Chairman of CIBAFI: Russia Needs a Roadmap for Implementing Islamic Banking Instruments
Chairman of CIBAFI: Russia Needs a Roadmap for Implementing Islamic Banking Instruments
28 February
Abdelilah Belatik told in an interview about leading countries in the development of partnership financing, how Islamic banks introduce innovations, and the ways Russia can increase its role in the global Islamic finance market
The total global market of Islamic financial assets is growing every year, exceeding $4.5 trillion in 2024. Countries in different regions of the world begin to introduce instruments of partnership banking, which opens up a wide range of opportunities for working with investors operating under the principles of Islamic finance. Abdelilah Belatik, Secretary General of the General Council for Islamic Banks and Financial Institutions (CIBAFI), in an interview with TASS spoke about leading countries in the development of partnership finance, how Islamic banks introduce innovations, and the ways Russia can increase its role in the global Islamic finance market.
— How has the total partnership financing market changed by the end of 2024? What are the growth forecasts for 2025? And which market segment is currently dominant?
— We expect the total Islamic finance market to reach 5.3 trillion by the end of 2025, with potential for further growth. For reference, this figure was $1 trillion in 2010 and it had grown to 4.5–4.7 trillion by 2024: a fourfold increase in 14 years. Forecasts for 2029–2030 predict a level of about $9 trillion.
That being said, despite the impressive growth in volumes, the focus is not so much on the amount of financing as on the impact that Islamic banking has on the real economy and on the development of small and medium businesses in particular. According to segmentation analysis, Islamic finance accounts for over 70% of the market, Islamic funds make up about 15%, and takaful (Islamic insurance) holds a small share. These figures, however, do not include the largest market for the halal industry.
— In which country or region of the world is the volume of Islamic finance growing fastest? Which country can be considered the leader in partnership financing? Where, in your opinion, is the Islamic banking system organised in the best way possible?
— If we take the regulatory infrastructure for the introduction of Islamic finance instruments, the leading countries are Malaysia and Bahrain. International organisations governing all aspects of these processes are located there, while the framework for such introduction of convenient instruments is built at the highest level.
In terms of production volumes and industry development, the leaders are Saudi Arabia, the United Arab Emirates, and Malaysia. At the same time, countries like Turkey and Indonesia, which, although not quite reaching the level of the leading countries yet, should be mentioned, too, as they have enormous potential due to their large populations and the size of their economies.
The emerging Islamic economies of Central Asia: Kazakhstan, Kyrgyzstan, and Uzbekistan, as well as the Republic of Tatarstan in the Russian Federation, holding promise in this area, are also noteworthy. Some African countries, despite their current relatively low levels, are showing notable growth, which allows them to be recognised as promising markets.
— Earlier it was reported that the Eurasian Development Bank (EDB) plans to introduce Islamic finance instruments and implement one or two pilot projects in 2025. Is there now some idea of what these projects may be and which countries are considered? What projects are Islamic financial institutions ready to invest in? Which of the participating countries are the most promising in terms of attracting Islamic finance?
— I’ve heard of these statements. It’s always a matter of infrastructure. When investors and banks enter a new market, they cannot always predict how things will work in the future, what difficulties they will encounter, and what the outcome of their participation will be. In this case, the implementation of a pilot project is a very good testing method. For example, the Islamic Development Bank is actively implementing similar projects in Central Asian countries: Kazakhstan, Kyrgyzstan, and Uzbekistan. This allows us to understand what tax changes and legislative adjustments are necessary for the successful implementation of such projects.
As for the examples of attractive projects, the focus is on green finance, environmentally friendly projects, and alternative energy sources, including solar energy. In addition, large infrastructure projects always lead to significant financing.
— Does the West express a growing interest in partnership financing? How actively are Western/European financial structures adopting Islamic banking instruments? Do you see more attention paid to Islamic finance, to investors specialising in partnership financing, from non-Islamic countries? To what extent can Western businesses be interested in Islamic finance and are Islamic banks interested in financing such projects in their turn?
— If we take the most advanced countries that are extensively introducing Islamic finance instruments, it is, first of all, the United Kingdom, where a certain number of Islamic banks have been functioning for some time now. Germany also takes an active stand, and we can see come interest in Islamic funds in Luxembourg and France.
The Organization of Islamic Cooperation (OIC) comprises 57 countries, however 110 countries are already implementing Islamic finance instruments. States such as Thailand, South Africa, and the Philippines take to this financing option as well. This is often not tied to the number of Muslims in the country, because once people realise the advantages of Islamic finance over conventional arrangements, the choice to adopt an ethical approach becomes obvious. For example, in Malaysia, only 30% of the population are non-Muslims, but half of the customers of Islamic banks are followers of other religious dominations.
