In the Arab countries, financial institutions provide their clients with the most advanced services and receive a profit no less than organizations in London or Zurich. The thing is that Islamic banks are different from ordinary ones.
A bit of history
In 1963, the first Islamic bank called Mit Gamr was formed in Egypt. He betrayed interest free loans to farmers. The institution lasted 4 years and served as an impetus for the emergence of new financial institutions in Saudi Arabia, Sudan, the UAE and Kuwait. Today there are more than three hundred. The most interesting thing is that you can find an Islamic bank in Kazakhstan or Poland. But Western financial institutions in the Middle East are not in demand.
In fact, Mit Gamr was a mutual assistance fund organized by economist Ahmad al Najar. This experience was later adopted by West Germany, creating Sparkasse. Then there were savings funds in the countries of Malaysia. In the UAE, the first truly Islamic bank, Dubai Islamic Bank, was formed in 1975.
rules
The main principle of cooperation in such organizations is participation in project profits and risks together. The absence of a fixed income and the likelihood of incurring losses makes institutions more cautious in choosing projects, leading to the need for active monitoring. For the same reasons, Islamic countries lack soap bubbles and pyramids. Banks more easily survived the 2008 crisis. Financial institutions are prohibited from investing in socially harmful projects. Islamic banking can be called ethical.
Despite these features, this area has become widespread in European countries. The main reason is a conservative approach to business. The risk of loss of savings is minimal.
Refusal of loan interest
In working with clients, banks are not lenders, but project investors. They share both profit and loss. For these purposes, a “Musharak agreement” is drawn up. A European financial institution, having issued a loan, expects to receive profit in the form of interest. According to a different principle, an Islamic bank operates. Credit in the standard sense is not provided here. Institutions fund the project. If the client makes money, the bank will receive its part. In the event of a project failure, both parties to the transaction will suffer damage.
There is also a “treaty of mudaraba." Clients are offered to open deposits, which will take into account profit or loss from investment projects.
As part of lending to individuals, banks in Islamic countries offer customers to issue “Ijara” and “Murabaha”. The first provides a lease with the condition of subsequent transfer of ownership. “Murabaha” is the sale of goods by installments. In this case, the selling price is set higher than the original.
Refusal of fines
Customers here are not fined. If a person suddenly turns out to be insolvent or cannot pay the debt on time, the Islamic Development Bank does not have the right to “wind up” a fine, but may require a security deposit as a guarantee.
Garar
The bank can not participate in speculation and play on the "Forex". More on this will be described later.
Intended use of funds
Banks should conduct project analysis. Cash should be used for purposes that do not contradict the Quran. For example, an Islamic bank is likely to refuse to invest in the construction of a distillery. The principles of the organizations, described above, allow financial institutions to create large capital and provide customers with the most modern services.But all parties must act on terms of mutual trust.
Islamic banks in the CIS countries
Most actively, these financial institutions are developing in Kyrgyzstan and Dagestan. Support is provided even at the legislative level. The Islamic Development Bank is collaborating with the Uzbek Central Bank on the development of a new area of financial services.
Traditional Islamic credit institutions operate in Bashkortostan. AF Bank offers its customers an interest-free MasterCard credit card. But it is impossible to get information about where and how the funds were used.
Services in the Russian Federation
It is impossible to find an Islamic bank in Russia. The only Muslim financial institution that existed on the territory of the Russian Federation was Badr-Forte Bank. All 15 years he was engaged in the support of export-import operations. However, he could not establish work with individuals. Therefore, in 2006, the Central Bank revoked his license.
Later, legal entities began to create Islamic banks in the format of AOs, which provided a small range of services to the population. In such "financial houses" you can open an interest-free account and invest in projects. For example, an Islamic bank in Kazan called Alma Financial House offers the Popular product, an on-demand deposit. The minimum replenishment amount is 5 thousand rubles. The profit share may be 1/10 or ¼ of the earned PD. The Pension and Accumulative programs have a lower entry threshold of 1000 rubles. The long-term product “Capital” is designed for a minimum deposit amount of 100 thousand rubles. The Islamic Bank in Kazan also provides installment services. For these purposes, FD collaborates with CB "Bulgar" through a separate branch. So, the organization provides only its clients with RKO services.
