Madina Kalimullina: The main problem in opening Islamic bank in Russia is financial ignorance of people

In 2008 the International Department of RMC opened the Economic Programs Office. During this period the employees of the Office have established relationships with many famous centers of Islamic financing and prepared theoretical, methodological, institutional framework for the implementation of Islamic financial products in Russia. In details about the work done Madina Kalimullina the Head of the Office shares in the conversation with IslamRF.

The area of activities of our Office is everything that connected with economic life of Muslims and Islamic principles of economics, which are now of great interest of both Muslims and Non-Muslims.

The theoretical part of our work consists of religious fundamentals, that deal with economic life: Zakat payment, business ethics, Islamic principles of financing, in future – principles of succession.

Our educational program includes the publication of books, manuals and articles. Recently we have been published “Zakat. Practical Guidance”. This book discloses the aspects of Zakat - one of Islam pillars and how it should be paid nowadays. The book should serve as a guidance to calculate and pay Zakat. In electronic form the table of Zakat-Calculator is available on the web-site we have just launched – http://www.muslimeco.ru. This web-site will highlight the activities of our Office. One of its sections – Business unit is planned as a platform to establish business-ties.

Among our educational projects there are training course “Islamic finance”, carried out jointly with Moscow International High School (MIRBIS). 11 of February the presentation of projects of the students of the course first intake will take place, after which they will receive the certificates. Real investors, recruiting agents and other interested people will take part in the presentation. In February the next intake of the course will be set as well.

Within the activities of the working group on alternative (Islamic) financial institutes and products we try to reach one of our main goals, namely the goal to work out recommendations to optimal implementation and functioning of Islamic finance programs in Russia. This group was created May 18, 2009 as a result of the resolution of International Conference “Islamic Banking: specifics and perspectives”, which took place March 17-18, 2009. The working group is represented by independent experts in the field of Islamic finance, Russian and Foreign legal framework, including taxation.

December 10, 2009 during the International Conference “Islamic financing. Perspectives of development in Russia” the members of the group decided to create an Association of professionals in the field of Islamic finance. The work of establishing this organization is holding now with the participation of our Office.

Within the educational activities of our Office we held a seminar in the form of master-class on Islamic banking and insurance for specialists in Banking and insurance fields. Among experts at the seminar there were executive director of Department of Islamic Banking and insurance of Central Bank Malaysia and also the Head of Academy of Shariah research in the field of Islamic finance, who visited Moscow with assistance of the Institute of Islamic research and training at Islamic Development Bank.

Recently we have started to work out Standards of Islamic finance instruments in Russia. In this activities we rely on the Association of accounting and auditing of Islamic Financial Institutions (Bahrain). In December 2009 we met with the General Secretary of the organization where we agreed to translate into Russian Shariah standards in this field.The translation will include comments in concordance with Russian realities.

Among such projects is the First Moscow International Exhibition of Halal - Moscow Halal Expo 2010, which we plan to hold from 3 to 6 of June, 2010 at VVC. The slogan of the event is “Halal – as a way of life”. The Exhibition will include not only exposure of various companies goods and services but also business-meetings, presentations of different projects to potential investors, cultural actions.

As for already really developing entrepreneurs activity, it is worth mentioning that we receive many questions from Muslims who want to bring their business in compliance with Shariah standards as well as from Non-Muslims who would like to launch some of these or other projects for Muslims consumers. To all those who turn to us we give consultancy, some entrepreneurs we invite to session of working group on alternative (Islamic) financial institutes and products.

As for real investment we held a number of meetings abroad and hope that soon the investment flow from Islamic countries will be attracted by Russian market.

Today we are more confident regarding the success of the project and our confidence is much more than in 2007 after close of Badr Forte Bank. The problem is not in the Russian legislation: during the sessions of the working group which I mentioned above, the experts has studied the prerequisites of realization within existing legislation such financial products as musharaka, mudaraba, sukuk and takaful, their law opportunities and tax consequences. The conclusion is that the legislation doesn’t prohibit but a little bit limit its realization. The question is how much investors are willing to invest in such projects. Many investors think about it but wait for someone else to make the first step.

The major problem for the one who will decide to implement Islamic financial products and open Islamic Bank would be in my opinion a low level of population awareness about Islamic finance, about Islamic bank. Many don’t know what is the difference between Islamic bank and common one. Not so long ago we have summed up the sociological research on Islamic economics and finance, which showed that even among young generation of Muslims that have free access to internet and are interested in news from Islamic life only 5% have an idea of basic Islamic financial operations. Major share of population is prepared to be a client of Islamic bank, but it is necessary to carry out wide educational work.

The second problem is training courses for the bank employees. Either for specialists of bank or Shariah advisers. Nowadays only one Russian has a certificate that confirms his right to work as Shariah adviser at Islamic financial organizations. It is an employee of the Religious Board of Muslims of Tatarstan Bulat Mulyukov who got relevant certificate of Association of accounting and auditing of Islamic finance instruments December 2009. However the fact itself that such specialists are in Russia already is a step ahead.

To receive this document is necessary to have basic Shariah education, economic education and to pass relevant training courses.

Though as the Permanent Representative of RF at OIC Kamil Iskhakov noted at the Press-Conference September 2009, Islamic Development Bank had already twice sent a letter to Central Bank of Russia with request to find opportunities for cooperation, but we don’t see understanding yet …

The position of the Central Bank in this question is mostly conservative and maybe it should be that way. As for the position of political leadership in this regard – it has many time resounded in favor of opening Islamic bank in Russia. The vice-speaker of the Federation Council Alexander Torshin has spoken out about it repeatedly. June 4, 2009 during the business-dialogue “Russia – Arabic world”, which took place within XIII St. Petersburg economic forum the first Deputy Minister Igor Shuvalov said that Russia will make amendments to current legislation if it is necessary to open Islamic bank.

But as it has been already mentioned the problem of opening Islamic bank is not only in legislation. For example in Kuwait the law on Islamic banking was adopted only in 2003, though such banks have been working successfully since 1970s.

Ideally it should be a Bank with an extensive network of branches, which would cover both poles of activity – either the work with individuals or financing entities.

Thank you for conversation and good luck!

Interviewed by Dilara Akhmetova.

04.02.2010