— Islamic finance must conform to certain standards, to the Shari’ah rules. How does this impact on the introduction of innovations and technologies in the banking sector, in financial institutions? Are there any obstacles? And do European banks have an advantage in this respect compared to banks in the Arab world?
— We pay careful attention to the introduction of innovative tools. Together with our partners, banks, and organisations, we regularly conduct research and consult experts working in the sector. Half of the respondents say that the challenges of innovation are comparable to those experienced by conventional banking institutions. Sometimes colleagues report that they are growing faster than many conventional banks. That being said, barring large Islamic banks from Saudi Arabia, Malaysia, and the UAE, Islamic banking institutions remain small in size, turnover, and volume. In general, the challenges faced by even small Islamic financial institutions are not due to the Shari’ah rules, but to traditional issues common to the banking sector as a whole.
Regarding the introduction of Artificial Intelligence tools, the significance of developing a digital currency really bears mentioning. We are now conducting research and, when new trends emerge, we convene a council of academics and Shari’ah experts to discuss innovations, develop solutions, and provide instrumental guidance. One such instance is the active research into the possibilities of analysing data using Artificial Intelligence, which is gradually being implemented by many institutions.
— Is there a skills shortage in the Islamic financial services industry? Where is it felt most? How is this issue being addressed?
— The usual situations are: we have a finance and banking expert who does not have sufficient knowledge of the Shari’ah rules and regulations, and a Shari’ah expert who is not always cognisant of modern financial instruments and banking systems. The main difficulty is to find a professional competent in both matters.
— Which sectors of the economy typically use Islamic finance? Where are Islamic investments allocated most actively (agriculture, petrochemical industry, IT, etc.)?
— The structure of Islamic banking is transparent and flexible enough to be adapted to any system and industry. For example, in the Gulf region, investments in oil production and petrochemicals prevail due to the specifics of the territory, while in Southeast Asia predominant areas are agriculture and related industries. The Islamic Development Bank allocates significant resources to finance region-specific trade and co-operation projects. This enables companies to turn to both conventional and Islamic finance, choosing the most appropriate instruments to implement projects in a particular region, as we’ve seen with Tatarstan.
— How do you assess the impact of Islamic finance on the development of the Russian banking sector? What can be gained strategically? What steps do you think should Russia take to become a prominent player in the global Islamic finance market?
— Russia is a multi-confessional country with rich cultural and national diversity, and everyone should be able to choose the preferred financial instruments. CIBAFI’s goal is to provide such a choice. As evidenced by past experience, the introduction of Islamic financial instruments can stimulate the growth of certain sectors of the economy and help to increase profits, while not provoking competition with conventional banking. Essentially, we do not want to share one pie, we want that pie to be bigger. The development of this financial infrastructure is beneficial for both banks and the economy as a whole, as it promotes investment opportunities. The realisation of the necessary regulatory infrastructure in the Russian Federation requires some effort, and CIBAFI is always ready to support this process.
— Some believe that the wider spread of Islamic banking transactions is hindered by financial illiteracy, amongst other things. What are the ways to raise it across the population and financial institutions? Are there any international practices that would be intriguing and beneficial to implement in Tatarstan and Russia as a whole?
— Yes, there is the belief that Islamic banking is identical to conventional banking and alternative financial instruments are redundant due to the established approaches in place. However, it is important to explain the advantages of Islamic finance. Thus, the training programme organised in Kazan by the Tatarstan Investment Development Agency together with the General Council for Islamic Banks and Financial Institutions (CIBAFI) is a powerful aid in this direction. We co-operate actively with international organisations and hold educational events in more than 20 countries. Partnership with organisations implementing similar educational initiatives allows us to bring up-to-date information on the benefits of Islamic finance to a wide audience.
The key factors for successful development are exchanging experience, analysing the engagement of local markets with global practices, and introducing innovations. Educational courses supported by universities and academic institutions give good long-term results, while holding events such as the Russia – Islamic World: KazanForum helps to expand the information field and draw attention to the benefits of Islamic finance.
— It is now customary in Tatarstan to hold sessions that pertain to discussing Islamic banking as part of the Forum “Russia – Islamic World: KazanForum”. Does this have any positive results and does it manage to attract partners? And what is the main practical benefit of such events?
— The Event bears great significance and attracts the attention of foreign partners. Personally, I visited Kazan and Tatarstan for the first time precisely because of the invitation to this forum. In the domestic market, the Forum helps to introduce people to Islamic finance: six to eight years ago these instruments weren’t even mentioned anywhere, whereas today a number of banks are already successfully implementing relevant solutions.
The Forum externalities are noticeable as well: 10–15 years ago Kazan was little known in the international arena, but nowadays the city is recognised as an attractive business platform with huge potential amongst the countries of the Organization of Islamic Cooperation. Tatarstan, in turn, can significantly increase exports of halal products to OIC countries.
