Bank IBA-Moscow receives central bank mandate to develop Islamic banking products - IFN

Bank IBA-Moscow receives central bank mandate to develop Islamic banking products

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RUSSIA: Bank IBA-Moscow, a wholly-owned subsidiary of the International Bank of Azerbaijan (IBA) has successfully received a preliminary permit from the central bank of Russia (Bank of Russia) to develop Islamic banking and financial products. By next year, the bank intends to launch minor operations to raise financing based on Islamic principles. The main introduction for Shariah compliant banking is said to be scheduled for 2014-15. According to Fuad R Abdullaev, the chairman of IBA-Moscow, the bank was required to obtain permission from the central bank before introducing Islamic banking principles. “We’ve set up a workgroup and are considering the matter of introduction of these products in the territory of Russia,” he said. With approximately 20 million Muslims across the country, there is considerable potential for such financing. He added that many Islamic financial institutions are keen to participate in the Russian market but have not yet succeeded in doing so. The workgroup (a team consisting of representatives from IBA and IBA-Moscow) is currently looking into the implementation of Islamic banking principles in accordance with the guidelines of Bank of Russia and other federal agencies. Upon completion of the Islamic products, IBA-Moscow will work together with Bank of Russia to ensure its regulatory compliance to the central bank’s rules. The mandate received by IBA-Moscow indicates Bank of Russia’s recognition of Islamic finance in the federation. IBA-Moscow was established in 2002 and founded by IBA. With registered capital of RUB544.6 million (US$16.66 million), the bank is the first financial institution in Russia to procure 100% foreign capital from Azerbaijan, a CIS country. Islamic finance has long been discussed by the Russian authorities. Earlier in May Rustam Minnikhanov, the president of Tatarstan, confirmed the upcoming issuance of a sovereign Sukuk worth US$200 million to finance the Smart City Kazan project. Once issued, the deal will be the first Sukuk to originate from the Russian federation.