Another Uzbek bank is taking the Islamic route, jumping into the Shariah finance space through an Islamic banking window, bringing the number of Shariah banking aspirants in the Republic to at least nine. VINEETA TAN has the details.
Orient Finans Bank will be diversifying its products and funding sources with Islamic structured instruments and has engaged the Islamic Corporation for the Development of the Private Sector (ICD) to assist it in establishing a Shariah banking window. The ICD is already lending its expertise to a number of Uzbek banks to enter the Islamic banking arena including Trustbank, Xalq Banki, Turonbank and Asia Alliance Bank.
The ICD will help Orient Finans in accounting, information technology solution selection, human resources and the legal dimensions of operations, theoretical and on-the-job training.
Orient Finans may be the latest contender in the Islamic finance ring; however, it is not a complete stranger to the sector: it previously secured two Shariah compliant credit lines worth US$17 million from the ICD which it channeled toward financing local SMEs.
Compared with its regional peers such as Kazakhstan and Tajikistan, Uzbekistan admittedly has some catching-up to do in terms of providing a conducive operating environment, particularly a regulatory infrastructure, to nurture the fledgling Islamic finance sector. However, the government of the Muslim nation of 33 million is backing the proposition: at the end of last year, the Capital Markets Development Authority finalized its draft Sukuk regulations, setting the foundation for a 2021 Islamic offering.
This political will and latent demand for Shariah financial services are sending the right message as a slew of conventional lenders are making their move into the space: at least eight commercial banks could kick-start their Islamic banking window operations.
There are also other initiatives in the works such as preparing to establish an Islamic insurance operator, a digital Murabahah platform and Islamic finance academic programs in higher learning institutions.