Consequently, KazanForum gives businesses, government agencies, and investors an opportunity to meet, network, and establish joint projects that contribute to the development of Russian-Islamic co operation.
Source: TASS
The total global market of Islamic financial assets is growing every year, exceeding $4.5 trillion in 2024. Countries in different regions of the world begin to introduce instruments of partnership banking, which opens up a wide range of opportunities for working with investors operating under the principles of Islamic finance. Abdelilah Belatik, Secretary General of the General Council for Islamic Banks and Financial Institutions (CIBAFI), in an interview with TASS spoke about leading countries in the development of partnership finance, how Islamic banks introduce innovations, and the ways Russia can increase its role in the global Islamic finance market.
— How has the total partnership financing market changed by the end of 2024? What are the growth forecasts for 2025? And which market segment is currently dominant?
— We expect the total Islamic finance market to reach 5.3 trillion by the end of 2025, with potential for further growth. For reference, this figure was $1 trillion in 2010 and it had grown to 4.5–4.7 trillion by 2024: a fourfold increase in 14 years. Forecasts for 2029–2030 predict a level of about $9 trillion.
That being said, despite the impressive growth in volumes, the focus is not so much on the amount of financing as on the impact that Islamic banking has on the real economy and on the development of small and medium businesses in particular. According to segmentation analysis, Islamic finance accounts for over 70% of the market, Islamic funds make up about 15%, and takaful (Islamic insurance) holds a small share. These figures, however, do not include the largest market for the halal industry.
— In which country or region of the world is the volume of Islamic finance growing fastest? Which country can be considered the leader in partnership financing? Where, in your opinion, is the Islamic banking system organised in the best way possible?
— If we take the regulatory infrastructure for the introduction of Islamic finance instruments, the leading countries are Malaysia and Bahrain. International organisations governing all aspects of these processes are located there, while the framework for such introduction of convenient instruments is built at the highest level.
In terms of production volumes and industry development, the leaders are Saudi Arabia, the United Arab Emirates, and Malaysia. At the same time, countries like Turkey and Indonesia, which, although not quite reaching the level of the leading countries yet, should be mentioned, too, as they have enormous potential due to their large populations and the size of their economies.
The emerging Islamic economies of Central Asia: Kazakhstan, Kyrgyzstan, and Uzbekistan, as well as the Republic of Tatarstan in the Russian Federation, holding promise in this area, are also noteworthy. Some African countries, despite their current relatively low levels, are showing notable growth, which allows them to be recognised as promising markets.
— Earlier it was reported that the Eurasian Development Bank (EDB) plans to introduce Islamic finance instruments and implement one or two pilot projects in 2025. Is there now some idea of what these projects may be and which countries are considered? What projects are Islamic financial institutions ready to invest in? Which of the participating countries are the most promising in terms of attracting Islamic finance?
— I’ve heard of these statements. It’s always a matter of infrastructure. When investors and banks enter a new market, they cannot always predict how things will work in the future, what difficulties they will encounter, and what the outcome of their participation will be. In this case, the implementation of a pilot project is a very good testing method. For example, the Islamic Development Bank is actively implementing similar projects in Central Asian countries: Kazakhstan, Kyrgyzstan, and Uzbekistan. This allows us to understand what tax changes and legislative adjustments are necessary for the successful implementation of such projects.
As for the examples of attractive projects, the focus is on green finance, environmentally friendly projects, and alternative energy sources, including solar energy. In addition, large infrastructure projects always lead to significant financing.
— Does the West express a growing interest in partnership financing? How actively are Western/European financial structures adopting Islamic banking instruments? Do you see more attention paid to Islamic finance, to investors specialising in partnership financing, from non-Islamic countries? To what extent can Western businesses be interested in Islamic finance and are Islamic banks interested in financing such projects in their turn?
— If we take the most advanced countries that are extensively introducing Islamic finance instruments, it is, first of all, the United Kingdom, where a certain number of Islamic banks have been functioning for some time now. Germany also takes an active stand, and we can see come interest in Islamic funds in Luxembourg and France.
The Organization of Islamic Cooperation (OIC) comprises 57 countries, however 110 countries are already implementing Islamic finance instruments. States such as Thailand, South Africa, and the Philippines take to this financing option as well. This is often not tied to the number of Muslims in the country, because once people realise the advantages of Islamic finance over conventional arrangements, the choice to adopt an ethical approach becomes obvious. For example, in Malaysia, only 30% of the population are non-Muslims, but half of the customers of Islamic banks are followers of other religious dominations.
— Islamic finance must conform to certain standards, to the Shari’ah rules. How does this impact on the introduction of innovations and technologies in the banking sector, in financial institutions? Are there any obstacles? And do European banks have an advantage in this respect compared to banks in the Arab world?
