It appears Russian Banks are considering a ‘drastic’ new way of raising finance after the Central Bank raised interest rates to 17% earlier in the month. Bloomberg reports they are now considering Islamic Finance aka Sharia Finance as an option to raise money. Rather than issue bonds that may be considered Junk, they are considering raising Islamic Bonds and have approached advisers from the Middle East who are familiar with such lending. The major difference between Islamic Finance and that practiced in the west is that Islamic Bank do not charge interest rates when they lend. Rather they share in the profits and loss of whatever the funds will be used for. Nigeria also practices Islamic Finance with Sukuk Bonds. The Nigerian Stock Exchange also has the NSE Lotus Islamic Index for stocks that qualify as Islamic Finance.
To enable this form of Finance, Russia may have to pass new laws allowing its banks raise money via Islamic Finance. It’s ironic that Russia will be considering this move as Russians are mostly Orthodox Christians with just 15% Muslim population. However, with oil price continuing in its slump and the currency depreciating by 40% and now the worst in the world you can’t blame them for taking such drastic measures can you?
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