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Islamic finances are ready to penetrate into the russian economy

Overlook of islamic finance’s market from investment company Finam.
Islamic finances are ready to penetrate into the russian economy
During the crisis islamic banking attracted increased attention of investors. Economic convulsion plagued less, and many people thought that if Shari'ah forbids speculative investment (there’s possibility to invest only to real industrial activity), it means that islamic financing has a sort of immunity against the crisis. And turned out to be wrong. А number of defaults in the sukuk market (islamic bonds) in 2009 disproved.

“However in current climate defaults happens in all markets,- noticed Farmida Bi, the partner of company “Norton Roiz”, in her speech at the conference dedicated to the prospects of islamic financing’ s development in Russia. – While institutional investors of islamic countries are still rich and are ready to invest their funds.

Underlying on the basis of islamic financing Shari'ah’s laws forbid adding the interest and investing money in alcohol and porkmeat trade, in entertainment concerned with gaming and erotica. Moreover, development partners (particulary financial institutions) have a risk exposure, sharing among themselves both profit and material losses.

Islamic finances are ready to penetrate into the russian economy

At the present time islamic banking gives place to traditional bank even in islamic countries. As well in Malaysia, which is considered to be one of the islamic banking development’s center, its market share is about 30%.

However in view of strengthening of religious orders' observing experts foreshorten long-term growth of islamic banking. In Russian Federation, where total population of muslims measures up 20-30 millions of people islamic financing's instruments are also rather interesting as well as for representatives of different confessions.

According to quiz of Russian Council of Muftis 69% of the pollees wonder about alternative financing methods and personal needs. 56% express the willingness to become islamic bank customer, another 26% consider about it.

Madina Kalimullina, the departmental manager of the Council's economic programmes, says that a lot of people are stopped by information gap. Islamic banking is relatively infant. Starting point of its development is considered to be the establishment of Islamic Development Bank in 1975 and Dubai Islamic bank. In Russia islamic banking is presented with non-existent Badr-Forte Bank, with one mutial fund and with the issue of sukuk.

Among another reasons according to which Russian don't hurry to use the instruments of islamic banking are inflation, taking a toll of money while they are on the islamic bank account, risk of bleeding cash and uncertainty in rapid development of islamic banking, "as far as the whole world works only for the american economy".

It is incredible, but in european coutries the population, who express their readiness to use the instruments of islamic banking, is larger than in muslim countries. For instance, in the UK they total 75%, while in Saudi Arabia - 65%, in United Arab Emirates - 25%.

Generally, in the West the United Kingdom is reputed centre for islamic banking development, and, as predicted, for the nearest time along with Dubai and Cyprus it may be among the top three of the worldwide leaders. According to the words of Andrew Berd, the partner of Berwin Leighton Paisner, the origin of islamic banks (such as HSBC Amanah, UK'Islamic Bank of Britain, etc) have become possible by virtue of the extended financial infrastructure, development of necessary normative legal base and tax basis.

According to HSBC, in the world thre are nearly 300 islamic pecuniary institutions. Masrur Hak, the chief of VTB Capital responsible for Middle East and Africa, predicts that the size of market comes to 500-700 billion dollars, and distance for some years will reach billion dollars. The expert considers the agriculture as one of the most attractive sectors for islamic finances in Russia. Alexander Barmin, Denton Wilde Sapte partner, includes with it also infrastructure projects.

In view of experts murabaha (sale with delay in payment), mudarabah and musharakah
(fiduciary and joint management), takaful (insurance) and sukuk are the most perspective instruments of Islamic financing in Russia. However, the use of all these instruments is attended with certain difficulties.

In russian practice the term commercial finance is quite in tune to the definition of murabaha. However, in our country the commercial activities of banks are forbidden. They can only discount the news, buy and sell precious metals.Otherwise, for instance, islamic bank depositors can either participate in capital investment project of bank, sharing not only its profit, as was said before, but also its losses, or take on non-interest bearing account and have benefits in obtaining of credit. Allow for the fact that Shari'ah forbids loan interest islamic bank itself undertakes purchase and sale. Suppose that the bank buys flat then resells it to customer with the payment by installments. In this case, however, according to russian legal system double taxation occurs first in purchase, then in sale.

Experts maintain that removing current problems is possible with correct structuring of transactions, but depending on individual cases developments are necessary in russian legal system. During the last few years the authorities extensively stand up for promotion of finance services procurability, expansion of new financial providers. So, according to the words of Oleg Ivanov, the vice-president of Russian Association of Regional Banks, these activities entirely correspond to this context.


 

Top list of events affecting the russian market

 




















































Event


Rating


Forecast


Macroeconomy

The general situation on the world stock market C Pos
Macroeconomic environment in USA D Neg
Macroeconomic environment in Russia B Neg

Policy

Documents signed with the establishment of a customs union C Pos

Raw materials market

Oil prices level in the world C Pos
Precious metals prices level in the world C Pos

Economic branches and corporative news

Investment programme of Russian Railways to be increased in 2010 till 271 billion dollars C Pos
V.Putin approved assignment of 12 billion dollars to AUTOVAZ C Pos
State Duma again postponed the consideration of trade act C Neg

 

Annotation
1.On our scale the events with the mark A influence the market intensely, the events with the mark D influence the market faintly
2. The top list of previous day can be pointed out in the parts "Macroeconomy” and "Raw materials market” in column 2 tangentially
3. In the column 3 the arrow "downward” points out the probable negative influence to the market, the arrow "upward” points out the positive/neutral influence.


Investment environment - moderate positive

Makeeva Larisa (Finam.ru)

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Analytics

Malaysia's fast-growing Islamic finance sector benefits not only the Muslim world but also non-Muslim countries, said former Prime Minister Tun Abdullah Ahmad Badawi.

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