ISLAMIC BANKING AND FINANCE GROWING GENTLY IN UZBEKISTAN.

Byline: ZAIB-UN-NISA

The total volume of Islamic Banking and Finance assets grew to US$ 2.6 trillion globally. Iran, Saudi Arabia and Malaysia were the largest markets of the 61 countries that reported Islamic financial assets, with all three recording more than US$ 500 billion in assets. The year 2020 appear to be relatively good for Islamic finance in terms of continuous growth and support for the real sector and infrastructure. Though, according to the recent SandP Global rating of the industry, the Islamic finance industry is set to grow at a rate of around 5% in 2020, due to weak economic conditions in the industry's core markets and pandemic created by Covid-19. But the rise of three derivatives FinTech, ESG Sukuk, and standardization could fuel the industry in 2020.

The growth of Islamic finance industry in CIS countries is slower than other but it is attracting the attention of the global international banking industry due to the rising opportunities in this region. Islamic banking will grow substantially in CIS countries in the next five years from a low base, if their governments took initiatives to boost this sector. Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan can be main players to lead this expansion of Islamic banking and finance in CIS. The interest for Islamic finance is gradually growing in Uzbekistan.

In 2003 and 2004, Uzbekistan has made significant steps towards recognition of Islamic finance via membership in the IDB and ICD. Stable relations between these institutions and the government have enabled Islamic finance to gain an entry point into this market. Around 93 percent of Uzbekistan's population is Muslims but no local bank nor any foreign institutions offering Islamic banking and capital markets services other than the IDB and ICD. Although more than 9 banks get grant from ICD on Mudarabah base to start Islamic Banking but still waiting for legislation to be passed which allow them to work under Shariah. Foreign institutions are not prevented from engaging in the market without being registered in Uzbekistan provided they satisfy requirements contained in CBU Regulation. In May 2019 the Government of Uzbekistan issued a draft resolution to create infrastructure for Islamic banking and finance in order to foster alternative financing opportunities, expand the range of banking, financial services and to open the doors for Islamic investors from the Middle East.

The Government of Uzbekistan is also planning to...