done. As result, quite effective legislative and investment environment for full-scale work with western investors had been created.

Due to imposed sanctions Russia started work with Asian countries, for example with China.

Russia is to build up administrational relations with Asian and Middle East countries. There are lack of experience and sometimes the lack of regulatory basis, which makes it impossible to work at full blast. Russia has subsidiaries and agencies of Asian banks and financial structures in its territory. But talking about China we are not yet ready to make business with this country. So it is time when we gain the experience. New cooperation culture is required.

What about Arabian countries, what disturbs Russia to work in this field?

Situation is the same with Arabian countries. Finance requests separate approach. Islamic finances require different way of regulation. The issues of double taxation are to be solved. Now, there are needs of Islamic finances and banking terminology to be introduced at Russian legal framework, working out of necessary practice and to remove the barriers which disturbs to Islamic financial Institutes to work at full-blast. This is the stage that we are to go through. In my opinion it might take from one to three years. I think our country is so close to make a decision to work at sphere of Islamic banking.

Islamic banking has some difficulties to be solved. But sukuk is tool which is quite real to implement. It is said that Russian Federation had made emission of Islamic securities.

Sukuk market grows on average for 15% annually. Hong Kong, Senegal, South Africa, Luxemburg and Great Britain have made emission of sovereign sukuk in 2014. Japan, USA, South Korea, Tunisia, Bangladesh has claimed about intentions to enter the market. At the end of 2014 the amount of emitted securities is estimated to 300 billion dollars.

Kazakhstan Republic has an experience of sukuk emission. Development bank of Kazakhstan floated first emission of sukuk al-murabaha for 240 mln Malaysian ringgits

IBFD Fund has agreements with financial centers of Malaysia and England and we are in touch with Dubai Islamic economy development center. We have clear vision of how to work and to use this tool and what to be done for sukuk emission. Kazan Sukuk Conference, which will be held on March, 2015, in Kazan, will touch upon the issues of sukuk as means of resource mobilization to investment projects of large corporations, financing of regional infrastructure development, facilities of sukuk use and mechanism of Islamic securities implementation in modern world.

Mr.Yakupov, how Islamic financial products are implemented in Russia. Are any specific steps done in this area?

Educational facilities take active part at that. They make the educational programs, trainings with participation world-wide recognized experts. Education of Human resources is one of the important factors of economic processes. Tatarstan has RCIEF and departments which educates Islamic economy and finance.

The Council of Federation of the Federal Assembly of the Russian Federation has created working team which studies the possibilities of Islamic financing development in Russia. Consultative meeting of the parliamentarians of Russia and OIC countries, supported by the Federation Council are being held annually within KazanSummit. The issues of development of Islamic finance model of the Russian Federation and cooperation with Islamic world are being discussed. Ilyas Umakhanov, deputy chairman of the Federation Council, takes an active part on that.

Association of Russia banks and Association of regional banks started to work at this branch.
Central Bank of Russian Federation is interested too. Elvira Nabiullina, chairman of Central Bank stated that bank studies the issue of creation of regulations for functioning of Islamic banks. It shows that the authorities are ready for certain steps. Islamic funding rises from year to year. Conditions should be created at federal level also, and necessary changes in legislative are to be done. Sceptics say the shares of Islamic facilities are scanty. But let us remind the number of traditional banks at the beginning of 90-s. It is just matter of the time and cooperative work of government, financial and other involved organizations.