Azerbaijan develops Islamic financing

Azerbaijan may soon become a regional Islamic financing centre and play a significant role in boosting cooperation in Islamic banking with Persian Gulf and Central Asian countries.
Islamic financing is one of the fastest growing segments of the global financial services industry worldwide. At the same time, interest in Islamic finance as a source of investment is high in the country, reported Azerbaijan’s news agency, Trend.

Many countries’ interest in Islamic finance was associated with different factors, the foremost of which was the desire to attract liquid resources from the Middle East and Southeast Asia and a certain demand for financial products in accordance with syariah law by local Muslims.
Today, Azerbaijan actively introduced Islamic financing. The independent authority of the International Bank of Azerbaijan (IBA) on Islamic banking would start its work in March, which planned to present six Islamic banking products to the market during the first phase, it stated.

Islamic financial tools could become the channel through which their assets could be involved in the economy. — Bernama

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Tajikistan Offers Opportunities In Construction, Islamic Banking

Tajikistan, currently undergoing massive redevelopment, is offering investment opportunities for Malaysian companies, particularly in construction and Islamic banking. TM International Tajikistan’s general director Abdurazzok Abdulloev said the country was currently going through rapid development in terms of infrastructure, especially in the major cities.

“Most of our construction projects were stopped back in 2000 and started to pick up only in 2004, (so) we need a lot of expertise in that industry,” he told reporters at the “Seminar in Doing Business with Tajikistan” here Friday.

Abdurrazzok is among 21 trade delegates from Tajikistan who are in Malaysia for the 10-day incoming buying mission which started yesterday.

Tajikistan, a land-locked country, shares a common border with China, Pakistan, India and Afghanistan.

With a population of 7.5 million people, the country has recorded a gross domestic product (GDP) of US$15.5 billion as to date.

On Islamic banking, Abdurrazzok said banks in the country were exploring opportunities to set up Islamic banking window.

Malaysia is seen as a role model in Islamic banking due to its vast experience in managing and developing the industry for over 20 years, he said.

Currently, trade between Malaysia and Tajikistan is “quite small”, he added.

Tajikistan’s main partners for both imports and exports are Russia, China and Uzbekistan.

Total exports to Tajikistan stood at US$1.6 billion in 2008 which covered aluminium, electricity, cotton, gold, fruits, vegetable oil and textile.

The country imported petroleum products, aluminum oxide, machinery and equipment, and foodstuff.

source : afk

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.


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.