Rifkat Minnikhanov on experiment with Islamic banking: ‘We could not even dream about it’
At a scientific and practical conference, Muslims of Tatarstan discovered that the concept of “Sharia” fell out of the federal law on Islamic banking
“The adoption of the law went very difficult. But it opens up great opportunities to satisfy the 20 million ummah of Muslims in Russia," State Duma Deputy Ayrat Farrakhov welcomed the launch of an experiment with Islamic banking with great reserve. From September 1, banks in four regions of Russia will be able to conclude transactions according to Islamic norms. However, the Muslims of Tatarstan intend to fight for the inclusion of the concept of Sharia in the new law, which was replaced by the words “partner financing”, and to achieve the abolition of VAT on Sharia purchase and sale transactions.
Instead of “sharia”, “partner financing” was introduced into circulation
On the eve of the launch of the pilot experiment on the introduction of Islamic banking, representatives of the Muslim clergy and entrepreneurship, State Duma deputies and high-ranking officials came to the special conference “Problems and prospects of Islamic banking in Russia”. The discussion took place at the Academy of Sciences of the Republic of Tatarstan, where Rifkat Minnikhanov spoke for the first time in the status of the newly-made president. It would seem that the federal law on conducting an experiment in the regions has been signed, what else can we discuss?
However, the approved version of the federal bill on Islamic banking does not fully comply with Muslim canons. The Muslim community discovered that the key concept of “Sharia” has fallen out of the regulatory framework of the law. It was replaced with a more euphonious phrase — “partner financing”, meaning Sharia norms. And hence the rest of the legal “roughness” that will have to be polished during the two years of the experiment. So, there are no rules on expert sharia (the one who approves transactions, without which there is no trust in these transactions). And there is also no legislative ban on the use of Islamic money for weapons, drugs, pornography. Of course, this is not allowed by default, but it must be prescribed in the law. It is for this reason that Muslims have called the adoption of FZ-417 a “compromise” between the possible and the impossible.
“A large field of activity, which was not even dreamed of”
“Islamic finance is based on the principles of Sharia, has a long practice and operates in 130 countries of the world," the president of the Academy of Sciences of the Republic of Tatarstan recalled in his opening speech. According to him, the republic has long-term relations with Islamic countries, back in 2006, a memorandum on cooperation in the field of partner finance was signed between the Islamic Development Bank and the republic. Thus, it took 16 years for the new instrument to gain recognition in Russia.
“We believe that the adoption of the federal law on the beginning of the experiment will give new opportunities in the development of financial services (including insurance) and will contribute to economic growth," said Rifkat Minnikhanov. “The launch of the experiment within the framework of FZ-417 in four regions — Tatarstan, Bashkortostan, Chechnya, Dagestan — is a significant step in this direction. Islamic finance is a new big field of activity, which was not even dreamed of.”
Agriculture, small and medium-sized businesses are the areas where Islamic banking can quickly come. “We believe that there are areas of activity that are not attractive to banks, in some part it is agriculture, small, and medium-sized businesses. They can be replaced by Islamic banking technologies," he believes. He sees the advantage of the new tool in humane principles of activity. “They offer many solutions to eliminate social inequality," Minnikhanov said. “First of all, this is charity. In the Islamic world, helping one's neighbour is easier to solve.”
Airat Farrakhov on Islamic mortgage: they did the impossible
Islamic banking has not been recognised in Russia for a long time, recalled State Duma Deputy Ayrat Farrakhov. “This issue has been raised for at least 14 years. I remember well how the deputy finance minister of Russia came to KazanSummit and made a devastating speech about why it was not necessary to implement. The reason is there is no legislation.” Both the Central Bank and the financial authorities of the country were against it.
Nevertheless, a year and a half ago, on behalf of the president of Russia, a working group was created in the State Duma, it included two deputies from Tatarstan. “It was very hard going, it took a long time to coordinate. Our goal was to make a law of direct action, but... As a result, today it opens up great opportunities to satisfy the 20 million Ummah of Muslims of the Russian Federation," he said. The deputy called the main success that it was possible to legalise the Islamic mortgage. “By the second reading, it was possible to introduce an Islamic mortgage, it was almost impossible," Farrakhov said. It turns out that orthodox Muslims, despite having many children, do not take a preferential mortgage, it is forbidden for them (haram).
The deputies are not going to stop at the adoption of the law. They will have to prove the relevance of the new tool. “An expert council has been created at the Central Bank, whose task is to draw three conclusions. The first is either to stop the experiment, or to change and improve the legislation. Our task is for expert groups to come to the right conclusions," Farrakhov said.
According to him, it is necessary to fight for “serious tax changes on VAT”. We are talking about the abolition of VAT on Sharia transactions. Besides, there is a question of amending the Civil Code and the law on banking. “Within two years, we must prepare concrete proposals to make the reform. So that Islamic financing can work in full," he said. The reform has already been carried out in Kazakhstan.