Uzbekistan establishes legal framework for Islamic banking activities

The introduction of this framework is expected to broaden access to financial services for both the general population and the business community. By incorporating Islamic finance, the government aims to enhance competition within the banking sector and attract a new wave of strategic international investors.

The newly approved legislative document clearly defines the scope of operations permitted for Islamic banking institutions. These activities include financing clients or attracting funds into investment deposits based on profit-sharing arrangements. Furthermore, institutions may provide or attract funds through agency agreements.

The law also outlines specific methods for client financing, such as the sale of goods on credit, the provision of financing via advance payments for goods, and engaging in joint ventures or taking equity stakes in the charter capital of legal entities. Additionally, the framework allows for Islamic leasing, where property is rented with the eventual right of buyout.

According to the regulations, only legal entities holding a specific license issued by the Central Bank of the Republic of Uzbekistan are authorized to conduct Islamic banking activities. These licenses will be granted without an expiration date and are strictly non-transferable to other parties.

The law is set to come into effect three months after its official publication, providing a transition period for the Central Bank and financial institutions to prepare for the rollout of these new services across the country.