Islamic banking in Central Asia, namely in the Commonwealth of Independent States (CIS) with its presently nine member nations, is developing fast and is on the best way to become integrated into the global Islamic finance industry and the worldwide Islamic capital market.
One sign for this are the currently ongoing preparations for the CIS Islamic Banking and Finance Forum 2020 to be held from August 13 to 15 this year in Tashkent, the capital city of Uzbekistan.
The event, already held for the second time, will focus on a broad variety of Islamic banking themes, including financial inclusion and poverty alleviation, takaful, sukuk and Islamic microfinance, the introduction of Islamic finance and operations in the region and their potential, regulation, auditing and Islamic finance contracts, Islamic fintech, the role of Islamic Finance in reaching the United Nation’s Sustainable Development Goals, as well as general investment opportunities in the CIS member states through Islamic funding..
The conference, staged by Pakistan-based AlHuda Center of Islamic Banking and Economics (CIBE), a nonprofit organisation that specialises in research, training and consulting in the Islamic microfinance industry, is planned to be conducted annually as many new Islamic finance markets are seen to be emerging in CIS countries.
The trend is strongly supported by the Islamic Development Bank, acknowledged as one of the most important growth factor of the industry in the region owing to the bank’s vast investment portfolio in the segment, as well as to increasing demand for agricultural and transport infrastructure financing as a result of the region’s continued economic growth and also partly due to projects connected to China’s Belt and Road Initiative.
According to pre-Covid-19 forecasts, the volume of Islamic finance industry was expected to double in assets and market share (currently estimated at about 5% to 10%, depending on the country) in the region and also to spill over into Russia.
In the current virus crisis situation, forecasts remain a bit muted, but in general, a strong rebound of growth in Islamic banking finance is seen to be on the cards after the coronavirus pandemic will eventually have subsided.
According to Zubair Mughal, CEO of AlHuda CIBE’s Pakistan-based unit, the CIS region “has significant potential” for the Islamic banking and finance industry as the latter remained rather untapped in the past despite a sizeable Muslim population.
Islamic banking and its products are likely to become more and more popular in CIS countries and the wider region and will also become attractive in nations with significant numbers of Muslim business persons, he noted, adding that “moving forward, expansion of the Islamic banking and finance industry in the CIS region is expected to bring progress in trade opportunities and business interactions with the Middle East.”
The conference will further serve as “an effective platform to demonstrate the flexibility of Islamic financial markets during the current economic crisis [caused by the coronavirus pandemic],” Mughal said.
Some Islamic banking institutions in the region have already made their names on the global finance stage.
Global Finance Magazine in its new World’s Best Banks 2020: Asia-Pacific rating released earlier this month listed Asia Alliance Bank (AAB), which started operations in Uzbekistan in 2009, as one of the best banks in Central Asia due to its operational scale, including co-operative partnerships with leading foreign banks and international financial institutions, and its strong financial stability.
Late last year, AAB signed a $10mn-financing agreement with the Islamic Corp for the Development of the Private Sector, a unit of the Islamic Development Bank, to facilitate lending for micro, small and medium-sized enterprises, alongside an advisory agreement to launch an Islamic-financing window.
Although not a CIS member state, but having observer status and enjoying significantly improved economic conditions over the past decade, Afghanistan has also been lauded in the ranking.
Kabul-based Ghazanfar Bank has earned the magazine’s recognition as a pioneer in Shariah-compliant banking and for its commitment to corporate social responsibility, as well as for providing affordable loans to female entrepreneurs and supporting social programmes, serving as a role model for Islamic finance-based impact banking.
