Islamic financial system

5.2 Risks in Islamic banking

With the use of Islamic banking services and products related to the particular difficulties relating to the identification, measurement, monitoring and control of risks. The existence of these problems requires not only more resembling the regulatory system, but the creation of a special institutional environment that ensures the stability of the Islamic financial system.

In Sandaradzhana Errico and addresses specific risks associated with Islamic banking. The participation of investors in the profits and losses of banks require special attention of regulators, since the application of this principle leads to the transfer of the risks of Islamic banks to depositors, as well as an increase in overall risks in the banking system caused by the absence of traditional mechanisms of control over the investment activities in the Islamic countries. Consequently, risk management, with the participation of investors in the profit and loss statement is usually more complicated than the conventional financing. In particular, the Islamic banking necessarily audit of funded projects to ensure proper management and adequate risk assessment.

It should be noted that since the Islamic bank provides funds for the implementation of the entrepreneur of his project, based solely on the qualifications of the entrepreneur and the prospects of the project, often requiring no collateral on his part, as an entrepreneur and the bank provides incentives for opportunistic behavior. For example, a client may try to hide the real income of the bank for its projects. Also, for example, in the case of a contract Mudaraba bank has the right to require the owner principal repayment only if the project made a profit. If the project proved unprofitable, the bank can not get back on credit facilities granted. That is, in this case, the risks of an Islamic bank are much more significant than the usual risks of the bank.

The contracts do not involve the participation of the investor in the profits and losses associated with fewer risks and have more in common with conventional financing mechanisms. However, they are also accompanied by the special risks not inherent in conventional banking system. For example, type contracts Bai Salam (purchase with deferred delivery) were subjected to Islamic banks as credit risk and price risk, as banks agree to buy the product in the future, having carried out the calculations for the moment. Similar risks related contracts such as Ijara. They, in contrast to conventional leasing contracts, the banks are not able to shift a significant portion of the risks associated with owning the property to the tenant, as the leased assets should be reflected in the bank's balance sheet during the period of the lease.

Other specific risks inherent in Islamic banking transactions occur because of the special nature of investment deposits, principal and interest of which are not guaranteed, greatly increases the risk of misconduct. The fact that depositors using investment deposits do not have such rights owners who have in common stock investment companies, but bear the same risks. To the greatest extent it concerns the contributors to the two-way mudaraba model in which corporate management is becoming more complex, which creates conditions for the emergence of excessive risks.

Another threat to the stability of the Islamic banking system is the lack of standardization of Islamic banking products as well as services offered by Islamic banks are very diverse. In addition, there are always new products based on the principle of investor participation in the profits and losses. In such circumstances, the standardization of Islamic financial instruments is a challenge. As noted by Pervez, currently there are no uniform standards for the reporting of Islamic banks. As a result, there are no standards for the accounting of various transactions.

It should also be noted that Islamic banks compared with conventional a smaller number of tools that can be used to hedge risks. Sharia prohibitions against riba (interest) and some of the issues of Islamic jurisprudence on the interpretation gharar (excessive risk), lead to the fact that many of the hedging instruments that are based on generally accepted mechanisms, such as options, futures and forwards, Islamic banks at the present level of development available.

Because of the risks related to financial transactions in the Islamic countries have developed special procedures based on similar techniques of Western banks. In the first phase of audit projects funded by thorough check of all transactions of the enterprise client. None of the members of the leadership of the Islamic bank has no right to unilaterally decide on the loss of the project. Such a decision can only be taken jointly. In the event that the project's profitability was lower than expected, the balance sheet is studied by special independent committee. If the audit reveals concealment of income by the client, he is obliged to pay the remaining amount. In addition, the bank may exercise its rights as a shareholder to replace the unscrupulous managers of the company. In particularly problematic cases, the bank has the right to withdraw client funds listed under compulsion, after which the company intruder entered in the "black list." In the event of late payment the case is referred to court, which requires the customer to pay the required amount, as well as agreed in the original contract fee.

Thus, Islamic banks face significant specific risks that could undermine their stability. Obviously, to control those risks requires an appropriate institutional environment. Consider the regulation of the activities of Islamic banks in more detail.



6. Regulation of Islamic Banks

6.1 Development of legislation

For the proper functioning of the Islamic banking system is necessary to develop legislation with the Sharia, which sets out the terms of detail as conventional commercial banks, and special features directly related to Islamic financial institutions. We must carefully negotiate the terms of licenses that are valid models of financing, and clearly establish the rule of law and control methods. Including the law should clearly indicate which organizations can call themselves Islamic banks and carry out banking activities in accordance with Islamic principles.

However, now in many countries adequate legislation has not yet been developed. Legislation to facilitate the functioning of Islamic financial institutions, there are only a few countries. Most of the Islamic banks operating in states that retain the Western form of the organization of economic life (eg, Malaysia and Kuwait) and Islamic banks operate under the leadership of the central banks of those countries.

