The tie between Russia and the Arabs and Muslim world has been longer than the life of many nations and empires

Dr. Salah Addeen A. Qader M. Saeed, General Manager, Credit and Risk Management, Bahrain Islamic Bank about Islamic banking in Bahrain and its prospects in Russia- in an Interview to MuslimEco.Ru.

- In 921 the Abbasid Muslim Khalifa, Al Muqtadar sent his ambassador Ibn Fadhalan, after receiving an invitation from the king of Volga, Bulgaria. The delegate was there to answer the question raised:" how could a religion that has stemmed out of the heart of the desert established such a great empire that was matched in size only by the empire of the great Alexander?

The tie between Russia and the Arabs and Muslim world has been longer than the life of many nations and empires. It is an ever lasting relation that we need to enhance and cherish. We have a common heritage that we have ignored but have never forgotten. And the time has now come to reestablish these ties again.

The Shariah values are consistent with universal values. Islamic banking is a form of ethical banking that would give an added value to the community as it takes into account the benefit to the community in every transition it undertakes.

Islamic banking is not only for Muslims but is for every body. The Muslim population in Russia is growing and hence there is an increasing need for introducing Islamic banking. Islamic banking was introduced in the west though Muslims where considered as ethnic minorities. Instead of thinking of obstacle, we should always think of the positive side of why Islamic banking should be introduced and how it could help rather than obstacles.

When Bahrain Islamic bank was first established as the first Islamic bank in Bahrain, there was a strong resistance against its establishment. When Islamic banks were established for the first time, people were sceptic and many though that they would not survive beyond the first six months of operation. The banks are still going strong after two decades.

The founders and managers were true pioneers in the field and they faced all problems conceivable, which were overcome through sheer determination. The products were new and untried. The Central banks in the Gulf felt uncomfortable about granting a licence. Some of the problems that Islamic banks faced at inception are summarised below:

1) Getting a licence

The Central Banks initially resisted the idea of setting up an Islamic Banks as they did not have the confidence in the capability of such a bank to meet regulations. There were serious doubts about the viability of Islamic banks and they questioned the need for setting up such a bank. During the late seventies Bahrain was growing into a major banking centre and the Government did not want to get into a situation whereby a bank gets out of control or goes bankrupt as this would have a negative impact on reputation of Bahrain as a banking centre and may discourage prospective banks from coming in.

2) Raising equity

With the initial negative publicity, launching a new bank on the public was met with resistance. The founders had to put in extra effort through personalised selling to potential investors to raise equity and attract the public.

3) Building up Human Resources

It was difficult for a new bank to attract the right calibre of staff. There was very little expertise in the field of Islamic banking in the first place. Expert bankers were apprehensive and from the way they were trained, conventional commercial banking was the thing to do. They found the concept of Islamic banking as too difficult to understand and thought would be impossible to implement.

4) Creating Awareness of the Product

People were used to conventional commercial banking. The accounting systems of the borrowers were geared to work with commercial banks. There was very little incentive for customers to change. It was very difficult to create awareness of the product and hence the need has risen to educate not only the potential customers but also the public at large, in what appears to be a very complex product.

The bank had to go through a very long and tedious process of educating the public. Lectures were initially given in schools and later at universities. The objective was to make the future generations more receptive to Islamic banking.

5) Management

Setting up a management team of an Islamic bank was a major challenge. Organisation of the Islamic bank differs in some ways from a conventional bank. The organisational structure is flatter as more empowerment is given to the middle management. This was a real dilemma to the bank as the staff concerned were not up to the task.

6) Attracting Depositors

Now who would keep a deposit in a bank that has just started operation and does not give interest? A depositor would be worried about getting the principal back let alone additional profit. The founders had to pump in their personal deposits to get the bank to get on its own feet. Later many depositors came on as they found the product appealing on religious grounds.

7) Creating a Network with Banks

A bank cannot operate effectively in isolation. Islamic banks may not deal in inter bank lending and borrowing, like conventional banks. However, the bank would need the services of correspondent banks overseas for services such as accounts in foreign currencies, exchange, transfer of funds, opening letters of credit to facilitate imports and export in addition to other related services.

It is very difficult for a new bank to build up such a network or get credit facilities from other banks. These facilities are extended among banks on reciprocal basis to allow the placement and taking of deposits, confirmation and negotiating letters of credits.

A number of Islamic banks were established in the west such as the UK and USA where Muslims are considered as ethnic minorities. Theses banks had to operate within the regulatory frame work of conventional banking.

Today, with the growth in Islamic banking wide world, and the development of Islamic banking products, the expanded net work among Islamic banks and the larger number of Islamic banking scholars and professionals, setting up Islamic banking has become easier than in the past. And the most important factors that has been determined and proved, is that an Islamic bank can operate under any conditions even within a country that is catered for conventional banks only.

Historically, the relationship ship between Russia and our region extend to over 11 centuries. The ties that have connected us in the past has extended beyond business as it extended to culture. These ties, though have slowed over the last century, were never broken. There all a lot similarities which would make the integration of business much easier than other countries.

- The economy in the gulf depends mainly on the income from exportation of oil. The agriculture is limited and the region relies to a great extent on agriculture products from various counties. They import a large number of products ranging from food, clothing, equipment, all kinds of vehicles and machineries. The region relies to a great extent on some major international contractors for infrastructure work. There is large number of expatriate workforce at all levels.

Russia is a vast country and can be very attractive as a tourist place for us. The wealth of culture, the vast area, the pleasant weather in summer and the relatively short distance is very appealing to us.

I have visited Russia for the first time last summer when I attended the Islamic summit in Kazan. I have thoroughly enjoyed this visit and have really felt that I was at home.

- The concept of Moscow Halal Expo 2010 is an excellent idea as it could attract many participants and is a direct reminder that Russia and the Islamic world are working hand in hand in the same direction with common goals. It is a reassurance that Russia can offer what we as Islamic nation are aiming for.

Staff reporter

30.03.2010