Sanctions could spur Islamic finance in Russia

Moscow1International sanctions against Russia could accelerate the country’s efforts to create an Islamic finance industry to ease its dependence on western capital.

The prediction is from Linar Yakupov, president of the Islamic Business and Finance Development Fund, a non-profit fund created in 2009 in the Russian republic of Tatarstan to promote financial links with Islamic countries.

“Many people in the west don’t understand how Russia works,” said Yakupov, who spoke at the IFN Investor Forum, a conference on Islamic finance held in Dubai this month. “Maybe they thought sanctions will put pressure. But the more you pressure Russians, the more united they become, and they start looking for other options.”

Some researchers estimate that 14% of Russians are Muslim, though other polls suggest the figure is 6%. To date, Russia has not played a significant role in Islamic finance. Instead, Malaysia, Indonesia and the Gulf countries have been the main centres for sharia-compliant investment.

However, according to Yapukov, this may soon change. The Russian legal system already allows Islamic financial instruments, he says, and lawmakers are working on a legal framework to allow Islamic institutions to operate in the country.

“Islamic finance is an economic instrument that will allow us to diversify our financial relationships, work with the Islamic world, and capture the needs of the Muslim population,” he said.

Starting from March 2014, a number of countries including the US and the member states of the European Union applied sanctions against individuals and businesses in Russia and Ukraine in response to the Ukraine crisis.

These sanctions contributed to the collapse of the Russian currency and an ongoing financial crisis in the country. However, Yapukov struck a defiant note at the conference.

“The Russian Federation cannot be isolated, and is too big to be ignored,” he said.

The Islamic Business and Finance Development Fund was established after a conference on Islamic finance held in 2009 in Kazan, the capital of Tatarstan. The second Kazan Sukuk Conference is taking place on April 9.

©2015 funds global mena

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