A draft law on Islamic banking has been submitted to the State Duma in Russia concerning the establishment of new bank accounts allowing investment into only Shariah-approved assets.

The idea was first raised at the level of the State Duma a year ago after Western sanctions closed Russia’s access to the European and American capital markets. Linar Yakupov, President of the Foundation for the Development of Islamic Business and Finance stated that to associate Islamic finance with political or religious ideas would be to misunderstand the concept of it, as it is only a set of financial instruments largely unrelated to Islam itself.

A draft law was submitted to the State Duma in January. Under this law, banks could set up accounts with funds that could be invested only in line with an investment declaration, thus adapting the Russian banking system to the requirements of religious financial institutions. Individuals and organisations would need to be assured that their funds are invested in accordance with Shariah law, therefore outlawing use of the funds in industries such as alcohol and gambling.

Yakupov has advised that a better alternative for Russia would be to set up dedicated ‘windows’ in existing large banks to provide Islamic banking services, rather than setting up independent Islamic banks. This route has been taken by world-leading banks such as HSBC and Citibank, and would go some way to reducing competition between ‘ordinary’ and Islamic institutions.