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Central Asia news

TuranAlem of Kazakhstan offers Russia Shar'ah loans

17.10.2006 22:38 msk

Irina Galkina, Ekspert

Religious life Kazakhstan

TuranAlem, one of the three largest banks in Kazakhstan, is determined to become one the largest private banks in the Commonwealth by 2008. The bank expanded into Russia through procurement of the stock of its strategic partners, Volga-Kama Joint Stock Bank and Slavinvestbank. Gulnara Galjamova of TuranAlem Directorate of International Loans claims that the bank will be mostly using traditional instruments in Russia. "When the Russian market is analyzed and the necessary experience in Islamic funding accumulated, however, we will offer this service in Russia," Galjamova said.

Accommodated party in Islamic funding is supposed to meet all Shar'ah requirements. It does not mean that owners of companies should embrace Islam first. It means that the companies in question are not supposed to deal in spirits, tobacco, drugs, weapons, or pornography, gambling, and so on - in whatever abases a person and jeopardizes his or her life and soul.

Invented only 30 years ago, Islamic funding is something exotic in the Commonwealth for the time being. It may be viewed as an alternative source of finances allowing for an expansion of the list of investors into banking sectors of the Middle East and Southeast Asia. According to some estimates, almost 300 Islamic banks with aggregate assets amounting to $300 billion operate in 75 countries nowadays. Their aggregate potential may increase to $1 trillion by 2013. The largest Islamic financial establishments are located in Bahrain and Malaysia.

Apart from certain demands to the accommodated party, Shar'ah law place certain demands on the sponsor as well. No interest (nominal, simple, complicated, fixed, or floating) is permitted as amoral. The sponsor is permitted to seek other ways of benefiting, however. For example, the bank may participate in the project is it financing so that it will share all risks and benefits. It may participate in commerce and benefit from the difference between what an article was bought for and what it was sold for afterwards. It is only required that every commercial contract be based on the principles of fairness, so that illegitimate enrichment of an involved party is ruled out.

TuranAlem has already accumulated $250 million received in accordance with the principles of Islam and placed the money in Kazakhstan. Specialists of the bank comment on the interest in Kazakhstan and the Commonwealth in general displayed by Islamic and other banks of the Middle East and Southeast Asia and Islamic divisions of Western financial institutions. Growing size of the syndicated loans the bank is getting in the East to try and invest in the Russian economy confirms that the interest is vivid indeed.

Ekspert, No 38, October 16, 2006

© Translated by Ferghana.Ru