Emerging Trends of Islamic Banking and Finance Industry in CIS Countries

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 its vary 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.

Islamic finance leader in CIS countries

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 banks 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.

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.   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.

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.


(Mr. Muhammad Zubair Mughal is the Global CEO of AlHuda Center of Islamic Banking and Economics since 2005 and eminent writer of Islamic Banking and Finance, he can be contacted at  Zubair.mughal@alhudacibe.com )


Will digital economy in Africa just remain a myth?

World Bank has projected that by the year 2060, Africa’s population will be as much as 2.7 billion people; Sub-Saharan Africa’s population is estimated to be at 860 million.

At the moment, at least 60 percent of Africa’s population is under the age of 25. This figure also indicates that Africa has one of the largest youth populations in the world.

Africa’s economy has to be in proportional progression to keep up with the ever-rising population. Needless to say, the digital economy is indispensable as it intertwines creative and innovative technological solutions that not only reshape traditional marketing endeavors but also changes people’s lives completely.

It is not surprising to see that there is very little understanding of the digital economy in some African countries. Youth are most likely victims in less democratized regimes as such systems impede democracy by limiting active digital spaces for public participation through constructive dialogue on areas such as: investment, free trade, business, and so many others. To overcome this, it is imperative for governments to decentralize their policy formulating processes by opening up to the public in the digital sphere.

The time is also reasonable for African educational institutions to redesign their curriculum by establishing new marketing disciplines that reflect the new digital age. Incorporating this new intellectual development can help youth acquire technological experiences that will dictate how they can participate and benefit in the digital economy, for instance, the evolution of Artificial Intelligence (AI) which has started to replace thousands of workers across the globe. Africa has to put in place viable policies and plans to co-exist with this new development.

Africa must scale up youth-based enterprises by nurturing and empowering their creativity in innovation in areas such as: health, education, industry, agriculture, fishing, forestry, and other crucial sectors. This will create a resourceful pool of vibrant entrepreneurs and new business ventures.

Meanwhile, African nations should look to diversifying traditional markets to e-trade for small and medium-sized enterprises (SMEs). Environments should be favorable for African businesses to leapfrog from local/physical transactions to the international e-transactions which are more frictionless and convenient.

Africa MUST connect. Data, information, and communication are pivotal to transform into the digital economy. Therefore, there is an urgent need to re-examine how smooth internet experience is in Africa if we are ever to allow easy accessibility. According to the Alliance for Affordable Internet (A4AI), in 60 low and middle income economies surveyed, it was found that, ‘at the end of 2017, only 24 met the UN Broadband Commission’s target of affordable cost of a gigabyte of data not costing more than 2% of average monthly income’.

This actually means users were to pay an average of 5.5% of their monthly income for one gigabyte. This should not be a heavy burden. On the contrary, telecoms should lower their network costs to allow more involvement of people especially those in suburbs and rural areas. If they can tailor special/regional packages it would be a strategic maneuver.

There is more to be done.  African governments, the private sector, and relevant stakeholders ought to invest in resilient ICT infrastructures such as: land-based fiber networks and wireless last-mile connections to ensure each individual gains access.

Africa needs an inclusive digital economy such as in the mobile money revolution— a digital economy that lowers inequality and poverty. It should be a digital economy for all, not for the wealthy or literates. Despite the fact that new technology might overthrow existing development initiatives it suffices to suggest it should also be tailored along pre-existing ideas.

Benson Mambosho is a digital supervisor for Tecno Mobile Tanzania