Regulation of Partner Financing: a Legal Experiment and its Participants

Abstract

The article discusses the regulation for new type of financial operations — partner financing (Islamic banking), and for the organizations providing such operations. Particular attention is paid to the implementation of the experimental legal regime (ELR) and the prospects for the future widespread implementation of appropriate regulation. Under ELR such operations can be carried out by both financial and non-financial companies. The legal requirements are compliance with the rules established by law, inclusion in the special register of the Bank of Russia and supervision by the regulator. One of the basic principles of Islamic finance is the risk sharing between investor and financial institution. For this reason, classical contractual interestbearing instruments (loans, credits and deposits) are unsuitable to impose the obligations on them. The novelty factor for the Russian financial market of partner, non-interest-bearing financial products (services) makes them potentially less understandable for investors and regulators in matters of pricing, valuation, and asset quality.