Why is Russia Introducing an Islamic Banking System?

Back in July, Russia's lower house of parliament passed a bill to introduce an experimental Islamic banking system in the country's mostly Muslim regions. The pilot project will start on September 1st and will last for 2 years. According to some estimates, Muslims make up nearly 10% of Russia's 143 million people, with four areas in country's south having the highest concentration.

By next month the Russian regions of Chechnya, Dagestan, Tatarstan and Bashkortostan will have the option of conducting their finances in an Islamic based banking system. Russian financial analysts believe the changes will help the country build new economic links with Muslim countries across the Gulf and Asia. Islamic banking practices forbid the charging of interest on loans, and instead offer partnerships and participation in both profits and losses on certain investments. The system is gaining global popularity in financial hubs like London, Kuala Lampur, Riyadh and Dubai. The move comes as Russia looks for new economic partners amid ongoing western sanctions caused by the war in Ukraine.

Guests:
Madina Kalimullina
Executive secretary at RAEIF

Torek Farhadi
Former Adviser to IMF and World Bank

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