LONDON, Sept 14 (IFR) - Russian republic Tatarstan's
ambition to develop a Sharia-compliant market received a boost
this week when the Kazan-based AK Bars Bank became
the first Tatar credit to secure a murabaha loan.
It was also the first international loan facility compliant
with Sharia canons for a Russian bank .
Earlier this year Tatarstan announced an Islamic finance
initiative to promote the sector, and the Ba1/NR/BBB- rated
Muslim-majority republic backed this up with plans to tap the
Sharia-compliant market with sukuk paper.
The Tatar President, Rustam Minnikhanov, is pushing for
amendments to Russian Federal legislation that will enable the
US$1trn asset class to flourish in the country and in January
signed an Islamic finance accord with Amanah Raya, Kuwait
Finance House and Linova during a visit to Malaysia.
Kuwait Finance House is seen as a likely lead manager for
any Tatar sukuk deal, which would act as a test run for future
issuance in the region.
"The government of Tatarstan actively promotes and supports
the idea of Sharia-compliant financing and the republic is
indeed the best candidate among the Russian regions for sukuk
issuance. However, regulatory restrictions on external
borrowings for regions, set by the Federal Budget Code, need to
be taken into account," said Stepan Amosov, director of emerging
markets structuring and credit trading at ING in Moscow.
On the flip side, Russian municipals will be able to borrow
abroad from next year and their securities will not be liable to
Resource-rich Bashkortostan, rated Ba1/BB+, is seen as
another republic in Russia where Islamic finance could find a
home. One-seventh of Russia's population is Muslim, making it
the largest religious minority, with most of them residing in
the middle of the Volga Basin and North Caucasus.
Companies from the VTB Group , Gazprombank Invest
(MENA) and the City of Moscow, among others, have
already expressed an interest in tapping the sukuk market in
order to diversify their investor bases.
While various Russian credits have ambitions to tap the
Islamic market whether many will print transactions is yet to be
There are possible obstacles, such as finding appropriate
assets, and achieving legal transfer of ownership to the issuing
SPV could prove to be a challenge for credits that see sukuk as
one of the means to finance infrastructure projects.
(Reporting by Bakyt Azimkanov; editing by Alex Chambers)