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Russia is set to launch its first Islamic banking system as part of a two-year pilot program starting on September 1.
The Islamic banking sector in Russia is experiencing a 40% annual growth rate and is predicted to reach a value of $7.7 trillion by 2025, according to Sberbank’s senior vice president, Oleg Ganeev. However, the market requires regulation and investor protection. State support programs for mortgage financing and small and medium enterprises are not suitable for the Islamic finance market due to their interest-bearing nature, which contradicts Shariah. The adopted law aims to address these obstacles and develop further conditions for Islamic finance development.
Russia’s economy has remained resistant to Western sanctions due to its energy revenues and Islamic banking, which has a small direct impact. However, a new two-year experiment aims to make Russia more attractive to foreign investment from the Middle East and other countries with Shariah finance frameworks. The program aims to develop assets-based financing and risk-sharing partnership relations, benefiting small and mid-sized enterprises, which are often under-financed. Islamic finance is more oriented at financing the real economy with real economic products.
