31oct

The experts of the Higher School of Economics and their partners are studying the possibilities of using Islamic financial instruments for the needs of the real sector of the Russian economy.

Sukuk, insurance and equity finance are the most undeveloped segments of the Islamic financial market in Russia. While the domestic Islamic finance market can offer certain solutions to the consumer, Russia has nothing to boast of on the international Islamic finance market: international transactions in this area are more the exception than the rule. There are no sukuk deals at all. The reason lies in three key factors.

The first factor is cultural. Russia and the Islamic world are too different in their cultural background, the culture of building business contacts, there are no long-term business ties between the regions.

The second factor is investment. Russia does not have a reputation of a clear investment harbor, and the risks are still high.

The third factor is the cost of issuing sukuk. Given the first two factors, investors tend to expect a premium to yield, which not all issuers are willing to accept, especially those who have alternative ways to raise capital.

Today, the chances of Russian corporate issuers in the international sukuk market remain low. However, there are no prohibitions either. The HSE-Skolkovo Institute for Law and Development under the leadership of its Director Alexey Ivanov, in general and the Agrofinmost project team, in particular, are doing a research of the application of sukuk issue and other Islamic financial instruments for the needs of the real sector of economy, primarily the agriculture sector. The real content of the project as well as its real benefits are more important for Islamic investors. In this context the agricultural sector is of primary importance.

Source: HSE Webiste