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Articles > RMC > Islam and Economics > Dr Alchaar: Russia has a unique chance to become centre for Islamic finance

Dr. Muhammad Nedal Alchaar is the head of the international organization issuing standards for the young industry of Islamic finance. Being the organization responsible for development and issuance of standards on accounting, auditing, ethics, governance, and Shari’a for the international Islamic finance industry, AAOIFI has played the leading role in promoting harmonization and standardization of international Islamic finance practices. The standards are now used by all leading Islamic financial institutions across the world. At present there are 220 AAOIFI members in 46 countries.

AAOIFI is constantly and closely cooperates with the central banks, providing for consultancy on the stage of introduction of Islamic financial products and their harmonized development. In its activities AAOIFI closely interacts with the world famous shariah scholars, such as Taqi Usmani, Abdullah Al-Manea, Muhammad Al-Darir, Jaseem al-Nashmi and others.

Dr. Alchaar, head of AAOIFI, had personally met with the presidents, prime-ministers and central bankers of many countries, including the UK and France.

In September 21-23 upon the invitation of Russian Muftis Council and with the assistance of Russian expert association in Islamic financing and Finance University under the Government of the Russian Federation Dr. Alchaar paid a visit to Russia and met with Russian experts in the industry in the form of a professional discussion, had a meetings in the Central bank of Russia, the Ministry if Finance and Association of banks of Russia. Dr. Alchaar as well met with prof. M. Eskindarov, rector of the Finance University under the Government of the Russian Federation and opened with a short lecture the educational course on Islamic finance in Moscow International higher business school (Mirbis).

Apart from that Dr. Alchaar met with the representatives of the financial and investment companies of Russia.

One of the main purposes of Dr. Alchaar’s visit to Russia was the presentation of AAOIFI standards published in the Russian language. The agreement on official translation of AAOIFI standards into Russian was reached during the visit of the delegation of the Russian expert association in Islamic financing to Bahrain in December 2009.

AAOIFI three sharia standards in Russian language “Sukuk”, “Murabaha” and “Islamic insurance” had been presented to the public. Three more standards are to be published in the coming month.

The chronics of the visit

Upon his arrival to Moscow Dr. Muhammad Nedal Alchaar, met with Rushan Abbyasov, head of the International Relations Department of Russian Muftis Council. During the meeting, Rushan-hazrat briefed the guest about the history and present state of Islam in Russia, about the lives of Muslims, ongoing programs of the Russian Muftis Council in Economics and Finance. Dr. Alchaar had been informed that due to the demand of the Muslim community and businessmen the Economic programmes office was created within RMC, among its objectives is promotion of economic and business relations between Muslims of Russia and other counties using the Islamic finance principles. Madina Kalimullina, deputy head of the International Relations Department, head of the Office of economic programs of Russian Muftis Council also took part at the meeting.

Meeting with Russian Expert Association in Islamic Financing

On September 21st prior to the visit to the state authorities the meeting took place between Dr. Muhammad Nedal Alchaar and the Russian association of experts in Islamic financing. On the meeting the experts exchanged their opinions concerning prospects of development of Islamic financial institutions and products in Russia, application of AAOIFI standards in the field of accounting, audit and norms of Shariah, and also actual world tendencies of the young industry.

“The Islamic banking and finance it is an old and new story. It is the story of excellence and it is the story of laziness. It is the story of excellence due to the beautiful principles which are in this industry. It is the story of laziness because we have ignored it for the last 1400 years. It is only today that we are ready to use the economic principles of Islam”, - with these words Dr. Alchaar opened his welcome speech. – “It is the system that is based on rigid and solve principles. They came not from a human, they came from God. They can accept anyone, everyone. This is the financial inclusion. There is a very important misconception around the Islamic banking. Some people say that if you want to use the IB, to manage the bank you have to be a Muslim. The answer is “no”. The system is for everyone. For Muslims it’s not a choice, it’s an alternative. We Muslims today we have to go through our transaction in an Islamic way. For those other than Muslims it is a choice, an option. They can choose whether they want to do the transactions in an Islamic way or in a traditional, conventional way. The two systems both thrive for the same target. It is fetching higher returns for he investors and for the consumers and providing higher benefits for the society. The difference between the two of us is that we use difference mechanisms and techniques”.

Another misconception about Islamic finance, according to Dr. Alchaar’s opinion, is the perception that the Islamic banks had not suffered during the financial crisis. “If we say that we did not suffer during the crisis, it means that we isolate ourselves from the world financial system”, Dr. Alchaar said. – “What we do not deal in is the financial derivatives and speculation. We must be sincere with people. We are the part of the economy and the society”.

Answering one of the questions addressed by Andrey Juravliov on the prospects of Islamic finance in Russia where lots of people regard Islamic finance products as exotic, Dr. Alchaar said that the criteria for successful negotiations is the absolute openness and sincerity. “Whether you like it or not, this system is not the invention of a human, this system is based on faith. And when we speak about faith, it is not subject to changes. Development of Islamic finance is a gradual process depending on dissemination of knowledge, explanation of all the benefits of Islamic finance. The system is still very small, only 1 trillion USD, but it gives a lot of new possibilities”.

According to the opinion of prof. Irina Yarygina, head of the chair of International financial relations of the Finance University under the Government of the Russian Federation, once the people will have understanding on what Islamic finance is about, they will never name it exotic. It is rather the high-risky financial derivatives which are exotic.

 After the meeting the presentation of the translation of the AAOIFI standards in the Russian language took place.

