Staunton, August 11 – The Association of Russian Banks has called for the passage of a new law on Islamic finances to regulate the activities of Muslim credit organizations and for the establishment of a special council on shariat-based banking in the Bank of Russia, efforts that reflect both the growth of this sector and the willingness of Russian bankers to go along with it.
On Friday, the Association of Russian Banks sent a letter to the Bank of Russia outlining these requests, arguing that such steps were necessary because of the growth in this sector and of the absence of definitions and arrangements for such institutions in Russian law and practice (arb.ru/b2b/docs/pismo_arb_direktoru_departamenta_bankovskogo_nadzora_banka_rossii_amiryantsu_r_v-9832643/).
In the meantime, the ARB letter said, the Bank of Russia needs to issue a set of instructions on the registration of banking institutions following Islamic law and consider establishing special licensing arrangements for such banks and a special board to carry those out (lenta.ru/news/2014/08/11/islamfinance/?fb_action_ids=521769597959487&fb_action_types=og.recommends).
Islamic banking is growing rapidly in the Muslim republics and regions of the Russian Federation. In reporting this story, Lenta.ru noted that Kazan’s Ak Bars Bank, which operates according to shariat rules, attracted 100 million US dollars from investors in the Middle East during January 2014 alone.
In the past, many Russian bankers have opposed shariat banks because the rules the latter operate under are so different, but Moscow’s desire to find alternative sources of funding given its deteriorating relationship with the EU and the US may have given these banks in Russia a chance, precisely because of their ability to attract funds from the Muslim world abroad.