Interest in Islamic banking in Tatarstan doubles in 6 months, amount of transactions exceeds a billion
The “margin” for halal financial products for Tatar businessmen is going to be reduced
Representatives of the Ministry of Economy, Agency for State Procurement, Guarantee Fund, bankers and a representative of the Duma of the Republic of Tatarstan spoke at a press conference about new halal financial products, the first results of the Russian experiment aimed at creating conditions for partner financing in Tatarstan, and the difficulties of its implementation on 29 March. Read the details in the material of Realnoe Vremya.
Something to be proud of
The number of transactions on partner financing products has doubled in Tatarstan after the law on Islamic banking came into force, and the total amount exceeded 1 billion rubles, Ruslan Khaliullin, the head of the Partner Finance Division at the Ministry of Economy of the Republic of Tatarstan, said at the press conference:
“In the 3 months after the adoption of the law, applications were received from the participants of the experiment, twice as many as in the previous period: there were 153 transactions worth 257 million rubles, now — 315 worth over 1 billion.”
He stressed that a special point of pride for the republic can be the fact that 10 of the 13 companies included in the register of participants in the Islamic banking experiment are represented in Tatarstan, and now five more organisations have submitted applications for participation in the experiment.
Now, according to him, an expert council has been created that identifies “weaknesses” in the legislation on Islamic banking in order to eliminate them later:
“In general, the law suits. Further in the process of work, I think some adjustments will be made…"
Instead of interest, there is a fee for the service…
A conversation with journalists about how the federal law “On conducting the experiment to establish special regulation to create the necessary conditions for the implementation of partner financing activities in certain regions of the Russian Federation and on Amendments to certain legislative acts of the Russian Federation”, which entered into force in August 2023, was timed to coincide with the beginning of the holy month Ramadan, which is not surprising: the experiment aims to create conditions for entrepreneurs who seek to conduct business in accordance with Sharia law. And this is not easy, because Sharia prohibits many things, without which, it would seem, successful commerce is impossible.
Techniques born during the experiment help to solve the “commerce or faith” dilemma without loss. For example, Muslims are prohibited from interest-bearing transactions, but it is not forbidden to charge for the service. Rasim Usmanov, the deputy director for economics and finance of the Guarantee Fund of the Republic of Tatarstan, said that the fund provides entrepreneurs who, according to the conclusion of the financial organisation, have a stable financial position, but do not have sufficient collateral, a guarantee when applying for debt financing — loans, leasing, etc. — on “halal” terms:
“Our service is paid — from 0 to 1.5 percent, but we are not talking about interest [of the amount of the guarantee], but about reimbursing our operating expenses.”
He also added that the maximum amount of guarantee from the Guarantee Fund of the Republic of Tatarstan for the product under the Daman partner financing programme is 50 million rubles, the amount of guarantee is up to 50% of the loan amount.
The representatives of Ak Bars Bank told about the successful development of Islamic mortgages, the issuance of a halal corporate card and a halal open-end fund. The head of the Banking Department of the Corporate Business Product Development Directorate, Ildar Abdullin, noted that at the first stage difficulties arose with the integration of these products into the banking system, but they were overcome.
...and instead of a fine, a voluntary donation
All “halal” financial products offered as part of the experiment are strictly monitored for compliance with Sharia law. How this control is carried out, said Bulat khazrat Mubarakov, a member of the Council of Ulema of the Muslim Spiritual Board of the Republic of Tatarstan. According to him, every product and every contract within the framework of Islamic banking is checked for compliance with the norms of Islam by Sharia experts, then financial products are studied by the Ulema Council and only after that can they be approved. Besides, according to him, throughout the entire period of implementation of such commercial projects, Sharia control is carried out over them and an external Sharia audit is conducted.
Bulat khazrat did not give examples when a particular project was rejected by experts, but, answering a clarifying question from Realnoe Vremya, he explained that, considering the leasing agreement, the experts did not allow the introduction of a penalty clause into it. In return, as a material incentive to fulfill the contract, they proposed to introduce a condition on contributions to a charitable foundation.
“We are following the path of advantages”
The participants of the press conference honestly admitted that they often hear the claim that “halal” financial products cost partners of financial organisations more than those that have not been tested for compliance with Sharia law. Bulat khazrat noted that the rise in price is a “payment for labour”, since these products are being examined.
“The purpose of this press conference was to show new products that are aimed at making them not more expensive… We are following the path of advantages," Ruslan Khaliullin added to the explanation, answering a question from our publication.