At the same time, Islamic financial institutions in the traditional financial systems are inferior to the competitiveness of traditional banks. For example, in most of the Islamic financial contracts related to real assets are treated as purchase and resale, and therefore subject to greater taxation than traditional banking operations. For example, in many countries, interest on deposits and loans exempt from taxation, while the implementation of Islamic financial contracts similar taxes are levied. However, in some countries such as the UK and Singapore for the taxation of some Islamic contracts similar to taxation traditional bank instruments.

The leaders on the degree of development of the Islamic financial sector, such as Bahrain and Malaysia, could create legal and economic conditions that take into account peculiarities of Islamic banks and help sustain the existence of a mixed banking system.

Regulatory requirements and effective monitoring can improve the efficiency of financial institutions, to ensure the development of the financial market by protecting the rights of users of financial services, in particular investors. This creates an equal competitive opportunities for all market participants, as well as providing support to financial institutions in difficult times. Since the Islamic market is still relatively underdeveloped, and the structure of assets and liabilities is quite specific, the regulation and supervision of these institutions must be done with great care. We should pay attention to aspects such as openness and transparency, risk management, corporate governance, internal control system.

In addition, it is important to ensure the provision of Islamic financial institutions Sharia-compliant procedures required to maintain their performance. These procedures include:

* recourse to the lender of last resort;

* capital adequacy requirements, taking into account the specifics of Islamic banks;

* the use of reserve requirements of Islamic banks with the central banks in accordance with the requirements of Sharia

* the availability of suitable Sharia government securities;

* Recognition of Islamic banking at the legislative level.

Since the activities of Islamic financial institutions are often associated not only with purely commercial banking, but also investments in the real sector and insurance services, they can be compared with the universal banks. Such a feature of Islamic banks hindered their development in the past, as in many jurisdictions, commercial banks, investment banks and insurance companies, and mutual funds are treated as separate entities. In addition, the activities of an organization in different segments of the market are often banned. Subsequently, however, this separation of banks has been canceled, and the interaction of banks, insurance and investment companies has become common.

For example, in the United States since 1933, a law distinguishes between these segments of the financial system (Glass-Steagall Act), however, due to changes in the economic situation in 1999, it was canceled. In many European countries can be conducted at the same time the banking and insurance activities. However, requires that the financial statements of the two types of activities conducted separately.

Since the activities of Islamic banks covering multiple segments of the financial market (commercial banking, investment banking, insurance services), the monitoring of the organization can be by several public authorities (such as the Ministry of Finance, the Central Bank and the authorities governing the activities of investment and insurance companies and pension funds).

6.2 Especially for capital adequacy of Islamic banks

In the area of ??banking capital adequacy at the international level, important progress was made in 1988, with the adoption of the Basel standards and set international standards for capital adequacy, widely spread in the world.

Note that the requirement for traditional banks is guaranteed return of principal amount of bank deposits. In an Islamic bank, as has been described above, in addition to current and savings accounts, which ensures repayment of the principal amount of the contribution is allocated as investment accounts, in which it is impossible to guarantee the return of principal, as their investment somehow involve financial risk. In that regard, the Islamic banks are often problems with the regulators. Bank Al-Baraka (Saudi Arabia) to solve this problem used the deposit insurance scheme, invested by investors in certain models of Murabaha industry where return the invested amount as probable, and used a number of other mechanisms.

At the international level to set standards in the financial statements directed the organization's accounting and auditing operations of Islamic financial institutions (Accounting and Auditing Organization for Islamic Financial Institutions, AAOIFI). The standards developed by the organization, accepted by many Islamic financial institutions. For example, some banks are considering investment accounts as off-balance sheet commitments, which reduces the requirements for the size of their capital. Therefore AAOIFI requires that such accounts are recorded in the balance sheet of the bank.

Because of the size of the bank depends on its stability in some countries, such as Turkey, Pakistan, Sudan, Indonesia, the government requires banks or increase capital, or to carry out the merger to improve reliability.

In economic policy should take into account that the optimal amount of capital depends, among other things, the composition of the portfolio of assets. If the majority of the portfolio consists of more risky contracts (Mudaraba, Musharaka), the capital requirements should be stricter. On the other hand, if a high proportion of low risk portfolio of contracts such as salam, Ijara, istisna, Murabaha, the capital requirement should be lower.

6.3 Monetary policy in the Islamic financial system

According Sandaradzhana work, etc. There are certain difficulties in the conduct of monetary policy in countries with Islamic banking system. Because of the prohibitions imposed sharia on the transaction using the rate of interest, the availability of services for refinancing provided by conventional central banks for Islamic financial institutions is limited. The task of developing mechanisms for the implementation of monetary policy in this situation is particularly difficult.

At the same time, it is worth noting that at the present time in order to regulate liquidity in some Islamic countries issued government securities, consistent with Islamic jurists. For example, the Central Bank of Iran issued national certificates of participation used to finance public investment projects. These securities do not have a particular interest rate, and the rate of return on them is determined based on return on the stock market. In Sudan, the central bank issued securities that are based on the model of Musharaka.

