Point of Principle

In October 2014, President Nursultan Nazarbayev received the Global Islamic Finance Award (GIFA) at the 10th World Islamic Economic Forum that was held in Dubai as the organization decided to celebrate the President’s efforts to promote Islamic Finance and Banking in Kazakhstan. The committee stressed Kazakhstan’s role as an economic and cultural bridge between East and West, and its efforts to foster cooperation between Muslim and non-Muslim businessmen.

During the conference, President Nazarbayev stressed the need to increase cooperation in the Islamic world, especially in light of the challenges that will characterize the future world economy. “We stand on the threshold of the third industrial revolution. Members of the Organisation of Islamic Cooperation control 70% of global energy resources and export 40% of mineral raw materials. However, only 7.5% of global GDP and 11.2% of total global trade is accrued by OIC countries.”

During the forum, the National Bank of Kazakhstan’s Chairman, Kairat Kelimbetov and the Central Bank of the United Arab Emirate’s Chairman, Mubarak Rashid Al Mansouri also signed a MoU aiming to establish cooperation between the two central banks in financial supervision and the development of Islamic Financing to ensure the stability of the financial systems of the two states.

Approximately 70% of Kazakhstan’s population is Muslim, and the country is looking to make Almaty an Islamic finance hub of the CIS and Central Asia region. Kazakhstan was the first nation in the region to develop a partnership program with the Islamic Development Bank (IDB), which opened a branch in Almaty in 1997. During the first quarter of 2010, Al Hilal Islamic Bank was opened as the first Islamic Bank in Kazakhstan. From its offices in Almaty, Astana, and Shimkent, Al Hilal is focusing on building up relationships with governmental companies and their subsidiaries, while concentrating on providing innovative Islamic financing solutions to address the needs of large infrastructure projects and corporate transactions.

Several years have passed since Kazakhstan’s first sukuk offering took place in 2009. Now, the country will draft a new set of Islamic banking laws to stimulate the sector even further, which will allow established institutions such as Al Hilal Bank to widen their operations, and support new players entering the country. The industry is still in its nascent stages in Kazakhstan, with total assets of less than $200 million at the end of 2013 (Standard & Poor’s). However, the revised legislation—to be presented in the middle of 2015—will allow Islamic finance to establish itself more firmly across the Kazakh financial landscape. The new law it is expected to focus on a set of financial instruments, on a clear tax regime, and the actual structures and mechanisms the industry has to offer.

According to Prasad Abraham, CEO of Al Hilal Bank in Kazakhstan, Kazakhstan will be a model for Islamic Finance for the entire region: “our medium term goal is to test this model in Kazakhstan, and if it is successful, use it as the launch pad for other CIS countries. There have been a number of expressions of interest regarding the development of Islamic banking, particularly in Azerbaijan, Tajikistan, and Turkmenistan. Some countries are developing Islamic banking privately, but I am told that it is with the government’s strong endorsement. Once they have a workable model they simply approve it. For Al Hilal to expand into other CIS countries there would be one main prerequisite—the existence of acceptable legislation.”