Bello Danbatta, the Secretary General of the Islamic Financial Services Board (IFSB) sees Kazakhstan, the Caspian region’s third-largest economy, as a potential hub for Islamic banking in and around Central Asia.
“We see here a huge potential for the development of Islamic finance,” Danbatta said Wednesday, according to reports by Kazinform.
“With the population of 18 million, [Kazakhstan] still has access to the CIS with its Muslim population of nearly 80 million, as well as to the Russian market. All in all, there will be about 200 million Muslims with access to Islamic finance,” the secretary general of one of the main standard-setting bodies for Islamic finance said.
Danbatta was on a visit to Nur-Sultan which is currently hosting a week of events for the Islamic Financial Services Board.
Islamic finance, also known as Islamic banking, complies with Islamic law, known as sharia, and includes such modes as mudarabah (profit-sharing and loss-bearing), wadiah (safekeeping), musharaka (joint venture), murabahah (cost-plus), and ijara (leasing). Sharia prohibits usury, or lending money and charging interest, while investments in businesses that provide goods or services considered contrary to Islamic principles such as pork and alcohol are also prohibited.
Kazakhstani authorities have been trying to develop Islamic finance in a country where over 70 percent of the population are Muslim. The first Islamic bank in the region, Al Hilal, was established in 2010. In 2017, Al Hilal introduced Islamic banking services to the public by opening a retail branch in Almaty, Nur-Sultan and Shymkent – the three largest cities in what is Central Asia’s largest economy.
Today there are two Islamic banks operating in Kazakhstan – Al Hilal and Zaman-Bank, as well as international institutions such as the Islamic Development Bank and the Islamic Corporation for the Development of the Private Sector.
“The government provides the necessary support such as infrastructure, necessary changes in legislation, where adjustments are necessary to reflect the specifics of Islamic finance in comparison with the traditional banking sector,” Danbatta said Wednesday.
“At the same time, we are witnessing a great interest from the industry, especially thanks to the launch of the AIFC in 2018, a lot of people moving here,” the IFSB top official said, referring to the Astana International Financial Center, set up following EXPO 2017 and now Kazakhstan’s financial services hub.
Launched in 2018 and modeled on similar centers in Singapore and Dubai, the center uses English – not Russian or Kazakh – as its main language; follows British securities and corporate law; and offers visa and tax waivers for global financial investors. Members of AIFC are exempt from Kazakhstani corporate income tax, individual income tax, land tax and property tax for 50 years.
“In the future, we see the AIFC as a regional hub for Islamic finance,” Bakhytzhan Sagintayev, a former prime minister of Kazakhstan, said on July 4 according to reports by Sputnik.
Earlier this month, AIFC’s management announced intent to issue sukuk, or Islamic bonds, for investment, infrastructure and environmental projects by the end of the year. Unlike traditional bonds, sukuk does not imply a fixed income, since sharia prohibits interest.