Keen on developing Islamic finance in Kazakhstan

During a recent visit to Astana, foreign Islamic bankers announced that Kazakhstan is strongly interested in developing Islamic finance. The central Asian nation is emerging strongly as the most proactive and advanced Islamic finance market, Gazeta.kz reported. President Nazarbayev is keen to develop diversified economic relations with both traditional partners such as Russia but also with the West and the Middle East Muslim nations. Kazakhstan is a member of the OIC (Organization of the Islamic Conference) and the IDB.

A delegation from Malaysia’s International Islamic Financial Centre (MIFC) visiting Kazakhstan at the end of January was encouraged by the developments in the Islamic finance in the CIS country. The visit was part of the MIFC’s objective of consolidating Malaysia as the international hub for Islamic finance and its efforts to foster bilateral ties and cross-border cooperation in Islamic finance. The MIFC visit in January also coincided with the Islamic Finance Forum which was addressed by key MIFC initiative stakeholders.

source : new europe

ANALYSIS: Kazakhstan’s Islamic finance market starts to grow

Eight months after Kazakhstan’s law on Islamic finance and banking was adopted, a handful of local and international Islamic institutions have already set up in the country. Looking ahead, the issuance of Islamic bonds by Kazakhstan-based companies is expected to drive the market for Sharia finance.

Within Kazakhstan, Fattah Finance, the country’s first brokerage specialising in Islamic finance, started work in March, a month after the law was adopted. The firm has put together a team of around 15 professionals, with experience in the stock market, and Islamic finance and banking. Although the firm still works with traditional instruments, its main purpose is Islamic finance. Kazakhstan also has its first consultancy focussed on Islamic finance, Kausar Consulting.

Meanwhile, from the United Arab Emirates, Al Hilal Bank is already present in Kazakhstan, and is planning to open two branches – in Almaty and Astana – by the end of 2009. It is expected to focus on the industry, agriculture, real estate and tourism sectors. In May, Qatar Islamic Bank and Bahrain’s Ithmaar Bank also announced their intention to enter Kazakhstan, though concrete plans haven’t yet been announced.

Financial hub

The new law is part of Kazakhstan’s efforts to develop its financial infrastructure and establish Almaty as a regional financial centre.

Chingiz Kanapyanov, deputy chairman of the Agency of the Republic of Kazakhstan on Regulation of Activities of the Regional Finance Centre of Almaty (RFCA), which pushed for the law’s adoption, stresses that Islamic finance will exist alongside traditional finance in Kazakhstan. “We are not switching the system completely, but would like to create another opportunity for both Kazakh and global players to invest in this country,” he tells bne.

As the first country of the Commonwealth of Independent States (CIS) to introduce legislation on Islamic finance, Kazakhstan hopes to open up new investment opportunities for domestic actors and build new links with the Islamic world. According to Kanapyanov, interest from investors in the Middle East and Malaysia has been very strong.

Astana’s policy of maintaining friendly relations with other nations encompasses the Islamic world. These efforts have been stepped up recently. Kazakhstan is organising investment conferences in both Bahrain and Abu Dhabi later this year, and on October 31 national carrier Air Astana will launch weekly flights to the Malaysian capital Kuala Lumpur. “We would like to see more investors operating in the Sharia-compliant sectors, and to see more bridges being built between Kazakhstan and the Islamic countries. This will be very beneficial for our country,” Kanapyanov says. “At the same time, banks such as Al Hilal that choose to come here from abroad will gain access to Kazakhstan and Central Asia. Despite the international turmoil, Central Asia is still one of the fastest growing economies, and there are definitely opportunities here.”

Research carried out by Fattah found that institutional investors, pension funds, insurance companies and individuals in Kazakhstan would be interested in buying sukuks. “The pension funds are increasing their activities, and would like to start buying sukuks to diversify their investment portfolios,” says Fattah chairman Aidos Demeshev. “Individual people are also interested. It’s not just Muslims; other people are attracted because Islamic financial products are connected to something real, and all risks and profits are shared.”

Demeshev stresses that sukuks must be issued in Kazakhstan if the new law is to have a real effect on the economy. Under the law, only wholly owned state companies – those within the Samruk-Kazyna and KazAgro groups – and Islamic banks can issue sukuks. As yet, none have been issued in Kazakhstan, although some are understood to be in the pipeline. “We want and we are ready to work with other actors in the market to start this process,” says Demeshev. “Our company will grow at the same speed as the sukuk market in Kazakhstan. We would like to work with other foreign partners and we are open for cooperation for developing our market.”