6.4 The problem of combating money laundering and the hawala system

After the terrorist attacks of September 11, the U.S. began to pay special attention to the possibility of illegal financing, paying close attention to the countries of the Persian Gulf. For example, some investment from Saudi Arabia to the United States were frozen. There was a view that the Islamic financial instruments can be used to finance terrorist activities. In particular, the Islamic financial system is quite common is a tool such as hawala, which is a bill of exchange. Hawala allows for cross-border transactions by transferring funds from one account to another while avoiding the physical transportation of cash.

If Hawala is in the form of bank money order or through licensed agencies, it is considered legal. However, very often transfers are carried out illegally unlicensed organizations with the financial and legal barriers cost. In addition, even if the hawala used for legitimate purposes, to diversify the risks associated with the transfer of large sums, intermediaries, and service provider's hawala (hawaladars) used methods similar to the methods of money laundering. In particular, a large sum is divided into many small ones, which are translated in part through a large number of banks. Hawala is closely linked to Islamic banking and commerce in Asia primary commodities (especially gold). Funds transferred by banks through the hawala system, directed, first, on the leasing of industrial equipment, loans for construction of industrial facilities and commercial real estate, working capital financing companies and the purchase of gold.

The traditional way of offsets in the hawala system is the calculation of gold and precious stones. The largest world centers such calculations are Dubai and London. Hawala has received a special distribution in India and Pakistan.

Formal banking system, hawala noticeably inferior in speed of transfer and in the cost of services. International money transfer system charge a commission of 5 - 10%, and the commission of Pakistani banks sometimes reaches 30%, while hawaladar take their customers only 1 - 2% of the amount transferred. An important advantage of hawala is the fact that an extensive network of branches characterizes the system and provides for the transfer of money in small towns that do not have banking institutions. In addition, hawala provide more exchange rates that are favorable when granting the recipient the money transfers from abroad in the local currency. Hawala system plays a crucial role in the economies of some of the underdeveloped countries, serving remittances to their families. In Pakistan alone, through the hawala system goes from two to five billion dollars a year.

In this struggle with illegal hawala system, leading government agencies in many countries (ex. USA, UK, India, etc.) faces a number of challenges. In particular, in practice there is no statements at hawala-committed transactions.

Interbank lending market

One of the objectives of the central bank is to ensure the stability of the banking system, including by maintaining normal levels of liquidity. In today's financial system a key role in the provision of liquidity among banks, other plays the interbank lending market. However, the Islamic financial system is characterized by poor development of the interbank lending market. As we noted above, because of the nature of an Islamic bank in the interbank market is not possible to use traditional instrumenty32. At the same time, the development of the interbank market using unique Islamic financial instruments is also difficult because of the extremely small amount of the corresponding rynka33. Thus, in the present Islamic finance urgent problem of the lack of liquidity in the banking sistemy34. This creates difficulties for the central banks of those countries in which operates a large number of Islamic lending institutions.

Thus, we reviewed the basic principles of the Islamic financial system. It can be argued that the characteristics of the majority of Islamic financial contracts are not economic, but due to the necessity of their conformity to Islam. Apparently, almost every Islamic financial instrument has a traditional analog, the implementation of which is simpler and associated with lower transaction costs.

At the same time, there is reason to believe that in countries with large Muslim populations, are not ready to trust their savings to traditional banks, as well as with a significant number of Muslim executives who do not use traditional banking services, the development of Islamic financial institutions can improve the efficiency of financial markets and accelerate its development.

The development of Islamic banking in the United States and Western Europe suggests that eventually such financial institutions will arise in our country. As we have demonstrated above, the functioning of Islamic financial institutions associated with the need for changes in the legislation, as well as difficult to carry out monetary policy and maintain the stability of the financial system. In such a situation, it is necessary to know the characteristics of their operations and the risks that they bring to the national financial system. Nevertheless, before exploring the issues raised at the exit of Islamic financial institutions in the traditional markets, consider their development and the geography of the present time.

6.5 Analysis of the spread of Islamic banking

The development of the Islamic banking system began only in the second half of the XX-th century in the Muslim countries, many of whose inhabitants refused to use the services of traditional banks. In this situation, Islamic economists have proposed a new system of banking. The first Islamic financial institution appeared in the 60s in Egypt. Savings Bank of Mit Ghamr, which opened in 1963, began to conduct operations to attract retail deposits, as well as to invest the accumulated resources. According to the principles of its work, it was more like a thrift institution, rather than a commercial bank. The first is a commercial bank operating on Islamic principles; the bank is considered Nasser Social Bank, founded in 1971 in Egypt. In the 1970's - 80's Islamic banking system began to develop more rapidly, primarily because of the oil crisis of 1973, in which the sharp rise in oil prices has caused a great increase in export revenues in the Middle Vostoka35. Raising funds clients among religious Muslims allowed Islamic banks to generate significant liabilities; however, due to lack of development of the Islamic capital market to invest efficiently they could not. In 80 years, the main objective of Islamic banks has become standardized financial produktov.36

Currently, Islamic banking in demand primarily in Muslim countries: in the South, Southeast and Central Asia and Africa, where most of the focus of potential customers of these banks. Now, in addition to the countries of these regions, such organizations can be found in Europe, USA and Australia.

