Russia: Mudarabah or mathematics on the investment platform
AS SALAM is a unique project providing Islamic financing services in the territory of the Russian Federation. The name was not chosen by chance — AS SALAM means ‘May Allah’s blessing be on everything the company does for the benefit of the Ummah’.
AS SALAM received permission from the Central Bank of Russia to carry out activities in the field of partnerships (Islamic) finance in May 2024. However, the management team of AS SALAM has been involved in Islamic finance in Russia since 2008. In 2017, it was the first in Russia to issue Sukuk al-Mudarabah which was structured within the framework of the current legislation for ordinary bonds.
AS SALAM developed its own gradation of the Islamic capital market for the development of new products:
I. Retail individual investment market;
- Online platform for digital Sukuk (crowd-lending, crowd-investing);
- Exchange-traded bond market — Sukuk;
- Attracting investments on foreign stock exchange platforms
On the 12th July 2024, with JSC status, the largest registrar in Russia, a pilot transaction was implemented to attract investments in accordance with the principle of Mudarabah. This transaction was implemented on the basis of an investment financing agreement with a floating interest rate, depending on the financial performance of the borrower.
Now we have financing facility at a floating rate, which depends on the financial results of the borrower, to which this rate is tied with mathematical formulas and management accounting, but the main thing in all of this is that now this financing has become digital — it can be attracted on the investment platform with an invest status — now it is an electronic Sukuk Mudarabah.
AS SALAM’s CEO, Renat Yedikhanov once said — mathematics and AAOIFI standards can do everything in Islamic finance!
1. Islamic finance in Russia is now an experiment. To develop financial companies, they need liquidity and the ability to exchange it. The Central Bank of Russia cannot yet provide such an instrument, if only because the entire system is designed for traditional financing facilities.
The first unknown was found: the interbank solution was decided through digital Mudarabah (short-term market — 1–2 months)
2. Many companies whose founders or managers are Muslims, or companies that look to attract financing on fair terms, without driving themselves into a debt hole with a traditional financing, need a working capital financing tool.
The second unknown has been found: an analogue of a low-risk diversified portfolio of shares for investors and a potential market for replenishing turnover for borrowers (medium-term market — up to 6–8 months)
3. Well, the third variable follows from the second. Packing projects into formulas and management accounting, polishing all this with AAOIFI standards and at the end we get a market for both startups and a market for those who have already developed a business and want it to grow — investments are needed.
So, the third unknown has been found — project financing — an analogue of a long-term diversified portfolio of shares with a higher risk.
AS SALAM is creating history in the Islamic finance market of Russia.
