The gradual investment of foreign Islamic banks can allow the use of a wide range of Islamic products and stimulate the penetration of Islamic financial institutions into Uzbekistan, the CEO of the International Islamic Trade Finance Corporation (ITFC) Hani Salem Sonbol told Trend.
ITFC first introduced Islamic Trade Finance to Uzbekistan in 2018, in partnership with Asia Alliance Bank with a $9 million line of Murabaha Trade Finance. Under the collaboration with the local banks, ITFC extended financing to the private sector namely SMEs for their import and export activities. Following this successful model, ITFC added another four local banks in Uzbekistan to its portfolio to support the private sector.
ITFC also is aspiring to play a pivotal role in the development of Islamic Trade Finance and the promotion of Islamic Finance. This was done through a series of workshops on Islamic Finance for financial institutions in addition to the Central Bank, Uzbekistan Banking Association, and other State Entities.
"Our approach has been a mix of capacity building tools for development in addition to financing and guarantees for SMEs," said Hani Salem Sonbol.
Islamic Finance is going to address the gap of serving the pent-up demand for ethical and shariah (body of Islamic law) based financing, which will contribute to inclusive growth.
Presently, a sizable part of the population abstains from services offered from conventional financial institutions for religious reasons. The absence of Islamic financial institutions or shariah-compliant products in the market contributes to the financial access gap and thereby hindering growth.
As a multi-lateral financial institution, ITFC has seized the opportunity to promote Islamic finance to foster inclusive economic growth among the business community in Uzbekistan.
"We are observing that small Shariah-compliant Financial Services institutions are being set up by local entrepreneurs such as leasing company (Al Mulk), first shariah-compliant insurance company (Uzaro), advisory services company (IsBF) and paid training provider (Al Huda), etc. International Center for Education in Islamic Finance started its cooperation with a local University to offer an Islamic finance master’s program," said the CEO.
The local banks are also working on setting up Islamic windows (a form of operating structure in a conventional bank that offers Islamic banking products and services). The momentum is slowly building up for foreign Islamic Banks to invest in Uzbekistan. This also can be a catalyst to expedite the adoption of legislation that can enable the use of a wide range of Islamic products and stimulate the penetration of Islamic financial institutions into Uzbekistan.
"We see a positive change in Uzbekistan including the overall improvement of the Investment climate. We at ITFC believe that the road is still being paved towards the creation of Islamic Finance infrastructure, and there are still untapped opportunities in which ITFC will work side by side with the partners in the country to contribute to the development of Uzbekistan," Hani Salem Sonbol noted.
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