Russia is set to launch Islamic banking


4 September 2023 at 12:47

 Russia is set to launch Islamic banking

By MUDI Report

Russia is launching Islamic banking for the first time as part of a two-year pilot programme on September 1.

With a sizeable Muslim population estimated to be up to 25 million, Islamic financial institutions have existed in Russia until now, but this is the first time the country’s legislation has officially endorsed its launch.

On August 4, Russian President Vladimir Putin signed a law introducing Islamic banking to assess its “feasibility”.

The pilot programme will take place in four Muslim-majority republics – Tatarstan, Bashkortostan, Chechnya and Dagestan, areas that already have the most experience in Islamic finance.

If the programme proves to be successful, the plan is to introduce the new regulation to the rest of the country.

Here’s all you need to know about the new experiment:

What is different about Islamic banking?

Islamic banking operates under Shariah, the Islamic legal system that forbids transactions involving usury, or charging of interest as it is considered an unjust exchange.

Whereas conventional finance is debt-based and the client bears all the risk and liability in transactions, Islamic banking is asset-based, with profit and risks shared between the financial institution and the client as part of a partnership.

“No bank can benefit from the client’s financial problems and insolvency that often happens in conventional finance,” Madina Kalimullina, the executive secretary of the Russian Association of Experts in Islamic Finance, told Al Jazeera.

“Islamic finance promotes partnership-based relations, which is rarely the case in conventional finance,” she said.