You can take out a loan from an Islamic bank through another participant, YumartFinance. The company offers financing services for individuals and opening savings deposits. In Ufa and Novgorod, there are branches of the Islamic Bank Vostok-Capital.
In order for these credit institutions to develop in the Russian Federation, it is necessary to amend the current legislation. According to current standards, banks cannot issue money without interest. This condition excludes the system of Islamic financial organizations.
Ethnic Banking in Kazakhstan
In 2009, on the initiative of the president, the law “On Banks and banking activities in the Republic of Kazakhstan. ” This amendment paved the way for Islamic financial institutions to enter the market. In March 2010, the Agency for Financial Supervision issued a license to “conduct banking operations " credit institution Al Hilal. From that moment, two groups of banks began to work in Kazakhstan: classic Western and new, which comply with Sharia principles. The republic was the first of the CIS countries to try to introduce ethnic banking.
In 2009, Kazakhstan accounted for 70.2% of the adherents of Islam. Although the proportion of the population that really knew the Qur'an did not exceed 20%. For comparison: in Turkey, this figure was 47%. It was a group of people devoted to the principles of Islam that made up the first client base of financial institutions. But this does not mean that banks differentiated the population into categories. Like any other commercial structure, they tried to attract customers with new interesting products. Just an ordinary client, when choosing an institution, compares the cost of services, and a Muslim completely excludes traditional banks.
Instruments
Financial institutions have a number of products that could be interesting in the CIS market. They differ from the standard. The most common is sukuk. These are Islamic bonds or certificates of participation. On global market according to BMB Islamic, this tool accounts for 11.3% of the total product volume. Potential clients are small companies engaged in capital-intensive industries. They may consider this type of investment to diversify their capital.
Sources of income
If the depositor suffers losses, he has the right to investigate the causes of their occurrence. If it turns out that the reason is poor management, lack of professionalism, then the credit institution will be responsible. So the system is built.
Islamic banks also profit from operations in financial markets. But deals have their own nuances. The speculative trading of the Central Bank is not carried out. But banks are buying shares to increase assets. Therefore, credit institutions from Muslim countries are not particularly active in the stock market, and if they invest, then for the long term.
Islamic banks receive most of their income from commission operations. Of course, credit institutions in all countries charge a fee for customer service. But in no other country in the world is this type of income so popular. To understand this scheme better, consider how an Islamic bank issues a loan.
In Russia, any solvent citizen can take a loan for goods. In this case, the bank pays the purchase price. The amount that the client must return to the financial institution includes the initial costs, as well as interest. Murabaha functions differently. An agreement is concluded between a credit institution and a client on the sale of goods at a special price that exceeds the original. The bank, on behalf of the client, buys the goods, and then resells them with a mark-up. The customer pays for the goods in equal installments for a fixed number of months. This scheme is often used in foreign economic transactions. Extra charge is included in the letter of credit.
There is another kind of "Murabaha" - the operation "Bai al-salam." A contract is concluded between the bank and the client on the sale of the last goods on a prepayment basis. Having received the funds, the credit institution has time in reserve to invest them in the production or purchase of securities. These operations also generate revenue.
In Arab countries, leasing is very popular. The essence of "Ijara" is as follows: on behalf of the client, the bank buys equipment, which will then be leased. Islam does not prohibit charging property.
Our days
Islamic banks are very popular. They introduce new products and increase their share in all markets. The Muslim population opens the market for banking services oriented to the laws of countries. European lending institutions have already felt increased competition in the market.
Issuing interest-bearing funds is considered a sin in Islam. Therefore, institutions do not provide credit in the classical sense of the word. Shariah also prohibits playing the stock exchange, so banks can only store their assets in long-term securities, and not use them to increase profits. It would seem, how can an Islamic bank in Moscow, London or Berlin attract customers? An unconventional approach to business.
In the UK, HSBC Amanah and UK'Islamic Bank are established. The same consortia plan to organize BNP Paribas, American Finance House, Devon Bank. The Muslim community is open to such innovations. Islamic banking standards and principles of profit sharing attract the attention of both parties to the transaction.
European banks also offer customers zero interest loans. But these institutions do not combine the concepts of “banking” and “morality”. Consider one example.
