Islamic banking in international finance system

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Russian Foreign Trade Academy

International Business English Department

Report

«Islamic banking in international finance system»

Prepared by: 2 term

FVM student

Bayramov Arsen

Checked by: Maslennikova A.S

Introduction

Islamic banking ... For most average Russian today this phrase seems unusual - so far apart in their view the concept of "Islam" and "bank". But in the East, and the West, the term is already familiar. In recent years, sounded even suggested that Islamic banking may well compete with the traditional type of banking. What are the main differences between them?

banking financial Islamic

1. Islamic banking

As Heydar Jemal, chairman of the Islamic Committee of Russia

"The essence of Islamic economics - the refusal of interest and from futures transactions. As a method of work, the closest, the design concept is suitable investments related to the division of risk, equity participation. The Bank does not earn interest, he studied at the person who came to him for help, analyzes risks. Home care - to prevent the game over time, and to prevent the laying of time. Islamic society is arranged so that it focuses on the real economy.

2. History of Islamic banking

When in the Middle East began the introduction of western banking system, it turned out that the principles of banking in many ways not consistent with the Shariah. This gave rise to the idea of ??their own, halal (ie, meeting the Shari'ah) of the banking system. In the 60th - 70th. conducted the first experiments on the creation of Islamic banks (namely in 1963 in Egypt opened its first Islamic bank "Mit Hamr," in 1968, was replaced by "Nasr Soushel Bank". In 1978 he opened the first Islamic bank in Europe, in Luxembourg.) In the 90-ies. they have mass distribution in the Middle East, Southeast Asia and, soon, in some European countries.

3. The main principles of Islamic banking

The main feature of an Islamic bank - the lack of any interest was on deposits and loans. Any charging of interest (riba) is understood as Shariah sinful. Also strict differentiation on halal and unnhalyal subject areas of investments the bank. Thus, the ban imposed on the profit by the occasion - and the Islamic bank has not invested in securities, the rate of which depends on the non-economic factors. Denied deliberate risk - and the Islamic Bank is only deals with real security. He does not recognize future transactions and transactions with derivatives. And of course, the Islamic bank does not apply to transactions with "sinful" goods and services (alcohol, tobacco, pork, porn industry, gambling).

Particularly of financial transactions

1) Deposits

In Islamic bank depositors, unlike traditional banks receive full information about when, where and under which project their money is invested, and the investor has a choice in what kind of industry or project it to invest. Remuneration of the Depositor can not be fixed and guaranteed and depends on profits funded business. In this case, losses on the investment project, and possibly other risks are fully covered by insurance

2) Loans

Loans issued by the Islamic Bank, also have no interest. Issuing credit for business (Musharaka), the bank became a partner of the borrower. He gets a share of the profits from the business to venture, but also take a share of losses in case of failure. When a loan to buy something (murabaha), the bank itself is essentially buying this product, and then resells the customer with an agreed mark-up.

3) Sukuk - financial certificate or the so-called Islamic equivalent of bonds. In the classical period of Islam sukuk - means any contract or document the transfer of the rights, obligations or funds obtained in accordance with the Shariah. Exchange of debt for a fee - is prohibited, as well as manufacture of traditional loans. Consequently, all the income and cash flows from sukuk will be associated with purchased assets or income from the assets created, and not just the profit as a percentage.

4. Unique financial institution

From the point of view of the history of Islamic banking, one should note the uniqueness of the financial institution, which, as a rule, is not mentioned in the debate on Islamic banking, but the value is high. The financial institution and the Office of the Pilgrims Fund Board of Malaysia, which is widely known as the Tabung Haji. Was established in 1969.

Tabung Haji purpose is (1) to save money Muslims for their costs of performing the pilgrimage (Hajj;) or other expenses necessary for them, (2) the possibility of saving money by Muslims to take part in investment in industry, trade, as well as in Real Estate in accordance with the principles of Islam, and (3) ensuring the protection, control and welfare of Muslim pilgrims. "

Generally, the level of dividends on Tabung Haji ranged from 8 percent to 8.5 percent. Although, strictly speaking, Tabung Haji is not a bank, it worked the same methods of Islamic banking. Institution has two main functions of banking - to accept deposits and make investments. In fact, Tabung Haji is a good example, as a specialized financial institution can operate successfully in accordance with the principles of Islam.

5. Especially in Russia

In Russia, attempts to introduce Islamic financial instruments have been made repeatedly. Moreover, the initiative was not only from his compatriots, but also from the outside - as close to us from Kazakhstan and from the distant Bahrain, whose representative - Ithmaar Bank announced its intention to open in Russia Islamic bank with a branch in Bahrain. In practice, all limited unsuccessful attempts "Badr-Forte Bank" and "Slavinvestbank" as well as the release of the bank "Globex" in 2006 sukuk - halal bonds.

However, the pioneer in the introduction of Islamic banking in the broad masses of the population has bank "Express", as a springboard for this curious experiment - Dagestan. It was there in 2008, "Express" issued bank card settlement, the relevant rules of Islam - it does not bear interest. The client can choose the category: Visa Electron, MasterCard Mass or MasterCard Gold.

It has long been interest in Islamic banking and VTB showed, but practical action is not reached. However, here at the end of last year to take a positive shift. It was decided that future development within the VTB halal banking system with the support of the International Bank of Azerbaijan.

6. Prospects of Islamic Banking

Even if only to focus on the Muslims, even in this case, the prospects for Islamic banking looks rosy. According to statistics, in 2030 the number of Muslims from the current 1.6 billion to increase to 2.2 billion. This means that more people will invest in Islamic banks will invest more.

Over the past 4 years the total assets of institutions offering Islamic banking increased 1.7 times and reached the psychologically important mark of $ 1 trillion. But while this is a drop in the sea of total assets (1.9% of total assets of institutions).

Islamic banking is kept at a high level of reliability of their deposits and the maximum risk minimization. This too will play an important role in the future.

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