The Ghanaian Minaret

Moscow, Russia: Russia is set to begin the practice of Islamic banking in four Muslim-dominated regions of the country on a pilot basis.

The two-year pilot programme will start on September 1, 2023, and end in September 2025, under the supervision of the central bank.

There is also an option to extend the piloting beyond the stipulated period and cover other regions.

Regions with access to Islamic banking services include Dagestan, Chechnya, Bashkortostan, and Tatarstan.

The decision was reached after the State Duma, the lower house of the Russian parliament, approved legislation allowing Islamic banking in the four regions.

A group of deputies and senators headed by Anatoly Aksakov, chairman of the Duma committee on the financial market submitted the legislative document to the State Duma.

Under the new legislation, the Islamic banking system would require the creation of a special council at the Central Bank of Russia.

The council will act as an arbitrator to evaluate and determine whether certain bank decisions comply with Sharia principles.

Some analysts believe the move will help the country build economic links with Muslim countries across Asia and the Gulf, especially when it seeks to evade western sanctions.

Islamic banking, also known as participatory banking, is a financial system that operates in compliance with Shariah principles.

These principles, derived from Islamic teachings, are to guide the ethical and moral aspects of Muslim individuals and societies.

One of the key tenets of Islamic banking is the prohibition of Riba, which refers to the taking of a fixed percentage as interest or a fee for loans.

Instead, Islamic banks engage in profit and loss sharing mechanisms that promote risk sharing and discourage exploitation.

This approach encourages a more equitable distribution of wealth and fosters a sense of communal responsibility.

In Islamic banking, financial transactions must adhere to the principles of fairness, transparency, and justice.

The concept of “Halal” (permissible) and “Haram” (prohibited) is an essential consideration in all aspects of banking operations.

As a result, Islamic banks offer a range of products and services that cater to the unique needs of their customers while maintaining compliance with Shariah principles.

Some common Islamic banking products include Mudarabah, where the bank invests funds on behalf of its customers.

Musharakah, is also a form of partnership between the bank and the customer to share profits and losses in specific ventures.

Additionally, Islamic banks also offer Ijarah (leasing), Murabahah (cost-plus financing), and Takaful (Islamic insurance), among others.

Islamic banking has gained significant traction globally, with various financial institutions offering Shariah-compliant services.

This system serves both the Muslim and individuals who seek ethical financial solutions that promote social and economic justice.

By aligning their financial activities with Islamic principles, Islamic banks contribute to the overall well-being of their customers and society as a whole.

The Islamic Banking system is gaining popularity in financial hubs like Kuala Lumpur, London, Riyadh, and Dubai.