In Iran, Pakistan and Sudan, the entire financial system is subject to Islamic norms, and all the banks in these countries are Islamic. In Muslim countries such as Malaysia, Indonesia, the United Arab Emirates, Saudi Arabia, Brunei, there are two types of banks; the number of conventional banks are also large enough.

While Muslim customers of financial institutions are mostly Muslims, whose number about 1.6 billion people around the world. However, interest in investing in the Middle East are already showing and representatives of other religions, as in the Old and the New World. It offers Islamic banks have resorted multinational giants such as General Motors, IBM, Alcatel, Daewoo and others.

Today, Islamic financial sector is growing rapidly; its average growth rate is estimated at 10-15% per year. In this case, the rating agency Standard & Poor's considers Islamic banks to the category of high-yield.

6.6 The size of the industry

One of the major problems encountered in the analysis of Islamic banking is the lack of reliable statistical information about the industry. In collaboration Islamic Research & Training Institute, Islamic Development Bank and the Islamic Financial Services Board40 summarizes some of the findings obtained by different researchers of the Islamic financial system now. The only official source of information on Islamic banking system is the «Council for Islamic Banks and Financial Institutions» (CIBAFI). According to the data given in the report for the year 2005 in 38 countries operated 284 Islamic financial institutions. Their assets totaled about $ 250 billion. However, in the above statistics do not include the operation of Islamic banking "windows" offered by conventional banks, as well as the operations of non-bank financial institutions, investment companies and takaful. In particular, it is estimated CIBAFI, the volume of transactions specialized Islamic windows in conventional banks in 2005 reached 200 billion U.S. dollars.

Currently, the market is booming Islamic securities. According to «The Islamic Banker» 42 January 2006 in the world operated more than 250 are consistent with Sharia mutual funds, total assets of 11 billion U.S. dollars. According to The Liquidity Management Centre of Bahrain, the home market of Islamic debt certificates in Malaysia in 2006 was about 17.1 billion U.S. dollars, while in Bahrain - U.S. $ 2 billion.

Studies conducted IRTI (Islamic Research & Training Institute), suggests that a significant part of the companies on the stock markets of member countries of the Islamic Development Bank operates in accordance with the rules of Islam. The development of Islamic technology risk management and market infrastructure can further strengthen the position of this segment of the stock market.

Precise data on the volume of transactions Takaful (Islamic insurance) is not in our possession, but in the IRTI said that in 2005, worldwide there were 78 companies that have carried out similar operations. In 2006, the amount of insurance premiums reached $ 20 billion. Non-bank financial institutions in the Islamic financial system to rapidly evolve. According to the Mudaraba Association of Pakistan, capital of companies operating Mudaraba, estimated in 2004 at $ 145 million and their assets - $ 300 million.

The average rate of growth of assets of Islamic financial institutions are estimated at 10 - 15% per year. A significant portion of Islamic credit and insurance organizations is concentrated in Bahrain, Malaysia and Sudan, and much of the investment funds operating in the markets of Saudi Arabia and Malaysia.

As noted in the article Zhuravlev, though the assets of Islamic banks, it is estimated the Federation of Arab banks reached a third of total assets of all Arab banks in general Islamic institutions such as small. In the first hundred Arab banks, which include a large number of conventional banks and, in 2001, according to the magazine "The Banker", there were only eight. In this case, the largest Islamic bank Al-Rajhi Banking and Investment Corporation was the sixth, and the second-largest Kuwait Finance House - 21 in terms of assets among Arab banks.

According to the Islamic Development Bank in the late 1990s. a third of the surveyed Islamic financial institutions had assets that do not exceed $ 50 million, while the number of institutions with assets exceeding one billion dollars, was less than 20. However, only 10% of credit institutions were characterized by normal levels of capital adequacy ratio by international standards. Preferred orientation of Islamic banks in the domestic market gives them a very limited field of action in a highly competitive environment.

6.7 Geographical spread of the Islamic banking

At present, the world is a number of organizations promoting the development of the Islamic financial institutions. In this case, the main trend in the regulation of Islamic banking is the standardization of the management and control measures. The Islamic Development Bank has played a key role in the development of international standards and procedures and the development of the sector in different countries. Under the auspices of the Islamic Development Bank in 1981, a special institute for the development of research activities and training.

The Islamic Development Bank was established as an intergovernmental financial institution whose members are the countries participating Organization of the Islamic Conference (OIC). Officially, the bank started its activities in October 1975. Currently, the IDB includes 56 states, through which generated capital of $ 45 billion.

