Russian banks turn to Islamic finance: Several leading Russian banks including Vnesheconombank (VEB) and VTB are looking to develop their expertise in Islamic finance as a means of tapping into new sources of funding in the light of the sanctions that are limiting their ability to raise capital on Western markets. With 20 million Muslims living in Russia, cash-rich Islamic funds have been identified as an alternative source of finance to help broaden funding sources for local firms. A spokesman for (VEB) confirmed that it was considering Islamic financial tools, while VTB said that it was exploring sukuk deals for several of its clients while acknowledging that questions remained over how such deals were to be treated for accounting purposes.
Islamic or Sharia-compliant banking prohibits the acceptance of specific interest or fees for loans of money, while sukuk deals grant the investor a share of an asset along with the commensurate cash flows and risks. There are also Sharia-compliant versions of investment funds and insurance takaful. Ernst & Young estimates that Islamic banking assets grew globally at an annual rate of 17.6% between 2009 and 2013, and will grow by an average of 19.7% over the next three years. In 2012 Iran accounted for 43% of the world’s Islamic banking assets, with Saudi Arabia (12%) and Malaysia (10%) ranking second and third.The Moscow Times