Meeting at the Central Bank of Russian Federation

On September 22, 2010 at the Central Bank of Russia the head of AAOIFI was welcomed by Alexey Chernov, director of the department of the International financial and economic relations. At the beginning of the talks, Mr. Chernov offered the guest to take some drinking water having mentioned that it was “absolutely halal”. During the meeting the parties discussed the role of AAOIFI in regulating the industry, the specifics of Islamic finance accounting and audit and their differences from the international and Russian practice, as well as other issues.

Mr. Chernov pointed out that in the USSR the system of accounting was closer to Islamic financing, and as for today, Russia is more and more approaching IRFS. In response to the question of AAOIFI’s role in the international Islamic finance industry, Mr. Alchaar noted that notwithstanding its name, AAOIFI’s functions are not limited to those of publishing the standards in the field of Islamic financial institutions accounting and audit. Since its creation, the scope of the organization’s activities has considerably broadened, though all enforcement functions in the industry are carried by the central banks, the latter maintaining enough close coordination with AAOIFI.

Meeting at the Finance University under the Government of the Russian Federation

At the Finance University under the Government of the Russian Federation Dr. Alchaar was welcomed by its rector, Mikhail Eskindarov. The Director of the Centre for International educational and scientific cooperation Prof. V.V.Dumny, Head of International monetary-and-credit and financial relations chair Prof .I.Z.Yarygina and professor of the same chair O.M.Preksin, Deputy head of the International Relations Department of the Russia Mufties Council and Finance University postgraduate M.E.Kalimullina also participated at the meeting.

During the meeting, possible areas of cooperation between the Finance Academy and AAOIFI in the sphere of education and science were also discussed. Particularly, Dr. M.N.Alchaar expressed his willingness to assist to the work of “Islamic finance” division at the International monetary-and-credit and financial relations chair’s laboratory, participate in educational workshops and consultative meetings dedicated to Islamic finance, as well as render advisory activities to “Islamic finance” educational program, which is being introduced since this year under the University MA course. Thus, for example, an agreement to invite the expert professors recommended by AAOIFI to deliver lectures as part of this course was achieved.

The Finance University members mentioned that Islamic finance represent an innovative project for the Russian finance industry and expressed their hope that in the near future the legislative framework for the functioning of Islamic financial institutions in Russia will appear.

 The participants of the meeting stated a mutual intention to reflect the outlined areas of cooperation in an agreed document that would identify the key forms and methods of interaction in the educational and scientific spheres.

Meeting at the Association of Russian banks

At the Association of Russian banks the negotiations were held with the Association vice-presidents A.I.Milyukov, K.N.Mozel, O.M.Preksin and chief specialist of the International cooperation department I.E.Rakova.

During the meeting Dr.Alchaar told about the differences between the financial model of an Islamic bank and that of a traditional one. He also informed of the preconditions that are indispensable for the existence and development of Islamic banks and Islamic financial products. Dr.Alchaar mentioned as well that the key problem is the alteration in people’s minds concerning the new industry, which is impossible without enlightment and educational programs.

The host party expressed its interest for further interaction on the issues of the new industry development. The parties agreed to continue their consultations and exert their mutual efforts to translate them into course of concrete decisions and actions that would provide additional opportunities for the formation of the competitive international financial centre in the country.

Besides that, Dr.Alchaar held meetings with the representatives of investment companies where the parties outlined the areas of cooperation in the field of conducting a series of educational round-tables and discussed a number of projects on which cooperation is possible.

Meeting with students at MIRBIS Institute, opening the course of Islamic finance

On the same day’s evening, Dr.Alchaar, a professor with 20-years experience, participated in an inauguration ceremony of the “Islamic finance” course, third by this year, held in Moscow International Higher Business School (Mirbis).

In his short lecture before an audience of MIRBIS professors and course attendants Dr.Alchaar covered 9 principal features of Islamic finance, among which are functions of Islamic banks, correlation with real assets, treatment of money and risks, social responsibility, concept of financial all-encompassing, alternative opportunities etc.

Dr.Alchaar mentioned that the position he holds as the head of the international organization - AAOIFI - is an honorable and a noble mission for him. He also congratulated the audience with the fact that they are becoming the participants of a new industry and will have a unique opportunity to contribute to the history of Islamic finance development in Russia and in the world as well, since in this industry, notwithstanding its composite nature and self-sufficiency, one has to meet more and more new challenges day by day, and a whole series of new challenges are expected to arise in the future.

The audience were able to receive responses for the issues they were interested in.

Meeting at the Ministry of Finance of the Russian Federation

At the Ministry of Finance Dr.Alchaar held a meeting with the Law department deputy director V.V.Kudryashov. The representatives of Sberbank of Russia, Finance University under the Government of the Russian Federation, Ministry officials and members of Russia Muftis Council also participated in the meeting.

 The Ministry of Finance representatives informed Dr.Alchaar of the specifics of the financial regulation and control in Russia and scheduled reforms. Mr.Kudryahsov mentioned that state structures lack the information about Islamic financial system and they would willingly take part in the relevant conferences and other events on that topic.

The parties agreed on further cooperation.

On the whole, Russian side has emphasized more than once during the meetings that Russia has many factors indicating urgency and necessity of Islamic financing development in the country: 25 mln of indigenous Muslim population, geographic position, plans to develop International financial centre in Moscow.

In the opinion of Head of AAOIFI, Russia is a unique country for the development of Islamic financial industry. This, in addition, is facilitated by good prospects of retail (due to high number of Muslim citizens) and wholesale markets, and by the fact that the financial system is still in the process of reforming and improvement. The expert from Bahrain expressed the view that this factor is an advantage the USA and Britain lacked while facing serious difficulties in attempts to amend their financial systems considered to be perfect for a long time. In case of successful realization of new financial products in Russia, it can become regional and world centre of Islamic finance.

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