As Russia's 20 million Muslims observe Ramadan, the country's banks are beginning to wake up to the growing opportunities offered by Islamic banking.
"Sharia banking stands a good chance in Russia, since Islamic business is slowly but surely developing here," Linar Yakupov, who heads Russia's Islamic Business and Finance Development Fund, said in an interview with the Moscow News.
"Recently a centre for halal food producers opened in Kazan. There are more investment companies working according to Sharia rules, and foreign Muslim investors are seeking opportunities here."
Under Sharia law, the key principle in Islamic banking is sharing profit and loss and the prohibition of usury, interpreted as receiving interest on deposits and paying interest on overdrafts/loans.
"Banking according to Shariah law is very much like an investment house, since it forms a partnership with a borrower," said Yakupov. "That's why about half the world's Islamic banking clients are not Muslims."
- VTB tries Islamic projects
This year, state-controlled VTB Bank plans to sell sukuk, (Islamic), bonds worth about $200m, Reuters reported .
"For international loans VTB is considering not only Western banks but also Asia and Arab countries, and the bank is going to e mit not only euro bonds, but also Islamic sukuk bonds," said Andrei Kochkin, spokesman for VTB Capital.
Last summer VTB Capital opened an office in Dubai. The bank al so plans to launch other Islamic projects, investing in Russian property together with the Sultan of Oman's State General Reserve Fund. Banking experts say that, given Russia's growing Muslim population, Islamic finance could potentially involve 5pc-10pc of the country's citizens.
There are still major obstacles to developing Islamic finance, however, including a lack of banking legislation that meets Islamic rules.
"In European countries, Japan and Britain, there is wide practice of Islamic banking, but here we need to thoroughly investigate the market and the target audience," said Leonid Sukiyainen, a professor at Moscow's High School of Economics, adding: "The word Islam sounds scary to many Russians today."
