Bank and MFI customers will be able to invest through a new Islamic contract

The National Bank of the Kyrgyz Republic has proposed to enshrine a new Islamic financial instrument, the wakalah bil-istismar agreement, in the regulatory framework. The document will allow banks, microfinance organizations, and credit unions to attract and manage deposits in accordance with Sharia principles, as well as to use this agreement for investment purposes.

The changes are being made to the provisions on Islamic operations for banks and MFOs, as well as to the instructions for working with deposits. Wakala bil-istismar provides that the depositor appoints a bank or MFI as an agent to manage funds for the purpose of making a profit. The agent receives remuneration, and the return for the client is fixed at the expected level, with the possibility of setting a minimum threshold for individuals.

The National Bank notes that the legal regulation of wakala bil-istismar will reduce risks for clients and increase confidence in Islamic products. The innovation is also aimed at implementing the Concept for the Development of the Islamic Economic Platform of the Kyrgyz Republic for 2023-2027 and is in line with global trends.