IslamicFinance.de

Islamic banking in Central Asia, namely in the Commonwealth of Independent States (CIS) is developing fast and is on the best way to become integrated into the global Islamic finance industry. One sign for this are the currently ongoing preparations for the CIS Islamic Banking and Finance Forum 2020 to be held from August 13 to 15 this year in Tashkent, Uzbekistan. The event will focus on a broad variety of Islamic banking themes, including financial inclusion and poverty alleviation, takaful, sukuk and Islamic microfinance, the introduction of Islamic finance and operations in the region and their potential, regulation, auditing and Islamic finance contracts, Islamic fintech, the role of Islamic Finance in reaching the United Nation's Sustainable Development Goals, as well as general investment opportunities in the CIS member states.

Uzbekistan is joining the rising number of Central Asian nations to develop a Shariah-compliant banking system given its large Muslim population. This month, the Uzbek government issued a draft resolution to create infrastructure for Islamic banking and finance in the country. The aim is to create alternative financing opportunities in the former Soviet republic and open the doors for Islamic investors from the Middle East and Southeast Asia. To that end, the central bank has been tasked with developing a legal and regulatory framework not just for Islamic banking, but also for Takaful and securities trading, as well as financing for small and medium enterprises and Halal microfinance. The framework will include the launch of the Islamic Development Bank of Uzbekistan (IDBU), which will provide standard retail banking services, trade financing, property and commercial real estate financing, as well as leasing, Takaful and securities services.

The International Islamic Trade Finance Corporation (ITFC), the Ministry for Foreign Trade of Uzbekistan and the United Nations Development Program (UNDP) have come together for the first trade finance workshop titled "Trade Finance as a Key Factor in Trade Promotion". ITFC's chief operating officer Nazeem Noordali said that ITFC and the government of Uzbekistan signed a $100 million framework agreement to finance pre-export and import activities in the country. He added that ITFC was working closely with its partners to promote Islamic trade finance among the Uzbek banks and non-banking financial institutions.

The Islamic Corporation for the Development of the Private Sector (ICD) and JSCB Microkreditbank Uzbekistan have entered into a Joint Strategic Collaboration to finance SMEs in Uzbekistan. The Line of Financing facility agreement for the amount of USD 12 million was signed by the CEO of ICD, Khaled Al-Aboodi and the Acting Chairman of JSCB Microkreditbank, Shukhrat Rasulov. The collaboration will focus on developing the private sector especially SMEs, improving the living standard, generating tax revenues for the government and promoting Islamic Banking in the country. Khalid Al-Aboodi stated that ICD was pleased to extend a line of financing facility to Microkreditbank which will enhance the impact of socio-economic development. Shukhrat Rasulov welcomed the partnership with ICD and ensured that JSCB was committed to providing professional banking services while promoting private entrepreneurship in the Republic of Uzbekistan.

Until recently the banking and financial services sector and business in Uzbekistan have had limited exposure to and understanding of Islamic finance. The key laws such as the Civil Code, the Tax Code and laws on banking and investment do not refer to Islamic finance or to Islamic finance instruments. It is therefore important that Islamic finance and Islamic banking instruments are first recognised as a legislative concept before any regulatory mechanisms are put in place. Foreign banks including Islamic banks may open representative offices or set up subsidiary outlets in Uzbekistan provided they comply with minimum criteria and qualify under requirements imposed by the CBU in accordance with the Regulation on the Procedure for Registration and Licensing of Banking Operations.

It is possible that the Commonwealth of Independent States will become the next frontier for Islamic finance. At this point, six Muslim republics of the former Soviet Union, Azerbaijan, Kazakhstan, Uzbekistan, Turkmenistan, Kirgizstan and Tajikistan are members of the CIS. Moreover, Russia has also 20m indigenous Muslims in Russia, mostly concentrated in the semi-autonomous Caucasus provinces of Chechnya, Ingushetia, Dagestan, Tatarstan and Bashkortostan.
Although the relationship between Russia and its Muslims wasn't very good, it has started to make concerted efforts to reach out to Turkey, Iran and the Arab nations to the south and Pakistan, Malaysia and the Islamic democracies of South East Asia.

Mohammad Yahya Maroufi, secretary general of Economic Cooperation Organization (ECO), revealed that his organization has agreed to certify a bank to promote economic cooperation with banks in the Islamic countries.
He added that the plans include to open a trade market for its member states.
The ECO curent members are: Islamic Republic of Iran, Afghanistan, Azerbaijan, Kazakhstan, Kyrgyzstan, Pakistan, Tajikistan, Turkey, Turkmenistan and Uzbekistan.

Nine member countries have been approved to receive financing. They are Indonesia, Uzbekistan, Bangladesh, Pakistan, Sudan, Turkmenistan, Gambia, Mauritania and Albania.
The financing includes technical assistance in the form of grants for development projects in Benin, Chad, Togo, the GCC and grants and concessional loans for Sudan.
The approved financing also includes health and educational projects directed towards communities in non-member countries including Congo, Fiji, India and South Africa.