ASTANA: The Islamic Development Bank (IDB) will finance the realization of 12 new projects worth nearly US$1 billion in Kazakhstan.
Islamic finance has become one of the rapidly growing industries of the world system with an annual turnover exceeding US$2 trillion. Kazakhstan is the only country in the CIS that uses the Islamic finance.
Foundations for Islamic banking’s activity in Kazakhstan were created in 2009 right after the corresponding amendments to the legislation were signed. Today, a number of Islamic financial institutions in banking, insurance and leasing are represented in the country. The main feature of the Islamic finance is the ban on loan interest. In fact the bank works as a partner of the project by participating in both profit and loss.
Humayon Dar Expert in Islamic Finance said, “First of all, it is the absence of interest and the rejection of futures transactions. We don’t sell what we don’t have. That is not right. How we can be responsible for it. Secondly, we do not sell alcohol and do not invest in gambling. Thirdly, there is a ban on speculation. Today, activities of the Islamic finance are widely represented in the Islamic world, as well as in Australia, Britain, India, the United States, France and Japan.”
He further added that Islamic banks prioritize the financing of infrastructure projects, agriculture and food industry enterprises. The Islamic finance will play an important in the activity of the Astana International Financial Center. The AIFC doesn’t exclude the fact that Kazakhstan’s population will have access to Islamic mortgage in the near future.
Sayasat Nurbek, Managing Director, AIFC said, “The goal of the AIFC is to increase the concentration of players, to raise the amount of knowledge in this market and to create system conditions as well as preferences by using its platform. This will lead to increase of the flow of banks, experts and funds. Now a growing percentage of the population refuse traditional financial services due to ethical and other considerations in favor of alternative financial services and tools.”
“All will depend on how quickly and flexibly our financial institutions react to the changes. If the financial institutions see the demand and more knowledge in the market, they will quickly create such tools. According to forecasts of analysts, by 2020 the annual turnover of the Islamic finance in the world will make US$3 trillion,” he added.
According to the data of the Boston Consulting Group, by 2025 the potential volume of assets of the Islamic finance in Kazakhstan could reach US$23 billion.
It is worth to mention here that The Astana International Financial Centre (AIFC) hosted the Global Islamic Finance Awards (GIFA), a prestigious award honouring individuals and institutions that have contributed to the promotion of Islamic banking and finance.
Established in 2011 by Edbiz Corporation, an international Shariah advisory firm, the award seeks to push Islamic banking and finance forward worldwide. The inaugural GIFA ceremony took place Dec. 7, 2011 as part of the Oman Islamic Economic Forum (OIEF).
This year, the event gathered more than 200 representatives of the Islamic finance industry, including 50 winners, from more than 20 countries. Kazakhstan President Nursultan Nazarbayev and high-ranking Kazakh officials also attended.
AIFC Governor Kairat Kelimbetov had opened the award ceremony. He called Kazakhstan a pioneer of Islamic banking and finance in the Commonwealth of Independent States incorporating the regulatory framework for Islamic banking in the national legislation in 2009.
“In 2009, Kazakhstan became the first country in the CIS region and Central Asia to create a path for Islamic finance industry. Since then Kazakhstan has witnessed a gradual growth in developing of Islamic finance industry,” said the AIFC governor.
One of the pillars in the work of the AIFC, scheduled to launch next year, is Islamic finance, added Kelimbetov. “AIFC will serve as an Islamic finance getaway and Islamic finance hub for the region,” said Kelimbetov.
Author is senior Editor with Media Hub International Dubai.