clarifying concepts and principles of islamic banking
TRANSCRIPT
CLARIFYING CONCEPTS AND PRINCIPLES
OF ISLAMIC BANKING
VERSUS TRADITIONAL ONES
Valeriya Stefanenko,
HSE Doctoral student
Moscow, April 23, 2021
Section E-23-4. Regulation
XXII April International Academic Conference
on Economic and Social Development
Clarifying concepts and principles of Islamic banking versus traditional ones
Outline
1. Islamic Finance in Russia
2. Motivation in Research
3. Сhart of accounts in comparison
4. Resume
Clarifying concepts and principles of Islamic banking versus traditional ones
Islamic Finance in Russia
EXPORT: For more than 10 years, Russia has been one of the largest exporters of food to the
Organization of Islamic Cooperation countries among Eurasian countries (81.24% of the total
food exports from Eurasia to the OIC countries)
INVESTMENTS: The investments of $ 60 million has been attracted on Islamic financial
principles by Tatarstan for the 27th Summer Universiade - Kazan 2013
Source: Без процентов, алкоголя и свинины: исламский банкинг в России, Daily Moscow, 2020
Source: Исламская экономика – самая быстрорастущая крупная экономика. Евразийский фокус, IEMS 2018
Motivation in Research
Islamic banking
Fee for services
Investment incomeInterest on money
Clarifying concepts and principles of Islamic banking versus traditional ones
Income
Traditional banking
Source
of FundsDeposits
Profit sharing investment
accounts (PSIA) on balance
Clarifying concepts and principles of Islamic banking versus traditional ones
IFSB-2 Standard, December 2005 (Appendix A)
Motivation in Research
Displaced commercial risk (DCR)
Basel Standards for Equity Instruments
Basel II: a 300% risk weight for publicly traded equity holdings and a 400% risk weight for all
other equity holdings (BCBS (2006a))
Basel III: risk-weight depending on the risk of the final asset (BCBS (2013е))
&SF UPSIA UPSIA
KCAR
RWA RWA PER IRR
Clarifying concepts and principles of Islamic banking versus traditional ones
Source: Bahrain Islamic Bank (BisB), Composition of Capital and Liquidity Disclosures - 31 December 2020
https://www.bisb.com/en/our-financials
№ Description BD’000
1 Total Self Financed Assets 717,320
2 Total URIA Financed Assets 494,260
3 Less: PER of URIAs (1,310)
4 Less: IRR of URIAs -
5 Off Balance Sheet Items – with relevant Credit Conversion
Factors
58,702
6 Leverage ratio exposure [(1)+{(2)+(3)+(4)}*30%+(5)] 932,906
7 Tier 1 Capital 111,019
8 Leverage Ratio [(7)/(6)] 12,0%
Leverage Ratio [(7)/(6)] if a=1 9,0%
Motivation in Research: Example
Clarifying concepts and principles of Islamic banking versus traditional ones
Source: CIMB ISLAMIC BANK BERHAD, Unaudited statements of financial position as at 30 september 2019 (Malaysia)
Motivation in Research: Example
Literature
Clarifying concepts and principles of Islamic banking versus traditional ones
Suandi, 2017 - Classification of profit-sharing investment accounts
What’s about other Assets & Liabilities of Islamic banks?
Clarifying concepts and principles of Islamic banking versus traditional ones
Source: Islamic Finance and Global Financial Stability Report, 2010
Clarifying concepts and principles of Islamic banking versus traditional ones
Assets/
Liabilities/
Equity
Islamic accounts & contracts Comments Accounts,
Russian NAS
A
L
L, E
Asset-backed transactions –
Murabaha
Deposits –
Qard, Wadiah (+hibah)
Reserve funds –
Mudharabah
cost plus
IRR – Liabilities
PER – Liabilities & Equity
А – балансовые счета/ balance accounts
A
L
Profit-sharing transactions –
Mudharabah, Musharakah
Profit-sharing investment accounts –
Mudharabah
UPSIA on balance
RPSIA off balance
Б – счета доверительного управления/
trust or fund management
A Asset-backed transactions –
Ijarah
Leasing on balanceВ – внебалансовые счета/ off-balance accounts
А Salam
Istisna’
forward delivery
manufacture
Г - Производные финансовые инструменты и срочные сделки/
Derivative financial instruments and forward transactions
Сhart of accounts in comparison
Clarifying concepts and principles of Islamic banking versus traditional ones
Resume
1. Peculiarities of Islamic Banking exist. Some of them are described
in Russian literature (Zhuravlev, 2017; Bekkin, 2010; Trunin,
2008)
2. Structure of balance sheet differs that leads to variety of reflection
in accounting systems.
3. Regulation of Islamic Banking differs.