The main activities of the IDB are facilitating cooperation among Islamic countries, the fight against poverty, improve education, support of science and technology, infrastructure investment banking and financial sektora.49 Bank in its operations using Islamic financial products. The Bank has established a special fund for the financing of certain activities, including funds to help Muslim communities in countries that are not members of the Organization of the Islamic Conference.

There are also a number of other organizations involved in the development of standards consistent with Sharia Islamic banking. These include AAOIFI, «The Islamic Finance Service Board» (IFSB), «The International Islamic Financial Market», «Council for Islamic Banks and Financial Institutions» (CIBAFI), «Arbitration and Reconciliation Centre for Islamic Financial Institutions» 50. In addition, "International Center for liquidity management" is engaged in the development of secondary market for Islamic securities and the development of new financial instruments for Islamic finance, and the "International Islamic Rating Agency" - the development of the Islamic financial market, the development of international standards for Islamic banking and ratings of Islamic financial institutions . AAOIFI was established in 1995. The purpose of its activities is the development of standardized methods of accounting and financial operations of Islamic banks and their representation in the form of appropriate standards, bearing

advisory. A number of central banks in Muslim countries adopted these standards for the purpose of regulating the activities of reporting them to the Islamic financial institutions.

One of the goals of organizations such as the IFSB, the International Islamic Rating Agency, CIBAFI etc. is to create infrastructure to issue Islamic bonds (sukuk) 52.

For example, in Malaysia in 2002 passed a special law giving the IFSB the privileges and powers, which are usually international organizations and diplomatic missions. Within its competence the IFSB adapts existing or developing new banking instruments and financial reporting standards, the relevant Sharia that govern Islamic financial institutions.

In this regard, the work being done IFSB, complements the work of the Basel Committee on Banking Supervision (Basel Committee on Banking Supervision), the International Organization of Securities Commissions (International Organization of Securities Commissions) and the International Association of exercising supervision over insurance activities ( the International Association of Insurance Supervisors).

In July 2003, IFSB started the development of two standards of financial reporting in the field of Islamic financial institutions, namely the Risk Management (Risk Management) and capital adequacy (Capital Adequacy). In 2004, the IFSB started to develop standards in the field of corporate management (Corporate Governance).

Currently, there are Islamic market indexes, which allow the assessment of profitability of the portfolio securities that would satisfy the norms of Islam. This, above all, indexes, similar to the Dow Jones, calculated from 1999 year and covers about 700 companies, that is, all of the largest global companies, whose activities meet the Sharia. Firms engaged in the production of alcohol, tobacco, pork, as well as the prohibited types of entertainment such as gambling, are not included in the calculation of these indices.

Now consider the state of the Islamic banking system in the selected countries.



7. Muslim countries

In the 70 - 80-ies of XX century in the Muslim countries are having the first major Islamic banks such as Dubai Islamic Bank (UAE), Faisal Islamic bank of Egypt, Faisal Islamic Bank of Sudan. In addition, the largest Islamic banks Muslim countries are Abu Dhabi Islamic Bank (UAE), Faisal Islamic Bank of Egypt (Egypt), Al Rajhi Banking & Investment Corp (Saudi Arabia, have branches in Malaysia), Shamil Bank of Bahrain (Bahrain) .

In the Gulf function as local investment banks: First Islamic Investment Bank (Bahrain), The International Investment Bank (Kuwait), as well as international banks offering services consistent with Islam (the so-called Islamic windows conventional banks): HSBC, UBS (In mainly in Bahrain and the UAE). Citibank also has long cooperated with the Islamic banking institutions.

Note that in some Muslim countries, such as Saudi Arabia, UAE, Qatar Islamic financial institutions operate, but information on their activities effectively dead.

Malaysia

The banking system in Malaysia operate both conventional and Islamic financial institutions. Back in 1963 in Malaysia was based charity that attracted savings Muslims who were going to make a pilgrimage to Mecca. Subsequently, based on it emerged one of the world's largest Islamic investment funds Tabung Haji. However, the rapid development of Islamic banking in the country began in the 80's, when the 1983 Ball is based Bank Islam Malaysia Berhad.

Only ten years later, in 1993, launched an interest-free banking program, under which conventional banks started providing Islamic services. After that quickly appeared dozens of new players, and the product line has increased to 40 different types of services. A number of important innovations account for 90 years: the establishment of an Islamic interbank money market in 1994, the introduction of the reporting template for Islamic transactions conventional banks in 1996, the creation of the National Shariah Advisory Council as a body that provides a uniform interpretation of Islamic norms in the use of the banking and insurance business in 1997. In October 1999, the country has opened a second fully Islamic bank - Bank Muamalat Malaysia Berhad

In 2002, the Malaysian Islamic banks' assets totaled $ 18 billion According to the Central Bank of Malaysia, in 2002, Islamic banks have increased their share in total assets of the banking system of the country to 8.9%. At the same time it should be remembered that the leading role in the Islamic banking sector in Malaysia is still owned by the usual financial institutions participating in the program of interest-free banking.

