Islamic Finance in Russia : Status Quo and Outlook

The inception of Islamic finance in Russia dates back to 2000. Today, however, the industry remains small and lacks any meaningful market impact. In the light of the quick-paced progress of Islamic finance world-wide, this may look unnatural given the size of the indigenous Muslim population and huge demand for financial resources both by retail and business customers. Hence, the research aims at discovering the roots of the problems holding up the industry's development. To this end, the social, economic, political, and regulatory environments in which the Russia Islamic financial institutions operate, as well as the industry's institutional composition and product range were analysed. The study concludes that although large cross-border transactions based on Sharia principles are not impossible they will not signify the introduction of Islamic finance in Russia. It can be achieved only through organic development bottom-up. However, the Islamic financial industry in Russia is bound to remain a niche player unless the rejection of interest-based finance spreads among the Muslim population of this country.This paper was prepared in early 2013. A few developments have taken place since then, particularly departure of most of the market players mentioned in the paper, but the financial companies, whose family has witnessed an addition.As well, Russia has seen unusual public and media activity in the area of Islamic finance. However, the core has remained unchanged, that is, minor significance of the sharia-compliant mode for the Russian finance and indifference of the regulator