— We pay careful attention to the introduction of innovative tools. Together with our partners, banks, and organisations, we regularly conduct research and consult experts working in the sector. Half of the respondents say that the challenges of innovation are comparable to those experienced by conventional banking institutions. Sometimes colleagues report that they are growing faster than many conventional banks. That being said, barring large Islamic banks from Saudi Arabia, Malaysia, and the UAE, Islamic banking institutions remain small in size, turnover, and volume. In general, the challenges faced by even small Islamic financial institutions are not due to the Shari’ah rules, but to traditional issues common to the banking sector as a whole.
Regarding the introduction of Artificial Intelligence tools, the significance of developing a digital currency really bears mentioning. We are now conducting research and, when new trends emerge, we convene a council of academics and Shari’ah experts to discuss innovations, develop solutions, and provide instrumental guidance. One such instance is the active research into the possibilities of analysing data using Artificial Intelligence, which is gradually being implemented by many institutions.
— Is there a skills shortage in the Islamic financial services industry? Where is it felt most? How is this issue being addressed?
— The usual situations are: we have a finance and banking expert who does not have sufficient knowledge of the Shari’ah rules and regulations, and a Shari’ah expert who is not always cognisant of modern financial instruments and banking systems. The main difficulty is to find a professional competent in both matters.
— Which sectors of the economy typically use Islamic finance? Where are Islamic investments allocated most actively (agriculture, petrochemical industry, IT, etc.)?
— The structure of Islamic banking is transparent and flexible enough to be adapted to any system and industry. For example, in the Gulf region, investments in oil production and petrochemicals prevail due to the specifics of the territory, while in Southeast Asia predominant areas are agriculture and related industries. The Islamic Development Bank allocates significant resources to finance region-specific trade and co-operation projects. This enables companies to turn to both conventional and Islamic finance, choosing the most appropriate instruments to implement projects in a particular region, as we’ve seen with Tatarstan.
— How do you assess the impact of Islamic finance on the development of the Russian banking sector? What can be gained strategically? What steps do you think should Russia take to become a prominent player in the global Islamic finance market?
— Russia is a multi-confessional country with rich cultural and national diversity, and everyone should be able to choose the preferred financial instruments. CIBAFI’s goal is to provide such a choice. As evidenced by past experience, the introduction of Islamic financial instruments can stimulate the growth of certain sectors of the economy and help to increase profits, while not provoking competition with conventional banking. Essentially, we do not want to share one pie, we want that pie to be bigger. The development of this financial infrastructure is beneficial for both banks and the economy as a whole, as it promotes investment opportunities. The realisation of the necessary regulatory infrastructure in the Russian Federation requires some effort, and CIBAFI is always ready to support this process.
— Some believe that the wider spread of Islamic banking transactions is hindered by financial illiteracy, amongst other things. What are the ways to raise it across the population and financial institutions? Are there any international practices that would be intriguing and beneficial to implement in Tatarstan and Russia as a whole?
— Yes, there is the belief that Islamic banking is identical to conventional banking and alternative financial instruments are redundant due to the established approaches in place. However, it is important to explain the advantages of Islamic finance. Thus, the training programme organised in Kazan by the Tatarstan Investment Development Agency together with the General Council for Islamic Banks and Financial Institutions (CIBAFI) is a powerful aid in this direction. We co-operate actively with international organisations and hold educational events in more than 20 countries. Partnership with organisations implementing similar educational initiatives allows us to bring up-to-date information on the benefits of Islamic finance to a wide audience.
The key factors for successful development are exchanging experience, analysing the engagement of local markets with global practices, and introducing innovations. Educational courses supported by universities and academic institutions give good long-term results, while holding events such as the Russia – Islamic World: KazanForum helps to expand the information field and draw attention to the benefits of Islamic finance.
— It is now customary in Tatarstan to hold sessions that pertain to discussing Islamic banking as part of the Forum “Russia – Islamic World: KazanForum”. Does this have any positive results and does it manage to attract partners? And what is the main practical benefit of such events?
— The Event bears great significance and attracts the attention of foreign partners. Personally, I visited Kazan and Tatarstan for the first time precisely because of the invitation to this forum. In the domestic market, the Forum helps to introduce people to Islamic finance: six to eight years ago these instruments weren’t even mentioned anywhere, whereas today a number of banks are already successfully implementing relevant solutions.
The Forum externalities are noticeable as well: 10–15 years ago Kazan was little known in the international arena, but nowadays the city is recognised as an attractive business platform with huge potential amongst the countries of the Organization of Islamic Cooperation. Tatarstan, in turn, can significantly increase exports of halal products to OIC countries.
Consequently, KazanForum gives businesses, government agencies, and investors an opportunity to meet, network, and establish joint projects that contribute to the development of Russian-Islamic co operation.
Source: TASS
