February 9, 2016, Bishkek, Kyrgyz Republic—IFC,
a member of the World Bank Group, has released a study that finds overwhelming
demand for Islamic finance among smaller business in the Kyrgyz Republic.
The report revealed that 80 percent of micro,
small, and medium enterprises (MSMEs) are interested in Shariah-compliant
financing, a market that could be worth up to $456 million for lenders.
Despite that potential, the study, Islamic
Banking and Finance: Opportunities across MSMEs in the Kyrgyz Republic,
found that Islamic finance was not widely available because of a lack
of awareness and the high cost of structuring transactions. Yet Kyrgyz
officials are working to overcome these challenges.
“The government has made efforts to strengthen
the regulatory environment by way of amendments that laid down the key
principles of Islamic banking,” says Lada Orozbaeva, Deputy Chairperson
of the National Bank of the Kyrgyz Republic. “We have to continue developing
a prudent and transparent Islamic financial services industry with appropriate
standards and supervisory frameworks.”
The study was IFC's first on Islamic Finance
in the Kyrgyz Republic.
“Islamic Finance is one of the fastest growing
segments of the global financial system,” says Martin Naegele, IFC Country
Officer for the Kyrgyz Republic. “In this country, it has the potential
to provide an additional source of financing for smaller businesses, promoting
financial inclusion and addressing development challenges.”
Islamic finance refers to financial transactions
that are consistent with Shariah, or Islamic law. It includes banking,
takaful (Islamic insurance) and sukuk (Islamic financial
certificates). Interest in Islamic finance has grown steadily, with estimates
that Islamic banking assets globally will reach $1.6 trillion in 2020.
The IFC report highlights strategic measures
that banks could undertake to tap into the demand for Islamic banking among
the country’s MSMEs. The study was funded by the Government of Switzerland.
IFC, a member of the World Bank Group, is the largest global development
institution focused on the private sector in emerging markets. Working
with more than 2,000 businesses worldwide, we use our capital, expertise,
and influence, to create opportunity where it is needed most. In FY15,
our long-term investments in developing countries rose to nearly $18 billion,
helping the private sector play an essential role in the global effort
to end extreme poverty and boost shared prosperity. For more information,
please visit www.ifc.org