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/

 

TMH Africa unveils rolling stock manufacturing facility in South Africa

TMH Africa, a subsidiary of Russian rolling stock manufacturing giant Transmashholding (TMH), on Tuesday said that it was entering the South African economy with the aim of reviving the once-thriving manufacturing industry.

TMH Africa unveiled its 45,000 square meters rolling stock manufacturing facility in Boksburg, Ekurhuleni, as part of its R500 million investment over the next three to five years in Africa.

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The investment will include upskilling of the workforce and upgrading of the facility acquired last November from DCD Rolling Stock.

Jerome Boyet, chief executive of TMH Africa, said their decision to invest in South Africa was in part a response to the call by President Cyril Ramaphosa for more investment.

“But it is also informed by our understanding that South Africa’s real potential to become a leader in rolling stock manufacturing for Africa remains untapped,” Boyet said.

“We will pursue opportunities for the assembling, maintenance and refurbishment for rolling stock in South Africa and on the continent. Our focus will be on the contractual manufacturing and services for both locomotives and coaches, based on key strengths of TMH Group.”

Premier David Makhua, who presided over the unveiling of the plant, hailed TMH Africa for preserving jobs at the plant after DCD closed down, and committed the government to work together with business to produce the necessary skills required by industry.

“The Gauteng provincial government remains committed to economic transformation. I am glad that TMH Africa has made the right decision and chosen to invest in this sector that can only grow in Africa. A lot of factories closed down in Gauteng after the ’90s due to changes in the global manufacturing industry,” Makhura said.

“So we are happy by this investment because many people in South Africa use the rail system, not by choice, but because it is cheaper. This is why rail is the backbone of our public transport system in the National Development Plan.”

Sam Bhembe, director of Mjisa investments — the 30 per cent partner in TMH Africa, said that South Africa needs to claim its rightful place as a locomotives manufacturing hub in Africa, adding that this plant would bring innovation and efficiency in the local manufacturing industry.

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“The biggest constraint for South Africa was that we only had two major clients for locomotives, and that has been Transnet and Prasa. But this facility is meant to export locos into other countries, so now inevitable you have to have a competitive edge for the markets that you are supplying outside South Africa,” Bhembe said.

“As Mjisa we are bringing everything right from direct management. So we will have executives who are serving to manage the operation, on the board we will have directors who are strategising and fine-tuning the vision. We have in our midst engineers with 30 to 40 years experience in train manufacturing industry, so we are also bringing the finer skills of engineering.”

Eskom, BRICS bank sign $180 million renewable energy deal

The New Development Bank (NDB) and South African power utility Eskom on Monday signed a U.S.$180 million loan agreement to connect 670MW of renewable energy projects to the national grid.

Under the agreement, the bank will provide a loan with a sovereign guarantee to Eskom for renewable energy integration and transmission augmentation project.

The loan agreement was signed by NDB vice-president and chief operations officer (COO), Xian Zhu, and Eskom’s chief financial officer, Calib Cassim, during the 4th annual meeting of the New Development Bank in Cape Town.

The NDB’s Project Finance Facility (PFF) will be used to support the development of grid connection infrastructure, which is vital for the development of renewable energy projects.

The PFF will also support renewable energy development and reduce the country’s reliance on fossil fuels.

In a joint statement, the NDB said modern grid connection infrastructure will be used for renewable energy projects and augmentation of the Eskom transmission network to the identified areas.

The bank also said the project will also help increase electricity supply to the targeted areas for sustainable development.

The project will enhance the country’s capacity for renewable energy while achieving sustainable growth. It also aligns with the bank’s focus to support projects that aim at developing renewable energy sources.

The NDB was established by Brazil, Russia, India, China and South Africa to mobilize resources for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries.

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Zhu said they were happy to support this important project that will contribute to the development of grid connection infrastructure in South Africa and support the shift to a more sustainable energy path in the country.

“The project is coherent with the bank’s focus on projects that incorporate sustainability from their inception. Moreover, we believe that supporting South Africa’s energy sector is fully in line with the Bank’s mandate and our role as a reliable development partner,” Zhu said.

Cassim said Eskom welcomed the support from NDB and said they were looking forward to fostering a valuable partnership with this organization whose mission is to enhance infrastructure for sustainable development in its member countries.

“The successful conclusion of this inaugural transaction with NDB will significantly contribute towards driving Eskom’s goals to reduce South Africa’s CO2 emissions,” Cassim said.