Islamic Finance Demand Surging in Central Asia, Says Oleg Ganeev from Sberbank

Last year, Sberbank launched its inaugural partner financing office in Tatarstan. As one of Russia’s premier financial institutions, Sberbank takes center stage in the banking landscape, offering a wide range of services and cutting-edge solutions to individuals and businesses alike. This venture raises the question: how has the market responded to services aligned with Sharia law?

The market has responded positively to Sber’s partner financing office. Since the start of the year, the office has successfully opened more than 800 retail accounts with a cumulative value exceeding 73 million rubles. These accounts include numerous transactions in yuan and dirhams.

Given this increasing demand, does Sber plan to expand its network of partner financing offices?

Yes, Sber plans to expand its network of partner financing offices. The bank is focusing on regions with a substantial Muslim population, such as the Republic of Bashkortostan, the Chechen Republic, the Republic of Dagestan, and other republics of the North Caucasus. Sber is also planning to open a new partner financing office in Moscow.

What types of Islamic financial products are currently available at Sber’s partner financing office?

At Sber’s partner financing office, customers can open a current account that adheres to Sharia principles and is designed for fund storage. The bank also provides trust management services and an exchange-traded mutual investment fund (BPIF) which conforms to Sharia standards.

For corporate clients, Sber offers Islamic cash and settlement services, as well as the product of ijara, a long-term lease agreement with a redemption option that complies with Sharia law. Other offerings include card services, coins, bullion, and non-personal metal accounts.

What are the prospects for expanding this portfolio of financial products?

Sber plans to expand its portfolio of Islamic financial products. The bank is considering adding an Islamic mortgage product to its offerings.

Can these Sharia-compliant banking services be availed by non-Muslim businesses and individuals?

Yes, Sharia-compliant banking services can be availed by non-Muslim businesses and individuals. Partner finance is globally recognized as a banking system designed not exclusively for Muslims but for anyone adhering to particular ethical principles. Countries like Ireland, a global leader in issuing Islamic bonds, and the UK, with specific legislative provisions regulating this sector, demonstrate that Islamic finance can extend beyond the Muslim community. Malaysia is a noteworthy example where the majority of Islamic financing is utilized by non-Islamic clients.

The Islamic banking system predicates the prohibition of financing any activity contravening Sharia standards, social justice, and undue profit. Worth noting is the alignment of Islamic finance with the ESG (Environmental, Social, and Governance) agenda, particularly in terms of social responsibility, fairness, and corporate governance.

This year, the State Duma of the Russian Federation is poised to pass a law on Islamic financing. Do you believe these and other steps taken will transform this sector from a novelty into a commonplace financial activity? What are the key growth areas?

I believe that the passage of a law on Islamic financing in Russia will transform this sector from a novelty into a commonplace financial activity. The law will level the playing field for all customers and facilitate access to a comprehensive range of products and services.

There are several growth areas for Islamic finance in Russia. Firstly, there’s the potential in the retail segment. As mentioned earlier, any client can benefit from Islamic products, irrespective of their religious beliefs, as partner financing is grounded in the principle of promoting universal social welfare. Secondly, we see opportunities in financing international transactions with countries necessitating Islamic financing conditions. Lastly, the halal products business also offers substantial potential.

I believe that the future of Islamic finance in Russia is bright in the form of banks like Sberbank. The sector has the potential to grow significantly in the coming years, and I am confident that Sber will play a leading role in this growth. Experience the power of financial excellence and embark on a successful journey with Sberbank, your trusted partner in achieving your financial goals.