First step taken towards developing islamic finance in Uzbekistan
The ceremony of signing a Statement of Intent has been held between the Agency for the Development of the Capital Market of the Republic of Uzbekistan, the United Nations Development Programme (UNDP), and the Islamic Development Bank, establishing cooperation for the introduction of Islamic finance in Uzbekistan. The development of this new type of financing is considered to be an essential alternative financial model for achieving the Sustainable Development Goals in the country, Trend reports citing Timesca.
Atabek Nazirov, Director of the Agency for the Development of the Capital Market, said: “The Agency is firmly committed to the Sustainable Development Goals agenda, and to developing new financial instruments, particularly the Sukuk bonds which will bridge the gap in achieving national Sustainable Development Goals in Uzbekistan.”
Unlike traditional bank finance which is motivated primarily by profit, Islamic finance focuses on humanistic goals. It provides a “symmetrical approach between cost, personal contribution and reward”. In ordinary banking, preference is given to those activities which bring maximum profit, associated with a high interest rate. Meanwhile Islamic finance is by its nature not focused on maximizing profits.
“Uzbekistan and the countries of the world are going through difficult times, experiencing one of history’s deadliest pandemics. Against this backdrop, the Government of Uzbekistan is skillfully applying immediate support, as well as developing long term strategies to help the country recover from the crisis. This forward-looking approach can be observed in the intentions of the Agency in accelerating the development of new financing instruments,” said Ms. Matilda Dimovska, UNDP Resident Representative in Uzbekistan, during the online signing ceremony.
“The efforts of CMDA to establish an enabling environment for introducing green Sukuk bonds in Uzbekistan are commendable, and UNDP stands ready to support that process.”
The development of Islamic finance in Uzbekistan has the potential to be one of the most important elements in forming a national public-private partnership market, and can be very useful for achieving SDGs and reducing social tension.
The Vice President of the Islamic Development Bank for Country Programs Mr. Mansur Mukhtar said: “Our bank is pleased to support the initiatives of Uzbekistan on the way to expand financial opportunities for the development of the country.”
It is expected that this agreement will become a necessary foundation for developing Uzbekistan’s capital market. The cooperation will help develop a legal and institutional framework for introducing new financial instruments, and for taking the next steps towards launching an Islamic financial product in 2021.