Until domestic sukuks are issued, Kazakhstan-based institutions and individuals will have to invest in foreign Islamic financial instruments. “We can invest in sukuks on world capital markets. However, we want to invest domestic capital into sukuk bonds on the domestic market,” says Demeshev. “It would be very good if we could attract investors from both world and domestic market to projects in Kazakhstan. Investors from the Middle East and Islamic countries are likely to become more interested in Kazakhstani projects.”

Early stage

Islamic finance is still at a very early stage in Kazakhstan, and market participants acknowledge that it will take time for the market to grow. In the longer term, new legislation is expected to be adopted, allowing a wider range of Islamic financial products to be used, and more institutions to be set up. “Islamic finance is still in its infancy in Kazakhstan, and we need to develop this market,” says Demeshev.

It does, however, benefit from strong support from President Nursultan Nazarbayev, who was a driving force behind the law’s adoption, as well as other top government officials and the RFCA.

Now that the first steps have been taken, Kazakhstan has started working with the Islamic Development Bank to draft a roadmap on Islamic finance and economic development. This will form a central part of the IDB’s strategy in Kazakhstan, and is expected to be announced in early 2010.

 Source : skilledroadintelligent

Azerbaijan to sign agreements worth $200m with Islamic Development Bank

 
Azerbaijan is preparing a set of agreements to be signed at the 35th annual meeting of the governors of the Board of the Islamic Development Bank.

The agreements on two projects are estimated to be worth $200 million, according to a government source.

“We are also working on a project with the Saudi Development Fund, which may be signed during the annual IDB meeting as well,” the source said.

The annual meeting of the Islamic Development Bank will take place on 23-24 June 2010 in the Gulustan Palace in Baku.
A specialist mission of the bank is to visit Baku this week to work on preparations for the meeting.

The chairmanship of the IDB Board of Governors will be held by Azerbaijan for the first time in 2010.
Since Azerbaijan entered the IDB Group in 1992, the bank has given the country financial support of $280 million.

source : AZ news

Intl Bank of Azerbaijan sponsors the World Islamic Banking Conference

 

The International Bank of Azerbaijan received an official invitation to take part in the largest annual international event devoted to Islamic Banking – 16th World Islamic Banking Conference.

The Bank reports that the conference is given support by the Central Bank of Bahrain and a range of international financial institutions, including Islamic Development Bank, CITI, Gulf Finance House, Abu Dhabi Islamic Bank, Deutsche Bank, BNP Paribas, etc. The event to be held on 6-9 December 2009 in Manama, the capital of Bahrain, is to involve over 1 200 delegates from 50 countries of the world.

The IBA will participate in the conference as a privileged sponsor that will allow it to provide information about Azerbaijan and tell of prospects of Islamic Banking prospects in the country. The Bank’s executives intend to hold some meetings within the conference for the purpose to raise financial resources for Islamic Banking development in Azerbaijan.

AZ news

Islamic Finance Law legalized in KAZAKHSTAN

kaz_qarqand_mosque_s_The islamic finance in Kazakhstan to be under the legal frame work and it is the first CIS country legalize the islamic finance.

This law will help the Kazakhstan to leader in international investments in the CIS and central Asia Region. The purpose of this legal frame work for islamic finance to make Kazakhstan to be hub of Islamic finance in Central Asia Region and expected to expand beyond country from Middle East to South East Asia.

The ARA of the country initated this work by forming a working group including reperesentatives of state bodies and market players and finally the drafted law and submitted it to parliament.

An Islamic Finance Road show has been scheduled by RFCA in the following areas,

Examining key developments in Islamic finance in Kazakhstan and assessing how

Local practices compare and contrast to other regional centres.

Kazakhstan & the Islamic Capital Markets

Discussing local and regional developments in Sukuk and Islamic capital markets, including taxation, regulatory and ratings issues.

Islamic Products: What can and can’t be done?

Assessing the development of Islamic financial products in Kazakhstan and the regional market and exploring the potential for further innovation.

Issuing & Investing in the Islamic Financial Markets

Identifying important investor considerations for the Islamic capital markets: what are investors looking for and how can issuers meet their needs.

Issuers & Investors Round-Table

Examining current market trends and opportunities for the Islamic capital markets.

