Thursday, June 18, 2015

Russia looks to replace Western loans with Islamic finance.

Russia looks to replace Western loans with Islamic finance. (RBTH).

Islamic finance will help Russian companies make up for their credit shortage, which was in large part caused by the cooling of relations between Russia and the West. Russian banks are already showing interest in this alternative form of credit.

Islamic finance could help Russian companies hit by Western sanctions to gain access to credit, Rustam Minnikhanov, President of the predominantly Muslim-populated Russian republic of Tatarstan, said at the Kazan Summit Forum.

Muslim countries did not join attempts to isolate our country on the international arena, and the latest events in the world economy have shown that Islamic banks help counter world crises and supplement the world financial system,” Minnikhanov said.

He added that this Islamic finance could not completely substitute Western credit, but instead could provide Russian companies with an important financial instrument. According to IMF's latest calculations, by the end of 2015 the volume of Islamic finance around the world will amount to $3.4 trillion.

 An alternative scheme

 Against the backdrop of world crises, the importance of Islamic finance only increases, because all the operations in this scheme are backed up by real money, while investments become secure and do not carry any risks,” said Qatar’s Undersecretary of Economy and Commerce Sultan Al-Khater.

According to the requirements of Islamic banking, it is prohibited to charge interest while lending, while receiving credit essentially implies exchanging one commodity for another.

Ahmad Mohamed Ali Al-Madani, President of the Islamic Development Bank, said, “Islamic finance is by nature tied to real economic activity, which is why such a scheme allows the optimization of the internal resources.” He added, “The concept of dividing risk in Islamic banking stimulates healthy financial practices. In Islamic finance, the transactions are tied to real investments, which helps avoid speculation and the instability related to it.”

Al-Madani suggested that Tatarstan could be promoted as “an Islamic finance hub in Russia.” Hmmm.........Qatar and Turkey? I wonder where those unexplained Billions of $  in Turkey come from? Read the full story here.

Russia May Enter Foreign Loans Markets in 2016 Despite Sanctions.

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