Islamic Bank. “Clean” money in Kyrgyzstan

A new commercial bank may appear in Kyrgyzstan in the near future. It has serious shareholders — the National Bank of Kyrgyzstan and the Islamic Development Bank. Chairman of the National Bank Tolkunbek Abdygulov told in interview to 24.kg news agency why the country needs the 26^th bank and will not it eclipse the rest of the banks.

— Why do we need a new bank? Are the existing not enough?

— We have only one bank that is working according to Islamic financing principles. This is Eco Islamic Bank. And even it does it partially. There is no bank operating entirely under the Islamic financing principles in Kyrgyzstan. But it should be. The time has come.

Interest rate is prohibited in Islam. There is a surcharge. In addition, the bank becomes a direct participant in some operations. For example, how does a mortgage loan according to the same Islamic principles look like? A bank buys an apartment at its own expense, and sells it to you a bit more expensive, with its charge. The same principle is applied to the goods, export-import: the bank buys goods, brings it here and sells it together with you. You share a part of the profits with it.

If there is no profit, the bank may go bankrupt. Therefore, it is believed that the system of Islamic financing is fairer. The bank takes risks together with you.

Tolkunbek Abdygulov

— But there should be a legislative base at first.

— It is. The law on the National Bank and the law on the enactment of the law on the National Bank came into force. There is a whole chapter on Islamic financing principles: what is it like, how certain types of banking operations that will take place are defined. Such a notion as Shariah standards are introduced even into the Civil Code now.

— The law was adopted, but there is still criticism…

— Many people simply do not understand what it means. They are outraged that they ostensibly must live according to Shariah norms now. But this is fundamentally wrong. There are two standards of accounting and finance in the world. Europe and the Middle East work according to them. Many people think: if the Civil Code spells out the standards of Shariah, then someone will open the Koran and decide everything according to it. This is not true. It prescribes how to keep accounting records, how these operations are accounted.

The most basic thing in the Islamic principles of financing is not to hurry, but to develop slowly but surely.

Tolkunbek Abdygulov

— The new bank is created by two large financial institutions. Can it turn out that it will be ahead of the competition and will win over the clients from other banks?

— It can not happen. The National Bank does not pursue the goal of making money. This bank is important for us as an institution. We want an alternative source of money to appear. It is very important not to rush, make everything gradually. People should get used to it. Imagine: you go bankrupt and the bank simply takes your pledge, and that’s it. And the bank is also responsible here. Therefore, at least three organizations will participate in the project — the National Bank and the Islamic Development Bank as shareholders and the so-called anchor investor — a bank or financial company from Arab or other Muslim countries, which have experience in the creation and operation of such a bank. They will be operators of this bank. Neither the National Bank nor the IDB are present in governing bodies.

— When a new bank opens, will the existing ones have to change their working conditions in order not to lose clients?

— I do not think so. They have quite different clients. Not all of our businessmen are ready to follow all the laws of Shariah. These are non-standard operations. At first, people will simply be afraid of the new. And large businessmen are always attached to a bank.

— It’s clear. They trust this bank, because they are working with it not for the first year.

— Exactly right. The Russian-Kyrgyz Development Fund has the same problem now. It seems it has a lot of money. But, firstly, there are not enough projects. And secondly, the entire large business is already in commercial banks and is working with them. But the Islamic Bank will be interesting for the population. I think the people will gradually get used to it.

More and more people practice religion, study its canons now. And those who discern the «clean» money and haraam money will be potential clients of this bank.

Tolkunbek Abdygulov

But the creation of this institution is of interest to the National Bank first of all as an emerging of an alternative source of financing. Let people have a choice. In addition, the financial crisis of 2008 showed that Islamic banking is more stable.

— Is the Islamic Bank only for the Muslims?

— No, it is not. The advantage of Islamic principles is that they have no religious division. There are only principles of work: if you take a loan, there can not be an interest rate. If you take a loan for trade, then the bank is responsible together with you. The main principle of Islamic banks is comradely cooperation, comradely principles of financing.

— When the bank will be opened?

— In terms of legislation, our country is the leader in the region, and everything is almost ready. The Islamic Development Bank also recognizes it. There are some details that need to be clarified and finalized.

We can not exactly set the date of opening of the bank. One should not hurry here. It is better to wait a little and get a bank that is recognized by the world Islamic financial institutions.

Tolkunbek Abdygulov

— And why their recognition is needed?

— From the point of view of the National Bank, it is not a problem to open such a bank. We can open it within three weeks. But the problem is that the Islamic financing principles must be recognized by others. The banks have Islamic Shariah councils, there are many external participants. They come with an assessment like an international audit. And if they say that this is not an Islamic bank, the rest of the world will say that there are no Islamic principles of financing in Kyrgyzstan. Therefore, it is important to do everything slowly. There is a lot of money in that region. They are ready to invest them, but only in what really works under the Islamic principles.