The National Bank of Qatar (QNB) in 2015 during the month of Ramadan announced a deferral of payments of borrowers on car loans for 30 days. A prerequisite for this decision was the results of research. It turns out that it was during this period that people’s expenses greatly exceed incomes. Therefore, the refusal strategy was in line with consumer needs. Having demonstrated the perception of values, the bank formed a customer loyalty in the market.
World Ethnic Banking
The number of Islamic financial institutions, according to various sources, ranges from four hundred.It is difficult to name the exact figure, since in Turkey and European countries the legislation does not provide for differences between the two banking models. According to Ernst & Young, in 2012, the total assets of Islamic banks in the world amounted to $ 1.3 trillion. The average growth rate is 19%, while in developed countries this indicator is less than 3%, and in developing countries - 14%.
It is worth noting that more than half, and more specifically - 55%, of the total assets are in the Gulf countries, Turkey and Malaysia. At the same time, the share of Islamic banks in the OAU barely exceeds 20%. The fact is that the government does not develop preferential programs, but, on the contrary, tries to create a highly competitive environment in the market.
Shariah in London, Singapore and Dubai
The popularity of the new direction can be judged by the example of the UK. Officially, government policy is aimed at developing a “western” financial center that can compete with Islamic institutions. According to The UK Islamic Finance Secretariat, in 2012, 22 banks in the United Kingdom provided traditional and ethnic banking services to customers. And only 5 institutions worked completely according to Sharia principles. The total assets of the latter amounted to $ 19 billion. It was a world record. In addition, 25 law firms providing Islamic finance services were operating in the country. Four institutes, 10 universities of about 40 colleges today offer higher education in ethnic banking.
An example of London was followed by Singapore. This regional Asian market has over 600 different institutions providing a full range of banking services, including Islamic finance. The Central Bank of Singapore is taking all measures to develop the financial market, develop legislative and tax conditions conducive to attracting major players. "Islamic banking instructions" have already been approved. MAS in cooperation with the Ministry of Finance is developing the principles of tax regulation of financial products.
In 2013, the formation of an “Islamic economy” in Dubai began. The essence of the project is to create infrastructure, rules for Islamic products, which will be developed in parallel with existing ones. The strategy includes not only financial services, but also insurance, arbitration court, product quality management standards.
In the UAE, the Islamic finance market is quite large. There are 8 local banks with assets of $ 75 billion. The largest bank, DubaiIslamicbank, operates in Dubai. It was founded back in 1975 and is the first Islamic credit institution in the world to start providing a full range of Islamic banking services.
Future plans
In the near future, credit institutions will focus on two areas - improving products and increasing customer audience. The goal of the first financial institutions was to form a common understanding of banking among customers, without going into details.
European financial institutions have positioned their products as an important element of everyday life. Islamic institutions were aimed at expanding the range of services. The second generation has already been engaged in their implementation in European countries.
The Islamic Bank in Makhachkala and other new institutions are already operating in four directions:
- Entering new markets, including as non-banking financial organizations;
- create competition in their segment;
- develop new products;
- conduct daily work with the population in order to attract new customers.
European banks also see Muslim consumers as a new market segment, offering them cheaper goods.
Prospects
These examples confirm that the professionals of the financial market believe in a new attractive prospect for the growth of Islamic business. Such conclusions are made not on emotions, but according to the results of marketing research, as well as the forecasts of auditors. We list some of them:
- More than 1.5 billion people in the world are Muslims. But not all of them have access to Islamic banking services. Even in the Gulf countries, the percentage of implementation of the new system does not exceed 30.
- The number of products of Islamic banks has increased significantly compared to the nineties. Now financial institutions can satisfy the most complex needs of corporations and individuals.
- A growing number of middle and senior managers who want to work specifically with Islamic banks.
- The awareness of managers about the structure of Islamic banking products, standards of business relationships based on moral and ethical principles is increasing.
The most important reason for this interest in ethnic business is the huge momentum of speculative trading in derivative securities, that is, derivatives. Large European banks are the main players in the options and futures segment.
According to CGFS, three years ago, the market size was $ 1.5 quadrillion, the total value of open derivatives was $ 638.9 trillion, despite the fact that in the same period the total GDP of all countries of the world was estimated at $ 71 trillion. Such volumes of risky securities pose a threat in the form of huge losses to banks and the financial system after sharp price fluctuations. In the Islamic business model, there is no such risk.
