There is no doubt of the potential for Islamic finance in Russia and the CIS countries, but the major stumbling block is the absence of enabling legislation and a regulatory framework to facilitate Islamic financial products such as Murabaha, Ijara and sukuk.

These sentiments could not have been articulated better at the Moscow Forum on Islamic Finance & Investments which was held in the Russian capital last Thursday and attended by a host of local and international participants including Ali Hassan Jaafar, the Saudi Arabian Ambassador to Russia.
 

Few took notice outside certain coteries of specialist bankers and lawyers, but the launch of a 42 page master documentation for derivatives that comply with Muslim religious principles could have a far-reaching impact on the Islamic finance industry.

The International Islamic Financial Market (IIFM), a Bahrain-based Islamic capital markets body, and the International Swaps and Derivatives Association (ISDA) have for the past four years been working on standardised documentation for derivative instruments that comply with sharia, or Islamic law.
 

When Kuwait Finance House Malaysia helped develop a $1.3 billion real estate project in the country in 2005 as a partner in the deal, Islamic equity property ventures were a rarity.

Corporate restructurings were until recently relatively rare in the oil-rich Arab Gulf, but the experience is particularly novel for investment companies and banks that adhere to Islamic, or sharia, law.
 

Islamic finance players should explore opportunities in equity-based financing in making the industry more attractive.

Making this call, Bank Negara Malaysia's Deputy Governor Datuk Muhammad Ibrahim said through equity-based financing, industry players could move away from mimicking conventional products and operate truly on syariah compliance.