IF in Russia

Mushtak Parker (Editor Islamic Banker, UK) about 1st Annual Roundtable «Islamic Finance in Russia and the CIS — Market and Regulation»

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The international financial regulatory agencies and business representatives have discussed the issues of Islamic Finance development in Russia and the CIS countries.

The Roundtable discussion «Islamic Finance in Russia and the CIS Countries – Market and Regulation» was held on March 1, 2011 in Istanbul (Turkey) and gathered 49 attendees from 14 countries. The event brought together Russian and CIS officials and market players with counterparts in key countries where Islamic Finance is established and proven.

The event was organized by Bank Conference LTD (Russia) and co-organized by the Islamic Corporation for the Development of Private sector (ICD), member of the Islamic Development Group (Saudi Arabia). Along with the generous intellectual and financial support of the ICD, the financial aid to the event was given by the IFC Al-Shams Capital (Russia), Aktif Bank (Turkey), Taiba Leasing Company (Uzbekistan), the Caspian International Investment Company (Azerbaijan), Tatarstan International Investment Company (Russia) and the Ansar Leasing (Azerbaijan).

In the opening remarks, the moderator , a renowned expert on Islamic finance, Editor of Islamic Banker Magazine Mr. Mushtak Parker (UK), has highlighted a specific importance of holding a panel discussion where each participant had an opportunity to give his or her opinion, share the experience and discuss with the colleagues various aspects of Islamic financing. He also brought into focus that the Islamic finance are becoming, in many countries, a «backbone of economy» as such financing is dedicated, first of all, to the support of small and medium businesses.

Mr. Khaled Al-Aboodi, CEO & MD of the Islamic Corporation for the Development of Private sector (ICD) during his keynote speech, has expressed the support for the initiatives of the President and the Government of the Russian Federation concerning the creation of the world financial centre in Moscow and has laid emphasis on that the ICD and IDB, a key financial institution of the Organization of Islamic Conference (OIC), comprising 57 participating countries, is ready to make contribution to the development of Russian financial system. This could be an important financial assistance and will create many new positive factors: the inflow of new investments, which are under the control of the state, the growth of cooperation not only at public level but also amongst the commercial entities of Russia and the OIC countries and strengthening the position of Russia further to the creation of world financial centre. .

Mr. Khaled Al-Aboodi has noted that the ICD is financing a large number of projects in all OIC countries, however, it is acting the most actively in 33 countries and Russia may anticipate the establishment of dialogue and the development of amicable relationship with the Islamic Development Bank. He has also turned the delegates’ attention to the fact that the Islamic financing is showing a considerable growth and holds the more and more leading position in the world financial system, and such countries as Hong Kong and Japan have, recently, conducted the active dialogue with the Islamic Development Bank and have commenced to implement the features of Islamic financing. Mr. Khaled Al-Aboodi has expressed his certain concerns that, in a view of some reasons, the financial regulators in a number of countries will not be able to provide necessary control over Islamic finance. Nevertheless, the experience of Turkey, Hong Kong, Malaysia and other countries allows to say that the solutions can be found to that task and both the ICD and IDB are ready to provide their assistance in relation to these matters.

Assistant Governor of the Central Bank of Malaysia (Bank Negara), Mr. Bakarudin Ishak has provided the delegates with full details of the experience and the issues, which, at relevant time, had been actual for the regulatory bodies for the purpose of Islamic finance development in this country. He specifically noted that not only the Islamic financial system does not interfere with the conventional financing but it is assisting the fast growth of that traditional financing due to a certain competition. Mr. Ishak has dispelled a myth that Islamic financial products are mainly used by Muslim population. In Malaysia, 70% of investors who are using those financial products are not the Muslims but the adherents of other confessions.

Dr. Mohamad Nedal Alchaar, Secretary General of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) has criticized the myth concerning a simple set of financial services in the Islamic financial system. He said that, at the present day, the Islamic Finance is offering more than 300 types of financial services. Dr. Alchaar also expressed the readiness to make specific steps towards the regulators from Russia and the CIS countries in order that the experts be trained in respect of the regulation of Islamic finance and the control over the Islamic financial institutions.

During the Roundtable meeting the issues of policy and regulation, economic fundamentals and future funding requirements, capital markets and the practical recommendations for pragmatic progress of the Islamic Finance in Russia and CIS countries were discussed. Each attendee of the Panel discussion had an opportunity either to speak or to take part in a discussion.

Arkadiy Svistunov, member of the Financial Market Committee of the State Duma of the Russian Federation, as expressed his gratitude to all of the attendees for the true information that had been provided to the audience and he also gave his opinion that the Islamic model of financing in Russia which undoubtedly open a new horizons in the economy, should be gradually developed and act in parallel with the conventional financing.

The representatives of the regulatory bodies of Kazakhstan, Tajikistan, Kyrgyzstan, Germany, Luxembourg, Turkey and Russia have brought their consolidated opinion that not a spontaneous but a consistent dialogue amongst the internal regulators with the regulators from the countries where the Islamic Finance exists should necessarily be conducted. All of the attendees were unanimous that many issues relating to poverty and undeveloped infrastructure could have been handled using the Islamic financing. In the course of discussion it was also noted that the information exchange amongst the regulators is necessary to be taken to a leading edge. Thus, Mr. Khaled Al-Aboodi has proposed to organize a programme of visits of the regulators from Russia and the CIS countries to the central banks of the countries where the Islamic financial system is well-established.

Dr. Adalet Djabiev , CEO of the IFC Al-Shams Capital in his speech has expressed his view on the Russia’s existing financial system which is based on a speculative approach and, in his opinion has no future. He also shared his vision of its future possible development. The opinions as to how the development of Islamic financing in Russia and the CIS countries should be started have become different. The two opinions have arisen in the course of discussion of issues relating to the trends of Islamic finance development. The first one was about the necessity to go from top to the bottom: from the political will to its execution. The second point of view was just the opposite and consisted of the necessity of going from the bottom to top, from the practical steps to certain alterations in the legislation. As the discussion went on, the attendees have agreed that both the initiatives are needed but it all will depend on a specific country and the conditions in such a country.

The majority of the attendees have brought into focus a specific importance and timeliness of the event and they have also noted that the good moderated panel discussions prove to be the most efficient form of sharing the opinions.

The Roundtable in Istanbul was the first one in the series of planned events themed: «Islamic Finance in Russia & the CIS — Demystifying the Ethos, Identifying Challenges, Exploring Synergies and Opportunities».