The total volume of Islamic Banking and Finance has been exceeded $2.6 trillion globally. The growth of the Islamic banking and finance volume in different continents and regions is continuous with the positive node but sometime it varies region to region. Due to the reason, about 2,500+ Islamic banking and financial institutions are working in every region including both Muslims and non-Muslim countries. In the current era, Islamic banking and finance started in 1960s from Egypt and Malaysia and dramatically spread over the Middle East, Africa, Europe and other regions. The growth of this phenomenon swiftly increased in Middle East, South and East Asia whereas, in some regions, the growth of the industry was comparatively slow as in Northern African (Tunis, Morocco, Algeria etc.), Central Asian and Balkan countries. But keeping in view the Islamic banking and finance industry initiative was taken very late in Commonwealth Independent States (CIS) countries and its growth indicate that CIS countries are the emerging Islamic banking and finance market for near future. The delay for Islamic finance initiative in CIS countries may count in many folds, it would be due to Russian influence in CIS countries, mind set of Russian block and limited relations with International Banking and Financial Markets were few hurdles for the development of Islamic Banking and Finance in CIS, but recently, unstable Russian relationship with Europe and sharply decline of oil prices compelled Russia to get benefit from the best financial alternative, which is definitely Islamic banking and finance. The recently friendly Islamic Banking policies of Russia geared-up Islamic banking and finance industry in CIS countries, and now they opened for Islamic Banking and Finance industry aggressively.
In 1992 the CIS organization was established. Total Muslim population of CIS countries is estimated 75 million which is a good news for growing Islamic banking and finance industry. CIS countries’ list consist of 10 countries which includes Kazakhstan, Uzbekistan, Tajikistan, Kyrgyzstan, Turkmenistan, Azerbaijan, Russia, Armenia and others.
In CIS countries, the Islamic banking and finance market can be divided into three parts. At first, there are countries (Kazakhstan, Uzbekistan, Kyrgyzstan and Azerbaijan) where the pace of Islamic banking and finance industry is satisfactory and these countries want to promote it as sustainable financial alternative. Secondly, there are countries (Tajikistan, Turkmenistan and Russia) where the Islamic banking and finance industry exist with low growth rate. At final, there are countries like Armenia, Ukraine, and Belarus etc. where there is no initiative taken so far. However, overall Islamic banking and finance position in CIS countries is encouraging.
If we want to determine the Islamic finance leader in CIS countries, the credit goes to Kazakhstan where the Islamic banking and finance was started in 1992 but the growth was not phenomenal. After the recent financial crises in 2008, Islamic banking and finance again get a momentum in Kazakhstan with appropriate support of government institutions. Currently, 1 full-fledged Islamic bank and 4 Islamic banking windows are operating in the country. Takaful, Islamic leasing (Ijarah) and Islamic micro-financial institutions are also growing in the country, Kazakhstan also exercised Islamic Agricultural Finance product in the country with the financial assistance of Islamic Development Bank. The recent establishment of Astana International Financial Center (AIFC) caused innovation in Islamic financial market which would be positive sign for Kazakhstan to get eminent regional positioning in Islamic Banking Industry.
Kyrgyzstan is the only country in CIS where the Islamic banking law has been approved from the parliament in 2011 and one conventional bank is in the process to be full-fledged Islamic bank in near future.
Azerbaijan comes after Kazakhstan where the Islamic finance history is as old as in Kazakhstan but unfortunately, Islamic finance industry in Azerbaijan could not get the attention of government as much as was in Kazakhstan. Although there is no full-fledged Islamic bank in the country but 4 Islamic banking windows are working in the country with limited Islamic Banking Regulations. Whereas, under ICD-IsDB funding support, one Islamic leasing company offering Ijarah products to its clients while couple of Bank/Microfinance Institutions also utilizing ICD-IsDB funding for Islamic Banking and Finance.
Uzbekistan secured its positive position for Islamic finance industry in CIS countries after considerable initiatives taken by the new president H.E. Shavkat Mirziyoyev. Three Islamic banking windows are operational and accepting deposits on Shariah bases. Few Islamic leasing companies also offering Ijarah services, but it is predicted that after proper Islamic Banking and Finance Regulations, Uzbekistan can supersede other regional countries in the race of Islamic Banking hub for Central Asia.
Russia is also one of the biggest player of Islamic Banking and Finance in the CIS countries with having significant Muslim population, Russia has been trying to promote Islamic Banking since long but unfortunately did not get significant success but in recent govt-led initiative to support Islamic Finance will play a vital role for the development of Islamic Banking, Islamic Finance,Sukuk and Takaful in Russia but also in other CIS countries as well.
The most important factor of the growth of Islamic banking and finance industry in CIS countries is the Islamic Development Bank’s support whereas, ICD-IsDB also has huge investment portfolio for Islamic Banking and Islamic Leasing avenues in CIS countries including Azerbaijan, Kazakhstan, Uzbekistan, and Kyrgyzstan etc.
The writer has started putting his research, advisory, consultancy and capacity building services in CIS countries for Islamic banking and finance industry from 2006. In this connection he has conducted various capacity building and training workshops and conferences. He is hopeful that the volume of Islamic Finance Industry will increase by 100% in next five years which also will strengthen global Islamic Finance Industry. AlHuda CIBE is going to organize one more Islamic banking and finance conference of its kind in Tashkent, Uzbekistan on 2nd May 2019. The CIS Islamic Banking and Finance Forum will gather the CIS Islamic Finance Industry specialists and stakeholders on a single platform to promote Islamic Banking and Finance in the region.