Russia leads CIS towards Islamic banking and finance

While considerably new, Islamic Banking and Finance has now taken firm roots in Russia and other Commonwealth Independent States (CIS) countries are following suit.

The total volume of Islamic Banking and Finance has now exceeded $2.6 trillion globally. This amount represents transactions, assets and investments by over 2,500 Islamic banking and financial institutions around the global.

In the modern era, Islamic banking and finance can be traced back to the 1960s from Egypt and Malaysia and its dramatic spread over the Middle East, Africa and Europe. Interestingly, while Islamic banking and finance was slow to take foot in Commonwealth Independent States (CIS) countries, its unprecedented growth over the last few years indicates that CIS countries are the emerging Islamic banking and finance market for the future.

Some well known CIS countries include Russia, Armenia, Kazakhstan, Uzbekistan, Tajikistan, Kyrgyzstan, Turkmenistan and Azerbaijan.

“The delay for Islamic finance initiative in CIS countries may count in many folds, it would be due to Russian influence in CIS countries,” suggests the Islamic Banking guru Mr. Muhammad Zubair Mughal who is the Global CEO of AlHuda Center of Islamic Banking and Economics.

https://theexchange.africa/zubair-mughal-wins-the-islamic-finance-recognition-award/

According to the seasoned banker, the mind set of Russian block and limited relations with International Banking and Financial Markets hampered development of Islamic Banking and Finance in CIS.

However, owing to what he described as ‘unstable Russian relationship with Europe’ and the sharp decline of oil prices has now compelled Russia to seek better financial alternatives, Islamic banking and finance.

Effectively, Russia has gone ahead and instituted friendly Islamic Banking policies and as a result geared-up Islamic banking and finance industry in CIS countries. This opens doors for enormous investment opportunities given that the Muslim population of CIS countries is estimated to be 75 million not to mention the non-muslim bankers that, like Russia, will opt for better banking options.

Russia also has a significant Muslim population and is with the recent government led initiative to support Islamic Finance it is expected that various Islamic banking and finance products will take root like Sukuk and Takaful.

Promoting Islamic Banking in CIS

AlHuda Centre of Islamic Banking and Economics (CIBE), a pioneer organization started its efforts to promote Islamic Banking and Finance is holding an Islamic banking and finance conference in Tashkent, Uzbekistan on 2nd May 2019.

The CIS Islamic Banking and Finance Forum will gather the CIS Islamic finance industry specialists and stakeholders on a single platform to promote Islamic banking and finance in the region.

In CIS countries, the Islamic banking and finance market can be divided into three parts. At first, there are countries such as Kazakhstan, Uzbekistan, Kyrgyzstan and Azerbaijan where the pace of Islamic banking and finance can be described as is satisfactory and where it is promoted and considered the sustainable financial alternative.

Secondly, there is the second group of countries, the likes of Tajikistan, Turkmenistan and Russia where the growth rate of Islamic banking and finance is rather slow. And the third group consists of countries in which there is no initiative taken so far, these are like Armenia, Ukraine and Belarus.

Kazakhstan leads the CIS in the growth of Islamic banking and finance. Started only in 1992, Islamic financing has grown drastically. More so, the growth can be noted following the global financial crises that started in 2008.

In Kazakhstan there is also considerable appropriate support of government institutions. Currently it has one full-fledged Islamic bank and 4 Islamic banking windows. They offer Takaful, Islamic leasing (Ijarah) and Islamic micro-financial institutions among other Islamic banking and Finance products.

Kazakhstan also launched an Islamic Agricultural Finance product with the financial assistance of the Islamic Development Bank. Further still, the recent establishment of the Astana International Financial Center (AIFC) places Kazakhstan as the regional center for Islamic Banking.

Azerbaijan comes after Kazakhstan but with much less government involvement. There is also no full-fledged Islamic bank in the country but there are at least 4 Islamic banking windows operating with limited Islamic Banking Regulations.

Uzbekistan follows and credit can be given directly to its new president H.E. Shavkat Mirziyoyev who has spearheaded the growth of Islamic Banking. Three Islamic banking windows are currently operational and accept deposits on Shariah bases.

Few Islamic leasing companies also offer Ijarah services, but it is predicted that after proper Islamic Banking and Finance regulations, Uzbekistan can supersede other CIS countries.

Neighbouring Kyrgyzstan also takes precedence its parliament passing the Islamic banking law in 2011 making it the only country in CIS to do so. In fact, there is at least one conventional bank that is in the process of becoming a full-fledged Islamic bank.

The most important factor of the growth of Islamic banking and finance industry in CIS countries is the Islamic Development Bank’s support.

https://theexchange.africa/emerging-trends-of-islamic-banking-and-finance-industry-in-cis-countries/

 

Emerging Trends of Islamic Banking and Finance Industry in CIS Countries

The total volume of Islamic Banking and Finance has been exceeded $2.6 trillion globally. The growth of the Islamic banking and finance volume in different continents and regions is continuous with the positive node but sometime its vary region to region.

Due to the reason, about 2,500+ Islamic banking and financial institutions are working in every region including both Muslims and non-Muslim countries. In the current era, Islamic banking and finance started in 1960s from Egypt and Malaysia and dramatically spread over the Middle East, Africa, Europe and other regions.

