Halal loans are becoming accessible to all Russians.
Islamic banking, traditionally associated with real estate transactions and referred to as halal mortgages, is now gaining widespread acceptance in Russia. This Sharia-compliant financial system now allows individuals to acquire not only homes but also furniture, home appliances, and even sports equipment. Interestingly, a `halal loan,` as it`s informally known among Russians, is available to any adult citizen of Russia, regardless of their religious affiliation. We explored how purchasing items like a sofa or a bicycle through a halal installment plan differs from conventional credit.
Many Russians, unfamiliar with religious studies and banking practices, previously gave little thought to Islamic banking. However, the strict dress code at a Russian bank branch in the capital`s heart, requiring women to wear hijabs and men to avoid shorts and short sleeves even in hot weather, raised eyebrows and fueled misconceptions about Sharia-compliant financial operations.
Ramil, a visitor from Tatarstan, explained the connection between banking and faith: `Usury is considered a sin for believers. My wife and I came to Moscow for vacation, and before returning, we plan to buy bicycles for our children and a bedroom set – a divan, nightstands, and a dressing table with a pouf – for our home. We`ll arrange it through a halal installment plan; it`s very convenient. It`s fully compliant with Sharia, and we don`t have to pay the full amount upfront.`
When asked at the Muftiate about the difference between an installment plan and a `haram` (sinful) loan, they clarified: `In Islam, usury, or lending at interest, is forbidden. However, an installment plan is different. It`s the payment for a good in equal, extended installments, enabling Muslims to purchase necessities without incurring debt.`
To the question of what benefits Islamic bankers derive, besides pleasing Allah, the answer was: `While there`s no riba (usury) in an installment plan, there is a markup. When taking a conventional loan, a person commits to repaying more than the borrowed amount, which is strictly prohibited for Muslims. Hadiths from Imams Muslim and Ahmad state that the Prophet cursed everyone involved in riba – including lenders, borrowers, scribes documenting it, and witnesses – all are equally sinful before Allah. However, simply selling an item on an installment basis at a pre-agreed higher price is not riba; it`s considered legitimate trade, permissible for any Muslim.`
The `Islamic` financing model is explained by the Russian banking sector, which is not bound by religious restrictions, as follows: `Islamic finance differs in that banks don`t issue loans for purchases. Instead, they first acquire the desired item themselves, add a markup, and then sell it to the client under interest-free installment terms. The profit for Islamic banks comes from this added margin. For their clients, a key advantage is that conscientious `halal lenders,` including banks, never impose fines or penalties for overdue payments, nor do they sell client debts to third parties, as this is considered a grave sin.`
Research indicates that halal mortgages (selling new and secondary housing under Sharia-compliant conditions) have existed in Russia for a considerable time. However, other forms of halal installments, including those for goods, only became possible in Russia with the introduction of the Islamic banking law, effective September 1, 2023. Under this law, any adult Russian citizen, regardless of their faith, can obtain a `halal loan.`
Lawyer Ruslan Bokoev notes: `The law will soon be two years old, but not everyone is aware of it. Some even consider advertisements like `sofa in Islamic mortgage` a joke. Yet, as such advertisements become more common, more non-Muslims are `discovering` the benefits of Islamic finance.`
Previously, was halal mortgage only used by labor migrants for housing purchases? `To obtain a halal loan from a Russian bank, one needs a Russian passport. However, labor migrants in their home countries have their own Islamic banks, most of which are halal, as only they guarantee their believing clients purity before Sharia. A buyer, unless they are a banker, cannot personally control all the nuances of the transaction. And abroad, Muslims are often drawn into hidden loans.`
`Hidden loans` refer to the common Russian practice where, for example, a store offers an item on installment for 6,000 rubles, while its upfront cash price is 5,000 rubles. Russians, unconcerned with Sharia, admit that phrases like `bicycle according to Islamic norms` sound unusual, but essentially, you are protected from your loans and personal data falling into the hands of collectors. Conscientious non-Muslim `halal mortgagees` only genuinely fear one thing: if clients of other faiths learn to exploit Islamic financial organizations – and such schemes are quickly invented here – the requirements for `unbelieving` clients might become stricter. Currently, to obtain any type of halal loan, a Russian passport with a permanent or temporary registration stamp is sufficient.
Islamic bank credit managers initially surprise non-believing clients with their explanations, reminiscent of the fairy-tale character Old Man Hottabych.
As Abu Dawud stated in his hadith: `Let both parties be content with the lower price when concluding a dual transaction.` When entering a halal installment agreement, the total amount and repayment terms are fixed; the seller cannot change the final cost or the timeline during the payment period. If the seller offers two prices, the lower one is always considered valid. Any additional fees, including late payment penalties, are strictly prohibited. In Islamic banking, the seller transfers ownership of the goods immediately upon signing the installment agreement, unlike conventional banks where ownership is retained until full payment.
`So, is everything for the buyer`s benefit? All obligations on the seller, and none on the buyers?`
`A buyer who does not face financial difficulties should not intentionally delay payments. For this, they will be judged not by Islamic banking, but by the Almighty, which is far more serious.`
