President of Tartarstan confirms republic’s first Sukuk issuance (By IFN)

President of Tartarstan confirms republic’s first Sukuk issuance

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RUSSIA: The president of Tartarstan, Rustam Minnikhanov, has confirmed that the republic is currently in the midst of finalizing its first Sukuk issuance. This will also mark the first Sukuk to originate from the Russian federation states. Minnikhanov added that authorities from the republic are also discussing means of facilitating other Islamic financial instruments with officials in Moscow — which is situated 800km east from the republic. According to Linar Yakupov, the CEO of Tatarstan Investment Development Agency, the issuance is expected to reach US$200 million. However, other details such as the timing, maturity and currency of the issue have not been confirmed, he told Reuters. The Sukuk will be backed by real estate assets from the Kazan Smart City, where officials aim to develop as a business and technology district. In Volume 10 Issue 8 of Islamic Finance news, Vladislav Zabrodin and Anna Leksashova from Capital Legal Services revealed that the government of the Republic of Tatarstan has signed an MoU with Kuwait Finance House (Malaysia) and AmanahRaya for the issuance of a sovereign Sukuk for the republic, via an offshore entity either in Malaysia or Luxembourg. “This would demonstrate the possibility of placing a Russian issuer on the Islamic securities market to entice participants of the Russian market,” they wrote. However, key challenges remain in the development of Islamic finance in Russia; including its current riba-based banking system as well as current legislations which prohibit the participation of a credit organization in manufacturing, trading and insurance activities; limiting the use of Murabahah, Istisnah and Salam contracts in the market. On the flipside, the country’s abundant asset base compensates for the current restrictions in issuing Islamic paper onshore, with industry players suggesting the use of SPVs to issue Sukuk backed by Russian assets, as the current law does not prohibit foreign entities from owning local assets.