On 3 November 2019, the HSE-Skolkovo Institute for Law and Development will present the Agrofinmost project at the 14th international AAOIFI-World Bank conference on Islamic banking “The change in the global ecosystem: need for governance, standardization and regulatory support.” The Institute will hold a special event whose participants will discuss the issue of food security of Muslim countries and how Islamic financial instruments can be used to address it.
The aim of the special event is to take a look at food security governance in Middle Eastern countries from the perspective of the Islamic legal tradition and Shariah principles; to highlight those elements of international trade in commodities (including the high level of monopolization, speculation, and volatility of the market) which are in conflict with the basic Shariah principles; and to offer a practical solution in the form of sustainable models based on international cooperation and the Islamic legal tradition.
The session will bring together experts from Russia, the world’s largest wheat exporter in 2018/2019, Islamic finance scholars, Islamic and international expert community to discuss how Islamic finance instruments can be used to change the situation in the international food commodity markets for the better, how to reach sustainability and transparency and avoid the influence of the speculative financial capital on food trade. Real projects will be presented that potentially involve the issuance of sukuk and other financial instruments. Session participants will also discuss which of the instruments are better suited to achieve the above mentioned objectives.
The Islamic world, in particular the OIC countries, are highly dependent on imports of agricultural commodities, e.g. grain, to be used for subsidized food supply. Yet the OIC countries rarely buy these agricultural products directly from the producers, but mainly through a network of international traders operating in a tight oligopolistic market with prices heavily dependent on financial speculations at commodity exchanges based in Western countries. This system of global commodity trade is one of the last havens of pure financial capitalism with its sole focus on higher returns on investments and total negligence of human conditions and sustainability concerns. And in terms of Islamic legal traditions it comprises such forbidden elements as maisyr, gharar and ihtikar. Price fluctuations make it impossible now and in the foreseeable future to cater to the needs of the poor and to provide the necessary quantity of food commodities to meet the growing demand. The risk is high that today’s generation in the OIC countries may face a real threat of brutal severe hunger as it had happened back in the distant past.
The Agrofinmost Project offers practical solutions to establish fair market prices for agricultural products, which as a result could provide food security in Middle Eastern countries, on the one hand, and fair international trade without speculations based on Islamic legal principles, on the other.