Bahrain

In Bahrain, at the present time, there are also two types of banks. Bahrain is a leader in the number of Islamic financial institutions. Palm Bahrain finally took over from Malaysia in 2002, when in the capital Manama (along with the previously registered here AAOIFI, Islamic Rating Agency (Islamic rating agency) and the General Council of the Islamic Financial Institutions (CIBFI), to host the secretariat of the International Islamic Financial Market and the Center liquidity management. Malaysia is only the headquarters of the Council on Islamic Financial Services Board (IFSB), although it is one of the members of almost all the above-mentioned organizations.

Egypt

Once in the country, founded the first Islamic bank, from 1963 to 1967 in Egypt was built by a network of similar institutions. The project was a success, but was shelved until 1971 for political reasons, because the leadership of Egypt considered dangerous strengthening of the Islamic financial sector due to the rise of Islamic fundamentalism in the country.

Nasser Social Bank, which was founded in 1971, belongs to the state. It provides loans for small projects and perform social functions, such as helping needy students. Although Egypt is the number of Muslims is one of the first places in the world, Islamic banking is there compared to other Muslim countries is not so well developed, and the number of Islamic banks is small. In the banking sector is dominated by state-owned banks. In this case, government policy aims to control and Islamic banking, therefore licensing private Islamic banks is associated with considerable difficulties. An additional reason for this was the scandal that occurred in the 1989 round of Islamic investment funds, fraud conducted with funds of depositors.

However, Egypt has been actively involved in the activities of organizations such as the IDB, IFSB, AAOIF.

Pakistan

In Pakistan, the financial sector is fully subject to the principles of Islamic banking. The Islamization of the banking system in this country began in 1979. The most famous of the banks are Meezan Bank, Islamic Investment Bank Limited, Grindlays Modaraba.

Sharia advisory body to the central bank of Pakistan is not, however, the Council on Islamic ideology can provide centralized management of Islamic financial institutions. Moreover, in Pakistan, there is a Federal Shariat Court, which reviews all legislation from the point of view of Shariah.

Iran

After the victory of the Islamic revolution in 1979 Iran's banking system has undergone reorganization and completely switched to Islamic banking model.

Now the country can only Islamic financial institutions, with the share of private companies is low and most of the state-owned banking system. Some of the largest banks - is Bank Melli, Bank Saderat, Bank Mellat.

In Iran, there is no Shariah advisory body, but compliance with Shariah controls the Guardian Council - a special unparliamentary authority of Iran, consisting of 12 members, half of whom are appointed by the president and half - the parliament.

Sudan

All banks in the country are working, based on Islamic principles. The transition to the Islamic financial system began in the mid 80s. The Central Bank of Sudan has its own Sharia advisory body.

One of the largest banks in the country, El Nilein Industrial Development Bank, owned by the state. In Sudan, act as investment (Financial Investment Bank), and commercial banks (Bank al Baraka al Sudani, Faisal Islamic Bank of Sudan, Bank of Khartoum, Islamic cooperative development bank, etc.).

Turkey

The first Islamic bank in Turkey was Fasial Islamic Bank Kirbis, it was followed by Al-Baraka Turkish Finance House, Fasial Finance Institution, which appeared in the 80's. Now the largest Islamic banks are Turkiye Finans, Al-Baraka Turkish Finance House, Kuwait Finance House, Bank Asia. Islamic banking in the country shrugs are also a number of foreign banks such as HSBC, Dubai Islamic Bank.

In 1983, the country adopted a law under which it was allowed to open Islamic banks. Since 1999, Islamic banks have been considered within the legal framework of the Banking Act. But so far, the Islamic banks have no government support, as Turkey is positioning itself as a secular gosudarstvo.59

Kuwait

The largest Islamic Bank of Kuwait - Kuwait Finance House - was founded in 1977. This is one of the largest Islamic banks in the world in terms of assets. Bank opens its branch offices in many countries, such as Turkey, Bahrain and Malaysia.

In Kuwait, the rapidly evolving investment sector, represented by organizations such as The International Investor, Gulf Investment Corporation, The International Investment Group and others. Currently, the number of Islamic financial institutions is growing rapidly.

Developed countries

These days, the most popular among the developed countries Islamic banking has received in the United States and, to a lesser extent, in the UK, Germany and France. The known global banks such as HSBC, DeutscheBank, Calyon, Citibank, Standard Chartered, BNP Paribas, ING bank, Chaise Manhattan Bank, Goldman Sachs, The Nomura Securities, JP Morgan, Lloyds TSD and others open in their structures for Islamic finance division customers not only in Islamic countries but also in the U.S., UK, Germany,

France.

The first Islamic bank in the West, Islamic Banking System (now - Islamic Finance House), appeared in 1978 in Luxembourg. In Geneva based group Dar Al-Maal Al-Islami.

