“We are considered as reliable, sound and long-term partners”
Сhallenges of Islamic financial system in Russia
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“We are considered as reliable, sound and long-term partners”
The agreement on translation of all AAOIFI’s shariah standards regarding Islamic finance into Russian became an important strategic step for development of Islamic finance in Russia. This agreement was signed on Monday during the 15th annual conference of The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and the World Bank. Madina Emirovna Kalimullina, PhD. In Economics, executive secretary of the Russian Expert Association in Islamic finance (RAEIF), advisor on Islamic economy and finance for the chief of staff of the Russian Muftis Council, has recently returned from Bahrain and told MuslimEco about the work prior to this event and the development of the relationships with the AAOIFI.
Madina Emirovna, how would you evaluate the results of the conference of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and the World Bank? What were its highlights?
It should be noted that the conference is conducted on a consistently high level, with many interesting questions being discussed. The quality of participants’ speeches is up to the mark. It is obvious that they are the top figures in the field. Each session was attended by shariah experts. Moreover, they were not just people with a degree in shariah, but globally renowned people, such as Taqi Usmani, Abdusattar Abu Ghuddah and other members of Islamic banks’ shariah councils and the shariah council of the AAOIFI. Among attendees there were bankers, namely CEOs of Islamic banks from different countries, representatives of the World Bank and International Monetary Fund. All reports were relevant and interesting and made me look differently at many problems and aspects of the sector. In fact, all the problems existing in the sector were brought up for discussion. The audience was very active and consisted of professionals with various backgrounds who asked many clarification questions and made comments.
It was good to see that all senior management of the AAOIFI, all the members of the shariah council participated in the conferences for two days, all the day long. They took part in discussions, debates, coffee-break conversations. The programme was not overloaded, there was enough time for having rest and communication.
As for results, at the conference we heard the AAOIFI progress report, as well as its plans for future. The key points brought up for discussion were sukuk standards. It was noted that many deals still contain some dubious elements, and we should shift the sukuk positioning and issuance from debt instrument (alternative to bonds) to investment instrument, in order to make sukuk’s features resemble an investment instrument. Such important questions as private equity and standards in this sector, crowd funding, venture capital were also discussed. These issues were raised for the first time, there are currently no standards in this area, but perhaps they will be elaborated in future. Amendments to auditing, accounting and regulation standards were also discussed. So this was the concept of the event. I think it was well organized and had good results.
As we remember, when speaking at the 6th International Islamic Finance and Investment Forum within the frames of the International Moscow Halal Expo Exhibition 2015, the AAOIFI general secretary Dr Hamed Hassan Merah mentioned the importance of the AAOIFI’s cooperation with Russia and Russian companies. What progress have we managed to achieve in this area so far?
Apart from communication within the framework of the AAOIFI conferences, we liaised with the organization’s management on a permanent basis. Their representatives visited Russia a few times. During our cooperation, two general secretaries took office. If you remember, in 2010 the AAOIFI general secretary Dr Muhammad Nedal Alchaar came to Russia. Now the organization is headed by Dr Hamed Hassan Merah, an honourable person, whose activity is consistent with the organization’s spirit. He comes from Saudi Arabia, is young, enthusiastic and very responsive. He demonstrates great interest in shariah and other standards, he is bound up in it and does his best to make sure that the standards really meet the needs of modern Islamic financial infrastructure. As soon as he took the office he requested a meeting with us and asked about the work progress regarding the standards. At the following meetings we discussed the possibility of translation of all shariah standards (taking into account the revisions) into Russian with the AAOIFI’s direct technical support.
I should say that the first general secretary confessed that he had some doubts that our initiative could be implemented. As there were solid results, these doubts got later dispelled. We used to be newcomers at the market, now we are considered partners. I am talking now about the Russian Association of Experts on Islamic Finance (RAEIF), the Centre of Islamic Economy and Finance Development (CIEFD) and the Russian Muftis Council. We are considered as reliable, sound, long-term partners.
I think it is a great honour, but at the same time a great responsibility too. Even though, I guess, it is a logical progression of events. A huge amount of work regarding the standards translation has been done, as far as the shariah element of the Islamic finance market is concerned. That is why we believe that Russia and the CIS countries should be full-fledged members of the AAOIFI, participating not only in conveying the already existing standards to Russian-speaking audience, but ultimately in elaborating the standards as well. God willing, I think that in future (we have already discussed it), our experts in the fiqh muamalat al maaliya (Islamic law of property relations) will be able to participate in designing standards, transferring the best practices of Russia and CIS countries regarding the Islamic financial deals.
How are you going to proceed with translation of updated versions of the standards, as well as those being currently elaborated by the AAOIFI?
We have explored this question in depth. We set a system for translation based on previous practices with some corrections and proposals from the AAOIFI. Having taken all this into consideration, we have designed a translation system including several levels of quality control.
The editorial board includes several native Arabic speakers, several people with a degree in shariah with an emphasis on the fiqh of property relations. Apart from editors for general subjects and stylistics, we have involved and will involve experts specializing in certain types of financial and economic activity (legal aspects, tax aspects, economy, banking) as well as representatives of Islamic financial companies. We have much work to do. We have already started it. We understand that it is a great responsibility and hopefully we will be able to provide high quality results in due time.
Are the standards published by the AAOIFI and translated into Russian much in demand among Russian experts and entrepreneurs?
We started working on standards in 2009. So far we have published 11 standards and translated a bit more, but haven’t published them as they were amended. Not only Russian citizen show interest in the standards, but also our partners from the CIS countries, especially from Kazakhstan and Kyrgyzstan. Both students and professionals express interest in it. We even presented the standards to our Russian regulators. The standards are a departure point for do’s and don'ts within the frames of Islamic financial contracts. Having the official Russian translation of the full range of shariah standards, we have a reference point agreed upon by the global Islamic financial community and shariah scholars from all over the world.
Can we say that the AAOIFI standards represent a code of rules and regulations necessary for conducting business in a proper manner and establishing relationships in the area of Islamic finance?Standards set the limits that must not be transgressed. At the very least, they serve as a restrictive factor for those who might use Islamic financial tools for their personal gain, for their own profit.
The standards cover not only financial sector. They regulate business relationships and establishing any kind of a business. They can be useful not only for bankers and accountants, but also for manufacturers, traders and sole entrepreneurs willing to run their business in compliance with shariah rules.
Interview by Patina Sadykova
Expert Madina Kalimullina
Mrs.Madina Kalimullina is PhD in Economics, advisor on Islamic Economics and Finance to the Russia muftis Council head of Administration, executive secretary and member of the Coordination Council of the Russian Association of Experts in Islamic Finance. Internships on Islamic Finance: JSC "Ecobank" (Kyrgyzstan), Al Baraka Banking Group (Bahrain), Bank Muamalat Indonesia (Indonesia), and others.All expert's articles