Qatar, Bahrain Islamic banks eye Kazakh growth

images13DUBAI (Reuters) – Qatar Islamic Bank QISB.QA and Bahrain’s Ithmaar Bank ITHMR.BH on Monday announced moves into Kazakhstan, an increasingly popular destination for Gulf Islamic lenders eyeing deals outside their crowded home markets.

 

Qatar Islamic is setting up a unit in the mostly Muslim country of 15 million people, while Ithmaar said it was working with the Kazakh government to set up a $1 billion energy fund for the region, home to significant oil and gas reserves.

 

“Kazakhstan’s political and social stability, skilled workforce and bright economic outlook enhance the country’s favourable investment climate,” Ithmaar said in a statement.

 

“Kazakhstan holds 3.3 percent of the world’s proven oil resources,” it said.

 

Last month, the Kazakh government said Bahraini Islamic lender Gulf Finance House GFHB.BH planned to develop a petroleum-related research and education area on Kazakhstan’s Caspian Sea coast at a cost of $10 billion.

 

Flush with cash from a sixfold increase in oil prices since 2002, Gulf lenders are scrabbling to invest and expand, and are increasingly looking abroad.

 

Islamic banks in particular are looking to tap booming demand from the world’s 1.3 billion Muslims for investments that comply with their beliefs.

 

Qatar Islamic has subsidiaries in Malaysia, Lebanon and the United Kingdom. It is seeking an Islamic banking licence in Turkey and considering buying a bank in Egypt in the next year, a company spokesman told Reuters in March.

 

“The memorandum of understanding (for a unit in Kazakhstan) underlines Qatar Islamic Bank’s intent to consolidate its expansion plan outside Qatar,” Qatar’s fourth-largest lender by market value said in a statement on the bourse website.

 

The bank gave no further details.

 

Kazakhstan is central Asia’s biggest economy and oil and mining are its key industries.

 

The country has experienced a building boom in recent years, but local banks have been hit hard by the global credit crunch and liquidity is scarce, creating a market ripe for cash-rich Gulf lenders.

CENTRAL ASIA: GOVERNMENTS, BANKS GRADUALLY OPEN UP TO ISLAMIC BANKING

images30The Saudi-based Islamic Development Bank (IDB) and the Kyrgyz government have launched a pilot project designed to introduce Islamic financing in Kyrgyzstan.

Kyrgyz President Kurmanbek Bakiev and IDB President Ahmad Muhammad Ali al-Madani on July 4 signed a deal to that effect at a ceremony in Bishkek. Under that deal, Kyrgyzstan’s private EkoBank will be the country’s first bank to offer financial products based on Islamic law, or Shari’a, to its clients.

Bakiev said after the signing ceremony that he thinks the development of Islamic banking will convince the IDB’s other 55 member countries to invest in his country’s economy. He also indicated that his government was considering pushing the experiment further and set up a regional Islamic banking center in Bishkek.

Regional Growth Of Islamic Banking

Islamic banking is widely viewed as having first appeared in Egypt in the 1960s. Owing to the oil boom of the 1970s, it then flourished on the Arabian Peninsula and, from there, expanded into the Middle East, Iran, and Southeast Asia. It is now rapidly developing in Pakistan and India, and is making inroads in Western countries that have large Muslim communities such as Britain and the United States.

But it has so far made little headway in Central Asia and the Maghreb region (western North Africa), a circumstance that some observers ascribe to historical, sociological, and psychological reasons.

When Kyrgyz authorities last year first floated the idea of introducing Islamic banking in the country, National Bank Chairman Marat Alapaev argued that it could only be done on an experimental basis; Alapaev cited what he called the “fundamentally secular character” of Kyrgyzstan’s financial system.

Proponents of Islamic banking, in turn, object that the standards that apply in the Shari’a-based system do not differ greatly from that of traditional banking. They also say a number of conventional Western banks are offering Islamic financial products to their clients. They say the main difference between Islamic and secular banking is that Islamic banking has a stronger ethical component that makes it more appealing to Muslim believers.

’Ethical’ Investing

Another common argument in favor of Islamic banks is that they inspire confidence because they assume a share of the risks in the ventures they fund.

One of the system’s basic principles is the sharing of loss and profit. Islamic banking traditionally prohibits usury and the collection or payment of fixed interest (“riba” in Arabic). Under Islamic mortgage rules, a bank generally purchases the property and resells it at a profit, allowing the final buyer to pay in installments. This system is known in Arabic as “murabaha,” or cost-plus financing.

