Russia’s Largest Ipass Direct Lender Loans Sees Bigger Role for Islamic Finance As It Deploys First Halal ETF | Salaam Gateway

Sberbank, a state-owned company, through Sber Asset Management, launched Russia’s very first Sharia-compliant ETF in late November, called Halal Investments.

“The ETF is based on the MOEX Shariah Total Return Index designed by Moscow Exchange (MOEX) in collaboration with Sberbank,” said Behnam Gurbanzada, Director of Islamic Finance at Sberinvest Middle East. “The index is made up of the 15 most traded stocks of Russian companies on the MOEX. Our main idea was to create a Sharia compliant ETF for the local market. ”

The passively managed ETF is available to Russian and international clients, Gurbanzada said, adding that investors can buy even one share of the Halal Investments ETF.

“The recommended investment period is three years,” he said. “Product liquidity is high. Investments in assets are denominated in rubles. Next year the ETF will also be available in US dollars.

He pointed out that the ETF will be reviewed monthly and audited quarterly by the Sharia Supervisory Board, adding that non-halal funds will go to charities Ipass direct lender loans"}” data-sheets-userformat=”{"2":513,"3":{"1":0},"12":0}”>Ipass direct lender loans

“We are seeing a demand for Sharia-compliant products in the market,” Gurbanzada said. “In addition, clients are increasingly focusing on investment products rather than deposits. This fund is primarily designed for people seeking to invest and adhere to Sharia law. The financial attractiveness of the ETF is not inferior to other conventional investment instruments.

Sber’s halal ETF comes shortly after the introduction of Ipass direct lender loans two new Islamic indices that he helped create with the MOEX.

In October, the exchange launched the MOEX Shariah Index and the MOEX Shariah Total Return Index. Indices allow investors to invest in halal instruments.

Gurbanzada said there were administrative and educational challenges in developing their new ETF.

“It was a completely new product for the Russian market and for Sber as well,” he said. “Our team was very excited to learn more about the ethical requirements applicable to investment products. Based on the experience gained during the work, we discovered new investment ideas applicable to Islamic finance.

As part of new investment ideas, Sber’s Islamic finance team works in two areas. The first is the adoption of existing products to the standards required by Sharia. The second is the structuring of new products.

“Right now we are focusing on corporate finance,” he said. “Bank accounts for corporate clients, financing, investment products for individuals, operational leasing, etc.”

Underserved market

The Muslim population of Russia represents between 10 and 15% of the country’s 144 million, according to various estimates.

A Moscow-based banking analyst, who requested anonymity, said local Islamic finance experts highlighted the lack of information on the authenticity of Sharia compliance in the fund.

“I doubt that the investment community in Russia cares much about Islamic instruments,” he said. “I don’t know if this ETF will be of interest to non-Russian residents. ”

But a practitioner familiar with the Russian Islamic financial market disagreed, saying this was a positive development.

“This ETF is positive because Muslim consumers or those looking for Sharia-compliant investments in Russia have little or no choice,” he said.

Despite a large Muslim population and a gap for Islamic financial products, there are few players in the market. Market players highlight some of the legal and regulatory challenges.

“There is still no law on Islamic finance and subsequently tax treatment, including VAT [valued added tax], makes Sharia-compliant products uncompetitive, ”said the practitioner, who also requested anonymity.

Sber’s Islamic Finance Strategy

Sberbank’s Islamic finance efforts will be supported by Sberinvest Middle East, Sber’s subsidiary in the Abu Dhabi Global Market (ADGM).

The subsidiary has been operational since June 2021, when it received its final authorization from ADGM’s Financial Services Regulatory Authority (FSRA), noted Gurbanzada.

Sber’s foray into the Middle East follows a lengthy application process. In October 2020, Salaam Gateway reported that the Russian lender was working on the process.

In September 2020, the public lender signed a strategic agreement with Mubadala, Abu Dhabi’s sovereign investment company. The agreement covered cooperation in several areas, including Islamic finance.

“Our strategy is to create access for all customers,” said Gurbanzada. “To establish a secure bridge between Russia and the MENA region. The bridge that will be based on partnerships.

To meet the needs and demands of their clients, Sber’s Islamic finance team works on Sharia-compliant asset management products.

“We are considering several investment products for local and international clients with Sberinvest Middle East”, he said.

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