Alwaght- Russia’s first Islamic Bank is set to open in the city of Kazan, which is often referred to as the Muslim capital of Russia.
The Partnership Banking Center, which will operate according to the principles of Sharia (Islamic Law), is expected to commence its operations in March 2016 in Russia’s Tatarstan republic.
According to RIA Novosti, the bank will focus on working both with individuals and companies, and will aim to channel Islamic investment into Russia.
The Partnership Banking Center will also sign an agreement with the Islamic Development Bank, an establishment of Organization of Islamic Corporation, OIC.
Islamic banking stipulates that funds are invested only in the assets permitted by the Sharia law. This implies a ban on loan interest because interest is both regarded as usury and banned by Islam.
The creation of the first Islamic bank became possible following the enactment of a new law submitted to Russia’s Parliament in late January. Under the law, banks would be allowed to set up accounts whose funds could be invested only in line with an investment declaration, thus adapting the Russian banking system to the requirements of religious financial institutions.
Last week Vladimir Dmitriev, the chairman of Russia's state development bank VEB, said on the lender was interested in Islamic finance.
He also told reporters that VEB was urging the government to make changes to the country's legislation in order to facilitate access to such financing.
Islamic financial system continues making its way to Russia primarily to serve the country’s Muslims who number 21 million people, according to various estimates.
Last June Russia took its first step into the world of Islamic finance this month by issuing sukuk, Islamic bonds which comply with Muslim religious rules.
The bonds are to be issued by the majority Muslim Russian republic of Tatarstan in the Volga region, which has embarked on an ambitious drive to attract foreign investment.
The first sukuk to be issued in Tatarstan's capital Kazan on 20th June 2015, will be going toward financing a major business center in the city whose construction will cost USD200 million.
Bringing Islamic banks to Russia is "possible and even necessary", Tatarstan's leader Rustam Minnikhanov told investors in Dubai in May last year.
Oleg Ivanov, vice-president of the Regional Banks Association of Russia has underlined that the emergence of Islamic finance in the country "will definitely be positive for the development of the financial sector in Russia", noting that the assets of Islamic banks globally are estimated at a trillion dollars.