Islamic banking also forbids trading in financial risk and bans investing in commercial activities that are considered unlawful (“haram” in Arabic) under Shari’a, such as the gambling and pornography businesses, or the tobacco and alcohol industries.

IDB In Central Asia

While Islamic banking is not widespread in Central Asia, the IDB — which is the bank of the Organization of the Islamic Conference (OIC) — has been present in the region for more than a decade.

The IDB was launched in 1975 with a view to promoting Islamic banking worldwide.

Most Central Asian countries joined the bank in the mid-1990s, shortly after gaining their independence from the Soviet Union and entering the OIC. Kyrgyzstan joined first in 1993, followed by Kazakhstan in 1995, Tajikistan in 1996, and Turkmenistan in 1997. Uzbekistan became an IDB member only in 2003, seven years after joining the OIC.

The IDB’s largest Central Asian stakeholder is Kazakhstan, with 0.12 percent of its capital. Kyrgyzstan, Tajikistan, and Turkmenistan have 0.06 percent each. Uzbekistan has 0.03 percent.

The IDB says its aim is to foster the economic development and social progress of member countries and Muslim communities in nonmember states in accordance with Shari’a principles.

French Islam expert Gilles Kepel argues in “Jihad,” his reference work on radical Islam, that if the IDB has contributed to reinforcing Islamic cohesiveness among member countries, it also has fostered a dependence between its poorest member countries and its main shareholders, oil-rich Saudi Arabia and Libya, among others.

In Central Asia, as in the rest of the Muslim world, the IDB has funded a number of industrial projects with a view to promoting regional trade and reducing poverty. It has also been providing technical assistance and training facilities for personnel engaged in development activities. The bank operates special assistance funds to help Muslim communities in non-Muslim countries.

 

Under a separate deal concluded in July, the IDB agreed to lend Bishkek $12 million to upgrade the power grid in southern Kyrgyzstan’s Batken region. Kyrgyzstan has borrowed nearly $61 million and received more than $3.5 million in grants from the IDB since 1993.

In neighboring Uzbekistan, the IDB has earmarked some $115 million since 2003 for energy, education, health, and infrastructure projects.

IDB President al-Madani announced during a visit to Tashkent on July 3 that the bank will offer an additional $15 million credit to three Uzbek banks (Ipoteka-Bank and the state-owned Uzpromstroibank and Asaka Bank) to fund private industrial and agricultural projects.

Addressing a seminar the same day of the Arab Coordination Group — which includes the IDB and a number of Middle East-based development institutions (the Saudi Fund for Development, the Kuwait Fund for Arab Economic Development, the OPEC Fund for International Development, and the Abu Dhabi Fund for Development) — Uzbek Foreign Trade Minister Elyor Ganiev said his country hoped to attract more than $1.6 billion in investments from Arab IDB members within the next three years.

The IDB is also involved in a number of industrial projects in Kazakhstan, Tajikistan, and Turkmenistan.

Kazakhstan As Regional Center

Some banks in Kazakhstan are already offering Islamic financial products to their clients. But those offerings are reportedly limited to cost-plus financing, while more sophisticated forms of Islamic banking like leasing (ijara) or bonds (sukuk) are still under study.

Addressing an international conference on Islamic finance in Almaty in May, the deputy head of the state agency that regulates and supervises Kazakhstan’s financial market, Gani Uzbekov, said he thinks his country “stands a good chance of becoming a regional center of Islamic banking.”

Uzbekov said the IDB might soon repeat a successful experiment it carried out in Malaysia five years ago and issue Islamic bonds denominated in tenges, the Kazakh national currency. Those bonds would primarily serve to fund energy projects in the northern city of Ust-Kamenogorsk.

On the sidelines of the Almaty conference, Kazakhstan’s Bank TuranAlem and the Emirates Bank Group announced that they were in talks for the creation of a 50-50 joint venture that would specialize in Islamic financial products. The deal could be finalized by the end of this year.

Meanwhile, Bank TuranAlem this week secured a $250 million syndicated Islamic loan from Arab, British, and Malaysian lenders. In a July 12 statement, the bank called that credit the biggest Islamic loan facility it has ever received.

The time appears to be over when Muslim bankers lamented that Central Asian governments did not even appear to know that Islamic banking existed. Regional decision-makers and private bankers are gradually opening up to Islamic financial products.

Whether Islamic banking will achieve widespread success among Central Asian publics is another question.

euroasia.net