In France and Germany, many international and national banks offer Islamic department. These include Deutsche Bank AG, ABN Amro Holding NV, Societe Generale SA and BNP Paribas, Bank Sepah, Iran, Commerz Bank, HSBC. Fantsuzsky Calyon Corporate and Investment Bank SA from the 80s into transactions Mudaraba. Deutsche Bank is issuing sukuk, is working to create an Islamic hedge fund.

In Denmark, Australia, Canada and other countries also have Islamic financial institutions.

USA

The development of Islamic services due to the growing number of Muslims living in the country. The largest concentration of Islamic financial institutions is observed in areas with a high proportion of Muslims - Chicago, Northern Virginia, Michigan, Minneapolis, Southern California and New York60.

Among the financial institutions offering Islamic financial services in the United States, it is worth noting HSBC, Larina Finance House and University Bank in Ann Arbor, Michigan, and Devon Bank of Chicago. Also in the U.S., there are non-bank mortgage and finance companies that offer Islamic financial products.

It should be noted as a special project of Harvard University (Islamic Finance Project), in which the Law School set up a center for the study of Islamic financial institutions.

United Kingdom

In August 2004, in London started Islamic Bank of Britain - the first fully Islamic bank in Europe. However, the preconditions for the emergence of such a financial institution in the UK have arisen before. In particular, in the 1980s. The country has an Islamic bank Al-Baraka, whose services are used not only by Muslims, but also representatives of other religions. Bank branches were opened in major cities in the UK. Al-Baraka bank carried out its activities in accordance with the banking law. England-based issued by the Bank of England's license. But in the early 90s. due to the tightening of the requirements and standards of the Bank of England, the Bank's management was forced to revoke the banking license. In 1993, Al-Baraka Bank ceased to provide banking services, but continued his work as an Islamic investment company.

After the 1993 Islamic financial services (mainly mortgage loans in accordance with the requirements of Shariah) in the UK found themselves Islamic "windows" of such world-known banks like Citibank, HSBC, etc., but an independent bank that provided exclusively Islamic banking services in the UK was not.

In recent years the attitude of the British authorities to Islamic banks have changed dramatically for the better. After the start of the Financial Services Authority (FSA), is in control and supervision of the entire financial sector, the UK authorities in the face of FSA, have become more constructively to the idea of ??an independent institution of an Islamic bank in the UK, which would operate under the existing banking laws, along with traditional commercial banks.

Islamic Bank of Britain offers its customers a full range of banking products and services in accordance with Shariah.

The CIS islamic banking financial

In general, Islamic banking in the CIS countries is more developed, due to both the historically established preferences of economic agents, and with a low degree of customer awareness, bankers and public authorities on Islamic financial sisteme.61

One of the reasons that hinder the development of Islamic banks in the CIS, is the disparity between the principles of Islamic banking national zakonodatelstvu62. At the same time, many of the CIS countries are members of the Islamic Development Bank: Azerbaijan, Kyrgyzstan, Kazakhstan, Tajikistan, Turkmenistan, Uzbekistan.

Azerbaylzhan

Azerbaijan is a member of the Islamic Development Corporation, which provides loans for various investment projects. One of the first such project was implemented by the International Bank of Azerbaijan in 2003 - 2004 years. Source of funding for the project was the line of credit in the amount of $ 4.5 million, opened the Islamic Corporation for the Development of the International Bank for Azerbaydzhana.63

"Kovsar Bank", created in 1989, is the only one in Azerbaijan credit organization operating under the rules of Shariah. Since 2003, the Bank is a member of the Association of Islamic Banks, including the Organization of accounting and audit operations of Islamic financial institutions.

Representation of the Iranian bank "Meli", which operates in Iran according to the Shari'ah, in Azerbaijan performs "normal" bank operations, due to the lack of regulations of the National Bank of Azerbaijan. Thus, Islamic banking is now placed beyond the legal framework of the banking operations in Azerbaijan. At the same time, some banks are trying to introduce Islamic banking products.

Kazakhstan

There does not exist an appropriate legislative and regulatory framework for Islamic financial institutions. In Kazakhstan, there is no specific organization that can competently interpret the Shariah and competent to carry out control over the Islamic financial transactions. If we talk about the obstacles introduction of Islamic banking in Kazakhstan, it is, first of all, the issue of regulation and accounting for Islamic transactions.

In 2003, the Kazakh bank BTA raised Kazakhstan's first Islamic credit, and two years later made his first public transaction on the principles of Islamic financing in the amount of $ 50 million.

In May of 2007, BTA Bank and Emirates Islamic Bank of the United Arab Emirates have signed a memorandum of cooperation, which includes efforts to the development of Islamic finance in Kazakhstan. Including the parties have agreed on the establishment of the bank in Kazakhstan, which will work on the principles of Sharia.

In March 2007, Kazakh Alliance Bank signed a loan granted with the assistance of Calyon Corporate and Investment Bank SA and the Abu Dhabi Islamic Bank by the "Murabaha". The deal amounted to $ 150 million, it was attended by the creditor banks from the Middle East. Note that Alliance Bank is the third bank in Kazakhstan in terms of assets. In 2006 the bank's assets reached $ 7.1 billion.