The growth of this phenomenon swiftly increased in Middle East, South and East Asia whereas, in some regions, the growth of the industry was comparatively slow as in Northern African (Tunis, Morocco, Algeria etc.), Central Asian and Balkan countries. But keeping in view the Islamic banking and finance industry initiative was taken very late in Commonwealth Independent States (CIS) countries and its growth indicate that CIS countries are the emerging Islamic banking and finance market for near future.

The delay for Islamic finance initiative in CIS countries may count in many folds, it would be due to Russian influence in CIS countries, mind set of Russian block and limited relations with International Banking and Financial Markets were few hurdles for the development of Islamic Banking and Finance in CIS, but recently, unstable Russian relationship with Europe and sharply decline of oil prices compelled Russia to get benefit from the best financial alternative, which is definitely Islamic banking and finance. The recently friendly Islamic Banking policies of Russia geared-up Islamic banking and finance industry in CIS countries, and now they opened for Islamic Banking and Finance industry aggressively.

In 1992 the CIS organization was established. Total Muslim population of CIS countries is estimated 75 million which is a good news for growing Islamic banking and finance industry. CIS countries’ list consist of 10 countries which includes Kazakhstan, Uzbekistan, Tajikistan, Kyrgyzstan, Turkmenistan, Azerbaijan, Russia, Armenia and others.

In CIS countries, the Islamic banking and finance market can be divided into three parts. At first, there are countries (Kazakhstan, Uzbekistan, Kyrgyzstan and Azerbaijan) where the pace of Islamic banking and finance industry is satisfactory and these countries want to promote it as sustainable financial alternative. Secondly, there are countries (Tajikistan, Turkmenistan and Russia) where the Islamic banking and finance industry exist with low growth rate. At final, there are countries like Armenia, Ukraine, and Belarus etc. where there is no initiative taken so far. However, overall Islamic banking and finance position in CIS countries is encouraging.

Islamic finance leader in CIS countries

If we want to determine the Islamic finance leader in CIS countries, the credit goes to Kazakhstan where the Islamic banking and finance was started in 1992 but the growth was not phenomenal. After the recent financial crises in 2008, Islamic banking and finance again get a momentum in Kazakhstan with appropriate support of government institutions. Currently, 1 full-fledged Islamic banks and 4 Islamic banking windows are operating in the country. Takaful, Islamic leasing (Ijarah) and Islamic micro-financial institutions are also growing in the country, Kazakhstan also exercised Islamic Agricultural Finance product in the country with the financial assistance of Islamic Development Bank. The recent establishment of Astana International Financial Center (AIFC) caused innovation in Islamic financial market which would be positive sign for Kazakhstan to get eminent regional positioning in Islamic Banking Industry.

Azerbaijan comes after Kazakhstan where the Islamic finance history is as old as in Kazakhstan but unfortunately, Islamic finance industry in Azerbaijan could not get the attention of government as much as was in Kazakhstan. Although there is no full-fledged Islamic bank in the country but 4 Islamic banking windows are working in the country with limited Islamic Banking Regulations. Whereas, under ICD- IsDB funding support, one Islamic leasing company offering Ijarah products to its clients while couple of Bank/Microfinance Institutions also utilizing ICD-IsDB funding for Islamic Banking and Finance.

Uzbekistan secured its positive position for Islamic finance industry in CIS countries after considerable initiatives taken by the new president H.E. Shavkat Mirziyoyev. Three Islamic banking windows are operational and accepting deposits on Shariah bases. Few Islamic leasing companies also offering Ijarah services, but it is predicted that after proper Islamic Banking and Finance regulations, Uzbekistan can supersede other regional countries in the race of Islamic Banking hub for Central Asia.   Kyrgyzstan is the only country in CIS where the Islamic banking law has been approved from the parliament in 2011 and one conventional bank is in the process to be full-fledged Islamic bank in near future.

Russia is also one of the biggest player of Islamic Banking and Finance in the CIS countries with having significant Muslim population, Russia has been trying to promote Islamic Banking since long but unfortunately did not get significant success but in recent Govt. led initiative to support Islamic Finance will play a vital role for the development of Islamic banking, Islamic Finance, Sukuk and Takaful in Russia but also in other CIS countries as well.

The most important factor of the growth of Islamic banking and finance industry in CIS countries is the Islamic Development Bank’s support whereas, ICD – IsDB also has huge investment portfolio for Islamic banking and Islamic leasing avenues in CIS countries including Azerbaijan, Kazakhstan, Uzbekistan, and Kyrgyzstan etc.

The writer has started putting his research, advisory, consultancy and capacity building services in CIS countries for Islamic banking and finance industry from 2006. In this connection he has conducted various capacity building and training workshops and conferences. He is hopeful that the volume of Islamic finance industry will increase by 100% in next five years which also will strengthen global Islamic finance industry. AlHuda CIBE is going to organize one more Islamic banking and finance conference of its kind in Tashkent, Uzbekistan on 2nd May 2019. The CIS Islamic Banking and Finance Forum will gather the CIS Islamic finance industry specialists and stakeholders on a single platform to promote Islamic banking and finance in the region.

 

(Mr. Muhammad Zubair Mughal is the Global CEO of AlHuda Center of Islamic Banking and Economics since 2005 and eminent writer of Islamic Banking and Finance, he can be contacted at  Zubair.mughal@alhudacibe.com )