Islamic Finance in the Post-Soviet Space, United Arab Emirates and Turkey
The terms "Islamic finance" and "Islamic banking" have become increasingly common in recent times. A type of bank financing that has recently been actively developing worldwide, Islamic finance, with its growth potential and increasingly widespread adoption, makes a promising financing trend, yet not well known to quite a number of financial market participants.
This article is an effort to highlight a few specifics of Islamic finance and its legal regulation in Russia and other jurisdictions, with a brief overview of the practice and regulation of Islamic finance in the countries where GRATA International operates and where this viable financing option has developed.
INTRODUCTION
Islamic finance, also known as Islamic banking or partner finance, is an alternative practice of banking and financing that follows the rules of Sharia law, gaining popularity not only in countries where Islam is practised, but also far beyond their borders. Islamic banking is one of the fastest growing financial trends worldwide. The Islamic finance industry robustly grew by 17 per cent. to reach USD 4 trillion of assets in 2021. [1] There is a clear tendency towards expansion in the post-Soviet space. For example, Uzbekistan and Azerbaijan are currently discussing draft legislation to introduce Islamic finance. In Russia, a recent federal law introduced Islamic finance in some of its constituent entities in August 2023.
1. FUNDAMENTALS OF ISLAMIC FINANCE
Islamic finance is regulated by Sharia rules that prohibit any type of unethical, unfair, vague or onerous contract. Islamic banking focuses on movement of goods rather than money. Sharia also outlaws profits earned without reciprocal provision of wealth, or consideration.
Islam seeks to ensure fair financing by holding as haram (taboo):
- usury and interest (riba);
- transactions with excessive uncertainty, ambiguity and risk (gharar);
- gambling (maisir); and
- any business connected with the manufacture or sale of alcohol, tobacco, pork, arms and adult products, and gambling.
Moscow