At the moment, the only form of Murabaha Islamic financing used in the country. Recall that, according to the principles of murabaha bank buys on behalf of client specific product (components, raw materials, etc.), and then sells it to the customer at a premium. The value of mark-up pre-negotiated by the parties and shall be paid within a certain period. Products such as Mudaraba, Ijara sukuk, Musharaka and others are under investigation.

Of particular interest in the Kazakh market participants to exhibit Sukuk bonds. Broader scope of securities based on Islamic rules could significantly increase the Kazakh stock market, and promote the diversification of investment instruments of financial institutions.

Kazakhstan is a member of the Islamic Development Bank, and in 1995 received funding of more than $ 60 million. In February 2006, the bank signed an agreement Centre Credit about bringing murabaha Islamic financing in the amount of U.S. $ 38 million for a period of 1 year. Center Credit Bank was the first bank in Kazakhstan, who used this structure to supplement its funding base. The structure of the transaction includes 10 Islamic financial institutions, including the Abu Dhabi Islamic Bank, Commercial Bank of Qatar, Boubyan Bank, Dubai Bank PJSC, Habib Bank and others

Uzbekistan

Uzbekistan is a member of the Islamic Development Bank. In Nala of 2007 Islamic Development Bank has approved a financing of $ 15 million to three commercial banks of Uzbekistan. "Asaka" is planned release of a line of credit in the amount of $ 8 million, AK "Uzpromstroybank" - in the amount of $ 4 million and JSIB "Mortgage Banking" - in the amount of $ 3 million. The purpose of the credit line is the financing of small business and entrepreneurship in industry and agriculture sector. Under the contract, the funds should not be used in the manufacture of tobacco products and lottery business.

Russia

Currently, activities are fully Islamic banks in Russia is not conducted. In Russia there is currently no legislation that makes the functioning of Islamic banks is almost impossible. Badr-Forte Bank was the only bank in Russia, are trying to work on the principles of Islamic finance, but he's in December 2006, the Central Bank of Russia revoked the license for banking operations.

On 30 September 2006 the bank's assets Badr-Forte accounted for only 703.4 million rubles. (0.006% of the total assets of the banking system), and he held the 596 largest in terms of assets. In this case, the bank's equity amounted to 517.1 million rubles. The bulk of the assets were loans to non-banking (77%), and liabilities - non-bank sector funds in the form of current accounts and deposits of legal entities (71%). According to the Department of External and Public Relations of the Bank of Russia, the license was revoked due to failure by the bank of federal laws regulating banking activities, as well as the regulations of the Bank of Russia, and a violation of the requirements stipulated by the law "On Combating Legalization (Laundering) of the Proceeds from Crime and the financing of terrorism. "

Of particular interest to Islamic financial institutions in Russia is Tatarstan. June 21, 2006 signed a memorandum of understanding between the Ministry of Trade and Economic Cooperation of the Republic of Tatarstan, the International Educational Center for Islamic Finance (Malaysia) and IFC «Linova» founding in Tatarstan financial institutions - banks and insurance companies, which could act in accordance with Islamic printsipami.

In the capital of Tatarstan also operates a branch of the Kazakhstan bank - "BTA Kazan ', but due to the lack of necessary legislation it has no Islamic financial services.

Thus, they have shown that the current Islamic financial institutions are beginning to play an increasing role in the global financial system. This traditional Islamic products can be adapted so that they can be relatively easily and offered by conventional banks. At the same time, often out of Islamic banks to traditional banking markets are fraught with certain difficulties associated with adaptation as the banks themselves, and with the legislative regulation of banking. In the next section we will look at the problems associated with access to Islamic financial institutions in the traditional financial markets.

Kyrgyzstan

Kyrgyzstan is a new point of geography in Islamic Banking industry. Kyrgyzstan is also a member of the Islamic Development Bank. Now, however, Islamic banking in the country is underdeveloped, as up until now there were no necessary legal and regulatory framework. Only 6 March 2007 the National Bank of Kyrgyzstan adopted a position of "On the implementation of the principles of Islamic finance in the Kyrgyz Republic." The pilot project is being implemented on the basis of "Ecobank". This provision establishes a procedure for the permitted activities in accordance with the Islamic principles of financing.

You can guess that at the mention of Kyrgyzstan in the world today there little associations and, most likely, will not have any. This is quite understandable. A small mountainous country in Central Asia, which has no outlet to the sea and situated between such large and influential nations like China, Kazakhstan and Uzbekistan, far from the main shopping traffics, doesn't attention to themselves on the foreign policy horizon.

However, Kyrgyzstan has a history of statehood in excess of 2200 years, and all sorts of milestones marked by political and socio-economic ups and downs of the tragic and devastating. As for the state independence, then, along with other post-Soviet states, Kyrgyzstan acquired it in August 1991. Over the years, the country has to some extent significant changes in the political, economic and social spheres.

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