“The project turned out to be unsuccessful”: how Tatarstan international investment company was dying

On this day, 10 years ago, an agreement was signed in Kazan on the creation of the Tatarstan international investment company (TMIK) — an ambitious project at the time of launching to attract fashionable Islamic financing to the republic. As Realnoe Vremya found out, the grandiose plans were not destined to come true. TMIK has now actually suspended its work and focused only on one direction — the Eurasian leasing company offering Islamic leasing Ijara. Read about the reasons for curtailing the project and the problems of developing Islamic financial instruments in Russia in our material.

From a promising start to an inglorious finish

On 26 March 2010, an agreement was signed on the establishment of the Tatarstan international investment company. It was assumed that TMIK would strengthen cooperation between the republic and the Islamic Development Bank, as well as promote various investment projects.

One of the first projects of the Tatarstan international investment company was to create a centre in Kazan for the production of halal products for the whole of Russia. The second project is a development company, and the third is one of the largest business centres in the region.

Unfortunately, after 10 years, we have to state the actual “death” of the project. The TMIK website is out of work, phone numbers are not available, and the Association of Muslim Entrepreneurs of Russia claims that the company does not belong to it, despite the fact that TMIK is listed on their website as a partner.

The only working investment

Linar Yakupov, one of the initiators of the republic's cooperation with Islamic financial institutions, adviser to the Prime Minister of Tatarstan, President of the Fund for the Development of Islamic Business and Finance, confirmed to Realnoe Vremya that the company has almost suspended its operation.

“As far as I know, this is true, and the only working investment today is the Eurasian leasing company. TMIK is the initiator and one of the shareholders of the ELK, i.e. the Eurasian leasing company is a derivative of TMIK. ELK itself is now active and offers Islamic leasing Ijara. Let me remind you that they have been working on the market since about 2013," the expert said.

The president of the Association of Muslim Entrepreneurs of the Russian Federation, Aydar Shagimardanov, also told our publication that the project is close to closure.

“Indeed, TMIK is not a member of our association. I have not heard about any achievements or active activities of this company in the market of Tatarstan and the Russian Federation. At first, our friend Murad Yandiev was the head of the project, then he went to work at the Islamic Development Bank in Saudi Arabia, and I don't know who is currently heading the project. We can say that the project was unsuccessful, it has no life. As far as I know, the founders contributed some funds to it, then within a few years they were apparently 'eaten', and the project ended there," comments Shagimardanov.

Where $3 million went

As mentioned above, at the launch stage of the Tatarstan international investment company, its founders announced three directions of development at once. The adviser to the Prime Minister of Tatarstan on cooperation with Islamic financial institutions assumed that's why in the end it came down to just one Islamic leasing.

“I think several factors played a role here. It is clear that TMIK was created as a structure that was supposed to attract investment for projects in the Republic of Tatarstan and abroad — from the countries of the Organization of Islamic Cooperation. One of the problems was the structuring of these projects. The second task was to launch Islamic financial mechanisms. Of all the mechanisms that could be launched, leasing, we can say, more or less was realised," explains Linar Yakupov.

Also, the interlocutor of Realnoe Vremya notes that even before the creation of TMIK as an investment company in 2006, the primary agreement between the IBR and Tatarstan assumed that it would be an investment fund.

“However, in 2008-2010 there was a financial crisis, so the format had to be changed to an investment company. The authorized capital was small — 3 million dollars. Most of this money went to the development of the ELK," the expert concludes.

Problems of Islamic financial instruments

Commenting on the situation around the Tatarstan international investment company, our interlocutors also touched upon the topic of barriers that hinder the development of financial and business projects based on the principles of Islam. For example, Linar Yakupov draws attention to the following point: if the Western banking system entered the new Russia very aggressively and powerfully financed by the largest banks in the West, in the case of Islamic banking, everything was completely different.

“Such an aggressive movement does not correspond to the position of the Islamic Development Bank. The IBR is not trying to impose anything on anyone, and if the country has an interest in working in this direction, the bank is ready to provide some technical support in developing the necessary legislative framework. If there is no such desire, then everything is limited only to what can be done within the existing legislation. Unfortunately, all our initiatives in the Islamic financial sector have serious limitations. No one has been able to overcome the issue of double taxation. Unfortunately, all existing and implemented initiatives are limited only by the available capital — they cannot involve other market players. The instruments and financial structures that have been created are of B2B and B2C format. There are no tools for ordinary citizens who want to invest within the framework of Islamic financial principles," Yakupov states.

In turn, Iskander Iskhakov, the executive director of the center for the development of Islamic Economics and Finance, also points out a number of legislative restrictions.

“As for Islamic finance, there are certain barriers that do not allow the full development of banking services. To some extent, you can implement individual products and create individual Islamic financial companies, but legal restrictions will not allow you to open a full-fledged Islamic bank. As for development projects, projects from the real sector or investment transactions, there are no restrictions as such. In general, Islamic finance can be developed even in the existing legal framework — as I said, individual projects. Perhaps, sometimes the founders or investors of individual companies simply do not have enough serious intentions," Iskhakov concludes.

By Lina Sarimova

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