Islamic Banking on the Way
Islamic Banking on the Way
Islamic banking is coming to Kazakstan, and NBCentralAsia economists say it could be success provided the requirements of Shariah law can be matched to the country’s tax and finance legislation.
Following a conference on Islamic banking in Kazakstan on May 8, the heads of the major Kazak bank TuranAlem and the Emirates Islamic Bank decided to establish a joint bank working on Islamic principles. It will be the first financial institution operates according to Shariah precepts, which prohibit usury in the form of charging interest, lending for high-risk ventures and funding the production of weapons, alcohol or pork.
A new commission attached to the government agency that regulates the financial sector is to draft a plan for the way Islamic banking would work in Kazakstan,
NBCA analysts say Islamic banking is likely to be a success – it has worked in other secular states, and the Kazak financial sector is growing rapidly.
Mudassir Siddiq, a senior lawyer on the Shariah committee at the Islamic Development Bank, says introducing Islamic banking in Kazakstan will not pose problems because the financial standards that apply do not differ greatly from those used in secular banks.
“There are some misconceptions that a secular country’s legal system has to change fundamentally in order for Islamic financial services to work. In actual fact, Islamic banking standards are to a large exntent based on common standards,” said Siddiq. “The difference is that Islamic finance has a large ethical component, making business more ethically driven.”
Despite its advantages, Medet Sartbaev, an expert with the National Bank of Kazakstan, believes Islamic banking will still need some changes to be made to Kazak legislation before it can function properly.
“There are a number of issues that will hinder the development of Islamic banking, such as the absence of clear financial rules relating to its functioning, discrepancies between local and Islamic accounting methods, and inconsistencies between some Islamic banking principles and Kazakh tax legislation,” he said.
NBCentralAsia observers say there are around 270 Islamic banks around the world, and most of their clients are non-Muslim. Around half of Kazakstan’s 15 million population are Muslims.
Gulnara Galyamova, an expert on international lending at the TuranAlem bank, says one major discrepancy that will have to be addressed is their approach to loan interest.
But she said Islamic banks will win popularity and trust because they effectively act as investors in the ventures they fund and assume a share of the risk.
“The advantage is that religious people will be able to access banking services that satisfy their convictions. Islamic banking offers the same products, products adjusted to fit Shariah,” she added.
(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)
Following a conference on Islamic banking in Kazakstan on May 8, the heads of the major Kazak bank TuranAlem and the Emirates Islamic Bank decided to establish a joint bank working on Islamic principles. It will be the first financial institution operates according to Shariah precepts, which prohibit usury in the form of charging interest, lending for high-risk ventures and funding the production of weapons, alcohol or pork.
A new commission attached to the government agency that regulates the financial sector is to draft a plan for the way Islamic banking would work in Kazakstan,
NBCA analysts say Islamic banking is likely to be a success – it has worked in other secular states, and the Kazak financial sector is growing rapidly.
Mudassir Siddiq, a senior lawyer on the Shariah committee at the Islamic Development Bank, says introducing Islamic banking in Kazakstan will not pose problems because the financial standards that apply do not differ greatly from those used in secular banks.
“There are some misconceptions that a secular country’s legal system has to change fundamentally in order for Islamic financial services to work. In actual fact, Islamic banking standards are to a large exntent based on common standards,” said Siddiq. “The difference is that Islamic finance has a large ethical component, making business more ethically driven.”
Despite its advantages, Medet Sartbaev, an expert with the National Bank of Kazakstan, believes Islamic banking will still need some changes to be made to Kazak legislation before it can function properly.
“There are a number of issues that will hinder the development of Islamic banking, such as the absence of clear financial rules relating to its functioning, discrepancies between local and Islamic accounting methods, and inconsistencies between some Islamic banking principles and Kazakh tax legislation,” he said.
NBCentralAsia observers say there are around 270 Islamic banks around the world, and most of their clients are non-Muslim. Around half of Kazakstan’s 15 million population are Muslims.
Gulnara Galyamova, an expert on international lending at the TuranAlem bank, says one major discrepancy that will have to be addressed is their approach to loan interest.
But she said Islamic banks will win popularity and trust because they effectively act as investors in the ventures they fund and assume a share of the risk.
“The advantage is that religious people will be able to access banking services that satisfy their convictions. Islamic banking offers the same products, products adjusted to fit Shariah,” she added.
(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)
