Russian authorities are drafting a new law that would legalize and regulate Islamic banking in the country, which was originally to be introduced in four Muslim-majority republics as part of a pilot project, including Chechnya, Dagestan, Tatarstan and Bashkiria. Russian.
The establishment of non-credit banking institutions would operate as Financing Partnership Organizations (FPOs), offering Shariah-compliant financial products aimed at Muslim customers, according to a report by the Russian daily. Kommersant.
The report adds that the FPOs would be under the jurisdiction of the Central Bank of Russia, which would oversee their operations.
In a statement on Friday announcing the project, Chairman of the State Duma Committee on Financial Markets Anatoly Aksakov said: “We have long received many relevant requests from activists from Bashkiria, Tatarstan, Chechnya and other North Caucasian republics”.
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“These initiatives are attracting attention because some countries in the Middle East and Asia have shown interest in investing in these Russian regions, but they have not made this investment for religious reasons,” Aksakov added.
The move comes as Russian state banks have been hit by sanctions imposed by the West in response to ongoing military operations in Ukraine launched in February and is seen as an attempt to attract alternative investors from Muslim countries.
Last year, the State Duma Committee on Financial Markets reportedly set up a working group on Islamic finance, aimed at boosting investment from the United Arab Emirates and other Muslim states.
The global Islamic banking sector is expected to grow at an annual rate of 14% and its value is estimated at $1.99 trillion, representing a 6% share in the global non-Islamic banking sector.
Muslim-majority countries such as Qatar, Turkey, Saudi Arabia, Malaysia, United Arab Emirates, Kuwait and Pakistan account for the vast majority of Islamic banking assets – 93 percent. The first Islamic bank established outside the Muslim world was in Britain in 2004.
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