KAZAKHSTAN:
In an emailed statement to Islamic Finance news, S&P expounded its views on
the growth of Islamic finance in Kazakhstan. “It's still very early
days for Islamic finance in Kazakhstan, and there are some important
roadblocks to remove to enable its gradual growth. We think that the
potential of Islamic finance will closely hinge on banks' ability to
offer competitive products compared with conventional finance
products,” said S&P.
According
to the agency’s estimates, total assets of the Kazakh Shariah compliant
financial industry as at the end of 2013 stood at US$200 million. There
is currently one active Islamic bank in the republic, with a few other
Shariah compliant finance companies with very small operations. In
spite of having introduced Islamic finance regulations five years ago
and a predominant Muslim population as well as a strong investment
pipeline, Islamic finance in the country hasn't really taken off.
Based
on the research report released yesterday, S&P’s justifications for
its assessment on the embryonic stage of Islamic finance in Kazakhstan
include: insufficient product offering, a need for regulatory fine-tuning
to spur Islamic finance offerings as well as an estimation of market
demand and potential for Islamic financial services in the country, and
the lack of ability to offer competitive products compared with
conventional finance products.
There
are five key drivers that could propel the growth of the industry: (1)
securing the political and business community's willingness and
support; (2) establishing a central Shariah supervisory body; (3)
pricing competitively; (4) introducing liquidity management instruments;
and (5) educating human resources on Islamic finance specificities.
These factors have been derived from successful development of Islamic
finance in countries such as Malaysia and the UAE.
Conveying
a positive outlook on the industry S&P stated: “We believe
Kazakhstan's Islamic finance activity will gradually expand over the
next years. We think that the industry's competitiveness compared with
that of conventional finance – via Sukuk issuance or banking activity –
will largely determine its success.” Government support is also
critical in offering Shariah compliant liquidity management instruments
for the banking system and paving the way for private sector Sukuk
issuance.
For
an in-depth IFN analysis on the current developments of Islamic finance
in Kazakhstan and central Asia, see IFN Vol 11 Issue 15.
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