Roundtable on Islamic Agriculture Finance

The Institute together with the Afanasy Nikitin Association and the Agrofin-Congress group of companies on September 12th held an expert meeting on the implementation of Islamic investment instruments for developing the export potential of Russia's agro-industrial complex.

The discussion was moderated by Director of the Institute, Alexey Ivanov. In addition to representatives of the academic community, the meeting was attended by experts of agro-industrial business and experts of Islamic financial products, who have extensive experience in economic relations with Arab countries.

 

The basis for the expert discussion was a project developed by the Institute, within which it is proposed to develop agriculture and logistics infrastructure concerning Russia and also funds raised through the issue of commodity bonds and their sale to investors from Islamic countries, in particular, the Persian (Arab) gulf. This project is particularly relevant in light of the sanctions imposed on Russia, which significantly hamper the access of Russian business to Western capital markets. This challenge has been proposed to be met via the issuing of bonds for the supply of high-quality food, in particular, wheat. The issued bonds will give the holder the right to receive a quantity of food products produced in Russia. According to a speaker - leading researcher of the Institute Kirill Molodyko - such a financial scheme, on not based in speculation, fully complies with the basics of Islamic Finance and would be attractive to Muslim investors. In addition to the obvious advantages for Russia, the project could provide Arab countries with the opportunity to ensure their food security in the event of deterioration of climatic and international political conditions. During the meeting, the prospects and bottlenecks of the described project were considered.

 

Commercial Director of RZ Agro, Ivan Trutnev, in his report outlined the regulatory and infrastructural problems that hinder wholegrain trade in Russia. He explained how the Russian agricultural producer can be put at a disadvantage, and that Russian grain in some cases is unreasonably traded on foreign exchanges, although they could be traded on Russian ones.

 

The experts also discussed the infrastructural difficulties of the organisation of grain export supplies. Among the main ones – the current state of navigation on the Volga, and the Caspian Sea, the need for significant investments in transport infrastructure (ports, hoisting machines, trucks, etc.) Also relevant is the lack of certified warehouses in Russia, as well as laws concerning them.  In the context of exports, it is important to note that Islam denies speculative elements in trade. Therefore, the physical delivery of goods is important, and the possibility of turnover of purely speculative instruments should be excluded.

 

In general, the experts present gave a positive assessment of the project and made a number of constructive proposals for its further development.